A New Look at Long-Term Trends in Wealth Inequality in the United States

Abstract

IN THE EARLY DECADES OF THIS CENTURY, Progressives and New Dealers continually expressed concern about what they considered to be the increasing concentration of wealth in the United States. To them, wealth inequality was not just an economic problem but a political problem as well. W. I. King, the author of a book in 1915 on U.S. wealth and income distribution, put it most succinctly, if not most eloquently, when he wrote, Whoever controls the property of a nation becomes thereby the virtual ruler thereof.' Fears about power of this sort led many policy makers to advocate redistribution of resources by the state through progressive taxation. In the decades after World War II, the tenor of writings on wealth concentration changed, as economists specializing in national accounts and development economics addressed the issue in a number of empirical studies. Their findings alleviated some of the earlier concerns about trends in inequality in the United States. Great inequality, rather than being an ever onward and upward trend, was portrayed more as an economic phase that industrializing countries went through, only to return to lower levels of wealth concentration as they matured.2 Much of this work was summarized and substantially augmented in an important book written in 1980 by Jeffrey G. Williamson and Peter H. Lindert, American Inequality: A Macroeconomic History.3 Williamson and Lindert covered the history of wealth and income inequality as well as standards of living. Their point of departure was the work done by Simon Kuznets on income shares and Robert Lampman on wealth shares, which showed a trend toward equality between 1929 and the 1950s and some flatness thereafter. Williamson and Lindert, however, took their investigation back to the period before the availability of federal income and estate tax data, relying on a series of probate and census studies of the eighteenth and nineteenth centuries done by