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As the Data Show, There’s a Reason the Wall Street Protesters Chose New York
New York Times
Sam Roberts

October 25, 2011
View the Original Article

When the federal income tax was first imposed in 1913, the richest 0.1 percent of households reaped 8.6 percent of the nation’s income. In 2007, as the recession began, the share going to that sliver of megarich Americans was 12.3 percent.

And an even more exclusive club — the top 0.01 percent of households — is collecting a greater share of total income than ever before recorded.

Those numbers suggest that the Occupy Wall Street protesters can make a compelling case when they complain that the economic scales are unfairly tilted toward the wealthy. The megarich hold more of the nation’s wealth and collect more of the overall income today than at any time since right before the Great Depression.

Certainly, the protesters picked the right city in which to start their campaign. Among the 1 percent of American households with the highest income, a significant portion, 13 percent, live in the New York metropolitan area, with 4.4 percent living in Manhattan, according to an analysis by Andrew A. Beveridge, a sociologist at Queens College. In three Manhattan neighborhoods, the Upper East and Upper West Sides and Greenwich Village, more than 11 percent of the households make enough to qualify for the top 1 percent.

Making precise comparisons to earlier periods can be difficult: Some income and wealth numbers are estimates, and income is only one way of measuring wealth. Still, there are some notable ways to measure gilded ages.

In the late 1890s, when the average American worker’s weekly wage was less than $10, John D. Rockefeller was earning about $192,000 a week. When he died in 1937, the estimated annual investment return on his $1.4 billion wealth produced an income equal to that of about 116,000 American workers, according to Branko Milanovic, lead economist for the World Bank research group and the author of “The Haves and the Have-Nots.” Today, Bill Gates’s annual income equals that of about 75,000 workers.

“If you compare Rockefeller’s income and the average income in the United States, then the gap was even greater in those days,” Dr. Milanovic said. “In the 1920s, though, the overall distribution of income is about the same as now in terms of inequality — very high.”

J. Bradford DeLong, an economics professor at the University of California, Berkeley, largely agreed. “Because the economy was smaller back then, fewer people — John D. Rockefeller, Andrew Carnegie, J. P. Morgan — were more powerful in the country,” he said.

But comparisons of disparity are not just about income or even only about money.

“Right-wingers will say that even though the relative income and wealth gaps are about the same, that the lifestyle gap between rich and poor is much less than it was back then,” Professor DeLong said. “Nearly everybody today can afford to overeat to their heart’s content and watch ‘Hamlet’ when they choose, while a century ago only the rich could afford to overeat or watch ‘Hamlet.’ ”

Another economist, Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute, said that income inequality may have risen during the recession, but that generally, when dual-earner couples and government benefits and taxes were figured in, the overall increase in disparity was obscured.

Jacob S. Hacker, a political science professor at Yale and co-author of “Winner-Take-All Politics,” said measuring wealth gaps missed changes in sources of income over time. “The super-rich today are not rentiers living off their accumulated wealth, as was frequently true in early part of the last century,” he said. “The majority are financial and corporate executives.”

The wealthiest of the wealthy control more of the country’s treasure than at any other time for which data are available. In 1913, the share of national income going to the top 0.01 percent of households was 2.8 percent, Professor Hacker said. In 2007, that same percentage of households earned 6 percent of national income.

“In 1917, average income — including capital gains — among the top 0.1 percent was 127 times the average income of the bottom 90 percent,” Professor Hacker said. “Average income among the top 0.01 percent was 509 times as great. In 2007, average income among the top 0.1 percent was 220 times average income among the bottom 90 percent. Average income among the top 0.01 percent was 1,080 times as great.”

Over the past century, according to a study by Emmanuel Saez, an economics professor at Berkeley, the share of income collected by the top 1 percent of Americans peaked at 24 percent in 1928 — a high that was not matched until 2007.

While there are more very rich Americans today, the richest are very different from their predecessors. For starters, by most measures they are not as rich. By some counts, John D. Rockefeller was worth more than Bill Gates or Michael R. Bloomberg.

When Rockefeller died in 1937, his $1.4 billion fortune constituted one sixty-fifth of the gross national product, according to an analysis in 1996 by Michael Klepper and Robert Gunther in their book “The Wealthy 100.” That placed Rockefeller first in their compilation. Bill Gates ranked 31st, with his $15 billion net worth at the time then comprising one four hundred twenty-fifth of G.N.P.

Now, Mr. Gates’s net worth of $59 billion, according to the latest Forbes magazine ranking, is about one two hundred thirty-seventh of G.N.P., and would place him 12th on the 1996 list, after Henry Ford. Mr. Bloomberg, with about $19 billion, would be 58th, behind Julius Rosenwald, the early-20th-century president of Sears, Roebuck.

Mr. Gates, like Ford, Rosenwald and Mr. Bloomberg, also gives a lot of his money away (last year, he and Mr. Bloomberg were among 40 of the wealthiest Americans who pledged to give away at least half of their fortunes). Ron Chernow’s biography of Rockefeller recalls that his philanthropy was inspired, in part, by Andrew Carnegie, who wrote in 1889 that the gulf between rich and poor threatened the very survival of capitalism.

“The man who dies thus rich dies disgraced,” Carnegie said, which is another version of Mr. Bloomberg’s vow to bounce his check to the undertaker.