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THE ELECT AND
Most Americans--citizens of the wealthiest, most powerful andmost ideal-swathed country in the world--by a very wide margin own nothing more thantheir household goods, a few glittering gadgets such as automobiles and televisionsets (usually purchased on the installment plan, many at second hand) and the clotheson their backs. A horde if not a majority of Americans live in shacks, cabins, hovels,shanties, hand-me-down Victorian eyesores, rickety tenements and flaky apartmentbuildings--as the newspapers from time to time chortle that new Russian apartment-houseconstruction is falling apart. (Conditions abroad, in the standard American view,are everywhere far worse than anywhere in the United States. The French, for example,could learn much about cooking from the Automat and Howard Johnson.)
At the same time, a relative handful of Americans are extravagantlyendowed, like princes in the Arabian Nights tales. Their agents deafen a baffledworld with a never-ceasing chant about the occult merits of private-property ownership(good for everything that ails man and thoroughly familiar to the rest of the world,not invented in the United States), and the vaulting puissance of the American owners.
It would be difficult in the 1960's for a large majority ofAmericans to show fewer significant possessions if the country had long labored undera grasping dictatorship. How has this process been contrived of stripping threadbaremost of the populace, which once at least owned small patches of virgin land? Tothis fascinating if off-color question we shall give some attention later.
Statements such as the foregoing on the rare occasions whenthey are ventured (although strictly true and by no means new)1 are boundto be challenged by the alert propaganda watchdogs of the established order. Theseproprgandists, when hard pressed, offer an incantation about a mythical high Americanstandard of living which on inspection turns out to be no more than a standard ofgross consumption. The statements must, therefore--particularly in this age of burgeoningone-sided affluence--be monumentally and precisely documented and redocumented. Notthat this will deter the watchdogs, who have limitless resources of casuistry anddialectic to fall back upon as well as an endless supply of white paper from denudedforests.
Critical Scholarship Takes a Hand
But (fortunately for truth) critical scholarship, roused fromits one-time somnolence by echoing charges and counter-charges over the years, hasfinally been led to make penetrating, detailed, exhaustive and definitive revelationsof the underlying facts--although the findings of such scholarship are not featuredin the controlled prints, are not publicly discussed and are not even alluded toin polite society. As far as the broad public is concerned in an age of unrestrainedpublicity, when even the martyrdom of a virile young president is made overnightinto a profitable industry, the facts about the skeletons in the closet of the affluentsociety are shrouded in secrecy for all except those queer beings willing to delvefor hours among dusty tomes in library crypts.
Nonetheless, irreproachable scholarly analyses of diamond-hardofficial data fully support my initial assertions, which to the average newspaperreader. may seem incredibly. iconoclastic, ludicrously wrongheaded or the maunderings:of an idiot. Further along, some of the complex reasons for the odd situation willbe touched upon, after the paramount position of the wealthy and the ways they aremaintained have been fully depicted.
A Nation of Employees
Most adult Americans in the quasi-affluent society of today,successors to the resourceful (and wholly imaginative) Americano of Walt Whitman'slush fantasy, are nothing more than employees. For the most part they are precariouslysituated; nearly all of them are menials. In this particular respect Americans, thoughillusion-ridden, are like the Russians under Communism, except that the Russiansinhabit a less technologized society and have a single employer, There are, of course,other differences (such as the fact that Americans are allowed a longer civil leash),but not of social position. And this nation of free and equal employees is the realitythat underlies and surrounds the wealthy few on the great North American continent.
Those few newspapers that make a practice of printing foreignnews occasionally survey Latin American countries. The writers are invariably grievedto find a small oligarchy of big landowners in control, with the remainder of thepopulation consisting of sycophantic hangers-on and landless, poverty-stricken peasants.But I have never seen it remarked that the basic description, with the alterationof a few nouns, applies just as well to the United States, where the position ofthe landowners is occupied by the financiers, industrialists and big rentiers andthat of the peasants by the low-paid employees (all subject to dismissal for onereason or other just like the peasants).
The Banana Republics
These same writers, focusing attention on Central America, refercaustically to the "banana republics"--those countries, economically dominatedmainly by the United Fruit Company, where political leaders are bought and sold likepopcorn and where ambitious insurrectos from time to time overthrow earlier insurrectoswho run the government for their own profit. But the United States, sacred land ofWashington, Jefferson, Franklin and Madison--"Of thee I sing"--itself oftendisplays many similar aspects, mingled with a heady atmosphere at times reminiscentof rural carnivals, Oriental bazaars, raucous gambling houses and plush bordellos.If anyone thinks I exaggerate he should notice how the mingled images of Coney Island,Atlantic City, Miami Beach, Hollywood, Palm Springs, Broadway, Las Vegas and MadisonAvenue often disconcertingly float into plain view at political conventions, statefunerals, elections, court proceedings and congressional hearings, much to the gleeof enchanted but I fear disrespectful and unconsciously alienated spectators.
Conditions in the United States, mutatis mutandis, arenot nearly so different from conditions in other countries as North American nativesare customarily led to suppose by imaginative editors. As in the "banana republics"we have assassinations and attempted assassinations of the chief of state at regularintervals--Lincoln, Garfield, McKinley and Kennedy shot dead; Truman and both Rooseveltsthe targets of would-be assassins; any number of local jefes politicos bullet-drilled.This is not to say that those differences that exist between the United States andthe Central American republics may not be important. The point is that, while thedifferences in favor of the United States are endlessly stressed for public edification--suchas the prevalence north of the Rio Grande of indoor flush toilets, an engineeringmarvel long antedating television sets--the grim similarities are seldom or neveralluded to. To refer to them would be considered unpatriotic.
In the matter of domestic gunplay, for example, the United Statesfar outdoes any of the "banana republics." Since 1900 more than 750,000persons have died in the United States of nonmilitary gunshot wounds inside or outsidethe home, and the annual death rate from gunplay is now 17,000, or about 50 per day.2 Other forms of violence are equally prevalent;and violence in general, to the dismay of the genteel, is the staple theme in Americanfilms and television, reflecting the external society. More than one and a half millionhave been killed by the automobile since its vaunted introduction into the UnitedStates.
Crime to purloin a phrase, is rampant. From the Wickersham Reportof 1931 down to a presidential commission in 1967, several national commissions havesurveyed, recommended and wrung their hands as the tide of crime (much of which isnot reported) has risen. In addition to frequently disclosed tie-ins of organizedcrime with local politicians, the associations of the organized underworld are openlytraced up to the congressional level.3
In ancient days the messenger who brought bad news to the kingwas frequently executed. Those who produce unwanted messages such as these are nowgenerally stigmatized as "muckrakers," themselves unclean, as though anepithet disposed of the phenomenon.
Even in such a presumably distinctive Latin American featureas the intrusiveness of the military, the United States now clearly overshadows anythingin this line the Latin American republics are able to show. Compared with the politicalpower and influence of the American military today, Hohenzollern Germany (at onetime designated by horrified American publicists as the acme of cold militarism inmodern times) was only a one-cylinder, comic-opera affair. The Pentagon of today--itsagents busy in Congress and the Executive Branch, with the politicians obviouslystanding in awe of the bemedaled generals, with the defense-industry corporationsloaded with retired officers--could flatten an entity like Hohenzollern or HitlerGermany with a few well-placed blows. The youth, too, are freely conscripted, asthough they were German peasants.
Even the presidents are beginning to feel bewildered by it all.Dwight D. Eisenhower in his presidential "farewell address" called attentionto "this conjunction of an immense military establishment and a large arms industry"and warned the country to be on "guard against the acquisition of unwarrantedinfluence, whether sought or unsought, by the military-industrial complex."He said, "The potential for the disastrous rise of misplaced power exists andwill persist," and the influence of the military "is felt in every city,every state house, every office of the federal government." With the militarybehind it if not over it, the federal government is assuming a dominating role inmany directions, he said, "and is gravely to be regarded."
President John F. Kennedy felt that he had been duped by thePentagon and the CIA into acquiescing in the long-planned invasion of Cuba, whichfoundered at the Bay of Pigs as Kennedy back-pedaled on ordering air support; thisaction gained him many infuriated rightist enemies. Many partisans of President LyndonB. Johnson assert that he was misted by military advice into the costly Vietnam involvementthat cast a deepening shadow over his administration. However, some leading generalsfrom the beginning opposed the glorious adventure.
While American generals do not formally make political decisions,they (as have generals in many other countries since 1914) do evidently proffer advicethat makes certain decisions and consequences a foregone conclusion.4They are far from inconsequential politically.
Except that the United States has such large numbers of industrialand office workers, rather than landless peasants, it has few features to which generaldescriptions of Latin American society do not apply. The United States is a greatdeal more like Brazil and Argentina, for example, than it is like France or England(two countries upon which most Americans are inclined to look with patronizing reservation).
Even in such a distinctive United States feature as the separationof church and state there is now a strong movement, led by politicians with theireyes on the least instructed voters, for a direct supportive involvement of the statein the affairs of the church, an involvement that would presumably gain these politiciansthe support of the church. In this feature, then, there is a movement to make theUnited States even more like Latin America and less like Europe, where church andstate are tending to become more and more separate in most jurisdictions.
It might almost be said that there is a growing tendency tomodel the United States, apart from its industrial features, upon the "bananarepublics," thus making it the Banana Republic par excellence.
The Statistical Setting
The setting of our story is of necessity statistical. And statisticshave the merit of being succinct. I am aware, however, that many readers cannot facestatistics, a fact that leads seasoned editors to advise writers to dispense withthem or to hide them in the back of the book. Apparently childhood encounters witharithmetic under inferior school conditions have developed in many people (even thecultivated) a distaste for numbers, and when they see them they merely skip. Butit will repay readers to study and ponder carefully the following figures.
While good studies have been made for some decades, three recenthigh-level inquiries have developed the picture in sharper and more exact detailthan ever before. They represent a long series of analyses of the extent and concentrationof American wealth that was begun by G. K. Holmes in 1893. These analyses, showinggreater and greater precision with the passing years, are listed in the chapter notes.5
The three recent studies were made, independently, by ProfessorRobert J. Lampman of the University of Wisconsin for the National Bureau of EconomicResearch, by the Survey Research Center of the University of Michigan as a continuingproject in 1947, 1952, 1956, 1960 and 1963; and by the Harvard historian GabrielKolko as presented in his Wealth and Power in America (1962). I will touchupon these, as well as a resounding official clincher, in this order.
Running to 286 pages, containing 138 formidable tables and 37charts (including 13 Lorenz curves) and employing the most sophisticated applicablemathematics, the Lampman study was published by Princeton University Press in 1962.6
What Professor Lampman did was to obtain basic data from federalestate tax returns for the years 1922, 1929, 1933, 1939, 1945, 1949, 1953 and insome cases for 1954 and 1956; but he concentrated attention on 1953. Such tax returnsare required by law of all decedents with estates exceeding the level of exemption,which was $50,000 for 1922-26, $100,000 for 1926-32, $50,000 for 1932-35, $40,000for 1935-42 and $60,000 after 1942.
With the data in hand, Professor Lampman then employed the establishedestate-multiplier method. This requires that one multiply the number and propertyof decedents in each age-sex group by the inverse of the general mortality rate foreach such group. One thereby arrives at an estimate of living persons and the amountof estate in each age-sex group and in each estate size.
Professor Lampman illustrates the method as follows: "Supposethat out of a population of 1,000 men aged 40 to 50, two men died in one year withestates of $100,000 or more. Suppose further that it is known that 5 per cent ofall the 1,000 men aged 40 to 50 died in that year. Then it may be assumed that thetwo men who died with $100,000 were 5 per cent of all the living men in the groupwith $100,000. Hence, to estimate the number of living men with $100,000, we shouldmultiply two by twenty (the inverse of 5 per cent) to get the answer of forty livingmen with $100,000 or more."7
The Lampman Findings
What Lampman found was as follows:
1. More than 30 per cent of the assets and equities of the personalsector of the economy (about 20 per cent of all wealth in the country being government-owned)in 1953 was held by 1.6 per cent of the adult population of 103 million.8
2. This group of 1.6 per cent owned 32 per cent of all privatelyowned wealth, consisting of 82.2 per cent of all stock, 100 per cent of state andlocal (tax-exempt) bonds, 38.2 per cent of federal bonds, 88.5 per cent of otherbonds, 29.1 per cent of the cash, 36.2 per cent of mortgages and notes, 13.3 percent of life insurance reserves, 5.9 per cent of pension and retirement funds, 18.2per cent of miscellaneous property, 16.1 per cent of real estate and 22.1 per centof all debts and mortgages.9
3. The following table shows the percentage of national wealth-holdingsfor the top 1/2 of 1 per cent and 1 per cent for the indicated years.10
1/2 of 1 Per Cent 1 Per Cent of Adult Population of Adult Population (per cent) (per cent)1922 29.8 31.61929 32.4 36.31933 25.2 28.31939 28.0 30.61945 20.9 23.31949 19.3 20.81953 22.7 24.21954 22.5 ....1956 25.0 26.0
4. The estimated gross estate size for the total adult populationin 1953, obtained by extension of the same methods, was as follows:11
Gross Estate Number of Average Total GrossSize (dollars) Persons Aged Estate Size Estate 20 and Over (dollars) (billion (millions) Percentage dollars) Percentage0 to 3,500 51.70 50.0 1,800 93.1 8.33,500-10,000 19.00 18.4 6,000 114.0 10.210,000-20,000 21.89 21.2 15,000 328.4 29.320,000-30,000 6.00 5.8 25,000 150.0 13.430,000-40,000 2.00 1.9 35,000 70.0 6.340,000-50,000 0.80 0.8 45,000 36.0 3.250,000-60,000 0.35 0.3 55,000 19.3 1.7All under 101.74 98.4 7,900 810.8 72.460,00060,000-70,000 0.18 0.1 61,000 10.5 0.9over 60,000 1.66 1.6 186,265 309.2 27.6All estate 103.40 100.0 10,800 1,120.0 100.0sizesMedian estate size 3,500
In this table is found one verification of my initial paragraph.It shows that 50 per cent of the people, owning 8.3 per cent of the wealth, had anaverage estate of $1,800--enough to cover furniture, clothes, a television set andperhaps a run-down car. Most of these had less; many had nothing at all. Anothergroup of 18.4 per cent, adding up to 68.4 per cent of the population, was worth $6,000on the average, which would probably largely represent participation in life insuranceor emergency money in the bank. Perhaps this percentage included some of the selectcompany of "people's capitalists" who owned two or three shares of AT&T.
Another 21.89 per cent of adults, bringing into view 92.59 percent of the population, had $15,000 average gross estates--just enough to cover aserious personal illness. This same 92-plus per cent of the population all togetherowned only 47.8 per cent of all assets.
The number of persons in the top 1 per cent of wealth-holdersthrough the decades was as follows:12
Years Number of Persons Percentage Share (thousands) of Gross Estates1922 651 321929 744 381939 855 331945 929 261949 980 221953 1,030 25
But the top 11 per cent of persons in the magic 1 per cent (or0.11 per cent) held about 45 per cent of the wealth of this particular group whilethe lower half (or 0.50 per cent) held only 23 per cent.13
Says Lampman: "The personally owned wealth of the totalpopulation in 1953 amounted to about $1 trillion. This means that the average grossestate for all 103 million adults was slightly less than $10,000, The median would,of course, be considerably lower. In contrast the top wealth-holder group had anaverage gross estate of $182,000. The majority of this top group was clustered inestate sizes below that average. Of the 1.6 million top wealth-holders, over halfhad 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 countryin 1953--not only the greatest such aggregation at one time in the history of theworld but a number greater than the aggregation throughout all of history before1875 (as of 1966, millionaires numbered about 90,000). If consumer prices had remainedstable from 1944 to 1953 there would have been fewer. "In 1944 there were 13,297millionaires," says Lampman. "In 1953 there were 27,502 millionaires in1953 prices, but only 17,611 in 1944 prices."15
What of the 1965-67 year-span? As the prices of stocks advancedtremendously in the preceding dozen years, one can only conclude that the proportionof 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 65industrial stocks stood at 216.31 at the end of 1950; at 442.72 in 1955; at 618.04in 1960; and at 812.18 in March, 1964. As of May, 1965, it was well above 900. Theless volatile Securities and Exchange Commission index of 300 stocks shows the samequadrupling in value, standing at 41.4 in 1950; 81.8 in 1955; 113.9 in 1960; and160.9 in March, 1964. How many employees have experienced a fourfold increase insalaries in the same period?
The rise in value of stocks, however, surely invalidates oneof Lampman's speculations, to this effect: "Our finding that the share of wealthheld by the top 2 per cent of families fell from about 33 to 29 per cent from 1922to 1953, or about one-eighth, would seem compatible with . . . the general beliefthat there has been some lessening of economic inequality in the United States inrecent decades."16 The more recent rise in stock prices and in corporationearnings shatters even that slight concession.
Professor A. A. Berle, Jr., has rushed forward to hail the Lampmanshowing that the upper 1 per cent saw its participation reduced from 32 per centof all wealth in 1922 to 25 per cent in 1953; but his celebration was premature andhe did not fully report Lampman, who indicated that the participation had been reducedfrom 1922 to 1949 but thereafter was again increasing.17
The Lampman findings were extended to 1958 in an extremely sophisticatedstatistical critique presented in 1965 to the American Statistical Association byJames D. Smith and Staunton K. Calvert of the Statistics Division of the InternalRevenue Service.18
After reviewing Lampman, revising him in a minor particular,Smith and Calvert conclude that "top wealth-holders owned 27.4 percent of grossand 28.3 percent of net prime wealth in 1953, but increased their share to 30.2 and32.0 percent respectively by 1958. These data support Lampman's conclusion that theshare of top wealth-holders has been increasing since 1949." Prime wealth, asthey explain, is total wealth less the value of assets in trust funds and pensionreserves.
This is where the question rests on the basis of the most recentdata supplied by leading authorities in the field: Concentration of wealth in a fewhands is intensifying.
Actually, in view of market valuations, the share of top wealth-holdersat this writing is easily the greatest in history. It is my hypothesis that the shareof 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-holdersstudied by Lampman have been significantly exceeded. So much for Lampman althoughthere is much else in his razor'-sharp book that merits attention.19
The University of Michigan Study
Although showing some minor variations, the continuing Universityof Michigan survey dovetails with the Lampman study and fully supports it.
First, it was found that 3 per cent of spending units in 1953had $60,000 or more total assets; this compares with 2.3 per cent of individualsin the Lampman study. A "spending unit" consisted of any one or more personsestablished as a household.
According to this University of Michigan "Survey of ConsumerFinances," the upper 11 per cent of the nation's 54 million spending units held56 per cent of the total assets and 60 per cent of the net worth of all private holdingsin 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 ofConsumer Finances," 86 per cent of all spending units in the country owned nostock 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 percent owned no stock. The class of $7,500-$10,000 incomes was 78 per cent withoutstock ownership, while even in the $10,000-$15,000 income class 61 per cent ownedno 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 atrising prices. Whereas in 1953 only 44 per cent of the income class above $15,000owned no stock, in 1960 this same broad class included only 26 per cent without stockownership.21
For some years the New York Stock Exchange and the AdvertisingCouncil, as part of a campaign to show that a "people's capitalism" existswith a widely diffused ownership in American industry, have been busily pyramidingfigures. 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 citedis 20 million .23
Even though the method of their compilation is challenged bystatisticians, these computations could all be true and still not after the implicationsof the Lampman analysis and University of Michigan surveys. For if 17 per cent ofspending 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 stockholderif he owned only one share worth 10 cents.
That most stockholders own trivial amounts of stock is shownby the University of Michigan figures for 1963. The 17 per cent of spending unitsholding stock broke down in this way: 3 per cent held less than $500 worth; 2 percent held $500 to $999 worth; 4 per cent held $1,000 to $4,999 worth; and 2 per centheld $5,000 to $9,999 worth. As far as stock ownership goes, these are all insignificantfigures. Yet they make up 75 per cent of the households holding stock. Only 4 percent of all spending units owned more than $10,000 of stock.24 But mostof this group, exceeding four million people, also owned little stock; for we arealready aware that a group consisting of 1.6 per cent of the population owns morethan 80 per cent of all stock, 100 per cent of state and local government bonds and88.5 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 asfully established that 1.6 per cent of the adult population own at least 32 per centof 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 assetsand 60 per cent of the net worth. It is even possible, as we have seen, that 1/2of 1 per cent own more than one-third of all productive assets as of 1965-67. Itis evident that this leaves very little to be apportioned among 90 per cent of thepopulation. It will be recalled that Lampman showed 50 per cent owning virtuallynothing, 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 populationhad available to it only 47.8 per cent of the assets, while 50 per cent had only8.3 per cent. The University of Michigan figures and the Lampman figures, in short,coincide rather closely although developed by different methods.
Every other serious study supports these findings. The SenateTemporary National Economic Committee (TNEC) just before World War II inquired intothe distribution of stock among 8.5 million shareholders in 1,710 major companiesas of 1937-39 and found that 4 per cent of all common stockholders held 74.9 percent 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, theBrookings Institution of Washington, D. C., found that in 2,991 major corporationsonly 2.1 per cent of the holders owned 58 per cent of the common stock and 1.1 percent of the holders owned 46 per cent of the preferred stock. Two-thirds of all commonstockholders owned only 10 per cent of the shares.26 Harvard's J. KeithButters estimated that in 1949 the spending units (households) that owned $100,000or more in marketable stock, comprising 1 /5 of 1 per cent of all spending unitsand 2 per cent of stockholders owned between 65 and 71 per cent of all marketablestock held by individuals.27 None of these studies took into account thebeneficial interest of individuals in stock held by institutions for the accountof individuals, which swells the percentages proportionately.
The Lampman estate studies do not necessarily reveal the sizesof fortunes. 'This is because many of the fortunes are systematically distributedduring the lifetime of the owner, mainly for the benefit of heirs. At the time ofdeath the fortune is reduced.
Again, in extrapolating from the estates to the rest of thepopulation, at least two distortions are discernible. First, only adults are consideredby Lampman, whereas a considerable number of children are millionaires owing to havinghad trust funds settled upon them. Second, the economic position of age groups isnot strictly comparable between the affluent and the poor because of an average earlierdeath rate for the latter.
But, on the whole, the Lampman study came closer than anyonehad 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 possibleto be definitive about the distribution of wealth in the United States, on the basisof findings put forth recently under the highest official auspices.
In a complex and comprehensive study prepared for the Boardof Governors of the Federal Reserve System on the basis of Census Bureau data underthe title Survey of Financial Characteristics of Consumers, the cold figuresare officially presented on asset holdings as of December 31, 1962, removing theentire subject from the realm of pettifogging debate.
On that date the number of households in the country worth $500,000or more was carefully computed at about 200, 000.28 The number of millionairesat 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. 29These 200,000 at the time held 22 per cent of all wealth, while 57 per cent of thewealth was held by 3.9 million individual consumer units worth $50,000 or more.
The panorama of wealth-holding throughout the populace was asfollows (in millions of units):30
Percentage of Millions HouseholdsAll consumer units (households) 57.9 100.0Size of wealth:Negative 1.0 1.8Zero 4.7 8.0$1-$999 9.0 16.0$1,000-$4,999 10.8 18.0$5,000-$9,999 9.1 16.0$10,000-$24,999 13.3 23.0$25,000-$49,999 6.2 11.0$50,000-$99,999 2.5 5.0$100,000-$199,999 .7 1.25$200,000-$499,999 .5 Less than 1.0$500,000 and up .2 Less than 0.4
In stating that 200,000 households held 22 per cent of the wealththere is some danger of suggesting that the power of these 200,000 is less than itactually is. The nature of the wealth held is of determining importance here. ingeneral, the lower wealth-holders mostly own inert assets such as automobiles, smallamounts of cash and some residential equity, while the upper wealth-holders mostlyown corporate equities in an aggregate amount sufficient to show that they are infull control of the productive side of the economic system.
Households in the number of 200,000 worth $500,000 and moreheld 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 ofinvestment assets. The 700,000 households worth $100,000 to $199,999 held 11 percent of investment assets.31
Center of Economic Political Control
We see, then, that 1.4 million households owned 65 per centof investment assets, which are what give economic control. Automobile and home ownershipand bank deposits do not give such control. The economic power of the upper 200,000is greater than indicated by their ownership of 22 per cent ,of all assets; it amountsto 32 per cent of investment assets.
Experts concede that a 5 per cent ownership stake in a largecorporation is sufficient in most cases to give corporate control. It is my contentionthat general corporate control lies in this group of 200,000 very probablyand 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 perpetratingthe logical fallacy of division--that is, arguing that what is true of a whole istrue of its individual parts. That argument here would be that because 200,000 householdsown 32 per cent of investment assets they each hold a stake of exactly 32 per centin 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 corporationis required to control it. Control, as we shall see, is the relevant factorwhere power is concerned. Usually comparatively little ownership is necessary toconfer complete corporate control which, in turn, extends to participation in politicalcontrol.
A man whose entire worth lies in 5 per cent of the capital stockof a corporation capitalized at $2 billion is worth only $100 million. But as this5 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 hisis a large voice, not only because of campaign contributions he may make but by reasonof all the legislative law firms, congressional and state-legislative, under retainerby his corporation; for every national corporation has law firms in every state.There is additionally to be reckoned with all the advertising his corporation hasto dispense among the mass media as a tax-free cost item, the lobbyists his corporationputs into the field and the cultural-charitable foundations both he and the corporationmaintain.
Such a man, worth only $100 million net, is clearly a shadowypower in the land, his ownership stake vastly multiplied by what he controls--otherpeople's property as well as his own. And there are more than a few such.
On the other hand, many intelligent citizens today complainin the face of the alleged complexity of affairs of feelings of powerlessness. Theirfeelings 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 corporatepower 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 owned100 per cent of investment assets. Actually, it might be less: It would then receiveno support from many tremulous small holders but would probably find them in politicalopposition.
As to distribution of investment assets among smaller propertyholders, 1 per cent are owned by the $5,000 to $9,999 group, 7 per cent by the $10,000to $24,999 group, 11 per cent by the $25,000 to $49,999 group and 15 per cent bythe $50,000 to $99,999 group, or 34 per cent in all. In this group of comparativelymodest means one finds some of the most voluble supporters of the established corporateway. 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 thelarger 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 situationof the lower populace is more unfavorable, as shown in the following table.
Percentage ofNet Worth Consumer UnitsNegative (deficit) 11Zero 5$1-$999 12$1,000-$4,999 17$5,000-$9,999 15$10,000-$24,999 23$25,000-$49,999 10$50,000-$99,999 4$100,000-$199,999 1$200,000-$499,999 1$500,000-$999,999 Less than 1/2 of 1 per cent$1,000,000 and more Less than 1/2 of 1 per cent
As this table shows, 28 per cent of the households had a networth of less than $1,000; the 11 per cent with a deficit, on balance in debt invarying 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 pointedto with pride by Time, Fortune and the Wall Street Journal) were offsetby 11 per cent of households worth less than zero. Add the zerogroup and one obtains16 per cent of all households. Forty-five per cent of all households had a net worthof less than $5,000. Is this affluence?
The View from the Bottom
A sensitive statistical analysis meriting the closest attentionby 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 sameperspective 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 spendingunits (households) lived below the maintenance level set by U.S. Bureau of LaborStatistics budgets, and that 27.5 per cent lived below the emergency level.
Dr. Kolko approaches the problem via income from all sources,employment as well as assets. As he shows, using Bureau of Census and Universityof Michigan figures, the distribution of income in the United States is fantasticallylopsided. Whereas the lowest tenth of the population in all years from 1947 through1955 received only 1 per cent of national personal income after federal taxes, theupper tenth in the same years received from 27 to 31 per cent. The second from thelowest income-tenth received 3 per cent of income from 1947 through 1955 except forthe years 1953 and 1954, when it received 4 per cent. The third from the bottom income-tenthreceived 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 taxescompared with a varying 56-58 per cent for the three upper income-tenths.34These figures: spell poverty in all starkness--particularly in view of the greaterconcentration of children on the lower and poorly guided levels. Oddly, the prospectdoes not improve very much as one ascends until one gets to the very top. For thefourth income-tenth from the bottom received only 6 per cent of income, and the fifthincome-tenth received only 8 per cent. It is not until the sixth tenth from the bottomthat one finds 10 per cent Of the receivers obtaining 10 percent of the income, balanceddistribution. The next highest got 11 per cent, the next received 13 per cent andthe next to the top got 16 per cent.
But if the top income-tenth, which received 27 per cent of incomein 1955, were to be broken down into 1 per cent groups, we would find, as establishedby 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 participationin economic advantages. Again let me remind readers, these incomes are from employmentas 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 oneis not chained to a job, often ungratifying in itself. With asset-income one canchoose one's line of endeavor or choose to be completely idle while others work.
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-SocialSecurity, unemployment insurance, disability relief, minimum wage laws and the like-arequite inadequate in their coverage. There is no such thing, as newspapers repeatedlyinsist, as an embryonic Welfare State in the United States. This is evident in thefact that the average monthly oldage insurance payment in 1963 was $77.03, or $924.36per year.
As to savings by each income-tenth, the lowest income-tenthhas long lived on a deficit, From 1929 to 1950 this deficit varied from 2 to 35 percent, standing at 16 per cent in 1950. Not only does this group not own anythingbut it is deeply in debt. The lower 50 per cent of income receivers in 1950 had anet savings deficit of nearly 18.5 per cent; the sixth income-tenth from the bottomhad only 4 per cent of net national savings, with the figures rising thereafter byincome-tenths from 10 to 11 to 20 and to 72 per cent for the top tenth. During thedepression years of 1935-36, the net savings of the top income-tenth amounted to105 per cent, of the next income-tenth 13 per cent, of the next income-tenth 6 percent and of the fourth income-tenth 2 per cent-adding up to 126 per cent. But 60per 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 anotherowes.
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 otherwords, all this is the consequence of the inevitable interplay of chance factorsin which some persons are the lucky winners or the more intelligent players.
But actually the results at both the top and the bottom arecontrived. They are the outcome of pertinacious planning. For example, it is knownon the basis of other careful studies that the lower income levels are disproportionatelypopulated by Negroes and poor southern whites. They don't account for all of thelowly by any means; but they do account for very many. And the economic plight ofboth the Negroes and the southern whites is the consequence of a longstanding politicalpower 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 acquiescencethat would insure personally lucrative Democratic one-party dictatorial rule in theSouth. In return they agreed to deliver unbroken congressional support to the Republicansin blocking the rising national clamor, mainly from organized labor, for needed sociallegislation. For nearly a hundred years the scheme has worked perfectly, and thepolitically 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 ithas enabled the wealthy backbone of the Republican Party to keep a good portion ofthe 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 beendelay and obstruction, even though off and on there have emerged responsible, forward-lookingRepublicans.
This isn't to say that the foregoing paragraph accounts forthe existence of deep and widespread poverty in the midst of fabulous wealth, butit accounts for some of it.
The Mild War on Poverty
President Lyndon B. Johnson in 1964 startled average newspaperreaders by suddenly announcing, out of a seemingly cloudless sky, his "war onpoverty." 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 wasno 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 measureexceeding $1 billion, the country has been gradually introduced to the strange, evensubversive, notion that poverty is prevalent in the United States.
The argument has now shifted, as it is always bound to in thenimble hands of the dialecticians, to what precisely constitutes poverty. SargentShriver, director of the Office of Economic Opportunity and former President JohnF. Kennedy's brother-in-law, suggested that a family of four with a yearly annualincome under $3,000 and an individual with an income under $1,500 be classified aspoor, which would put more than 30 per cent of all families in the poverty-strickencategory according to University of Michigan figures. For the University of MichiganSurvey of Consumer Finances showed for 1962 that, while the figures of thelowest tenth of all spending units (households) were not then available, the figurefor the next to the lowest tenth was $1,510 for each household; and for the thirdfrom the lowest tenth it was $2,510. For the fourth tenth from the bottom it wasonly $3,350.37 Mr. Shriver subsequently raised his figures to $3,130 and$1,540.
The United States Chamber of Commerce predictably challengedMr. Shriver's first gauge of poverty as too high. "The Chamber of Commerce basedits criticism of the old gauge," said the New York Times, "on thefact that a small family living in a warm climate and growing most of its own foodcould live comfortably on $3,000 a year."38 As the patient couldrest easily on this amount of income, why introduce him to luxuries--such as medicine?
Mr. Shriver, himself a wealthy man, more recently indicatedthat 35 million American families are "poverty-stricken," untouched byexisting programs for assisting the poor.39 If one assigns only 3 personsto a poor family, many of which have many more, one obtains 105 million persons outof a population of 180-plus million.
Rather obtusely the Chamber of Commerce people did not recognizethat the Administration, in dealing with a serious situation (for whatever motives,humanitarian or self-serving) had produced a deceptive new official yardstick formeasuring poverty: income. Down through history poverty has always referred to lackof property. The man who had no property was defined as poor; the more property aman owned the less poor he was. Most people in the United States own little moreproperty than do Russian peasants, and by that standard they are poor.
By the Shriver standard, if a family had income from uncertainemployment of twice $3,130 a year it would not be poor. While many Americans by theShriver standard are poor, most are not--even though they own nothing worth speakingof. But the Shriver standard makes it appear that most people are well off, whichis hardly true.
For my part, I would say that anyone who does not own a fairlysubstantial amount of income-producing property or does not receive an earned incomesufficiently large to make substantial regular savings or does not hold a well-paidsecurely tenured job is poor. He may be healthy, handsome and a delight to his friends--buthe 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, aswas shown in the 1930's, Americans can become destitute overnight if deprived oftheir jobs, a strong support to mindless conformity. As a matter of fact, many personsin rather well-paid jobs, even executives, from time to time find themselves joblessowing 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 arereally poor, and they also discover by harsh experience to what specific conditionsthe word "poverty" refers. And even many of those who never lose theirjobs often discover in medical and similar emergencies that they are as helplessas wandering beggars. They are, in fact, poor. In such eventualities the man of propertyis evidently in a different position. He is definitely not poor. And this is allI say.
Conditions in England and India
The United States, in the short period since the public landswere distributed to the people, often through the intermediation of profit-skimmingrailroads, has rather quickly been brought close to the position of older countriessuch as England. In 1911-13 the small fraction of 0.63 per cent of persons over age25 in England owned 57 per cent of all capital, compared with 1.84 per cent of suchpersons owning 51.92 per cent of capital in 1946-47. In 1911-13 1.53 per cent owned66.9 per cent of capital compared with 4.56 per cent owning 63.27 per cent of capitalin 1946-47.40 Observers see a slight tendency to equalization in thesefigures.
But in superstition-ridden India about 1 per cent of the populationgets half of all income.41
Apart from the differences in the proportions, a differencebetween the United States on the one hand and England and India on the other is thatin the latter there is a much longer history behind each condition. In the UnitedStates it is recent.
Some Preliminary Conclusions
It should be evident in studying the Lampman and Federal Reservefigures on estates that the United States now has a well-established hereditary propertiedclass such as exists in Europe, which Americans have long looked upon disdainfullyas the stronghold of class privilege. Great wealth in the United States, in otherwords, 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-holderof the upper half of 1 per cent arrived by this route.
Lampman's figures clearly indicate this. He noted that 40 percent of the top wealth-holders are women. Now, while some women have garnered bigmoney by their own efforts--Mary Pickford, Greta Garbo, Helena Rubinstein and a sprinklingof others in the world of entertainment and fashion--few women have been even modestfortune 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 isincreasingly resorted to in order to take advantage of tax provisos. But this worksboth ways. Women can split estates with men just as men can with women. And on theupper level of wealth it is usually wealthy people who marry each other. Otherwiseit is front-page news. Even if it is contended that not so many as 40 per cent ofthe men are in the picture because of estate splitting, the men are, as heirs, prominentamong the wealthy for another reason. Many men, having inherited a smaller estate,have expanded their wealth through shrewd operations. J. Paul Getty, whom certainEnglish 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 themillionaire class. He has through operations in the oil business gone well beyondthis level. Nevertheless he is not "self made." There are more than a fewGettys among the top wealth-holders.
It can therefore be concluded that at least 40 per centof the men, or 24 per cent of all the top wealth-holders, are heirs, bringing tomore than 60 per cent the hereditary proportion. I believe, on other grounds, thatthe proportion of male heirs in the group is much larger. Women, owing to their inexperiencewith financial affairs, are generally poor estate managers, Hetty Green notwithstanding.They are more easily victimized by specious schemes, fail to take advantage of obviousopportunities, 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 entitlesthem 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--aresimply heirs. They got there by listening to a will being read, not by schemes thatfill some observers with unaccountable transports of delight, that others considerunspeakably ignoble. There are few newcomers, as we shall see in the next chapter.
Although a man who amassed his own money would figure only onceamong the propertied, some who are heirs are heirs many times over, having inheritedfrom many testators. This has taken place on the upper, intermediate and lower levelsof wealth. And this occasional process leads to further concentration.
The federal estate-tax statistics since 1916 show that an avalancheof wealth has been transferred over fifty years by testamentary bequest. Individualsinherited in nearly every case. Whatever the presence of rags-to-riches moneymakersin 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 thatmost of the people in the upper 1/2 of 1 per cent that now probably own at least33 per cent (by value) of all assets are members of extended family groups. Thereare more than 1,600 Du Ponts, not all individually in the upper circle. There aresizable clusters of Rockefellers, Vanderbilts, Whitneys, Mellons, Woolworths, Fishers,Phippses, Hartfords and others. Through distaff marriages part of the big fortunesare concealed behind offbeat names, such as Cecil (Vanderbilt). The well-groomedheirs or their representatives often sit together amicably on the same boards ofdirectors. Most belong to the same metropolitan clubs.
But the rather well-populated group that Lampman calls top wealth-holdersalso certainly contains many blanks as far as big wealth is concerned. It will berecalled he stressed that more than half of his top group had no more than $125,000of assets--a paltry sum, even though in thousands of neighborhoods around the countrya man with such wealth would be looked upon as a Croesus.
Owing to intermarriage among the wealthy, property holdingstend to concentrate in fewer and fewer hands. For the propertied, not without soundreason, often suspect the marital motivations of the nonpropertied.42
These processes cannot help but concentrate wealth and makethe scope of new estate builders less ample. There is less and less room at the topfor new moneymakers. Although there are new successful enterprises, they are allcomparatively small. Some are absorbed by the bigger enterprises on advantageousterms. None shows the slightest sign of becoming another Ford Motor Company. Allthe big bets seem to be down. Rien n'a va plus.
Apologists on the Defensive
But this panorama of contemporary private wealth and power throwssome doubt on the doctrines of earlier apologists for the big fortunes. It was oncewidely preached from pulpits as well as editorial pages that great wealth was eitherthe reward for social service (such as graciously building a vast industry to caterto an undeserving public) or it represented the inevitable, natural and wholly acceptableoutcome of an evolutionary struggle in which the fittest survived and the unfit landedin the gutter. On the basis of this doctrine the present top wealth-holders are theoffspring 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 equallydivided among all the people, in less than a generation it would be back in the samehands. 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 likeMr. James J. Hoffa and Mr. Frank Costello. In a struggle waged outside the Marquisof Queensberry rules (which is where the fortune-builders operated) most of the presentwealth-holders, many of them personally attractive, would hardly be voted most likelyto succeed. Could they make much headway against Jake Guzik and Tony Accardo? AlCapone and Machine-Gun Jack McGurn?
Down through the years all the estates have been subject totaxation--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 UnitedStates through taxation, as is commonly suggested by propagandists of the Establishment.And few estates, unless there are no heirs, pass to institutions. But many estatespass indirectly as well as directly to heirs through various arrangements such asdelayed-action trust funds, endowments and foundations. The indirectly conveyed portionsare operated by the heirs for their own beneficial interest.
The Fortress of Interlaced Wealth
What has developed, then, under the operation of inheritancelaws handed down from days when property ownership was far more modest to a day whenvast properties have been created mainly by technology, is a huge, solid fortressof 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 alwaysrewarding) is by marriage. If a potential new Henry Ford produces an invention andsets out with friends to market it he generally finds (as did Professor Edwin H.Armstrong, inventor of wide-swing radio frequency modulation, the regenerative circuitfor vacuum tubes, ultra short-wave super-regeneration and the superheterodyne circuit)that it is boldly infringed by established companies. After he spends the betterpart of a lifetime in court straining to protect his rights he may win (usually hedoes not); but if he wins he collects only a percentage royalty. What the infringerscan show they have earned through their promotional efforts they may keep, with theblessings 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 commitsuicide.
Henry Ford came up when there were only small competing companiesin 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 developmentof great fortunes. But they haven't been the only factor. A small group, unless possessedof 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 agreat measure to blame. . . ." The public itself has facilitated and continuesto facilitate the building of vast hereditary private power within the American electivesystem of government. This public is in many ways a self-made victim, as sociologistsnow regard many victims of crimes.
The contrast I have posed between concentrated wealth and widelydistributed poverty may seem to suggest that I am arguing for the equalization ofwealth. But though there is obviously considerable room for some equalization I shallnot argue for it because there are millions of people who could not hold on to $10for 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 $10,000for each adult. Let us suppose that a share in this amount were held for each adultin a national trust supervised by the United States treasury. The income from eachshare at 5 per cent would be $500 per annum. If one adds this to the present amountof each person's earned income it would not amount to much, however welcome it wouldbe 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-arrogatedand defaulted political policy-making power at home and abroad in a grossly disproportionatedegree 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 insupport of its various plans at home and abroad it can, and does, frustrate the governmentin various proceedings that have full public endorsement. It involves the nationin cycles of ferocious wars that are to the interest of asset preservation and assetexpansion but are contrary to the interest of the nation and the world. It can anddoes establish connections all over the world that covertly involve American powerin all sorts of ways unknown until some last-minute denouement even to Congress andthe president.
It doesn't do any of this maliciously, to be sure, any morethan 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 ofany kind must exert itself. Historically it has invariably exerted itself in itsown self-visualized interests.
So, concentrated asset-wealth not only brings in large personalincomes, but confers on the owners and their deputies a disproportionately largevoice in economic, political and cultural affairs. Thus the owners may make or frustratepublic policy, at home and abroad.
Low Incomes of Vital Personnel
Managers of concentrated asset-wealth determine, among otherthings, how much is to be paid for various services--who is to be paid a great dealand 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--forexample, certain leading company executives. Other persons are paid poorly for whatare universally insisted to be superlatively valuable services--for example, scientists,engineers, artists and teachers. The pay of scientists in the United States in the1960's, according to the National Science Foundation, is in the range $6,000-$15,000per annum,43 far less than that of an astute salesman of encyclopediasor vacuum cleaners. Referring to "starvation wages," Paul Woodring, educationalconsultant 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 lowas $3,000 per year and minimum salaries much lower still." 44If it is said that such compensation has more recently been increased (which isn'tgenerally true), one may still ask: Is it anywhere near the astronomical level ofexecutive salaries?
Of salaries of scientists and teachers, a company director wouldsay: "What have we to do with those? They aren't in our jurisdiction. The executivesalaries, I admit, are."
My response to this is: When the leading cadres of wealth wantto be the government, as we shall see, they are the government. When they don't wantto be, when there is some delicate problem to be solved, they say, "Go to Washingtonabout that. It's out of our jurisdiction." But even in Washington they havemany friends who believe that teachers and scientists should not be spoiled by beingpaid ample wages.
Marxism and the Workers
Marxists hold that it is the workers-factory workers--who are'being deprived to insure profits for the rich. And this may be so to some extentin some times and places, and at one time it was so universally in the United States.But the workers would not likely be paid more and would probably be paid less thanthey are now in thoroughly unionized industries: under such so-called Marxist regimesas we have yet seen.
In some instances, owing to organization and the balance ofexternal forces, some categories of unionized workers in the United States todayare probably disproportionately rewarded, are paid more than many trained scientists.Their leaders have simply seized opportunities to exert leverage in the power structure,threatening to disrupt production.
Lest I leave a misleading impression of American workers, itmust be said that the position of the unorganized and unskilled is very bleak, inthe depths of poverty. So-called white collar workers are also poorly paid. SinceWorld War II the custom has spread among low-paid skilled people, particularly teachers,of working at two jobs, a practice known as "moonlighting." Police andfiremen, too, participate in the practice, and so do even skilled factory operativeswho wish to keep above the poverty level. At a time when many sociologists discoursefervidly about a coming thirty-hour week and assert increasing leisure to be a basichuman problem, many moonlighters work sixty and seventy hours a week, hardly a stepforward from the nineteenth century twelve-hour day. The moonlighters drive taxis,tend bar, act as property guards, work in stores, etc.
But if the workers in general are indeed deprived for the sakeof profits they wouldn't be benefited much directly by an egalitarian distributionof assets, nor would anyone else. For it isn't the factor of ownership of assetsin itself that is crucial. It is the factor of general control that concentratedownership confers that needs to be understood. Owing to the strength given them bytheir concentrated and combined assets, the big owners and their paidmanagers have a major if not always decisive voice in running the economic system,in backing the political parties and their candidates and in influencing if not determiningnational policies from the highest to the lowest. The ownership titles, reinforcedmany times over from the vantage point of banks and insurance companies, are whatconstitute the ticket of admission. The amount of ownership at the top of the pyramidnecessary to insure such control for any group may be only 5 per cent. Scatteredsmaller owners, if there are any, cannot gather enough stock to overcome the leadingblocks and would not know what to do if they could.
The Radiation of Control
This control at one or a few points radiates through all ofindustry, with a few central groups participating in a cooperative manner. The industrialcontrol (to be shown later) gives command over vast resources, some of which areused to influence political parties and candidates, newspapers and other publications.A tacit, uncriticized scheme of values is put into action and is absorbed by manypeople far from the scene. The point to be raised is this: Is this scheme of valuesalways conducive to the security and well-being of the Republic? Whether it is ornot, it is often decisive at crucial historical turning points. And it isn't subjectto review in any public forum.
I don't assert that every single individual--man, woman andchild--in the circle of great wealth has an active role in this process of control.Many are far from the centers of power, leading la dolce vita, and hardlyknow what goes on. Some are utterly incapable, confined in sanatoria, the wards offamily trustees. Still others, present in full command of able faculties, disapproveof the general trend but are unable to prevail against what is basically a groupmomentum.
Many people own some stock. Each share is entitled to a vote.An owner may refuse to vote, in which case decisions are made despite him. Usuallyhe sends in his proxy to be voted for the management, which is the way the Russiansvote: for a single ticket. However, he may decide that he wants to vote against themanagement, in which case he must at great cost and effort round up many other stockholders.This task in any company is about as great as putting an opposition slate in thefield in a Russian "election." Occasionally it succeeds, although not wheninitiated by small stockholders. One must have some large blocks of stock to beginwith if one hopes to check or unseat any established management-blocks of 5, 10 or15 per cent of all outstanding stock. If one has that, one appeals for other largeblocks to join, or buys additional large blocks in the market (for vast sums, whichone must be presumed to have). For it is ownership blocks that determine who themanagers shall be.
If one miraculously wins the election, one has the task of installingnew managers, men more to one's liking. But the one who can do this is himself oneof the top dogs. He is not a small stockholder.
Such control is exercised not in one company or in a few companies(contrary to what is often supposed) but through a long series of interlocking companies.It is what constitutes power in the American system. It may not be power as greatat a single moment as that possessed by some elected officials, such as the president,but it is a more continuous power. An elected public official, even a president,must from time to time undergo the hazards of a formal election at regular intervals.And even a president is limited to a maximum term of eight years, whereas the headof a big corporation or bank can remain in office for forty or fifty years and cansee many presidents of the United States come and go.
Deficit in Public Services
The converse of the great concentration of personal wealth isthe great deficit in needed public social services. On the corporation front, thecountry is obviously extremely lusty. But in education and medicine, to cite merelytwo areas, everything suddenly becomes extremely meager, scrounging and hand-to-mouth.This disparity is curious in a wealthy country and forcefully reminds one of BenjaminDisraeli's allusion to two nations, the rich and the poor. But the deficits in theseareas, the dialecticians will be quick to point out, are gradually being met nowby government out of taxes. As we shall see later, however, the contribution of thetop wealth-holders to taxes is disproportionately low. The wealthy, like everyoneelse, dislike to pay taxes and, unlike most other people, they know how to minimizethem through the exercise of political influence. This is one of the nice differencesbetween being wealthy and being poor.
The Constitution of the United States bars the bestowal of titlesof nobility. But in many ways it would clear up much that is now obscure if titleswere allowed. Not only would they show, automatically, to whom deference was dueas a right but they would publicly distinguish those who held continuing hereditarypower from people who are merely temporarily voted in or appointed for limited terms.The chroniclers of High Society-that is, the circles of wealth--recognize this needand, in order to show hereditary status and family position, they allude to malesin the line of descent by number, as in the case of royal dynasties. Thus in theEnglish branch of the Astor family there is a John Jacob Astor VII.45But there are also George F. Baker III, August Belmont IV, William Bird III, JosephH. Choate III, Irénée and Pierre du Pont III, Marshall Field V, PotterPalmer III, John D. Rockefeller IV, Cornelius Vanderbilt V and so on.46
It is names such as these that would properly be found in anAmerican Almanach de Gotha.