I’ve been slowly working my way through Capital in the 21st Century by Thomas Piketty. It is fascinating! Some of the earliest data for his research comes from novels that described economics in the 18th and 19th centuries — like Jane Austen’s “Pride and Predjudice,” and “Sense and Sensibility.” Capital in those days was LAND. Those who had it were the “landed gentry,” les rentiers, and everyone else rented and worked the land to eke out a living. The landowners did sometimes have to work, but for the most part they received an income in the form of rents on the land.

TRANSITION FROM LAND TO FINANCIAL SECURITIES

These days, capital is more often in the form of financial securities — stocks, bonds, index and mutual funds, and other “financial instruments.” The top 10% of the population typically owns 50% to 70% or more of available capital. The top 1% owns 40% or more.

Tom Branson - Downton Abbey, rise from worker to gentryMuch of this capital is passed on from generation to generation through inheritance. But in the 21st century we have seen a rise in the “supermanager class” of corporate CEOs and top executives who are able to earn incomes far in excess of any productivity value that can be attached to their actual work. It is this new class of supermanagers that is threatening to tip the (im)balance of capital even more towards the top elite. Here in America the top 10% are coming to own close to 80% of available capital, which gives us some understanding of what the “99 percent” are facing.

THE ROLE OF INHERITANCE

I don’t know where exactly I fall on the scale between that top 10% and the vast majority of people who are living paycheck to paycheck with no opportunity to save, invest, and have a chance at improving their lot in life. But the fact that I can receive “an income” from my investments even as they keep growing is little short of amazing, isn’t it?

Capital in the 21st Century has also made me more aware of the culture that forms the backdrop of the PBS Masterpiece series, Downton Abbey,” which takes place between the two world wars in the early 20th century. It was a transitional time when workers could come to own their own property, when land was giving way to securities, and when les rentiers began to wonder how long they would continue to be able to live the priviledged life, or hold on to their grand estates. Next time you watch Downton, pay attention to the economics!

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