If you want to measure the capital of a nation, there are two ways of doing it.  One is to travel the length and breadth of the country counting the houses, the bridges, the factories, shops and offices, and adding up their total value.  The other is to knock on doors and ask people how rich they are.  National statistics offices typically do both these things, though not literally in this way.

The totals should be roughly the same, because however complex the  chain of intermediation, it is  the nation’s savings  which fund the nation’s investment.  The totals are not however exactly the same, for a clutch of reasons. 

         Some national assets are owned by foreigners, and some household wealth is held overseas. But for large, developed countries the net effect is small even though gross capital flows are large. The value of assets overseas owned by residents of  Britain and France is almost the same, in total, as the value of domestic assets held by overseas residents. Germany owns more than it owes but the reverse is true of the United States.

We do not treat government assets as part of our personal wealth, even if we attach value to the road network and the National Gallery, and we certainly should. If – directly or indirectly – we hold government debt we treat it as an asset, even though the future taxpayers who will have to pay it back do not report it as a liability. 

         Some of what we regard as household wealth is a claim on future earnings.  Apple has a market capitalisation of over $500 bn, but the corporation owns  physical assets worth only around $15bn (and a mountain of cash) The bulk of the corporation’s value is anticipation of future profits.  Pension rights are an important component of household wealth which may – or may not – be matched by anyone’s ownership of physical assets.

So there are two somewhat different concepts of national capital – physical assets and household wealth.  The widely cited study by Thomas Piketty measures national capital using data derived from the UN system of statistical accounts (the only source which provides internationally comparable information), Piketty has heroically attempted to reconstruct estimates for extended historical periods for Britain and France – to estimate what Wellington and Napoleon’s statisticians would have told their masters if they had appropriate data and knowledge of the UN system of accounts. 

      Piketty’s figures are closer to the first concept – physical assets – than to the second – household wealth. But for his principal purposes – a review of inequality – it would seem that household wealth  is more relevant.  The wealth of Carlos Slim, Bill Gates or Warren Buffett is largely outside his data, because the market value of American Movil, Microsoft and Berkshire Hathaway far exceeds the tangible assets of these companies.  And while these individuals are unrepresentative, among the rich of today, in terms of the scale of their wealth, they are wholly representative, among the rich of today, in the sources of their wealth. 

If ‘capital is back’, as Piketty contends, it is in a very different sense from the nineteenth century view in which the ownership of capital confers authority over the means of production. Slim, Gates and Buffett do control the means of production, but not in the way described by Marx. They did not acquire control of the means of production by virtue of their ownership of capital; rather they acquired capital from the control of the means of production, which  they had  gained  through political influence and success in the market. The days when economic power was acquired by inheriting the mill are long gone. Warren Buffett began his business career as mill owner, but closed the mills and went into insurance. That is the reality of capital in modern economics.