I got into a chance conversation with a friend a couple of weeks ago about wealth concentration, and he made an assertion that appalled me: that 400 families hold 50% of America's wealth. I told him that I knew wealth concentration was a serious problem, but that I was sure it wasn't that concentrated! He brought out his cell phone and googled these words: 400 families control 50% wealth, and got results. We were at lunch with a group, so I didn't pursue it then.
I returned to the topic and did some research (without recalling exactly what his search criteria had been). What I came up with were the following:
- A page from Michael Moore's website, entitled "The Forbes 400 vs. Everybody Else" (March 7, 2011), which begins, "According to the most recent information, the Forbes 400 now have a greater net worth than the bottom 50% of U.S. households combined." He provides sources for his assertions, and they all look quite sound to me, with the possible exception of his note 3, which includes nonprofits.
- A Politifact page which fact-checks Moore's statement and finds it true (and doesn't seem bothered by the nonprofits issue).
This is a very different assertion from saying that 400 families hold 50% of America's wealth. That sent me looking for the correct data for my friend.
- If you've spent much time on this site, you've probably looked at the series of 3 articles listed at left on Concentration of Wealth. Part 1 provides these data, from the 2007 Survey of Consumer Finances (Federal Reserve Board "Ponds and Streams"):
Top 1% 33.8%
Next 4% 26.6% [Cumulative: 60.4%]
Next 5% 11.1% [Cume: 71.5%]
Next 40% 26.0% [Cume: 97.5%]
Bottom 50% 2.5%
- The 2007 SCF study writeup says that the Forbes 400 are expressly and purposely omitted from the SCF, and suggests that they account for 1% of Net Worth. So add that to the numberator and the denominator.
- More recently, I learned about a series of 3 articles Citigroup published in 2005 and 2006 in a newsletter called "Equity Strategy" which dealt with how investors might profit from "plutonomy"; "rich" here pertains not to net worth but to income:
"In a plutonomy there is no such animal as “the U.S. consumer” or “the UK consumer”, or indeed the “Russian consumer”. There are rich consumers, few in number, but disproportionate in the gigantic slice of income and consumption they take. There are the rest, the “non-rich”, the multitudinous many, but only accounting for surprisingly small bites of the national pie. ... As Figure 1 shows the top 1% of households in the U.S., (about 1 million households) accounted for about 20% of overall U.S. income in 2000, slightly smaller than the share of income of the bottom 60% of households put together. That’s about 1 million households compared with 60 million households, both with similar slices of the income pie! Clearly, the analysis of the top 1% of U.S. households is paramount. The usual analysis of the “average” U.S. consumer is flawed from the start. To continue with the U.S., the top 1% of households also account for 33% of net worth, greater than the bottom 90% of households put together. It gets better (or worse, depending on your political stripe) - the top 1% of households account for 40% of financial net worth, more than the bottom 95% of households put together. This is data for 2000, from the Survey of Consumer Finances (and adjusted by academic Edward Wolff)." - October16, 2005
One of the other articles in the series also provided a much higher estimate for the net worth of the Forbes 400 than the 1% I'd been carrying in my head: 2.4%
The Factcheck article provided, for September 2010, the Forbes 400 Net Worth of $1.37 trillion and the total US Net worth of $54.9 trillion, which makes the Forbes 400's share 2.5%. If we apply that 2010 percentage to the 2007 SCF data, we get this:
Top 1% (33.8 + 2.5) / 102.5 = 35.4%
Next 4% 26.6 / 102.5 = 26.0% [Cumulative: 61.4%]
Next 5% 11.1 /102.5 = 10.8% [Cume: 72.2%]
Next 40% 26.0 / 102.5 = 25.4% [Cume: 97.6%]
Bottom 50% 2.5 / 102.5 = 2.4%
Or, viewed another way:
- Top 1% 35.4%
- Next 9% 36.8%
- Bottom 90% 27.8%
It appears to me that 50% of the net worth is held by about 3.5% to 4% of us.
Henry George wrote of a wedge being driven through society, driving a relative few upwards, and the rest downwards.
Thomas Shearman wrote, in 1889, as follows:
Federal taxation has increased 6-fold since 1860, and the whole of this increase has been taken out of the relatively poorer classes. At the same time, the profit which is secured to the wealthier classes by the adjustment of indirect taxation in their interest has been increased not less than 10-fold. The wealthy classes, collectively, have made a clear profit out of the indirect effects of taxation to an amount far exceeding all that they have paid in taxes, although this profit has been absorbed by a minority of even the rich. But, apart from this, the whole system of taxation is and has been such as to take from the rich only from 3% to 10% of their annual savings, while taking from the poor 75 to 90%. It is true that the same system existed, in form, before the war; but, taxation being light, the amount taken from each individual was far less, and the disproportion between the rich and the poor not so great, while the profit levied from the poor by the rich was much smaller. The amount of the burden has increased, and it has been more and more shifted over upon the poor.
It is childish to imagine that, under such circumstances, the concentration of wealth can go on less rapidly here than in Europe. On the contrary, it has gone on far more rapidly here; and it will continue to do so, at a tremendous pace.
It is intended to confine this paper to a simple investigation of facts, without suggesting remedies; but, to avoid misapprehension, the writer wishes it to be distinctly understood that he is opposed, on principle, to all schemes for arbitrary limitations of individual wealth, whether by a graduated income tax, a heavy succession tax, or otherwise; that he is utterly opposed to communism, socialism, and anarchism; and that he is of opinion that the enormous wealth of the few in this country has been forced upon them by the votes of the very masses who have been impoverished for their benefit. Populous vult decipi. The farmers insist upon throwing away their inheritance; and since they are determined to heap their earnings upon somebody, it is well that the list of their chief beneficiaries should be, upon the whole, so respectable. And, indeed, has it not been clearly explained to us that it makes no sort of difference who owns the wealth of the nation, so long as it is kept at home?
But the facts should be known, without regard to the inferences which may be drawn from them; and we are now prepared to answer the question: "Who own the United States?"
The United States of America are practically owned by less than 250,000 persons, constituting less than 1 in 60 of its adult male population.
Within 30 years, the present methods of taxation being continued, the United States of America will be substantially owned by less than 50,000 persons, constituting less than one in 500 of the adult male population.
The entire article is a few posts below this one, under the title, "The Owners of the U.S."