Simanaitis Says

On cars, old, new and future; science & technology; vintage airplanes, computer flight simulation of them; Sherlockiana; our English language; travel; and other stuff

INCOME INEQUALITY—A HISTORICAL PERSPECTIVE

“FOR YE HAVE the poor always with you…” “The vast gap between the rich and the poor has never been greater than it is today.” “The rich get richer; the poor get pregnant.” “The rich are different from you and me.” “Yes, they have more money.”

I’ve accepted these truisms all my life. However, my interests in historical drama and the Internet as a research tool have also made it possible for me to examine the concept of income inequality from a historical perspective.

Seeing the opulence of the Palace of Versailles was part of my intuitive assessment, together with reading about life in general during, say, the 18th century. I’d conjecture that the wealth gap separating King Louis XVI from the average serf of the Ancien Régime was immense.

Madame Defarge, in Dickens’ A Tale of Two Cities. Image by Heather Ordover from ravelry.com.

However, other than guillotine tallies of Madame Defarge, data on economic well-being during the French Revolution have eluded me. By contrast, I found a wealth, you’ll excuse the expression, of tidbits concerning America’s rich and its poor, from our country’s revolutionary days to the present.

The Rich. For instance, Ben Franklin was considered the richest American in 1785. My source for this and others regarding the rich is The Wealthy 100: From Benjamin Franklin to Bill Gates—a Ranking of the Richest Americans, Past and Present, by Michael Klepper and Michael Gunther, 1996.

Other richest Americans include John D. Rockefeller, 1890–1895 and 1910-1915; Andrew Carnegie temporarily pipping him 1900-1905; Henry Ford, 1920–1925 and 1940–1945; interspersed with Andrew Mellon during the Depression 1930–1935; and H.L. Hunt, 1950. From these, I choose John D. Rockefeller, 1913; Andrew Mellon, 1930; H.L. Hunt, 1950; and Bill Gates, 2016, for my serious-wealth data points.

John D. Rockefeller, 1839–1937, American oil magnate and philanthropist.

Rockefeller’s net worth in 1913 was about $16.3 billion; this, derived from Achievements: A Century of Science for the Benefit of Humankind 1901-2001, by Elizabeth Hanson, 2000.

Andrew Mellon, 1855–1937, American banker, philanthropist and politician.

Mellon: An American Life, by David Cannadine, 2006, estimated Andrew Mellon’s 1930 wealth at $300 to $400 million; let’s call it $350 million.

Haroldson Lafayette Hunt, Jr., 1889–1974, American oil tycoon and conservative Republican political activist.

In The Power Elite, 1956, C. Wright Mills wrote, “… in 1950 it is reported (although it is not so certain as with other periods) that H.L. Hunt is worth ‘one or two billions.’ ” Let’s say $1.5 billion.

Last, According to Bloomberg, Bill Gates is worth $85.9 billion today.

Average people. Enough of the rich already. What of the rest of us? According to the U.S. Department of Housing and Urban Development, the estimated median family income for Fiscal Year 2016 is $65,700.

I derive the historical data from ritholtz.com. For the past six years, until the newspaper revamped its business coverage, the Washington Post featured financial articles by Barry Ritholtz. His chart of “Average Income in the United States (1913–2006)” gives values adjusted to 2006 dollars.

Average income in the United States, 1913–2006. Note, values in this graph are normalized to 2006 dollars. Image from ritholtz.com.

Here, to parallel the historical wealth figures for the rich, I readjust these 2006 values using the CPI Inflation Calculator of the U.S. Bureau of Labor Statistics. Thus, for our historical data, average incomes in dollars of the era are around $690 for 1913, $1120 for 1930 and $3080 for 1950.

The poor. Last, what of poverty? An article in the Chicago Tribune, June 12, 1895, carried a provocative title: “Poverty, Man’s Own Creation.” In particular, a progressive attitude was professed: “It is not pretended that men all can become millionaires, but the grinding poverty that renders the lives of millions of human beings a burden, grievous to be borne, can be abolished, and without recourse to Bellamy panaceas.

Apparently Chicago Tribune readers of 1895 were a literate bunch. I had to look up Bellamy panaceas: a nationalization scheme fostered by American author Edward Bellamy in his 1888 utopian novel, Looking Backward, 2000–1887.

Two of my poverty values come from Gordon M. Fisher’s 1997 paper “Poverty Lines and Measures of Income Inadequacy in the United States Since 1870: Collecting and Using a Little Known Body of Historical Material.” In particular, he cites a “1904 poverty line of $460 per year for an ‘average family’ of five persons in the industrial of the North.” Another data point he offers is a $2000 low-income line for nonfarm families of all sizes set in a 1949 Congressional report. Let’s fudge a bit with these two for 1913 and 1950, respectively.

For 2016 and 1930, I adopt the U.S. Census Bureau’s characterization of a poverty threshold, slightly different from other federal guidelines of poverty. The most recent data point for a 2015 family of four living in the 48 contiguous states and D.C. is $24,250; Alaska’s is $30,320; Hawaii’s, $27,890. Let’s take a weighted average of $24,444. That is, poverty now can be defined as 37 percent of today’s median $65,700.

Poverty in 1930 can then be characterized as 37 percent of its average $1120, or $414.

Whew. Who knew it was this complicated? (And where have we heard that before?)

Everything is summarized in this table, its last two columns indicating the ratios of rich:average and rich:poor over time.

Scott Fitzgerald and Earnest Hemingway actually didn’t say it; the quotations were cobbled from their various writings. However, yes, the rich are different from us; they’ve got more money. ds

© Dennis Simanaitis, SimanaitisSays.com, 2017

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: