Concentrated Wealth Poses Threat
The late Supreme Court Justice Louis D. Brandeis once said: “We can either have democracy in this country or we can have great wealth concentrated in the hands of a few, but we can’t have both.” If he was right, democracy in the United States is now in greater jeopardy than at any time in the past 50 years--and probably since the Republic’s founding.
This shattering conclusion emerges from the first systematic government survey of the distribution of wealth in the United States since the early 1960s. The study, funded and supervised by the Federal Reserve Board and other government agencies, has revealed a nearly 40% increase since 1963 in the share of net personal wealth controlled by the wealthiest 0.5%--the richest 420,000 households in the country. This is the most dramatic increase in the recent recorded history of the distribution of wealth in the United States.
Official data on wealth distribution is relatively hard to come by. So much wealth is controlled by so few that wealth surveys must be specially designed to draw larger samples of the wealthy. And the rich are often understandably reticent about revealing the extent of their wealth. In 1983 the government conducted an extensive survey of wealth designed to be as comparable as possible to the last official study in 1963. A recent review published by the Congress’ Joint Economic Committee concludes that “the two surveys represent by far the best information available on trends in the concentration of wealth-holding in America during the last quarter century.”
‘Super-Rich’ Account for $3.7 Trillion
The first full body of results from the 1983 survey became available earlier this year: U.S. households controlled nearly $10.5 trillion in net personal worth in 1983. Of that net personal wealth, what the congressional review calls the “super-rich”--the wealthiest 0.5%--accounted for 35.1%, or $3.7 trillion.
What does this mean in dollars and cents? In 1983, almost 20% of all households had negative or zero net personal wealth. The average net wealth per household of the bottom 90% was only $39,584. In the same year, the average net wealth per household of the super-rich was $8,851,736.
As the Joint Economic Committee report remarked: “If the average wealth of households in the lower 90% were represented by a bar graph one-inch high, the bar graph required to represent proportionately the average holdings of families in the top 0.5% would be nearly 19 feet tall.”
The level of inequality at any given moment is somewhat less important than trends in the distribution of wealth over time. From 1963 to 1983, the super-rich increased their share of net personal wealth to 35.1% from 25.4%. The greatest gains of wealth shares by the super-rich came in two main asset categories--real estate (other than homes) and shares of net business assets. These were two types of capital assets that fared well in an inflationary era and whose relative value benefited from favorable tax treatment.
When did this dramatic increase in wealth concentration take place? We can refer to another series of somewhat less reliable but essentially comparable studies for a number of years between 1963 and 1983. Apparently, wealth concentration actually appears to have declined , rather than increased, from the mid-1960s through the mid-1970s. All of the increase from 1963 to 1983 appears to have occurred, as far as we can tell, from roughly 1976 to 1983.
This timing makes some sense. It was in the early 1970s that corporations and the wealthy began to worry about their profits and the impact of social movements on their room to maneuver.
“Too many of us have chosen to keep a low profile through the growing storm of disapproval,” Phillips Petroleum commented in a 1976 Business Week magazine ad. “It’s time American industry took a stand for free enterprise.”
Attempt to Roll Back Workers’ Gains
What followed was an intensive political and public relations campaign to roll back workers’ gains, promote government deregulation and secure much more favorable tax treatment for corporations and the wealthy.
It appears to have worked. With rapid inflation in the 1970s and high interest rates in the early 1980s, opportunities for substantial capital gains unfolded. Those with the most money were best positioned to take advantage of those opportunities. Particularly with the massive tax breaks for the wealthy in 1981 and 1982, the super-rich could continue to enjoy their harvest even after the tax collector came around.
We can also view this dramatic increase in wealth concentration from a longer historical perspective. There have been three principal phases in the distribution of wealth in the United States.
From the American Revolution through the Civil War, wealth inequality probably increased as many families lost their farms and corporations first began the pursuit of industrial wealth. Then, from the Civil War through the 1920s, wealth inequality appears to have increased quite rapidly. Finally, from the 1920s through the 1970s, the concentration of wealth declined fairly steadily as a result of the Depression, World War II and the supportive role of New Deal and Great Society programs.
It appears, therefore, that 1929 had represented the year of the greatest wealth inequality in the United States since American independence.
That record has now been broken. As a result of the Roaring Early ‘80s, by the best available evidence, the wealth share of the richest 0.5% of households was nearly one-tenth higher in 1983 than it was in 1929. Wealth inequality has never been greater.
Should we care? Wealth fosters power, both economically and politically. It enables the wealthy to buy favors, win influence, control corporations and, of course, to achieve significant leverage over both elections and outcomes in the political process.
If wealth creates opportunities for the exercise of power, then each of the households in the wealthiest 0.5% of the population has roughly as much influence as 224 households in the least affluent 90%. That is hardly the way to promote democracy.
