Capital and Ideology

by Thomas Piketty

When one country is required to pay another country profits, rents, and/or dividends over a long period of time, however, property relations can become even more complex and explosive. Constructing norms of justice acceptable to a majority through democratic deliberation and social struggle is already a complex enough process within a single political community; it becomes practically impossible when the owners of property are external to the community. In the most common and likely case, such external property relations will be regulated by violence and military force. In the Belle Époque, the colonial powers made ample use of gunboat diplomacy to ensure that interest and dividends would be paid on time and that no one would think of expropriating creditors. The military and coercive dimension of international financial relations and investment strategies also plays an essential role today, even though the interstate system has become much more complex. In particular, two of today’s leading international creditors, Japan and Germany, are states without armies, whereas the two principal military powers, the United States and to a lesser degree China, are focused more on investing domestically than on accumulating external financial claims. This may be due to the continental dimensions of both of these states as well as to their demographic dynamism (which may be about to change in China and may someday change in the United States).