Capital in the Twenty-First Century

In Balzac’s 1835 novel, Pere Goriot, a penniless young nobleman named Eugene de Rastignac travels to Paris to study law and ends up in a run-down boarding house. There he meets a man named Vautrin. As Piketty describes, “Vautrin explains to Rastignac that it is illusory to think that social success can be achieved through study, talent and effort” (299). Vautrin points out that after years of study and bowing to authority, the best Rastignac can hope for as a lawyer is five thousand francs a year. In contrast, if Rastignac marries Mademoiselle Victorine, who also lives in the boarding house and is in love with him, he can make fifty thousand francs a year. This is from her fortune of one million francs, with a return of five percent on the capital. The only caveat is that Mademoiselle Victorine’s brother must be killed which Vautrin is willing to do—for a fee.

The lesson from Balzac then is clear. Access to the top of 19th century society, in terms of status and living standards, depended on inheriting or marrying into wealth. Hard work and a profession may well raise one above the average level of poverty, but it will not even get you close to the resources of the truly wealthy. Moreover, this has deleterious consequences for society overall. Not only is such a situation unfair, it is also spiritually corrupting. While the rich become idle and alienated from ordinary life, men like Rastignac are tempted to kill, lie, steal, or marry someone they do not love, to join them. After all, why behave morally in, or contribute to, a society which exists simply to enrich a class of arbitrarily selected and amoral wealth owners?

This question troubled Balzac, as they did other writers and thinkers of the time. The issue for Piketty is whether it still has relevance today. As he says, “Even though all sorts of inequalities have re-emerged […] most people still believe that the world has changed radically since Vautrin lectured Rastignac” (302-303). We are tempted to believe that, despite its imperfections, Western society is different now. That, even if there is still much arbitrary privilege and unfairness, 21st century capitalism is still in some important sense meritocratic. Or at least that it is to a far greater extent than the societies portrayed by Balzac, Jane Austen, and Charles Dickens.

Certainly, there are some crucial differences. One of the most important of these is the rise of the middle-class. Piketty defines this group as the middle forty percent of the population. And in the developed world they have increased their share of wealth significantly since the early 20th century. From owning just five percent of wealth in Europe and the US in 1910, by 2010 they had increased this to thirty-five and twenty five percent of total wealth in Europe and America, respectively. Furthermore, this growth was accomplished primarily at the expense of the top one percent whose share of wealth in Europe fell from fifty percent to around twenty-five percent in the same period. This was indeed, as Piketty says, “a major transformation, which deeply altered the social landscape and the political structure of society” (328). A large class could now aspire to own at least some wealth, and live comfortably, without the need for large inheritances. Conversely, the numbers of people who inherited fortunes big enough to enable them to live off the returns from capital had shrunk considerably.

Likewise, the nature of inequality itself has partly changed. Whereas in Balzac’s day the truly significant inequalities were based in wealth ownership, the picture is more mixed now. Labour income for the top hundredth and thousandth of the income distribution has increased drastically since the 1980s. For example, in France this rose by thirty percent between 1980 and 1990 for the former group and by fifty percent for the latter. Meanwhile in the US, in 2010, the top ten percent earned fifty percent of total income, and the top one percent earned a massive twenty percent (as much as the entire bottom half of the population combined). This has meant that while wealth inequalities remain large, the top ten percent still own sixty five percent of wealth in the West, compared with just five percent for the bottom fifty. Whether this means that society is now any more meritocratic than it was for Balzac is hard to say. It could just be that this form of inequality is accompanied by, what Piketty calls, a better “apparatus of justification” (330). Either way, this is the topic he needs to explore in the following chapters.