What the distribution of wealth is among the people has been an elusive problem, and can now receive only a tentative determination. Little beyond empirical and deductive mehods have been at command, with slight reinforcement from statistics, and dependence on these methods is open to the objection that bias of opinion has large room for effect on conclusions. At the present time no direct attack on the problem can be made except by estimates of individual wealth, and thus far these have been based chiefly on assessments of property and incomes and the reputed amounts of large fortunes, with collateral aid from deposits in savings banks and the like. So much is assumed to be known and so little is really known in regard to the amount of the wealth of the rich, that a direct estimate of their wealth involves a large margin for error. It is intended in this article to avoid most of this common field of estimation and to direct attention to the wealth of the poorer class,  a course which is now for the first time made possible by statistics recently published by the census office. With the facts here disclosed it is believed that a more accurate estimate can be made as to the wealth of the poor than can be attained by subtracting the supposed wealth of the rich from the total wealth of the country. The wealth of the richer class may better be determined by subtraction.

     The census office has published the results of its investigation of farm and home proprietorship in twenty-two states and territories. In the case of every family the census recorded whether it owned or hired the farm or home that it occupied, and, in case of resident owners, whether or not the property was incumbered. If an incumbrance existed, its amount and the value of the farm or home were ascertained, and the values and incumbrances have been published both as averages and in a classification of amounts. The states and territories represented are Arizona, Connecticut, Georgia, Idaho, Iowa, Maine, Maryland, Massachusetts, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Wisconsin and Wyoming, and the District of Columbia is added. For the present purpose, the figures for these political divisions have been consolidated and applied to the whole country. It is believed that the results correspond closely to the real conditions for the United States, since the different regions where like conditions prevail give returns that correspond well with one another in proportion to population.

     In these twenty-two states thirty-two per cent of the farm families and sixty-three per cent of the home families are tenants. Among the farm-owning families thirty per cent carry incumbrances averaging $1,130, on farms whose average value is $3,190; among home-owners, twenty-nine per cent carry incumbrances, with an average debt of $1,139, on an average value of $3,254. Until the census shall determine, it may be assumed that there are 4,500,000 farms in the United States, leaving 8,190,152 families that occupy homes that are not farms.

    Computing, now, the number of tenant families, and allowing $150 above debts to each farm-tenant family and $500 above debts to each home-tenant family, we are able at once to set aside fifty-two per cent of the families of the country as worth less than one-twentieth of the nation's wealth, the total amount of this wealth being estimated at about sixty billions of dollars. For the South, containing about one-third of the nation's population, these allowances above debts are too large; they may be too small for some states elsewhere. It is not overlooked that many home-tenant families are worth considerable property, invested in retail trade, securities and otherwise; but the influence of this must be exceedingly minute in an average embracing the millions of families that are worth little or nothing.

    In estimating the wealth of families that own their farms and homes under incumbrance, net values are employed, and I confine myself to properties whose gross value is less than $5,000. Such farms, in the states mentioned above, constitute eighty-two per cent in number and fifty-two per cent in value of all incumbered farms occupied by owners. The corresponding figures for homes are eighty-two per cent for number and forty-six per cent for value. An allowance of 500 above an uncertain indebtedness is made to each family in the class considered, besides the net farm or home value.

    Greater uncertainty is encountered in handling the unincumbered farms. and homes occupied by owners, because their values are not published. All that can be done is to adopt the figures representing the incumbered properties--a course which probably makes the poorer class of home-owners too large, and also gives to it more home value than it possesses. To each free-farm family of the poorer class 1,000 is credited in addition to the farm value, and to each home family $2,000, after deducting debts of unknown amount. The result of the computations and allowances follows.

WEALTH DISTRIBUTION BY CLASSES.

1,440,000 farm-hiring families, worth $150 above
                     debts of indefinite amount   .   .   .   .    $216,000,000

752,760 families owning incumbered farms
                     worth less than $5,000, deducting
                     incumbrance and other debts of
                     indefinite amount, and allowing $500
                     for additional wealth .  .  .  .  .  .  .  .  .  $1,359,741,600

1,756,440 families owning free farms worth less
                    than $5,000, allowing $1,000 for
                    additional wealth above debts of
                    indefinite amount   .  .   .  .  .  .  .  .  .  .  $5,309,589,600

5,159,796 home-hiring families, worth $500 above
                   debts of indefinite amount .  .  .  .  .  .  .  $2,579,898,000

720,618 families owning incumbered homes
                   worth less than $5,000, deducting
                   incumbrance and other debts of
                   indefinite amount, and allowing $500
                   for additional wealth .  .  .  .  .  .  .  .  .  . $1,142,531,550

1,764,273 families owning free homes worth less
                   than $5,000 allowing $2,000 for
                   additional wealth above debts of
                   indefinite amount .  .  .  .  .  .  .  .  .  .  .   $6,749,076,593

11,593,887 families worth .  .  .  .  .  .  .  .  .  .  .  .    $17,356,837,343

    Otherwise stated, ninety-one per cent of the 12,690,152 families of the country own no more than about twenty-nine per cent of the wealth, and nine per cent of the families own about seventy-one per cent of the wealth . The chief elastic elements of the estimate are the amount of wealth that is credited to each family in addition to its farm or home and the amount of debt with which the family is charged above incumbrance. Opinions will vary in these matters, but the variations will need to be extreme before the preceding conclusion can be considerably changed. In forming an opinion, it should be borne in mind that only the cheaper of the owned farms and homes are represented--those whose value, without regard to incumbrance, is in no case as much as $5,000, and averages about half that amount.

    Among the 1,096,265 families in which seventy-one per cent of the wealth of the country is concentrated, there is a still further concentration, which may be indicated by taking account of the wealth of the very rich. The New York Tribune's list of 4,047 millionaires affords the best basis for this. Here the unknown quantities are of such magnitude that widely divergent estimates may readily be made. In Mr. Thomas G. Shearman's estimate of the wealth of millionaires, partly based on the assessment of Boston, and published in the Forum for November, 1889, the average for the class is set at about two and a quarter millions; but it would seem as if Mr. Shearman had considerably overestimated the number of millionaires worth less than $3,750,000 apiece, and, if so, his average is too small. Without going into details, the conclusion adopted in this article is that the 4,047 millionaires are worth not less than ten or more than fifteen billions of dollars, say twelve billions, or about one-fifth of the nation's wealth. This gives an average of about $3,000,000.

    We are now prepared to characterize the concentration of wealth in the United States by stating that twenty per cent of it is owned by three-hundredths of one per cent of the families; fifty-one per cent, by nine per cent of the families (not including millionaires); seventy-one per cent, by nine per cent of the families (including the millionaires); and twentynine per cent, by ninety-one per cent of the families.

    About twenty per cent of the wealth is owned by the poorer families that own farms or homes without incumbrance, and these are twenty-eight per cent of all the families. Only nine per cent of the wealth is owned by tenant families and the poorer class of those that own their farms or homes under incumbrance, and these together constitute sixty-four per cent of all the families. As little as five per cent of the nations wealth is owned by fifty-two per cent of the families, that is, by the tenants alone. Finally, 4,047 families possess about seven-tenths as much as 41,593,887 families.

     This result see almost incredible. It is not in accordance with appearances, and if the distribution of well-being is an indication of the distribution of wealth, some great mistake has been overlooked. Yet it is probable that the statement is approximately correct; otherwise, extravagant allowances of wealth must be made to the poorer families of the United States. If a recomputation should give one-third of the wealth to the 11,593,887 families--and it can hardly do more than that--still sixty-seven per cent of the wealth is owned by nine per cent of the families.

    The effect of the method herein adopted is to place about seventy-one per cent of the wealth of the country in the hands of the owners of farms and homes worth $1,000 and over. Excluding millionaires, the average wealth for the class becomes about $28,000, which at first seems improbable for as many as 1,092,218 families, or about nine out of every hundred. But the improbability disappears when it is known that the average family wealth, still omitting millionaires but including all other families, is about $3,800; so that about $380,000 must find owners among each one hundred families, of which fifty-two are tenants; twelve, burdened with incumbrances, have farms and homes of the cheapest sort; twenty-eight have farms or homes that, while free from incumbrance, are worth but a few thousand dollars each; and eight have farms and homes each worth $5,000 and over.

    Collateral support for the foregoing conclusions is found in the probability that more than one-quarter of the nation's wealth is in the hands of private debtors. Until private debts are run through a clearing house, no one can say what the total for the people of the United States amounts to; a wholesale merchant owes a manufacturer, a retail merchant owes the wholesale merchant, customers owe the retail merchant, many of the customers are themselves creditors, and so debts and credits offset each other in a maze of financial operations. It would be foolhardy to do more than take the principal classes of private debts, the amounts of which are known or may be estimated, perhaps without enormous error, and to regard their total as the minimum probable net debt. In the following statement of private indebtedness for 1890, each estimate, except the one for real-estate mortgages, has been included after much hesitation; the item of "other private debts" is not an estimate, but is added to bring up the total to a round number and to account for part of the net debt of trade, manufactures, court judgments, professional services and other items not specifically mentioned. For such possible use as the reader may desire to make of it, the public debt of 1890 is added.

MINIMUM DEBT OF THE UNITED STATES, 1890.

Private Debt.

Quasi-public corporations:
    Steam railways (funded) . . . . . . . . . . . . . . . . . . . . . . . . . . $4,631,473,184
    Street railways (funded) . . . . . . . . . . . . . . . . . . . . . . . . . . $151,872,289
    Telephone companies (funded). . . . . . . . . . . . . . . . . . . . . .$4,992,565
    Telegraph, public water, gas, electric
        lighting and power companies (estimated). . . . . . . . . . . . .$200,000,000
    Other quasi-public corporations (to make round total) . . . $11,661,962
    
    Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,000,000,000

Private corporations and individuals:
    Real estate mortgages (esti- mated) . . . . . . . $6,000,000,000
    Crop liens in the South (estimated). . . . . . . . $350,000,000
    Chattel mortgages (estimated). . . . . . . . . . . .$300,000,000
    National banks (loans and over- drafts). . . . .$1,986,058,320
    Other banks (loans and overdrafts,
    not including real estate mortgages) . . . . . . . .$1,172,918,415
    Other private debts (to make round total) . . . $1,191,023,265

   Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,000,000,000

   Total Private Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,000,000,000

Public Debt.

United States. . . . . . . . . $891,960,104
States. . . . . . . $228,997,389
Counties. . . . . . . $145,048,045
Municipalities. . . . . . . .$724,463,060
School Districts. . . . . . . . $36,701,948

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,027,170,546

___________________________


Grand Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,027,170,546

    From this it appears that, at the least, about twenty-seven per cent of the wealth of the country is in the hands of private debtors, and about thirty per cent in the hands of public and private debtors. But the private debtors have more than an equivalent of wealth with which to pay their debts. In respect to temporary possession, use and enjoyment, this wealth is distributed among persons and corporations that need it and have it under control. Most of it they use as productive capital and on most of it they pay interest. The query is now suggested whether this interest--and, consequently, all interest together with profit above interest--is not the chief of the more permanent immediate causes of a concentration of wealth.

    On the public and private debt alone the annual interest may be reckoned, at six per cent, to be more than one billion dollars--an amount undoubtedly much greater than the profit that remains with the debtors. It is equal to one-twentieth of the annual product of wealth and one-half of the annual savings. While the entire amount of the interest and profit paid every year to residents of the United States cannot yet be estimated, the total is clearly enormous; and the figures expressing farm and home proprietorship, on a preceding page, indicate that this amount is paid by the many to the few. There is nothing new in the computation that interest-bearing principal grows with geometrical progression when the interest is invested at interest; and this investment is more common among the very rich, who already own a large proportion of the national wealth. Such amounts as receive this accretion double every twenty years, if five per cent may be regarded as an average net return to the interest-bearing investments of the very rich.

    But while interest seems to be a potent cause of the concentration o wealth, it does not follow that fortunes will continue to grow from small beginnings to the same extent as in the past. Many of the opportunities that have made millionaires must be such as will recur with, less frequency, if they do not disappear entirely. The origins of millionaire fortunes have been ascertained by the New York Tribune, and they may be classified as follows, conceding that the classification is not a certain one and that it would be made somewhat differently by others:

CLASSIFICATION OF MILLIONAIRES ACCORDING TO SOURCES OF THEIR WEALTH.

Land and its exploitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 825
Natural and artificial monopolies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410
Agriculture, ranch stock, sugar, etc., often with land . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Trade and manufactures, often with land and securities . . . . . . . . . . . . . . . . . . . . . . . . . 2,065
Interest, profit and speculation not otherwise mentioned, often with land. . . . . . . . . . . . .536
Inheritances, otherwise unexplained. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Miscellaneous, often with land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70
Unknown. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4,047

    A new country, like the United States in its past decades, affords many opportunities for making fortunes that are rarely are never found in the older countries. The opening of mines, the cutting of forests, the building and consolidating of railways, the rise of land values in growing cities, the expansion of manufacturing and trading demands in a rapidly-increasing population--all these stimulate the initiator to play for great stakes. But the period of such chances and opportunities is transitory; pioneers cannot be followed by pioneers. As time passes fortune-building on the whole settles down to an investment of the savings of a moderate rate of interest. An exception of considerable importance is to be found in the unearned increment of land values. A reference to the Tribune's list of millionaires shows how potent a source of their fortune this increment has been, and although its powers may be diminishing, its extinction is not yet in sight, while the results the census indicate that the land is passing into the ownership of a smaller proportion of the inhabitants.

    It is time to pause in this consideration of the concentration wealth and to question whether wealth saving should be the chief object of life--whether within moderate limits of saving, the masses of the people are not happier and better qualified to elevate social institutions than they would be if saving were all and living nothing. Does not common sentiment regard an ambition merely to die rich as a most sordid one, and an ambition to round out one's existence with a life well lived, apart from money getting, as one to be commended? The two may go together with the rich, but as far as the masses of the people are concerned, most of them wage and salary earners or employers of productive capital on a small scale, the acquirement of moderate riches is at the price of much self-denial through life. Shall it be moderate riches, or a high standard of living without a competence? Evidently the people of the United States have preferred the latter; the savings of the nation, apparently, are not the savings of the masses of the people. The general appearance of comfort and well-being seen almost everywhere, except among the poor whites and blacks of the South and the poorer factory and tenement-house populations, indicates a disposition to live for the present, even if wealth in the future is delayed, rather than to sacrifice the present for the future. While the few have been getting a principal share of the new wealth, the many, on whom the progress of the nation ultimately depends, have been increasing their material comforts, their enjoyments and their knowledge; and has not this been better on the whole for the United States than such a saving as the French people have practiced?

    Perhaps the expenditure in place of saving has gone too far in the United States. It will not do to let the few become exclusively the employers and the creditors. They are not qualified to exercise such a trust; and even if they were, the time must nevertheless come when the masses of the people would find their interest less in raising the standard of living than in promoting their independence by accumulating wealth. Beyond some varying point, cost of living becomes inexcusable extravagance.

    But the tendency toward concentration of wealth in this country is promoted not only by the remarkably wide distribution of well-being, but also by a narrow diffusion of economic instincts; and further still by an insufficient distribution of wealth-saving employments. When the census returns of occupation are published, it may be possible to show somewhat definitely how the distribution of wealth is limited by the nature of occupations. While, all persons included, it is probable that the concentration of wealth has gone too far, yet, excluding most of the very rich, it would seem as if the concentration were largely determined by the defects of human nature and of social life in a rapidly evolving environment. There is a large element of the population unfitted to save or to earn much, and unqualified to use and keep considerable wealth. Until the race improves this class out of existence, there will be an extreme, of poverty--the penalty of shiftlessness, improvidence, a want of economy and deficient industry.

    The supposed "middle class" of wealth owners exists perhaps as much in appearance as in reality. It is numerically less than the poorer class, but it seems to be much larger, owing to the distribution of borrowed wealth and the remarkable diffusion of well-being that prevails. The probability that the middle class will acquire a larger proportion of the nation's wealth cannot be assured until the rising standard of living is checked; and even in that event not much progress can be made until in the course of time the savings out of wages and salaries and small business undertakings have assumed much greater proportions than they now present, and have become interest-bearing investments. The promise that these will balance the accumulations of the rich is so uncertain that it is not of present moment.

    Among the more wealthy there is a prospect, in some respects remote, it may be, that fortune building will be narrowed to the limits of saving from an income of interest. In a new country the accumulation of fortunes is not the unqualified evil that it is commonly supposed to be. The capital requisite for rapid development will not be acquired and saved by the masses; the undertakers of great enterprises must be very wealthy. But there is always danger that they will get too large a hold upon the wealth, the resources and the labor of the country. If they have now secured this, the most effective and practicable remedies are progressive taxes on incomes, gifts and inheritances.

    The disposition of property through bequest and under the laws of intestate succession seems to be an inadequate check on wealth concentration. Notwithstanding the fact that one fourth of the wealth is redistributed through probate courts every eleven to thirteen years, or thereabouts, and transmitted to more numerous holders, the diffusion of wealth has not been the net result, and perhaps it might not be so if accumulation were confined to interest and the earnings of labor. Perhaps the members of the middle class have not become poorer, but the rich have outstripped them as accumulators; and if, with nine per cent of the families of the country now owning more than seventy per cent of its wealth, the proportion of these families is to diminish in the future as it has done in the past, the problem that is to vex the coming ages of the republic is already clearly manifest.

    In a new country rapidly developing out of the conditions that go with agriculture, it is inevitable that there should be considerable concentration of wealth, and in some respects, at least, there are reasons for believing that to be desirable. But the inertia of such a movement may carry it too far, and it is not clear that, in the natural order of events, independent of taxation, the distribution that is most conducive to social welfare will assert itself when more permanent conditions have been reached.

GEORGE K. HOLMES.

Source: "The Concentration of Wealth." In Political Science Quarterly, Volume 7 (December 1893): 589-600.

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