The Rich Are Getting Poorer. We read so much about how "the rich are getting richer", and of the "ever greater concentration of the nations' wealth", that many have come to believe it. I came across an item that puts a little perspective on this subject. A 1996 study by Michael Klepper and Robert Gunther resulted in their book "The Wealthy 100: From Benjamin Franklin to Bill Gates- A Ranking of the Richest Americans, Past and Present". The authors updated their data for an article in the October 12, 1998 issue of American Heritage magazine. The first point is to campare wealth not in "nominal dollars", or even in inflation (CPI) corrected "constant dollars" but in the fraction of the total nation wealth (GNP) that any given rich individual owned. Rather the same way that national debt is compared from one time period to another. The article lists the 40 richest Americans throughout history. Only 3 of them are alive today. Bill Gates ranks #5, Warren Buffett is #13, and Microsoft bigwig Paul G. Allen is #22. The top four are: John D. Rockefeller, Andrew Carnegie, Cornelius Vanderbuilt, and John Jacob Astor. Homework assignment: How many of these top 5 richest Americans BORN to rich parents? Gates may be rich, but he is no Rockefeller. The authors estimate that someone today would need a net worth of $190 billion to equal what John D. Rockefeller had at the time hs died in 1937. Bill Gates at $62 billion (was that BEFORE the recent stock market drop?) is not even close. And the overall economy is growing faster than the wealth of the richest people, if you consider the "long run", and not just the recent bull market of the past few decades, which may be ending now. ,,,,,,, _______________ooo___(_O O_)___ooo_______________ (_) jim blair (jeblair@facstaff.wisc.edu) Madison Wisconsin USA. This message was brought to you using biodegradable binary bits, and 100% recycled bandwidth. Subject: Re: The Rich Are Getting Poorer. Date: Wed, 23 Sep 1998 16:02:42 -0400 From: G o e t z K l u g e <71520.3515@CompuServe.COM> Newsgroups: sci.econ References: 1 Increasing inequality means: The rich are getting richer. The poor are getting poorer. Clearly measurable: Inequality is increasing: http://ourworld.compuserve.com/homepages/SMIPP/frmentro.htm (Including inequality time series together with corresponding list of American presidents.) Hi, Increasing inequality can mean that both the rich and the poor are getting richer. Only SOME people (either rich, or poor, or inbetween or any of these) are getting richer FASTER than others. As pretty well describes the US today. If that is not obvious, see the "Wealth Fairy" example on my web page INEQUALITY section. -- ,,,,,,, _______________ooo___(_O O_)___ooo_______________ (_) Subject: Re: The Rich Are Getting Poorer. Date: Thu, 24 Sep 1998 21:09:31 -0700 From: royl@istar.ca Newsgroups: alt.politics.economics, sci.econ, alt.politics References: 1 , 2 jim blair wrote: The first point is to campare wealth not in "nominal dollars", or even in inflation (CPI) corrected "constant dollars" but in the fraction of the total nation wealth (GNP) that any given rich individual owned. Rather the same way that national debt is compared from one time period to another. C Post >This method invalidates the whole study. Rising population means that >it becomes harder and harder, in absolute terms, for an individual to >gain a given fraction of all the wealth. The whole premise of this >analysis is easily, completely and irrevocably refuted by considering a >modestly wealthy individual in, say, 1790, when the total US population >was just 4 million and Astor was just starting to really make his >money. The increasing standard of living lifts everyone more or less >equally, but it is 10, 20, or 50 times harder to gain a given fraction >of all the wealth when the population is 10, 20, or 50 times larger. Hi, Well then why do I keep reading about how ever more of the nation's wealth is concentrated in the hand of ever fewer people? This is not the case, but many people BELIEVE that it is true. And while as you say, it should be HARDER to "get" a certain fraction of the wealth when there are more people, this does not mean that it is IMPOSSIBLE. Consider the Pharoh of Egypt or the Inca. He owned EVERYTHING in the country, and when there were more people, he still owned 100% And (as someone pointed out) returns on invested money has averaged 6 or 7% over the long run, while the GNP growth is (and has been) less, at more like 3 to 4% over the same time (say since WW II). So it would not really be unexpected for rich people with lots of money in investments to outgain the GNP (and thus have their percent of the GNP increase). In fact, I found the result of this study to be a bit of a suprise. >Furthermore, the study looks at the _peak_ wealth of people, after they >have been accumulating it for a lifetime. Comparing the wealth of >someone in his 40s with the wealth of someone when he died at 80 is >outright dishonest. The study stands refuted. "Refuted"? What does that mean? Your first comments were that it is obvious that their results must be true: they are caused by increased population, and so are trivial. Now you say they are "refuted"? And do you really expect Bill Gates to top John D. Rockfeller in percent of GNP when Gates is 80? They way Microsoft stock is going, Gates will be lucky if he can keep his $62 billion. The top four are: John D. Rockefeller, Andrew Carnegie, Cornelius Vanderbuilt, and John Jacob Astor. >Notice that all four created the bulk of their empires in the first 100 >years of US history, when expansion of the USA produced incomprehensibly >vast increases in privately owned land values, paid for essentially by >taxpayers. To not confuse students of history, Rockfeller made his money in oil and Carnegie in steel. Vanderbuilt was in railroads, which did get land from the government, and only Astor was in real estate. Astor built hotels in big cities (like the Astoria), and he died on the Titanic. He was the great grandson of the fur trader that Post has him confused with, but THIS Astor was far richer. (But that goes counter to Post's explanation ;-) Rockfeller died in 1937. >Astor and Vanderbilt, in particular, made the overwhelming >bulk of their fortunes by pocketing land values created by government at >taxpayer expense, though Carnegie and Rockefeller also pocketed immense >amounts of money the same way. _None_ of them was even alive during any >part of the last 60 years. The study stands refuted again. Refuted? Again, you are explaining WHY (in your opinion) it is true. Gates may be rich, but he is no Rockefeller. >He is, by _any_ measure, far richer than Rockefeller was at the same _age_. "By any measure"? And "at the same age"? Just what do you think IS the proper way to measure wealth? Nominal dollars? So if there is hyperinflation, we can ALL be richer than Gates and Rockefeller combined? If you consider living standard, and life expectancy, most people in the US today are richer than the Emperors of ancient Rome. And what ever your measure, do you want to divide by age? The authors estimate that someone today would need a net worth of $190 billion to equal what John D. Rockefeller had at the time hs died in 1937. Bill Gates at $62 billion (was that BEFORE the recent stock market drop?) is not even close. >The population has more than doubled since 1937. $90 billion would >therefore be closer to the mark. Gates is still in his 40s, and has >been accumulating wealth for only 20 years. Rockefeller died in his >90s, after accumulating wealth for over three times longer than Gates. The study stands refuted. -- royl@not.this.partistar.ca Again, not "refuted", you are just explaining why you think it is correct. But on the population-time thing: note the book title "The Wealthy 100: From Benjamin Franklyn to Bill Gates". And note that NONE of the early founders are at the top of the list. By your logic, shouldn't Washington or some of those guys be on top? -- ,,,,,,, _______________ooo___(_O O_)___ooo_______________ (_) jim blair (jeblair@facstaff.wisc.edu) For a good time call http://www.geocities.com/capitolhill/4834 Subject: Re: The Rich Are Getting Poorer. Date: Fri, 25 Sep 1998 04:39:39 GMT From: oldnasty@mindspring.com (Grinch) Organization: Happy Skeptics of America Newsgroups: alt.politics.economics, sci.econ, alt.politics References: 1 , 2 jim blair wrote: Gates may be rich, but he is no Rockefeller. >C Post wrote: > >He is, by _any_ measure, far richer than Rockefeller was at the same >_age_. Not so. Rockefeller was a name partner in his own commodities firm at an age when Gates was still in high school. And he was a millionaire many times over in today's money at an age when Gates hadn't yet dropped out of college. Rockefeller locked up his monopoly in the oil industry in his early and mid 30s. When Gates was that age, in the late 1980s, Microsoft was nothing like it is now and had plenty of potent competition. If you want to compare the wealth of Rockefeller to that of Gates at age 45, then you have the problem of comparing the value of the greatest fortunes of different eras. Obviously even the average citizen of today is "richer" than the millionaires of 100 years ago in having consumer products, health services, and so on that were unimaginable then. The millionaires of today, even more so. OTOH, relative to average wealth, average income and measures such as Jim pointed out, Rockefeller was richer than Gates. So it's certainly not true that by *any* measure Gates is wealthier than Rockefeller was at the same age. And Rockefeller was ahead of Gates all the way along at the rate he accumulated his wealth. The new biography of Rockefeller by Chernow is very interesting. Similarities leap out between the oil industry of the 1880s and the software industry of today that are really surprising. The more things change ... >Rockefeller died in his >90s, after accumulating wealth for over three times longer than Gates. Rockefeller made his fortune early in life. Like Carnegie, he spent his later decades giving a large portion of his wealth away.