In the late 18th through the mid-19th Centuries, what distinguished the United States economically from the European powers was the prominence of human slavery.

In 1800, slavery represented nearly 20% 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 slaves were held, the proportion reached 40%:  1 million slaves and 1.5 million whites for a total population of 2.5 million…By 180s, the overall proportion of slaves in the overall population had fallen to around 15% (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%. (Page 159)

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Chapter is titled “From Old Europe to the New World.”  It covers the same ground as chapter 3, but looks at major economies other than those of Britain and France.  The first part focused on Germany, which then led to discussion of the collapse of European Capital/Income ratios due to the World Wars.

Part two looks at the United States, Canada, and touches on Net Foreign Capital.

Thomas Piketty points out two things here.  One is that the Capital/Income ratio c. 1800 is far smaller in the United States than in Europe:  around 3 rather than 6 or 7.  — and that much of this difference is explained by the smaller value of agricultural land (around 1x annual income in the United States vs. at least 3x annual income in Britain and France.)  An irony here is the land was so abundant in the United States compared to the Old World that it was dirt cheap, suggesting that real price and value are two different things.

(In economics, we call this the diamond-water paradox, that  something of extremely low value to society can be so highly priced while something essential for life itself can be extremely cheap.)

Thomas Piketty adds that housing and business capital also were lower.  In short, immigrants did not arrive with houses or often even large tools, and it took time to build these up.

The other major difference is that the Capital/Income ratio has been much more stable than it was in Europe.  In Britain and France it stated the 20^th Century at 7, fell to under 3, then climbed back up to over 6  Meanwhile, in the United States it started around 5, fell to around 3.8, and climbed back up to a bit above 4.  Quite simply, our country was far less affected by the World Wars, measured as either economic impact of % of the population killed.

Note that 5 of the top 6 countries (Belarus, Ukraine, Latvia, Lithuania, “Rest of the USSR”), were all part of the USSR during the decades around World War Two.

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Chapter 4 is titled “From Old Europe to the New World.”  It essentially covers the same ground as Chapter 3, which covered Great Britain and France, but looks at three other countries:  Germany, the United States, and Canada.  By examining more than two countries it was easier to grasp which patters are universal versus in which ways have countries genuinely different from one another.

I broke this chapter into two parts.  Each part covers a country and then a new aspect of the capital/income ratio.

Part 1)  Germany and details of the mid-20^th Century “shocks” which collapsed the capital/income ratio.

Part 2)  The United States and Canada, plus human slavery and how it affected the capital/income ratio, particularly in the United States.

Thomas Piketty Starts by looking at Germany.  (Note:  the graph starts in 1870 rather than 1700 because 1870 is the date of German unification.)

The first thing to notice is that the overall evolution is similar (to Britain & France):  first, agricultural land gave way  in the long run to residential and commercial real estate and industrial and financial capital, and second, the capital/income ratio has grown steadily since World War II and appears to be on its way to regaining the level it had attained prior to the shocks of 1914-1945. (page 141)

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