For the fourth income-tenth from the bottom
received
only 6 per cent of income, and the fifth income-tenth received only 8 per cent.
Lundberg - The-Rich-and-the-Super-Rich-by-Ferdinand-Lundberg
Of the 1.
6 million top wealth-holders, over half had less than $125,000 of gross estate and less than 2 per cent (27,000 persons) had more than $1 million.
"14
There were, then, in excess of 27,000 millionaires in the country in 1953--not only the greatest such aggregation at one time in the history of the world but a number greater than the aggregation throughout all of history before 1875 (as of 1966, millionaires numbered about 90,000). If consumer prices had remained stable from 1944 to 1953 there would have been fewer. "In 1944 there were 13,297 millionaires," says Lampman. "In 1953 there were 27,502 millionaires in 1953 prices, but only 17,611 in 1944 prices. "15
What of the 1965-67 year-span? As the prices of stocks advanced tremendously in the preceding dozen years, one can only conclude that the proportion of wealth of the top wealth-holders also advanced impressively. For this small group, as we have seen, owns more than 80 per cent of stocks. The Dow-Jones average of 65 industrial stocks stood at 216. 31 at the end of 1950; at 442. 72 in 1955; at 618. 04 in 1960; and at 812. 18 in March, 1964. As of May, 1965, it was well above 900. The less volatile Securities and Exchange Commission index of 300 stocks shows the same quadrupling in value, standing at 41. 4 in 1950; 81. 8 in 1955; 113. 9 in 1960; and 160. 9 in March, 1964. How many employees have experienced a fourfold increase in salaries in the same period?
The rise in value of stocks, however, surely invalidates one of Lampman's speculations, to this effect: "Our finding that the share of wealth held by the top 2 per cent of families fell from about 33 to 29 per cent from 1922 to 1953, or about one- eighth, would seem compatible with . . . the general belief that there has been some lessening of economic inequality in the United States in recent decades. "16 The more recent rise in stock prices and in corporation earnings shatters even that slight concession.
Professor A. A. Berle, Jr. , has rushed forward to hail the Lampman showing that the upper 1 per cent saw its participation reduced from 32 per cent of all wealth in 1922 to 25 per cent in 1953; but his celebration was premature and he did not fully report Lampman, who indicated that the participation had been reduced from 1922 to 1949 but thereafter was again increasing. 17
The Lampman findings were extended to 1958 in an extremely sophisticated statistical critique presented in 1965 to the American Statistical Association by James D. Smith and Staunton K. Calvert of the Statistics Division of the Internal Revenue Service. 18
After reviewing Lampman, revising him in a minor particular, Smith and Calvert conclude that "top wealth-holders owned 27. 4 percent of gross and 28. 3 percent of net prime wealth in 1953, but increased their share to 30. 2 and 32. 0 percent respectively by 1958. These data support Lampman's conclusion that the share of top wealth-holders has been increasing since 1949. " Prime wealth, as they explain, is total wealth less the value of assets in trust funds and pension reserves.
This is where the question rests on the basis of the most recent data supplied by leading authorities in the field: Concentration of wealth in a few hands is intensifying.
Actually, in view of market valuations, the share of top wealth-holders at this writing is easily the greatest in history. It is my hypothesis that the share of the top 1/2 of 1 per cent now exceeds the 32. 4 per cent of this group for 1929. Later studies should show that the proportions for all groups of top wealth-holders studied by Lampman have been significantly exceeded. So much for Lampman although there is much else in his razor'- sharp book that merits attention. 19
The University of Michigan Study
Although showing some minor variations, the continuing University of Michigan survey dovetails with the Lampman study and fully supports it.
First, it was found that 3 per cent of spending units in 1953 had $60,000 or more total assets; this compares with 2. 3 per cent of individuals in the Lampman study. A "spending unit" consisted of any one or more persons established as a household.
According to this University of Michigan "Survey of Consumer Finances," the upper 11 per cent of the nation's 54 million spending units held 56 per cent of the total assets and 60 per cent of the net worth of all private holdings in the country. "While this group held only 30 per cent of consumer capital," Lampman comments (p. 195), they held 80 per cent of business and investment assets. " 20
According to the 1960 University of Michigan "Survey of Consumer Finances," 86 per cent of all spending units in the country owned no stock whatever. Of incomes under $3,000, 95 per cent owned no stock; of incomes of $3,000-$5,000, 93 per cent owned no stock; and of incomes of $5,000-$7,500, 87 per cent owned no stock. The class of $7,500-$10,000 incomes was 78 per cent without stock ownership, while even in the $10,000-$15,000 income class 61 per cent owned no stock. In 1963 a total of 83 per cent owned no stock. Stock ownership, it is clear, was being somewhat more widely diffused as long-term holders gradually unloaded at rising prices. Whereas in 1953 only 44 per cent of the income class above $15,000 owned no stock, in 1960 this same broad class included only 26 per cent without stock ownership. 21
For some years the New York Stock Exchange and the Advertising Council, as part of a campaign to show that a "people's capitalism" exists with a widely diffused ownership in American industry, have been busily pyramiding figures. These computations show that in 1956 there were 8,630,000 American shareholders, and in 1962 there were 17,010,000. 22 The figure more recently being cited is 20 million . 23
Even though the method of their compilation is challenged by statisticians, these computations could all be true and still not after the implications of the Lampman analysis and University of Michigan surveys. For if 17 per cent of spending units owned stock in 1963, as the University of Michigan survey indicates, that would be well over 17 million persons. And anyone would qualify as a stockholder if he owned only one share worth 10 cents.
That most stockholders own trivial amounts of stock is shown by the University of Michigan figures for 1963. The 17 per cent of spending units holding stock broke down in this way: 3 per cent held less than $500 worth; 2 per cent held $500 to $999 worth; 4 per cent held $1,000 to $4,999 worth; and 2 per cent held $5,000 to $9,999 worth. As far as stock ownership goes, these are all insignificant figures. Yet they make up 75 per cent of the households holding stock. Only 4 per cent of all spending units owned more than $10,000 of stock. 24 But most of this group, exceeding four million people, also owned little stock; for we are already aware that a group consisting of 1. 6 per cent of the population owns more than 80 per cent of all stock, 100 per cent of state and local government bonds and 88. 5 per cent of corporate bonds. Less than 20 per cent of all stock in 1963, then, was owned by some 15. 4 million people.
Throughout this study, therefore, it is going to be taken as fully established that 1. 6 per cent of the adult population own at least 32 per cent of all assets, and nearly all the investment assets, and that 11 per cent of households (following the University of Michigan study) own at least 56 per cent of the assets and 60 per cent of the net worth. It is even possible, as we have seen, that 1/2 of 1 per cent own more than one-third of all productive assets as of 1965-67. It is evident that this leaves very little to be apportioned among 90 per cent of the population. It will be recalled that Lampman showed 50 per
cent owning virtually nothing, with an average estate size of only $1,800 as of 1953. This same study, according to my tabulation numbered 4, showed that 89. 6 per cent of the adult population had available to it only 47. 8 per cent of the assets, while 50 per cent had only 8. 3 per cent. The University of Michigan figures and the Lampman figures, in short, coincide rather closely although developed by different methods.
Supporting Studies
Every other serious study supports these findings. The Senate Temporary National Economic Committee (TNEC) just before World War II inquired into the distribution of stock among 8. 5 million shareholders in 1,710 major companies as of 1937-39 and found that 4 per cent of all common stockholders held 74. 9 per cent of the stock, and 4. 5 per cent of the preferred stockholders held 54. 8 per cent. 25 Looking into the same situation as of 1951, the Brookings Institution of Washington, D. C. , found that in 2,991 major corporations only 2. 1 per cent of the holders owned 58 per cent of the common stock and 1. 1 per cent of the holders owned 46 per cent of the preferred stock. Two- thirds of all common stockholders owned only 10 per cent of the shares. 26 Harvard's J. Keith Butters estimated that in 1949 the spending units (households) that owned $100,000 or more in marketable stock, comprising 1 /5 of 1 per cent of all spending units and 2 per cent of stockholders owned between 65 and 71 per cent of all marketable stock held by individuals. 27 None of these studies took into account the beneficial interest of individuals in stock held by institutions for the account of individuals, which swells the percentages proportionately.
The Lampman estate studies do not necessarily reveal the sizes of fortunes. 'This is because many of the fortunes are systematically distributed during the lifetime of the owner, mainly for the benefit of heirs. At the time of death the fortune is reduced.
Again, in extrapolating from the estates to the rest of the population, at least two distortions are discernible. First, only adults are considered by Lampman, whereas a considerable number of children are millionaires owing to having had trust funds settled upon them. Second, the economic position of age groups is not strictly comparable between the affluent and the poor because of an average earlier death rate for the latter.
But, on the whole, the Lampman study came closer than anyone had yet come to showing the asset position of all adult age-sex groups.
Definitive Data from the Federal Reserve
Strongly persuasive though all these studies are, it is possible to be definitive about the distribution of wealth in the United States, on the basis of findings put forth recently under the highest official auspices.
In a complex and comprehensive study prepared for the Board of Governors of the Federal Reserve System on the basis of Census Bureau data under the title Survey of Financial Characteristics of Consumers, the cold figures are officially presented on asset holdings as of December 31, 1962, removing the entire subject from the realm of pettifogging debate.
On that date the number of households in the country worth $500,000 or more was carefully computed at about 200, 000. 28 The number of millionaires at the year-end was more than 80,000, compared with Lampman's 27,000 as of 1953. Only 39 per cent of these 200,000 had no inherited assets. 29 These 200,000 at the time held 22 per cent of
all wealth, while 57 per cent of the wealth was held by 3. 9 million individual consumer units worth $50,000 or more.
The panorama of wealth-holding throughout the populace was as follows (in millions of units):30
All consumer units
(households)
Millions
57. 9
Percentage of
Households
100. 0
1. 8
8. 0
16. 0
18. 0
16. 0
23. 0
11. 0
5. 0
1. 25
Less than 1. 0
Less than 0. 4
Size of wealth:
Negative 1. 0
Zero 4. 7
$1-$999 9. 0
$1,000-$4,999 10. 8
$5,000-$9,999 9. 1
$10,000-$24,999 13. 3
$25,000-$49,999 6. 2
$50,000-$99,999 2. 5
$100,000-$199,999 . 7
$200,000-$499,999 . 5
$500,000 and up . 2
In stating that 200,000 households held 22 per cent of the wealth there is some danger of suggesting that the power of these 200,000 is less than it actually is. The nature of the wealth held is of determining importance here. in general, the lower wealth-holders mostly own inert assets such as automobiles, small amounts of cash and some residential equity, while the upper wealth-holders mostly own corporate equities in an aggregate amount sufficient to show that they are in full control of the productive side of the economic system.
Households in the number of 200,000 worth $500,000 and more held 32 per cent of all investment assets and 75 per cent of miscellaneous assets, largely trust funds, while 500,000 worth $200,000 to $499,999 held 22 per cent of investment assets. The 700,000 households worth $100,000 to $199,999 held 11 per cent of investment assets. 31
Center of Economic Political Control
We see, then, that 1. 4 million households owned 65 per cent of investment assets, which are what give economic control. Automobile and home ownership and bank deposits do not give such control. The economic power of the upper 200,000 is greater than indicated by their ownership of 22 per cent ,of all assets; it amounts to 32 per cent of investment assets.
Experts concede that a 5 per cent ownership stake in a large corporation is sufficient in most cases to give corporate control. It is my contention that general corporate control lies in this group of 200,000 very probably and almost certainly lies in the combined group of 700,000 wealthiest households, slightly more than 1 per cent, owning assets worth $200,000 and more.
There is a danger here, as the erudite will recognize, of perpetrating the logical fallacy of division--that is, arguing that what is true of a whole is true of its individual parts. That argument here would be that because 200,000 households own 32 per cent of investment assets they each hold a stake of exactly 32 per cent in the corporate system. I do not make such a ridiculous argument. First, this upper group concentrates its holdings for the most part in leading corporations, bypassing the million or so papertiger corporations of little or no value. Again, as just noted, far less than 32 per
cent of ownership in any individual corporation is required to control it. Control, as we shall see, is the relevant factor where power is concerned. Usually comparatively little ownership is necessary to confer complete corporate control which, in turn, extends to participation in political control.
A man whose entire worth lies in 5 per cent of the capital stock of a corporation capitalized at $2 billion is worth only $100 million. But as this 5 per cent--and many own more than 5 per cent--usually gives him control of the corporation, his actual operative power is of the order of $2 billion. Politically his is a large voice, not only because of campaign contributions he may make but by reason of all the legislative law firms, congressional and state-legislative, under retainer by his corporation; for every national corporation has law firms in every state. There is additionally to be reckoned with all the advertising his corporation has to dispense among the mass media as a tax- free cost item, the lobbyists his corporation puts into the field and the cultural-charitable foundations both he and the corporation maintain.
Such a man, worth only $100 million net, is clearly a shadowy power in the land, his ownership stake vastly multiplied by what he controls--other people's property as well as his own. And there are more than a few such.
On the other hand, many intelligent citizens today complain in the face of the alleged complexity of affairs of feelings of powerlessness. Their feelings are justified. For they are in fact politically powerless.
The actual power of such concentrated ownership, therefore, is much greater than its proportion in the total of investment assets. The corporate power of the top 200,000, and certainly of the top 700,000, is actually 100 per cent. The power of this top layer corporatively would be no greater if it owned 100 per cent of investment assets. Actually, it might be less: It would then receive no support from many tremulous small holders but would probably find them in political opposition.
As to distribution of investment assets among smaller property holders, 1 per cent are owned by the $5,000 to $9,999 group, 7 per cent by the $10,000 to $24,999 group, 11 per cent by the $25,000 to $49,999 group and 15 per cent by the $50,000 to $99,999 group, or 34 per cent in all. In this group of comparatively modest means one finds some of the most voluble supporters of the established corporate way. Within their own terms they are all winners, certainly hold some financial edge. Most of them, as their expressions at stockholder meetings show, greatly admire the larger stockholders. In their eyes, a divinity doth hedge the large stockholders.
Net Worth in the Populace
Approached in terms of net worth (assets less debt) the situation of the lower populace is more unfavorable, as shown in the following table. 32
Net Worth
Negative (deficit)
Zero
$1-$999
$1,000-$4,999
$5,000-$9,999
$10,000-$24,999
$25,000-$49,999
$50,000-$99,999
$100,000-$199,999
Percentage of
Consumer Units
11
5
12
17
15
23
10
4
1
$200,000-$499,999
$500,000-$999,999
$1,000,000 and more
1
Less than 1/2 of 1 per cent
Less than 1/2 of 1 per cent
As this table shows, 28 per cent of the households had a net worth of less than $1,000; the 11 per cent with a deficit, on balance in debt in varying amounts, greatly exceeded the percentage of those worth $50,000 and more. The less than 1/10th of 1 per cent who were millionaires (from time to time pointed to with pride by Time, Fortune and the Wall Street Journal) were offset by 11 per cent of households worth less than zero. Add the zerogroup and one obtains 16 per cent of all households. Forty-five per cent of all households had a net worth of less than $5,000. Is this affluence?
The View from the Bottom
A sensitive statistical analysis meriting the closest attention by all students of the distribution of wealth is that of Harvard's Dr. Gabriel Kolko, Wealth and Power in America. Not only does he develop essentially the same perspective as Lampman and the University of Michigan--"Since World War II, one-tenth of the nation has owned an average of two-thirds of liquid assets" (p. 49)--but he attacks the problem from below. He has no difficulty in showing, on the basis of official figures that, as of affluent 1957, 44 per cent of the spending units (households) lived below the maintenance level set by U. S. Bureau of Labor Statistics budgets, and that 27. 5 per cent lived below the emergency level. 33 These figures represent a slight improvement over 1947, when the figures were 51. 2 per cent and 27. 5 per cent.
Dr. Kolko approaches the problem via income from all sources, employment as well as assets. As he shows, using Bureau of Census and University of Michigan figures, the distribution of income in the United States is fantastically lopsided. Whereas the lowest tenth of the population in all years from 1947 through 1955 received only 1 per cent of national personal income after federal taxes, the upper tenth in the same years received from 27 to 31 per cent. The second from the lowest income-tenth received 3 per cent of income from 1947 through 1955 except for the years 1953 and 1954, when it received 4 per cent. The third from the bottom income-tenth received 5 per cent throughout these years.
For 1947-55, in other words, the three lowest income-tenths, or 30 per cent of recipients, received 9 per cent of national income after taxes compared with a varying 56-58 per cent for the three upper income-tenths. 34 These figures: spell poverty in all starkness--particularly in view of the greater concentration of children on the lower and poorly guided levels. Oddly, the prospect does not improve very much as one ascends until one gets to the very top.
For the fourth income-tenth from the bottom received only 6 per cent of income, and the fifth income-tenth received only 8 per cent. It is not until the sixth tenth from the bottom that one finds 10 per cent Of the receivers obtaining 10 percent of the income, balanced distribution. The next highest got 11 per cent, the next received 13 per cent and the next to the top got 16 per cent.
But if the top income-tenth, which received 27 per cent of income in 1955, were to be broken down into 1 per cent groups, we would find, as established by Lampman, that the top 1 per cent got the lion's share. For the higher one ascends, the fewer the number of persons involved, the greater the percentages of participation in economic advantages. Again let me remind readers, these incomes are from employment as well as from assets. It is the asset-derived income that is the most desirable, involving little or no strain on one's time or energy. With that kind of income one is not chained to a
job, often ungratifying in itself. With asset-income one can choose one's line of endeavor or choose to be completely idle while others work.
Inadequate Counter-Measures
Not only is poverty in the United States very deep and widespread, Dr. Kolko clearly shows, but the various New Deal measures devised to mitigate it-Social Security, unemployment insurance, disability relief, minimum wage laws and the like-are quite inadequate in their coverage. There is no such thing, as newspapers repeatedly insist, as an embryonic Welfare State in the United States. This is evident in the fact that the average monthly oldage insurance payment in 1963 was $77. 03, or $924. 36 per year.
As to savings by each income-tenth, the lowest income-tenth has long lived on a deficit, From 1929 to 1950 this deficit varied from 2 to 35 per cent, standing at 16 per cent in 1950. Not only does this group not own anything but it is deeply in debt. The lower 50 per cent of income receivers in 1950 had a net savings deficit of nearly 18. 5 per cent; the sixth income-tenth from the bottom had only 4 per cent of net national savings, with the figures rising thereafter by income-tenths from 10 to 11 to 20 and to 72 per cent for the top tenth. During the depression years of 1935-36, the net savings of the top income-tenth amounted to 105 per cent, of the next income-tenth 13 per cent, of the next income-tenth 6 per cent and of the fourth income-tenth 2 per cent-adding up to 126 per cent. But 60 per cent of the lower income receivers incurred debt of 25 per cent as an offset. 35 In this numbers game much of what one saves another owes.
To all this some hardy souls respond by saying, "Well, that's the way the ball bounces, that's the way the cookie crumbles. " In other words, all this is the consequence of the inevitable interplay of chance factors in which some persons are the lucky winners or the more intelligent players.
Planned Consequences
But actually the results at both the top and the bottom are contrived. They are the outcome of pertinacious planning. For example, it is known on the basis of other careful studies that the lower income levels are disproportionately populated by Negroes and poor southern whites. They don't account for all of the lowly by any means; but they do account for very many. And the economic plight of both the Negroes and the southern whites is the consequence of a longstanding political power play. Southern Democratic Party gravy-train politicians after the Civil War, seeing a popular local issue in "restoring slavery in all but the name," 36 asked for and received northern Republican acquiescence that would insure personally lucrative Democratic one-party dictatorial rule in the South. In return they agreed to deliver unbroken congressional support to the Republicans in blocking the rising national clamor, mainly from organized labor, for needed social legislation. For nearly a hundred years the scheme has worked perfectly, and the politically confused southern white in holding the Negro down, culturally and economically, has kept himself down to the same level. The scheme has had wider effects, as it has enabled the wealthy backbone of the Republican Party to keep a good portion of the rest of the country deprived, particularly of needed educational and social measures. The social role of the Republican Party ever since the death of Lincoln has been delay and obstruction, even though off and on there have emerged responsible, forward-looking Republicans.
This isn't to say that the foregoing paragraph accounts for the existence of deep and widespread poverty in the midst of fabulous wealth, but it accounts for some of it.
The Mild War on Poverty
President Lyndon B. Johnson in 1964 startled average newspaper readers by suddenly announcing, out of a seemingly cloudless sky, his "war on poverty. " This was widely interpreted, cynically, as a pure vote-getting ruse, of no intrinsic merit. For was it not a fact, as newspapers vowed, that there was no genuine poverty in the prosperous, high- living United States? But since then, as a result of official speeches and the passage of an initial anti-poverty measure exceeding $1 billion, the country has been gradually introduced to the strange, even subversive, notion that poverty is prevalent in the United States.
The argument has now shifted, as it is always bound to in the nimble hands of the dialecticians, to what precisely constitutes poverty. Sargent Shriver, director of the Office of Economic Opportunity and former President John F. Kennedy's brother-in- law, suggested that a family of four with a yearly annual income under $3,000 and an individual with an income under $1,500 be classified as poor, which would put more than 30 per cent of all families in the poverty-stricken category according to University of Michigan figures. For the University of Michigan Survey of Consumer Finances showed for 1962 that, while the figures of the lowest tenth of all spending units (households) were not then available, the figure for the next to the lowest tenth was $1,510 for each household; and for the third from the lowest tenth it was $2,510. For the fourth tenth from the bottom it was only $3,350. 37 Mr. Shriver subsequently raised his figures to $3,130 and $1,540.
The United States Chamber of Commerce predictably challenged Mr. Shriver's first gauge of poverty as too high. "The Chamber of Commerce based its criticism of the old gauge," said the New York Times, "on the fact that a small family living in a warm climate and growing most of its own food could live comfortably on $3,000 a year. "38 As the patient could rest easily on this amount of income, why introduce him to luxuries--such as medicine?
Mr. Shriver, himself a wealthy man, more recently indicated that 35 million American families are "poverty-stricken," untouched by existing programs for assisting the poor. 39 If one assigns only 3 persons to a poor family, many of which have many more, one obtains 105 million persons out of a population of 180-plus million.
Rather obtusely the Chamber of Commerce people did not recognize that the Administration, in dealing with a serious situation (for whatever motives, humanitarian or self-serving) had produced a deceptive new official yardstick for measuring poverty: income. Down through history poverty has always referred to lack of property. The man who had no property was defined as poor; the more property a man owned the less poor he was. Most people in the United States own little more property than do Russian peasants, and by that standard they are poor.
By the Shriver standard, if a family had income from uncertain employment of twice $3,130 a year it would not be poor. While many Americans by the Shriver standard are poor, most are not--even though they own nothing worth speaking of. But the Shriver standard makes it appear that most people are well off, which is hardly true.
Poverty Defined
For my part, I would say that anyone who does not own a fairly substantial amount of income-producing property or does not receive an earned income sufficiently large to make substantial regular savings or does not hold a well-paid securely tenured job is poor. He may be healthy, handsome and a delight to his friends--but he is poor. By this standard at least 70 per cent of Americans are certainly poor, although not all of these by any means are destitute or poverty-stricken. But, as was shown in the 1930's, Americans can become destitute overnight if deprived of their jobs, a strong support to mindless conformity. As a matter of fact, many persons in rather well-paid jobs, even executives, from time to time find themselves jobless owing to job discontinuance by reason of mergers, technical innovation or plant removal. Unable to get new jobs, they suddenly discover, to their amazement, that they are really poor, and they also discover by harsh experience to what specific conditions the word "poverty" refers. And even many of those who never lose their jobs often discover in medical and similar emergencies that they are as helpless as wandering beggars. They are, in fact, poor. In such eventualities the man of property is evidently in a different position. He is definitely not poor. And this is all I say.
Conditions in England and India
The United States, in the short period since the public lands were distributed to the people, often through the intermediation of profit-skimming railroads, has rather quickly been brought close to the position of older countries such as England. In 1911- 13 the small fraction of 0. 63 per cent of persons over age 25 in England owned 57 per cent of all capital, compared with 1. 84 per cent of such persons owning 51. 92 per cent of capital in 1946-47. In 1911-13 1. 53 per cent owned 66. 9 per cent of capital compared with 4. 56 per cent owning 63. 27 per cent of capital in 1946-47. 40 Observers see a slight tendency to equalization in these figures.
But in superstition-ridden India about 1 per cent of the population gets half of all income. 41
Apart from the differences in the proportions, a difference between the United States on the one hand and England and India on the other is that in the latter there is a much longer history behind each condition. In the United States it is recent.
Some Preliminary Conclusions
It should be evident in studying the Lampman and Federal Reserve figures on estates that the United States now has a well-established hereditary propertied class such as exists in Europe, which Americans have long looked upon disdainfully as the stronghold of class privilege. Great wealth in the United States, in other words, is no longer ordinarily gained by the input of some effort, legal or illegal, useful or mischievous, but comes from being named an heir. Almost every single wealth-holder of the upper half of 1 per cent arrived by this route.
Lampman's figures clearly indicate this. He noted that 40 per cent of the top wealth- holders are women. Now, while some women have garnered big money by their own efforts--Mary Pickford, Greta Garbo, Helena Rubinstein and a sprinkling of others in the world of entertainment and fashion--few women have been even modest fortune builders. Women simply do not occupy the money-making positions in finance, industry and politics. But they have been heirs.
It is true that estate splitting between husband and wife is increasingly resorted to in order to take advantage of tax provisos. But this works both ways. Women can split estates with men just as men can with women. And on the upper level of wealth it is usually wealthy people who marry each other. Otherwise it is front-page news. Even if it is contended that not so many as 40 per cent of the men are in the picture because of estate splitting, the men are, as heirs, prominent among the wealthy for another reason. Many men, having inherited a smaller estate, have expanded their wealth through shrewd operations. J. Paul Getty, whom certain English newspapers insistently refer to as "the richest man in the world," inherited $7 million from his father many years ago, thus placing him well in the millionaire class. He has through operations in the oil business gone well beyond this level. Nevertheless he is not "self made. " There are more than a few Gettys among the top wealth-holders.
It can therefore be concluded that at least 40 per cent of the men, or 24 per cent of all the top wealth-holders, are heirs, bringing to more than 60 per cent the hereditary proportion. I believe, on other grounds, that the proportion of male heirs in the group is much larger. Women, owing to their inexperience with financial affairs, are generally poor estate managers, Hetty Green notwithstanding. They are more easily victimized by specious schemes, fail to take advantage of obvious opportunities, and so tend to drop out of the group and to be under-represented. Men are usually financially more capable and their greater staying power entitles them statistically to a larger representation among the heirs than women. More conclusively, it is directly observable among the super-rich that the possessors--men or women--are simply heirs. They got there by listening to a will being read, not by schemes that fill some observers with unaccountable transports of delight, that others consider unspeakably ignoble. There are few newcomers, as we shall see in the next chapter.
Although a man who amassed his own money would figure only once among the propertied, some who are heirs are heirs many times over, having inherited from many testators. This has taken place on the upper, intermediate and lower levels of wealth. And this occasional process leads to further concentration.
The federal estate-tax statistics since 1916 show that an avalanche of wealth has been transferred over fifty years by testamentary bequest. Individuals inherited in nearly every case. Whatever the presence of rags-to-riches moneymakers in the past the acquisitors now are largely gone. The inheritors are in possession.
Extended Family Groups
Lampman's figures relate to individuals. They do not show that most of the people in the upper 1/2 of 1 per cent that now probably own at least 33 per cent (by value) of all assets are members of extended family groups. There are more than 1,600 Du Ponts, not all individually in the upper circle. There are sizable clusters of Rockefellers, Vanderbilts, Whitneys, Mellons, Woolworths, Fishers, Phippses, Hartfords and others. Through distaff marriages part of the big fortunes are concealed behind offbeat names, such as Cecil (Vanderbilt). The well-groomed heirs or their representatives often sit together amicably on the same boards of directors. Most belong to the same metropolitan clubs.
But the rather well-populated group that Lampman calls top wealth-holders also certainly contains many blanks as far as big wealth is concerned. It will be recalled he stressed that more than half of his top group had no more than $125,000 of assets--a paltry sum, even though in thousands of neighborhoods around the country a man with such wealth would be looked upon as a Croesus.
Owing to intermarriage among the wealthy, property holdings tend to concentrate in fewer and fewer hands. For the propertied, not without sound reason, often suspect the marital motivations of the nonpropertied. 42
These processes cannot help but concentrate wealth and make the scope of new estate builders less ample. There is less and less room at the top for new moneymakers. Although there are new successful enterprises, they are all comparatively small. Some are absorbed by the bigger enterprises on advantageous terms. None shows the slightest sign of becoming another Ford Motor Company. All the big bets seem to be down. Rien n'a va plus.
Apologists on the Defensive
But this panorama of contemporary private wealth and power throws some doubt on the doctrines of earlier apologists for the big fortunes. It was once widely preached from pulpits as well as editorial pages that great wealth was either the reward for social service (such as graciously building a vast industry to cater to an undeserving public) or it represented the inevitable, natural and wholly acceptable outcome of an evolutionary struggle in which the fittest survived and the unfit landed in the gutter. On the basis of this doctrine the present top wealth-holders are the offspring of public benefactors and the fittest of a past generation. Fortunately, they are not themselves facing the same tests of fitness.
It was also once often said that, if all money were equally divided among all the people, in less than a generation it would be back in the same hands. While this may have been true when the original fortune-builders were alive, it is hardly true any longer, when the heirs would have to contend with gentry like Mr. James J. Hoffa and Mr. Frank Costello. In a struggle waged outside the Marquis of Queensberry rules (which is where the fortune-builders operated) most of the present wealth-holders, many of them personally attractive, would hardly be voted most likely to succeed. Could they make much headway against Jake Guzik and Tony Accardo? Al Capone and Machine- Gun Jack McGurn?
Down through the years all the estates have been subject to taxation--federal and sometimes state--but to much less than is commonly supposed, as we shall see. There is no process of estate destruction taking place in the United States through taxation, as is commonly suggested by propagandists of the Establishment. And few estates, unless there are no heirs, pass to institutions. But many estates pass indirectly as well as directly to heirs through various arrangements such as delayed-action trust funds, endowments and foundations. The indirectly conveyed portions are operated by the heirs for their own beneficial interest.
The Fortress of Interlaced Wealth
What has developed, then, under the operation of inheritance laws handed down from days when property ownership was far more modest to a day when vast properties have been created mainly by technology, is a huge, solid fortress of interlaced wealth against which even clever new wealthseekers, try as they will, cannot make a tiny dent. About the only way one can get in (and that way isn't always rewarding) is by marriage. If a potential new Henry Ford produces an invention and sets out with friends to market it he generally finds (as did Professor Edwin H. Armstrong, inventor of wide-swing radio frequency modulation, the regenerative circuit for vacuum tubes, ultra short-wave super-regeneration and the superheterodyne circuit) that it is boldly infringed by
established companies. After he spends the better part of a lifetime in court straining to protect his rights he may win (usually he does not); but if he wins he collects only a percentage royalty. What the infringers can show they have earned through their promotional efforts they may keep, with the blessings of the courts, who are sticklers for equity: All effort must be rewarded. And then the overwrought inventor, as Professor Armstrong did in 1954, can commit suicide.
Henry Ford came up when there were only small competing companies in the field. When established companies are in the field, inventors must sell out, or suffer a fate similar to Professor Armstrong's.
The Role of the People
The inheritance laws have played a major role in the development of great fortunes. But they haven't been the only factor. A small group, unless possessed of direct dictatorial power, could not unaided have served itself so generously, even if masters of stealth. Writing about the wealthy in America's Sixty Families, page 5, I remarked: "The situation, for which the people themselves are in a great measure to blame. . . . " The public itself has facilitated and continues to facilitate the building of vast hereditary private power within the American elective system of government. This public is in many ways a self-made victim, as sociologists now regard many victims of crimes.
The contrast I have posed between concentrated wealth and widely distributed poverty may seem to suggest that I am arguing for the equalization of wealth. But though there is obviously considerable room for some equalization I shall not argue for it because there are millions of people who could not hold on to $10 for five minutes or $10,000 for five months.
If wealth were equalized, what would we have? As Lampman showed, if all asset- wealth as of 1953 were equally apportioned, there would be about $10,000 for each adult. Let us suppose that a share in this amount were held for each adult in a national trust supervised by the United States treasury. The income from each share at 5 per cent would be $500 per annum. If one adds this to the present amount of each person's earned income it would not amount to much, however welcome it would be for some in the lowest brackets.
If inequality of income is not the main question, what is?
Policy-Making Power of Wealth
First, the present concentration of wealth confers self-arrogated and defaulted political policy-making power at home and abroad in a grossly disproportionate degree on a small and not especially qualified mainly hereditary group; secondly, this group allocates vast economic resources in narrow, self-serving directions, both at home and abroad, rather than in socially and humanly needed public directions.
When, through its agents, it cannot enlist the government in support of its various plans at home and abroad it can, and does, frustrate the government in various proceedings that have full public endorsement. It involves the nation in cycles of ferocious wars that are to the interest of asset preservation and asset expansion but are contrary to the interest of the nation and the world. It can and does establish connections all over the world that covertly involve American power in all sorts of ways unknown until some last-minute denouement even to Congress and the president.
It doesn't do any of this maliciously, to be sure, any more than an elephant feels malice when it rubs against a sapling and breaks it in two. An elephant must behave like an elephant, beyond any moral stricture. And power of any kind must exert itself. Historically it has invariably exerted itself in its own self-visualized interests.
So, concentrated asset-wealth not only brings in large personal incomes, but confers on the owners and their deputies a disproportionately large voice in economic, political and cultural affairs. Thus the owners may make or frustrate public policy, at home and abroad.
Low Incomes of Vital Personnel
Managers of concentrated asset-wealth determine, among other things, how much is to be paid for various services--who is to be paid a great deal and who is to be paid very little. Some people, for the convenience purely of asset-wealth, are rewarded munificently for services of comparatively slight social importance--for example, certain leading company executives. Other persons are paid poorly for what are universally insisted to be superlatively valuable services--for example, scientists, engineers, artists and teachers. The pay of scientists in the United States in the 1960's, according to the National Science Foundation, is in the range $6,000-$15,000 per annum,43 far less than that of an astute salesman of encyclopedias or vacuum cleaners. Referring to "starvation wages," Paul Woodring, educational consultant to the Fund for the Advancement of Education of the Ford Foundation, said: "There are dozens of liberal arts colleges which pay average salaries as low as $3,000 per year and minimum salaries much lower still. " 44 If it is said that such compensation has more recently been increased (which isn't generally true), one may still ask: Is it anywhere near the astronomical level of executive salaries?
Of salaries of scientists and teachers, a company director would say: "What have we to do with those? They aren't in our jurisdiction. The executive salaries, I admit, are.
There were, then, in excess of 27,000 millionaires in the country in 1953--not only the greatest such aggregation at one time in the history of the world but a number greater than the aggregation throughout all of history before 1875 (as of 1966, millionaires numbered about 90,000). If consumer prices had remained stable from 1944 to 1953 there would have been fewer. "In 1944 there were 13,297 millionaires," says Lampman. "In 1953 there were 27,502 millionaires in 1953 prices, but only 17,611 in 1944 prices. "15
What of the 1965-67 year-span? As the prices of stocks advanced tremendously in the preceding dozen years, one can only conclude that the proportion of wealth of the top wealth-holders also advanced impressively. For this small group, as we have seen, owns more than 80 per cent of stocks. The Dow-Jones average of 65 industrial stocks stood at 216. 31 at the end of 1950; at 442. 72 in 1955; at 618. 04 in 1960; and at 812. 18 in March, 1964. As of May, 1965, it was well above 900. The less volatile Securities and Exchange Commission index of 300 stocks shows the same quadrupling in value, standing at 41. 4 in 1950; 81. 8 in 1955; 113. 9 in 1960; and 160. 9 in March, 1964. How many employees have experienced a fourfold increase in salaries in the same period?
The rise in value of stocks, however, surely invalidates one of Lampman's speculations, to this effect: "Our finding that the share of wealth held by the top 2 per cent of families fell from about 33 to 29 per cent from 1922 to 1953, or about one- eighth, would seem compatible with . . . the general belief that there has been some lessening of economic inequality in the United States in recent decades. "16 The more recent rise in stock prices and in corporation earnings shatters even that slight concession.
Professor A. A. Berle, Jr. , has rushed forward to hail the Lampman showing that the upper 1 per cent saw its participation reduced from 32 per cent of all wealth in 1922 to 25 per cent in 1953; but his celebration was premature and he did not fully report Lampman, who indicated that the participation had been reduced from 1922 to 1949 but thereafter was again increasing. 17
The Lampman findings were extended to 1958 in an extremely sophisticated statistical critique presented in 1965 to the American Statistical Association by James D. Smith and Staunton K. Calvert of the Statistics Division of the Internal Revenue Service. 18
After reviewing Lampman, revising him in a minor particular, Smith and Calvert conclude that "top wealth-holders owned 27. 4 percent of gross and 28. 3 percent of net prime wealth in 1953, but increased their share to 30. 2 and 32. 0 percent respectively by 1958. These data support Lampman's conclusion that the share of top wealth-holders has been increasing since 1949. " Prime wealth, as they explain, is total wealth less the value of assets in trust funds and pension reserves.
This is where the question rests on the basis of the most recent data supplied by leading authorities in the field: Concentration of wealth in a few hands is intensifying.
Actually, in view of market valuations, the share of top wealth-holders at this writing is easily the greatest in history. It is my hypothesis that the share of the top 1/2 of 1 per cent now exceeds the 32. 4 per cent of this group for 1929. Later studies should show that the proportions for all groups of top wealth-holders studied by Lampman have been significantly exceeded. So much for Lampman although there is much else in his razor'- sharp book that merits attention. 19
The University of Michigan Study
Although showing some minor variations, the continuing University of Michigan survey dovetails with the Lampman study and fully supports it.
First, it was found that 3 per cent of spending units in 1953 had $60,000 or more total assets; this compares with 2. 3 per cent of individuals in the Lampman study. A "spending unit" consisted of any one or more persons established as a household.
According to this University of Michigan "Survey of Consumer Finances," the upper 11 per cent of the nation's 54 million spending units held 56 per cent of the total assets and 60 per cent of the net worth of all private holdings in the country. "While this group held only 30 per cent of consumer capital," Lampman comments (p. 195), they held 80 per cent of business and investment assets. " 20
According to the 1960 University of Michigan "Survey of Consumer Finances," 86 per cent of all spending units in the country owned no stock whatever. Of incomes under $3,000, 95 per cent owned no stock; of incomes of $3,000-$5,000, 93 per cent owned no stock; and of incomes of $5,000-$7,500, 87 per cent owned no stock. The class of $7,500-$10,000 incomes was 78 per cent without stock ownership, while even in the $10,000-$15,000 income class 61 per cent owned no stock. In 1963 a total of 83 per cent owned no stock. Stock ownership, it is clear, was being somewhat more widely diffused as long-term holders gradually unloaded at rising prices. Whereas in 1953 only 44 per cent of the income class above $15,000 owned no stock, in 1960 this same broad class included only 26 per cent without stock ownership. 21
For some years the New York Stock Exchange and the Advertising Council, as part of a campaign to show that a "people's capitalism" exists with a widely diffused ownership in American industry, have been busily pyramiding figures. These computations show that in 1956 there were 8,630,000 American shareholders, and in 1962 there were 17,010,000. 22 The figure more recently being cited is 20 million . 23
Even though the method of their compilation is challenged by statisticians, these computations could all be true and still not after the implications of the Lampman analysis and University of Michigan surveys. For if 17 per cent of spending units owned stock in 1963, as the University of Michigan survey indicates, that would be well over 17 million persons. And anyone would qualify as a stockholder if he owned only one share worth 10 cents.
That most stockholders own trivial amounts of stock is shown by the University of Michigan figures for 1963. The 17 per cent of spending units holding stock broke down in this way: 3 per cent held less than $500 worth; 2 per cent held $500 to $999 worth; 4 per cent held $1,000 to $4,999 worth; and 2 per cent held $5,000 to $9,999 worth. As far as stock ownership goes, these are all insignificant figures. Yet they make up 75 per cent of the households holding stock. Only 4 per cent of all spending units owned more than $10,000 of stock. 24 But most of this group, exceeding four million people, also owned little stock; for we are already aware that a group consisting of 1. 6 per cent of the population owns more than 80 per cent of all stock, 100 per cent of state and local government bonds and 88. 5 per cent of corporate bonds. Less than 20 per cent of all stock in 1963, then, was owned by some 15. 4 million people.
Throughout this study, therefore, it is going to be taken as fully established that 1. 6 per cent of the adult population own at least 32 per cent of all assets, and nearly all the investment assets, and that 11 per cent of households (following the University of Michigan study) own at least 56 per cent of the assets and 60 per cent of the net worth. It is even possible, as we have seen, that 1/2 of 1 per cent own more than one-third of all productive assets as of 1965-67. It is evident that this leaves very little to be apportioned among 90 per cent of the population. It will be recalled that Lampman showed 50 per
cent owning virtually nothing, with an average estate size of only $1,800 as of 1953. This same study, according to my tabulation numbered 4, showed that 89. 6 per cent of the adult population had available to it only 47. 8 per cent of the assets, while 50 per cent had only 8. 3 per cent. The University of Michigan figures and the Lampman figures, in short, coincide rather closely although developed by different methods.
Supporting Studies
Every other serious study supports these findings. The Senate Temporary National Economic Committee (TNEC) just before World War II inquired into the distribution of stock among 8. 5 million shareholders in 1,710 major companies as of 1937-39 and found that 4 per cent of all common stockholders held 74. 9 per cent of the stock, and 4. 5 per cent of the preferred stockholders held 54. 8 per cent. 25 Looking into the same situation as of 1951, the Brookings Institution of Washington, D. C. , found that in 2,991 major corporations only 2. 1 per cent of the holders owned 58 per cent of the common stock and 1. 1 per cent of the holders owned 46 per cent of the preferred stock. Two- thirds of all common stockholders owned only 10 per cent of the shares. 26 Harvard's J. Keith Butters estimated that in 1949 the spending units (households) that owned $100,000 or more in marketable stock, comprising 1 /5 of 1 per cent of all spending units and 2 per cent of stockholders owned between 65 and 71 per cent of all marketable stock held by individuals. 27 None of these studies took into account the beneficial interest of individuals in stock held by institutions for the account of individuals, which swells the percentages proportionately.
The Lampman estate studies do not necessarily reveal the sizes of fortunes. 'This is because many of the fortunes are systematically distributed during the lifetime of the owner, mainly for the benefit of heirs. At the time of death the fortune is reduced.
Again, in extrapolating from the estates to the rest of the population, at least two distortions are discernible. First, only adults are considered by Lampman, whereas a considerable number of children are millionaires owing to having had trust funds settled upon them. Second, the economic position of age groups is not strictly comparable between the affluent and the poor because of an average earlier death rate for the latter.
But, on the whole, the Lampman study came closer than anyone had yet come to showing the asset position of all adult age-sex groups.
Definitive Data from the Federal Reserve
Strongly persuasive though all these studies are, it is possible to be definitive about the distribution of wealth in the United States, on the basis of findings put forth recently under the highest official auspices.
In a complex and comprehensive study prepared for the Board of Governors of the Federal Reserve System on the basis of Census Bureau data under the title Survey of Financial Characteristics of Consumers, the cold figures are officially presented on asset holdings as of December 31, 1962, removing the entire subject from the realm of pettifogging debate.
On that date the number of households in the country worth $500,000 or more was carefully computed at about 200, 000. 28 The number of millionaires at the year-end was more than 80,000, compared with Lampman's 27,000 as of 1953. Only 39 per cent of these 200,000 had no inherited assets. 29 These 200,000 at the time held 22 per cent of
all wealth, while 57 per cent of the wealth was held by 3. 9 million individual consumer units worth $50,000 or more.
The panorama of wealth-holding throughout the populace was as follows (in millions of units):30
All consumer units
(households)
Millions
57. 9
Percentage of
Households
100. 0
1. 8
8. 0
16. 0
18. 0
16. 0
23. 0
11. 0
5. 0
1. 25
Less than 1. 0
Less than 0. 4
Size of wealth:
Negative 1. 0
Zero 4. 7
$1-$999 9. 0
$1,000-$4,999 10. 8
$5,000-$9,999 9. 1
$10,000-$24,999 13. 3
$25,000-$49,999 6. 2
$50,000-$99,999 2. 5
$100,000-$199,999 . 7
$200,000-$499,999 . 5
$500,000 and up . 2
In stating that 200,000 households held 22 per cent of the wealth there is some danger of suggesting that the power of these 200,000 is less than it actually is. The nature of the wealth held is of determining importance here. in general, the lower wealth-holders mostly own inert assets such as automobiles, small amounts of cash and some residential equity, while the upper wealth-holders mostly own corporate equities in an aggregate amount sufficient to show that they are in full control of the productive side of the economic system.
Households in the number of 200,000 worth $500,000 and more held 32 per cent of all investment assets and 75 per cent of miscellaneous assets, largely trust funds, while 500,000 worth $200,000 to $499,999 held 22 per cent of investment assets. The 700,000 households worth $100,000 to $199,999 held 11 per cent of investment assets. 31
Center of Economic Political Control
We see, then, that 1. 4 million households owned 65 per cent of investment assets, which are what give economic control. Automobile and home ownership and bank deposits do not give such control. The economic power of the upper 200,000 is greater than indicated by their ownership of 22 per cent ,of all assets; it amounts to 32 per cent of investment assets.
Experts concede that a 5 per cent ownership stake in a large corporation is sufficient in most cases to give corporate control. It is my contention that general corporate control lies in this group of 200,000 very probably and almost certainly lies in the combined group of 700,000 wealthiest households, slightly more than 1 per cent, owning assets worth $200,000 and more.
There is a danger here, as the erudite will recognize, of perpetrating the logical fallacy of division--that is, arguing that what is true of a whole is true of its individual parts. That argument here would be that because 200,000 households own 32 per cent of investment assets they each hold a stake of exactly 32 per cent in the corporate system. I do not make such a ridiculous argument. First, this upper group concentrates its holdings for the most part in leading corporations, bypassing the million or so papertiger corporations of little or no value. Again, as just noted, far less than 32 per
cent of ownership in any individual corporation is required to control it. Control, as we shall see, is the relevant factor where power is concerned. Usually comparatively little ownership is necessary to confer complete corporate control which, in turn, extends to participation in political control.
A man whose entire worth lies in 5 per cent of the capital stock of a corporation capitalized at $2 billion is worth only $100 million. But as this 5 per cent--and many own more than 5 per cent--usually gives him control of the corporation, his actual operative power is of the order of $2 billion. Politically his is a large voice, not only because of campaign contributions he may make but by reason of all the legislative law firms, congressional and state-legislative, under retainer by his corporation; for every national corporation has law firms in every state. There is additionally to be reckoned with all the advertising his corporation has to dispense among the mass media as a tax- free cost item, the lobbyists his corporation puts into the field and the cultural-charitable foundations both he and the corporation maintain.
Such a man, worth only $100 million net, is clearly a shadowy power in the land, his ownership stake vastly multiplied by what he controls--other people's property as well as his own. And there are more than a few such.
On the other hand, many intelligent citizens today complain in the face of the alleged complexity of affairs of feelings of powerlessness. Their feelings are justified. For they are in fact politically powerless.
The actual power of such concentrated ownership, therefore, is much greater than its proportion in the total of investment assets. The corporate power of the top 200,000, and certainly of the top 700,000, is actually 100 per cent. The power of this top layer corporatively would be no greater if it owned 100 per cent of investment assets. Actually, it might be less: It would then receive no support from many tremulous small holders but would probably find them in political opposition.
As to distribution of investment assets among smaller property holders, 1 per cent are owned by the $5,000 to $9,999 group, 7 per cent by the $10,000 to $24,999 group, 11 per cent by the $25,000 to $49,999 group and 15 per cent by the $50,000 to $99,999 group, or 34 per cent in all. In this group of comparatively modest means one finds some of the most voluble supporters of the established corporate way. Within their own terms they are all winners, certainly hold some financial edge. Most of them, as their expressions at stockholder meetings show, greatly admire the larger stockholders. In their eyes, a divinity doth hedge the large stockholders.
Net Worth in the Populace
Approached in terms of net worth (assets less debt) the situation of the lower populace is more unfavorable, as shown in the following table. 32
Net Worth
Negative (deficit)
Zero
$1-$999
$1,000-$4,999
$5,000-$9,999
$10,000-$24,999
$25,000-$49,999
$50,000-$99,999
$100,000-$199,999
Percentage of
Consumer Units
11
5
12
17
15
23
10
4
1
$200,000-$499,999
$500,000-$999,999
$1,000,000 and more
1
Less than 1/2 of 1 per cent
Less than 1/2 of 1 per cent
As this table shows, 28 per cent of the households had a net worth of less than $1,000; the 11 per cent with a deficit, on balance in debt in varying amounts, greatly exceeded the percentage of those worth $50,000 and more. The less than 1/10th of 1 per cent who were millionaires (from time to time pointed to with pride by Time, Fortune and the Wall Street Journal) were offset by 11 per cent of households worth less than zero. Add the zerogroup and one obtains 16 per cent of all households. Forty-five per cent of all households had a net worth of less than $5,000. Is this affluence?
The View from the Bottom
A sensitive statistical analysis meriting the closest attention by all students of the distribution of wealth is that of Harvard's Dr. Gabriel Kolko, Wealth and Power in America. Not only does he develop essentially the same perspective as Lampman and the University of Michigan--"Since World War II, one-tenth of the nation has owned an average of two-thirds of liquid assets" (p. 49)--but he attacks the problem from below. He has no difficulty in showing, on the basis of official figures that, as of affluent 1957, 44 per cent of the spending units (households) lived below the maintenance level set by U. S. Bureau of Labor Statistics budgets, and that 27. 5 per cent lived below the emergency level. 33 These figures represent a slight improvement over 1947, when the figures were 51. 2 per cent and 27. 5 per cent.
Dr. Kolko approaches the problem via income from all sources, employment as well as assets. As he shows, using Bureau of Census and University of Michigan figures, the distribution of income in the United States is fantastically lopsided. Whereas the lowest tenth of the population in all years from 1947 through 1955 received only 1 per cent of national personal income after federal taxes, the upper tenth in the same years received from 27 to 31 per cent. The second from the lowest income-tenth received 3 per cent of income from 1947 through 1955 except for the years 1953 and 1954, when it received 4 per cent. The third from the bottom income-tenth received 5 per cent throughout these years.
For 1947-55, in other words, the three lowest income-tenths, or 30 per cent of recipients, received 9 per cent of national income after taxes compared with a varying 56-58 per cent for the three upper income-tenths. 34 These figures: spell poverty in all starkness--particularly in view of the greater concentration of children on the lower and poorly guided levels. Oddly, the prospect does not improve very much as one ascends until one gets to the very top.
For the fourth income-tenth from the bottom received only 6 per cent of income, and the fifth income-tenth received only 8 per cent. It is not until the sixth tenth from the bottom that one finds 10 per cent Of the receivers obtaining 10 percent of the income, balanced distribution. The next highest got 11 per cent, the next received 13 per cent and the next to the top got 16 per cent.
But if the top income-tenth, which received 27 per cent of income in 1955, were to be broken down into 1 per cent groups, we would find, as established by Lampman, that the top 1 per cent got the lion's share. For the higher one ascends, the fewer the number of persons involved, the greater the percentages of participation in economic advantages. Again let me remind readers, these incomes are from employment as well as from assets. It is the asset-derived income that is the most desirable, involving little or no strain on one's time or energy. With that kind of income one is not chained to a
job, often ungratifying in itself. With asset-income one can choose one's line of endeavor or choose to be completely idle while others work.
Inadequate Counter-Measures
Not only is poverty in the United States very deep and widespread, Dr. Kolko clearly shows, but the various New Deal measures devised to mitigate it-Social Security, unemployment insurance, disability relief, minimum wage laws and the like-are quite inadequate in their coverage. There is no such thing, as newspapers repeatedly insist, as an embryonic Welfare State in the United States. This is evident in the fact that the average monthly oldage insurance payment in 1963 was $77. 03, or $924. 36 per year.
As to savings by each income-tenth, the lowest income-tenth has long lived on a deficit, From 1929 to 1950 this deficit varied from 2 to 35 per cent, standing at 16 per cent in 1950. Not only does this group not own anything but it is deeply in debt. The lower 50 per cent of income receivers in 1950 had a net savings deficit of nearly 18. 5 per cent; the sixth income-tenth from the bottom had only 4 per cent of net national savings, with the figures rising thereafter by income-tenths from 10 to 11 to 20 and to 72 per cent for the top tenth. During the depression years of 1935-36, the net savings of the top income-tenth amounted to 105 per cent, of the next income-tenth 13 per cent, of the next income-tenth 6 per cent and of the fourth income-tenth 2 per cent-adding up to 126 per cent. But 60 per cent of the lower income receivers incurred debt of 25 per cent as an offset. 35 In this numbers game much of what one saves another owes.
To all this some hardy souls respond by saying, "Well, that's the way the ball bounces, that's the way the cookie crumbles. " In other words, all this is the consequence of the inevitable interplay of chance factors in which some persons are the lucky winners or the more intelligent players.
Planned Consequences
But actually the results at both the top and the bottom are contrived. They are the outcome of pertinacious planning. For example, it is known on the basis of other careful studies that the lower income levels are disproportionately populated by Negroes and poor southern whites. They don't account for all of the lowly by any means; but they do account for very many. And the economic plight of both the Negroes and the southern whites is the consequence of a longstanding political power play. Southern Democratic Party gravy-train politicians after the Civil War, seeing a popular local issue in "restoring slavery in all but the name," 36 asked for and received northern Republican acquiescence that would insure personally lucrative Democratic one-party dictatorial rule in the South. In return they agreed to deliver unbroken congressional support to the Republicans in blocking the rising national clamor, mainly from organized labor, for needed social legislation. For nearly a hundred years the scheme has worked perfectly, and the politically confused southern white in holding the Negro down, culturally and economically, has kept himself down to the same level. The scheme has had wider effects, as it has enabled the wealthy backbone of the Republican Party to keep a good portion of the rest of the country deprived, particularly of needed educational and social measures. The social role of the Republican Party ever since the death of Lincoln has been delay and obstruction, even though off and on there have emerged responsible, forward-looking Republicans.
This isn't to say that the foregoing paragraph accounts for the existence of deep and widespread poverty in the midst of fabulous wealth, but it accounts for some of it.
The Mild War on Poverty
President Lyndon B. Johnson in 1964 startled average newspaper readers by suddenly announcing, out of a seemingly cloudless sky, his "war on poverty. " This was widely interpreted, cynically, as a pure vote-getting ruse, of no intrinsic merit. For was it not a fact, as newspapers vowed, that there was no genuine poverty in the prosperous, high- living United States? But since then, as a result of official speeches and the passage of an initial anti-poverty measure exceeding $1 billion, the country has been gradually introduced to the strange, even subversive, notion that poverty is prevalent in the United States.
The argument has now shifted, as it is always bound to in the nimble hands of the dialecticians, to what precisely constitutes poverty. Sargent Shriver, director of the Office of Economic Opportunity and former President John F. Kennedy's brother-in- law, suggested that a family of four with a yearly annual income under $3,000 and an individual with an income under $1,500 be classified as poor, which would put more than 30 per cent of all families in the poverty-stricken category according to University of Michigan figures. For the University of Michigan Survey of Consumer Finances showed for 1962 that, while the figures of the lowest tenth of all spending units (households) were not then available, the figure for the next to the lowest tenth was $1,510 for each household; and for the third from the lowest tenth it was $2,510. For the fourth tenth from the bottom it was only $3,350. 37 Mr. Shriver subsequently raised his figures to $3,130 and $1,540.
The United States Chamber of Commerce predictably challenged Mr. Shriver's first gauge of poverty as too high. "The Chamber of Commerce based its criticism of the old gauge," said the New York Times, "on the fact that a small family living in a warm climate and growing most of its own food could live comfortably on $3,000 a year. "38 As the patient could rest easily on this amount of income, why introduce him to luxuries--such as medicine?
Mr. Shriver, himself a wealthy man, more recently indicated that 35 million American families are "poverty-stricken," untouched by existing programs for assisting the poor. 39 If one assigns only 3 persons to a poor family, many of which have many more, one obtains 105 million persons out of a population of 180-plus million.
Rather obtusely the Chamber of Commerce people did not recognize that the Administration, in dealing with a serious situation (for whatever motives, humanitarian or self-serving) had produced a deceptive new official yardstick for measuring poverty: income. Down through history poverty has always referred to lack of property. The man who had no property was defined as poor; the more property a man owned the less poor he was. Most people in the United States own little more property than do Russian peasants, and by that standard they are poor.
By the Shriver standard, if a family had income from uncertain employment of twice $3,130 a year it would not be poor. While many Americans by the Shriver standard are poor, most are not--even though they own nothing worth speaking of. But the Shriver standard makes it appear that most people are well off, which is hardly true.
Poverty Defined
For my part, I would say that anyone who does not own a fairly substantial amount of income-producing property or does not receive an earned income sufficiently large to make substantial regular savings or does not hold a well-paid securely tenured job is poor. He may be healthy, handsome and a delight to his friends--but he is poor. By this standard at least 70 per cent of Americans are certainly poor, although not all of these by any means are destitute or poverty-stricken. But, as was shown in the 1930's, Americans can become destitute overnight if deprived of their jobs, a strong support to mindless conformity. As a matter of fact, many persons in rather well-paid jobs, even executives, from time to time find themselves jobless owing to job discontinuance by reason of mergers, technical innovation or plant removal. Unable to get new jobs, they suddenly discover, to their amazement, that they are really poor, and they also discover by harsh experience to what specific conditions the word "poverty" refers. And even many of those who never lose their jobs often discover in medical and similar emergencies that they are as helpless as wandering beggars. They are, in fact, poor. In such eventualities the man of property is evidently in a different position. He is definitely not poor. And this is all I say.
Conditions in England and India
The United States, in the short period since the public lands were distributed to the people, often through the intermediation of profit-skimming railroads, has rather quickly been brought close to the position of older countries such as England. In 1911- 13 the small fraction of 0. 63 per cent of persons over age 25 in England owned 57 per cent of all capital, compared with 1. 84 per cent of such persons owning 51. 92 per cent of capital in 1946-47. In 1911-13 1. 53 per cent owned 66. 9 per cent of capital compared with 4. 56 per cent owning 63. 27 per cent of capital in 1946-47. 40 Observers see a slight tendency to equalization in these figures.
But in superstition-ridden India about 1 per cent of the population gets half of all income. 41
Apart from the differences in the proportions, a difference between the United States on the one hand and England and India on the other is that in the latter there is a much longer history behind each condition. In the United States it is recent.
Some Preliminary Conclusions
It should be evident in studying the Lampman and Federal Reserve figures on estates that the United States now has a well-established hereditary propertied class such as exists in Europe, which Americans have long looked upon disdainfully as the stronghold of class privilege. Great wealth in the United States, in other words, is no longer ordinarily gained by the input of some effort, legal or illegal, useful or mischievous, but comes from being named an heir. Almost every single wealth-holder of the upper half of 1 per cent arrived by this route.
Lampman's figures clearly indicate this. He noted that 40 per cent of the top wealth- holders are women. Now, while some women have garnered big money by their own efforts--Mary Pickford, Greta Garbo, Helena Rubinstein and a sprinkling of others in the world of entertainment and fashion--few women have been even modest fortune builders. Women simply do not occupy the money-making positions in finance, industry and politics. But they have been heirs.
It is true that estate splitting between husband and wife is increasingly resorted to in order to take advantage of tax provisos. But this works both ways. Women can split estates with men just as men can with women. And on the upper level of wealth it is usually wealthy people who marry each other. Otherwise it is front-page news. Even if it is contended that not so many as 40 per cent of the men are in the picture because of estate splitting, the men are, as heirs, prominent among the wealthy for another reason. Many men, having inherited a smaller estate, have expanded their wealth through shrewd operations. J. Paul Getty, whom certain English newspapers insistently refer to as "the richest man in the world," inherited $7 million from his father many years ago, thus placing him well in the millionaire class. He has through operations in the oil business gone well beyond this level. Nevertheless he is not "self made. " There are more than a few Gettys among the top wealth-holders.
It can therefore be concluded that at least 40 per cent of the men, or 24 per cent of all the top wealth-holders, are heirs, bringing to more than 60 per cent the hereditary proportion. I believe, on other grounds, that the proportion of male heirs in the group is much larger. Women, owing to their inexperience with financial affairs, are generally poor estate managers, Hetty Green notwithstanding. They are more easily victimized by specious schemes, fail to take advantage of obvious opportunities, and so tend to drop out of the group and to be under-represented. Men are usually financially more capable and their greater staying power entitles them statistically to a larger representation among the heirs than women. More conclusively, it is directly observable among the super-rich that the possessors--men or women--are simply heirs. They got there by listening to a will being read, not by schemes that fill some observers with unaccountable transports of delight, that others consider unspeakably ignoble. There are few newcomers, as we shall see in the next chapter.
Although a man who amassed his own money would figure only once among the propertied, some who are heirs are heirs many times over, having inherited from many testators. This has taken place on the upper, intermediate and lower levels of wealth. And this occasional process leads to further concentration.
The federal estate-tax statistics since 1916 show that an avalanche of wealth has been transferred over fifty years by testamentary bequest. Individuals inherited in nearly every case. Whatever the presence of rags-to-riches moneymakers in the past the acquisitors now are largely gone. The inheritors are in possession.
Extended Family Groups
Lampman's figures relate to individuals. They do not show that most of the people in the upper 1/2 of 1 per cent that now probably own at least 33 per cent (by value) of all assets are members of extended family groups. There are more than 1,600 Du Ponts, not all individually in the upper circle. There are sizable clusters of Rockefellers, Vanderbilts, Whitneys, Mellons, Woolworths, Fishers, Phippses, Hartfords and others. Through distaff marriages part of the big fortunes are concealed behind offbeat names, such as Cecil (Vanderbilt). The well-groomed heirs or their representatives often sit together amicably on the same boards of directors. Most belong to the same metropolitan clubs.
But the rather well-populated group that Lampman calls top wealth-holders also certainly contains many blanks as far as big wealth is concerned. It will be recalled he stressed that more than half of his top group had no more than $125,000 of assets--a paltry sum, even though in thousands of neighborhoods around the country a man with such wealth would be looked upon as a Croesus.
Owing to intermarriage among the wealthy, property holdings tend to concentrate in fewer and fewer hands. For the propertied, not without sound reason, often suspect the marital motivations of the nonpropertied. 42
These processes cannot help but concentrate wealth and make the scope of new estate builders less ample. There is less and less room at the top for new moneymakers. Although there are new successful enterprises, they are all comparatively small. Some are absorbed by the bigger enterprises on advantageous terms. None shows the slightest sign of becoming another Ford Motor Company. All the big bets seem to be down. Rien n'a va plus.
Apologists on the Defensive
But this panorama of contemporary private wealth and power throws some doubt on the doctrines of earlier apologists for the big fortunes. It was once widely preached from pulpits as well as editorial pages that great wealth was either the reward for social service (such as graciously building a vast industry to cater to an undeserving public) or it represented the inevitable, natural and wholly acceptable outcome of an evolutionary struggle in which the fittest survived and the unfit landed in the gutter. On the basis of this doctrine the present top wealth-holders are the offspring of public benefactors and the fittest of a past generation. Fortunately, they are not themselves facing the same tests of fitness.
It was also once often said that, if all money were equally divided among all the people, in less than a generation it would be back in the same hands. While this may have been true when the original fortune-builders were alive, it is hardly true any longer, when the heirs would have to contend with gentry like Mr. James J. Hoffa and Mr. Frank Costello. In a struggle waged outside the Marquis of Queensberry rules (which is where the fortune-builders operated) most of the present wealth-holders, many of them personally attractive, would hardly be voted most likely to succeed. Could they make much headway against Jake Guzik and Tony Accardo? Al Capone and Machine- Gun Jack McGurn?
Down through the years all the estates have been subject to taxation--federal and sometimes state--but to much less than is commonly supposed, as we shall see. There is no process of estate destruction taking place in the United States through taxation, as is commonly suggested by propagandists of the Establishment. And few estates, unless there are no heirs, pass to institutions. But many estates pass indirectly as well as directly to heirs through various arrangements such as delayed-action trust funds, endowments and foundations. The indirectly conveyed portions are operated by the heirs for their own beneficial interest.
The Fortress of Interlaced Wealth
What has developed, then, under the operation of inheritance laws handed down from days when property ownership was far more modest to a day when vast properties have been created mainly by technology, is a huge, solid fortress of interlaced wealth against which even clever new wealthseekers, try as they will, cannot make a tiny dent. About the only way one can get in (and that way isn't always rewarding) is by marriage. If a potential new Henry Ford produces an invention and sets out with friends to market it he generally finds (as did Professor Edwin H. Armstrong, inventor of wide-swing radio frequency modulation, the regenerative circuit for vacuum tubes, ultra short-wave super-regeneration and the superheterodyne circuit) that it is boldly infringed by
established companies. After he spends the better part of a lifetime in court straining to protect his rights he may win (usually he does not); but if he wins he collects only a percentage royalty. What the infringers can show they have earned through their promotional efforts they may keep, with the blessings of the courts, who are sticklers for equity: All effort must be rewarded. And then the overwrought inventor, as Professor Armstrong did in 1954, can commit suicide.
Henry Ford came up when there were only small competing companies in the field. When established companies are in the field, inventors must sell out, or suffer a fate similar to Professor Armstrong's.
The Role of the People
The inheritance laws have played a major role in the development of great fortunes. But they haven't been the only factor. A small group, unless possessed of direct dictatorial power, could not unaided have served itself so generously, even if masters of stealth. Writing about the wealthy in America's Sixty Families, page 5, I remarked: "The situation, for which the people themselves are in a great measure to blame. . . . " The public itself has facilitated and continues to facilitate the building of vast hereditary private power within the American elective system of government. This public is in many ways a self-made victim, as sociologists now regard many victims of crimes.
The contrast I have posed between concentrated wealth and widely distributed poverty may seem to suggest that I am arguing for the equalization of wealth. But though there is obviously considerable room for some equalization I shall not argue for it because there are millions of people who could not hold on to $10 for five minutes or $10,000 for five months.
If wealth were equalized, what would we have? As Lampman showed, if all asset- wealth as of 1953 were equally apportioned, there would be about $10,000 for each adult. Let us suppose that a share in this amount were held for each adult in a national trust supervised by the United States treasury. The income from each share at 5 per cent would be $500 per annum. If one adds this to the present amount of each person's earned income it would not amount to much, however welcome it would be for some in the lowest brackets.
If inequality of income is not the main question, what is?
Policy-Making Power of Wealth
First, the present concentration of wealth confers self-arrogated and defaulted political policy-making power at home and abroad in a grossly disproportionate degree on a small and not especially qualified mainly hereditary group; secondly, this group allocates vast economic resources in narrow, self-serving directions, both at home and abroad, rather than in socially and humanly needed public directions.
When, through its agents, it cannot enlist the government in support of its various plans at home and abroad it can, and does, frustrate the government in various proceedings that have full public endorsement. It involves the nation in cycles of ferocious wars that are to the interest of asset preservation and asset expansion but are contrary to the interest of the nation and the world. It can and does establish connections all over the world that covertly involve American power in all sorts of ways unknown until some last-minute denouement even to Congress and the president.
It doesn't do any of this maliciously, to be sure, any more than an elephant feels malice when it rubs against a sapling and breaks it in two. An elephant must behave like an elephant, beyond any moral stricture. And power of any kind must exert itself. Historically it has invariably exerted itself in its own self-visualized interests.
So, concentrated asset-wealth not only brings in large personal incomes, but confers on the owners and their deputies a disproportionately large voice in economic, political and cultural affairs. Thus the owners may make or frustrate public policy, at home and abroad.
Low Incomes of Vital Personnel
Managers of concentrated asset-wealth determine, among other things, how much is to be paid for various services--who is to be paid a great deal and who is to be paid very little. Some people, for the convenience purely of asset-wealth, are rewarded munificently for services of comparatively slight social importance--for example, certain leading company executives. Other persons are paid poorly for what are universally insisted to be superlatively valuable services--for example, scientists, engineers, artists and teachers. The pay of scientists in the United States in the 1960's, according to the National Science Foundation, is in the range $6,000-$15,000 per annum,43 far less than that of an astute salesman of encyclopedias or vacuum cleaners. Referring to "starvation wages," Paul Woodring, educational consultant to the Fund for the Advancement of Education of the Ford Foundation, said: "There are dozens of liberal arts colleges which pay average salaries as low as $3,000 per year and minimum salaries much lower still. " 44 If it is said that such compensation has more recently been increased (which isn't generally true), one may still ask: Is it anywhere near the astronomical level of executive salaries?
Of salaries of scientists and teachers, a company director would say: "What have we to do with those? They aren't in our jurisdiction. The executive salaries, I admit, are.
