I’m behind again, and again due to travel. I’ll be pushing the schedule out a day to compensate, and plan to catch up next week with a Tuesday/Friday schedule. Thanks for bearing with me!
It’s time to turn to literature, and how writers like Balzac and Austin used wealth to signal people’s positions in stories. The two kinds of wealth mentioned are agricultural land, and interest from government bonds. While narratively interchangeable as simply wealth, from an economic position, they aren’t. In the conception of national income, government bonds can only be private wealth, canceled out by definition by public debt, and representing a transfer payment from taxpayers to debt holders.
The capital income ratio, high in the 19th century, suffered a reversal of fate from the world wars. It fell with the enormous costs of conflict, but it’s made a recovery since, though not to its original heights. But the fall and growth and recovery post-war created an illusion that capitalism wasn’t inherently rent-seeking.
The composition of the assets that make up capital has changed. Agricultural land capital has had to contend with serious newcomers in what we mean within the idea of capital: houses, buildings, businesses, financial instruments, and colonial and post colonial holdings. This fall of relative agricultural capital reflects the smaller role it plays in the economy, and the fact that technology has made buildings and what happens in them much more economically interesting. Communications and travel made foreign assets much more manageable as well.
I’m not going to summarize the summaries of Balzac and Austin. Yo, dawg.
It’s hard to calculate the value of public assets like schools, infrastructure, and government buildings — you can’t exactly go look up how much they regularly sell for on Ebay. But even without knowing that, it’s clear that private wealth far outstrips public wealth, which is largely canceled out by public debt. And that debt also represents more private wealth. But public debt is never a huge portion of private wealth — where a national debt can be as much as 1x (on in some cases close to 2x) national income, private capital can go to 7x to 8x national income.
19th Century France and Britain had far more public debt than I’d ever realized, and much more than they have now. Much of that public debt represented transfers of wealth to the already wealthy. This was unlike the form of debt I grew up with in the 20th century, where debt was seen as a way to provide services and infrastructure, like education and transit, as a great leveler of society. Debt seemed to be a great idea in an era where inflation was guaranteed to make it vanish quickly into an ever widening pool of productive progress. It was almost a reversal of the literary opening of the chapter — representing a transfer of wealth from the rich to everyone else. But in the 21st century, inflation is dipping closer to 19th century levels, and doesn’t seem to have its leveling effect anymore.
The chapter ends on the shocks of the Great Depression, and distrust of the elites who were seen to bring it on or profit from it, and the Second World War. This is where the 20th century’s “mixed economies” came in, where economies that had been laissez-faire now came under state intervention to varying degrees with nationalizations and fiscal policies all over the world, even to the extremes of the communist planned economies. The 1970s and 1980s began to bring privatization and laissez-faire again, starting us back on the road to the 19th century’s patterns of capital, even though the ingredients of capital have changed forever.