Capital in the Twenty-First Century

by Thomas Piketty

Broadly speaking, the 1970s and 1980s witnessed an extensive “financialization” of the global economy, which altered the structure of wealth in the sense that the total amount of financial assets and liabilities held by various sectors (households, corporations, government agencies) increased more rapidly than net wealth. In most countries, the total amount of financial assets and liabilities in the early 1970s did not exceed four to five years of national income. By 2010, this amount had increased to ten to fifteen years of national income (in the United States, Japan, Germany, and France in particular) and to twenty years of national income in Britain, which set an absolute historical record.28 This reflects the unprecedented development of cross-investments involving financial and nonfinancial corporations in the same country (and, in particular, a significant inflation of bank balance sheets, completely out of proportion with the growth of the banks’ own capital), as well as cross-investments between countries.