Capital in the Twenty-First Century (28 page)

Two world wars changed this situation considerably, as Europeans were forced to sell
many foreign assets. This took time, however: from 1950 to 1990, Canada’s net foreign
debt represented roughly 10 percent of its domestic capital. Public debt rose toward
the end of the period before being consolidated after 1990.
¹²
Today, Canada’s situation is fairly close to that of the United States. Its domestic
capital is worth roughly 410 percent of its national income. Of this total, assets
owned by foreign investors (less foreign assets own by Canadian investors) represent
less than 10 percent of national income. Canada is thus more than 98 percent Canadian
owned and less than 2 percent foreign owned. (Note, however, that this view of net
foreign capital masks the magnitude of cross-ownership between countries, about which
I will say more in the next chapter.)

This comparison of the United States with Canada is interesting, because it is difficult
to find purely economic reasons why these two North American trajectories should differ
so profoundly. Clearly, political factors played a central role. Although the United
States has always been quite open to foreign investment, it is fairly difficult to
imagine that nineteenth-century US citizens would have tolerated a situation in which
one-quarter of the country was owned by its former colonizer.
¹³
This posed less of a problem in Canada, which remained a British colony: the fact
that a large part of the country was owned by Britain was therefore not so different
from the fact that Londoners owned much of the land and many of the factories in Scotland
or Sussex. Similarly, the fact that Canada’s net foreign assets remained negative
for so long is linked to the absence of any violent political rupture (Canada gradually
gained independence from Britain, but its head of state remained the British monarch)
and hence to the absence of expropriations of the kind that elsewhere in the world
generally accompanied access to independence, especially in regard to natural resources.

I cannot conclude this examination of the metamorphoses of capital in Europe and the
United States without examining the issue of slavery and the place of slaves in US
fortunes.

Thomas Jefferson owned more than just land. He also owned more than six hundred slaves,
mostly inherited from his father and father-in-law, and his political attitude toward
the slavery question was always extremely ambiguous. His ideal republic of small landowners
enjoying equal rights did not include people of color, on whose forced labor the economy
of his native Virginia largely depended. After becoming president of the United States
in 1801 thanks to the votes of the southern states, he nevertheless signed a law ending
the import of new slaves to US soil after 1808. This did not prevent a sharp increase
in the number of slaves (natural increase was less costly than buying new slaves),
which rose from around 400,000 in the 1770s to 1 million in the 1800 census. The number
more than quadrupled again between 1800 and the census of 1860, which counted more
than 4 million slaves: in other words, the number of slaves had increased tenfold
in less than a century. The slave economy was growing rapidly when the Civil War broke
out in 1861, leading ultimately to the abolition of slavery in 1865.

In 1800, slaves represented nearly 20 percent of the population of the United States:
roughly 1 million slaves out of a total population of 5 million. In the South, where
nearly all of the slaves were held,
¹⁴
the proportion reached 40 percent: 1 million slaves and 1.5 million whites for a
total population of 2.5 million. Not all whites owned slaves, and only a tiny minority
owned as many as Jefferson: fortunes based on slavery were among the most concentrated
of all.

By 1860, the proportion of slaves in the overall population of the United States had
fallen to around 15 percent (about 4 million slaves in a total population of 30 million),
owing to rapid population growth in the North and West. In the South, however, the
proportion remained at 40 percent: 4 million slaves and 6 million whites for a total
population of 10 million.

We can draw on any number of historical sources to learn about the price of slaves
in the United States between 1770 and 1865. These include probate records assembled
by Alice Hanson Jones, tax and census data used by Raymond Goldsmith, and data on
slave market transactions collected primarily by Robert Fogel. By comparing these
various sources, which are quite consistent with one another, I compiled the estimates
shown in
Figures 4.10
and
4.11
.

What one finds is that the total market value of slaves represented nearly a year
and a half of US national income in the late eighteenth century and the first half
of the nineteenth century, which is roughly equal to the total value of farmland.
If we include slaves along with other components of wealth, we find that total American
wealth has remained relatively stable from the colonial era to the present, at around
four and a half years of national income (see
Figure 4.10
). To add the value of slaves to capital in this way is obviously a dubious thing
to do in more ways than one: it is the mark of a civilization in which some people
were treated as chattel rather than as individuals endowed with rights, including
in particular the right to own property.
¹⁵
But it does allow us to measure the importance of slave capital for slave owners.

FIGURE 4.10.
   Capital and slavery in the United States

The market value of slaves was about 1.5 years of US national income around 1770 (as
much as land).

Sources and series: see
piketty.pse.ens.fr/capital21c
.

This emerges even more clearly when we distinguish southern from northern states and
compare the capital structure in the two regions (slaves included) in the period 1770–1810
with the capital structure in Britain and France in the same period (
Figure 4.11
). In the American South, the total value of slaves ranged between two and a half
and three years of national income, so that the combined value of farmland and slaves
exceeded four years of national income. All told, southern slave owners in the New
World controlled more wealth than the landlords of old Europe. Their farmland was
not worth very much, but since they had the bright idea of owning not just the land
but also the labor force needed to work that land, their total capital was even greater.

If one adds the market value of slaves to other components of wealth, the value of
southern capital exceeds six years of the southern states’ income, or nearly as much
as the total value of capital in Britain and France. Conversely, in the North, where
there were virtually no slaves, total wealth was indeed quite small: barely three
years of the northern states’ income, half as much as in the south or Europe.

FIGURE 4.11.
   Capital around 1770–1810: Old and New World

The combined value of agricultural land and slaves in the Southern United States surpassed
four years of national income around 1770–1810.

Sources and series: see
piketty.pse.ens.fr/capital21c
.

Clearly, the antebellum United States was far from the country without capital discussed
earlier. In fact, the New World combined two diametrically opposed realities. In the
North we find a relatively egalitarian society in which capital was indeed not worth
very much, because land was so abundant that anyone could became a landowner relatively
cheaply, and also because recent immigrants had not had time to accumulate much capital.
In the South we find a world where inequalities of ownership took the most extreme
and violent form possible, since one half of the population owned the other half:
here, slave capital largely supplanted and surpassed landed capital.

This complex and contradictory relation to inequality largely persists in the United
States to this day: on the one hand this is a country of egalitarian promise, a land
of opportunity for millions of immigrants of modest background; on the other it is
a land of extremely brutal inequality, especially in relation to race, whose effects
are still quite visible. (Southern blacks were deprived of civil rights until the
1960s and subjected to a regime of legal segregation that shared some features in
common with the system of apartheid that was maintained in South Africa until the
1980s.) This no doubt accounts for many aspects of the development—or rather nondevelopment—of
the US welfare state.

I have not tried to estimate the value of slave capital in other slave societies.
In the British Empire, slavery was abolished in 1833–1838. In the French Empire it
was abolished in two stages (first abolished in 1792, restored by Napoleon in 1803,
abolished definitively in 1848). In both empires, in the eighteenth and early nineteenth
centuries a portion of foreign capital was invested in plantations in the West Indies
(think of Sir Thomas in
Mansfield Park
) or in slave estates on islands in the Indian Ocean (the Ile Bourbon and Ile de France,
which became Réunion and Mauritius after the French Revolution). Among the assets
of these plantations were slaves, whose value I have not attempted to calculate separately.
Since total foreign assets did not exceed 10 percent of national income in these two
countries at the beginning of the nineteenth century, the share of slaves in total
wealth was obviously smaller than in the United States.
¹⁶

Conversely, in societies where slaves represent a large share of the population, their
market value can easily reach very high levels, potentially even higher than it did
in the United States in 1770–1810 and greater than the value of all other forms of
wealth. Take an extreme case in which virtually an entire population is owned by a
tiny minority. Assume for the sake of argument that the income from labor (that is,
the yield to slave owners on the labor of their slaves) represents 60 percent of national
income, the income on capital (meaning the return on land and other capital in the
form of rents, profits, etc.) represents 40 percent of national income, and the return
on all forms of nonhuman capital is 5 percent a year.

By definition, the value of national capital (excluding slaves) is equal to eight
years of national income: this is the first fundamental law of capitalism (
β
=
α
/
r
), introduced in
Chapter 1
.

In a slave society, we can apply the same law to slave capital: if slaves yield the
equivalent of 60 percent of national income, and the return on all forms of capital
is 5 percent a year, then the market value of the total stock of slaves is equal to
twelve years of national income—or half again more than national nonhuman capital,
simply because slaves yield half again as much as nonhuman capital. If we add the
value of slaves to the value of capital, we of course obtain twenty years of national
income, since the total annual flow of income and output is capitalized at a rate
of 5 percent.

In the case of the United States in the period 1770–1810, the value of slave capital
was on the order of one and a half years of national income (and not twelve years),
in part because the proportion of slaves in the population was 20 percent (and not
100 percent) and in part because the average productivity of slaves was slightly below
the average productivity of free labor and the rate of return on slave capital was
generally closer to 7 or 8 percent, or even higher, than it was to 5 percent, leading
to a lower capitalization. In practice, in the antebellum United States, the market
price of a slave was typically on the order of ten to twelve years of an equivalent
free worker’s wages (and not twenty years, as equal productivity and a return of 5
percent would require). In 1860, the average price of a male slave of prime working
age was roughly
$
2,000, whereas the average wage of a free farm laborer was on the order of
$
200.
¹⁷
Note, however, that the price of a slave varied widely depending on various characteristics
and on the owner’s evaluation; for example, the wealthy planter Quentin Tarantino
portrays in
Django Unchained
is prepared to sell beautiful Broomhilda for only
$
700 but wants
$
12,000 for his best fighting slaves.