Friday, August 17, 2012

The Concentration of Wealth in the USA Changed over time.

Alice Kessler-Harris, the 2011-2012 president of the Organization of American Historians, made a formal address at the annual meeting of the Organization on the topic "Capitalism and Democracy". It is available on CSPAN American History TV. The fundamental point of the talk is that while the United States has been both capitalistic and democratic since its conception at the end of the 18th century, the association has not always been comfortable, and the way that capitalism and democracy have been understood to relate has changed significantly over time.

Some of her remarks triggered my interest in the changes in concentration of wealth in U.S. history. I found this reference that states:
In 1774, the top 1 percent of households got 9.3 percent of income.
The article goes on to speak of Thomas Jefferson's thoughts on the subject, the writer of the phrase
"All men are created equal" -- thought a lot about income inequality. In a letter to a friend describng the 13 colonies, he wrote "The great mass of our population consists of laborers. The rich, being few and of moderate wealth..." 
"Can any condition of society be more desireable?"
The concentration of wealth increased greatly over time. According to Wikipedia:
In 2007 the richest 1% of the American population owned 34.6% of the country's total wealth, and the next 19% owned 50.5%.
A 1980 study states:

Wealth inequality declined in three periods. First, during the Civil War decade, while Northern wealth inequality remained almost unchanged, Southern inequality was reduced dramatically by slave emancipation. This revolutionary leveling in Southern wealth contrasted with and outweighed the opening of new inequalities in wealth (as well as income) between North and South. Second, both wealth and earnings leveled during the brief World War I episode. The third and last period of declining wealth inequality coincided with the “incomes revolution” documented by Kuznets (1953) and proclaimed by Arthur Burns. That is, wealth inequality declined between the late 1920s and the mid-twentieth century.
The graph above shows the increase in the median net worth of families over the past couple of decades. More specifically, the table above indicates that the average wealth of the top 1 percent in 2007 was over $19 million, and had been increasing more rapidly in recent decades than that of less wealthy sections of the population. The table shows that there was a decrease in wealth with the crash of 2007, but one can assume that much of that loss has been recaptured since 2009.

The graph above, which seems more commonly used, shows the trend in the portion of the income captured by the top one percent. I assume that this is taken from tax records, and does not show the portion of increase in net worth that is captured by the top one percent of wealthy.

I continue to be worried that the country is becoming less democratic as the wealthy are capturing more and more of the wealth and income of the nation. I certainly don't believe in the trickle down theory that greater accumulation of wealth in the top one percent leads to greater income for the rest. Indeed, the historical record suggests that in recent years as the rich have gotten much richer, the poor have gotten poorer.

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