Richard Vague is the Secretary of Banking and Securities in Pennsylvania. Prior to his appointment in 2020, he was Managing Partner of Gabriel Investments and Chairman of the Governor’s Woods Foundation, a nonprofit philanthropic organization. Previously, he was co-founder, president and CEO of Energy Plus, an electricity and natural gas company. Wave was also co-founder and CEO of two banks and founder of the economic data service Tychos. His new book is An Illustrated History of U.S. Affairs (University of Pennsylvania Press, May 21, 2021). Learn more at richardvague.com.
US Representative Alexandria Ocasio-Cortez (D-NY) wears a dress with the slogan “Tax the Rich” at the 2021 Met Gala. With her, dress designer Aurora James.
Two things have always been present in the history of American wealth: 1) inequality increases and 2) it is then corrected through adjustments and policies when the gap between the haves and have-nots causes pronounced stress in society. . Both things are part of American business history, so calls in 2021 for child tax credits or higher minimum wages are not inconsistent with similar calls in the past.
In its early days America had much less wage inequality than its European ancestors – slaves and the scourge of slavery excepted – because land was plentiful and labor scarce, in stark contrast to the conditions. found in Europe. Average wages in America quickly exceeded those in Europe.
But wealth inequality increased dramatically, reaching its first all-time high in the mid to late 1800s with the massive rail, steel and coal companies of the Industrial Revolution. The lives of many workers deteriorated when they descended into the coal mines and steelworks, and their livelihoods became tied to the ruthless cycle of industry boom and bust.
Soon a gulf separated the very rich and the poor. The immigrants who flocked to the United States often lived in heartbreaking and abject poverty – made all the more unsettling compared to the sparkling lifestyles of the wealthy around them.
Depressions such as the one that followed the panic of 1893 led to sharp cuts in wages at large companies. For miners and other workers already living at subsistence levels, these cuts have had serious consequences. They led to social disruption in the form of often deadly strikes, most notably the bituminous coal miners’ strike of 1894, the Lattimer massacre in 1897, and the Battle of Virden in 1898.
As the fortunes of the privileged few rose to previously unimaginable heights and economic inequalities soared with them, the progressive political movement grew in the early 1900s to oppose laissez-faire capitalism and monopoly corporations. and to bridge the inequality gap.
Business history shows that wealth inequalities tend to reach a point of no return. Progressives such as Jacob Ris, Ida Tarbell and Jane Addams condemned harsh working conditions, especially for children, and advocated for public education. Theodore Roosevelt adopted progressive policies of regulation and disloyalty when he became president in 1901.
But Henry George, the most famous economic writer of the progressive era, had a more dramatic approach to wealth inequality. He spoke out against low wages and inequality and espoused a philosophy known as Georgism, which held that the benefits of the land belonged equally to everyone. He called for a “single tax” on the unimproved value of land, arguing that all government revenue should come from this tax. Although almost forgotten today, George’s most famous work, Progress and poverty (1879), sold millions of copies internationally, and probably had a larger circulation worldwide than any economics book ever written.
The decimation of fortunes during the Great Depression and the widespread demand for labor during World War II once again reduced our country’s inequalities, albeit by grim means, and in the 1950s and 1960s the middle class has peaked, measured both as a percentage of the population and in relative income.
Unions have grown in power and influence – in the automotive, steel, mining, communications, trucking and more. Union members made up 7 percent of the workforce in 1930. During the Great Depression, this figure rose to 18 percent, then peaked at 28.3 percent in 1954. These unions won and expanded the main benefits, especially pensions and health care. Today, unions represent only 10.8% of the workforce.
In recent decades, however, the rise in inequality has further intensified. In the United States, the Gini coefficient, which measures inequality and where a higher number represents greater inequality, fell from 0.40 in 1980 to 0.48 in 2019.
From 1989 to 2019, the net financial worth of the lowest 59.9% of U.S. households rose from 43% to 24% of their income, leaving them with a reduced relative ability to pay for education, investments, and income. other expenses. For the richest 10 percent, their net financial worth has double from 158% to 335% of their income. The contrast could hardly be more striking.
So it shouldn’t shock or surprise us that we hear again about policies aimed at closing the wealth inequality gap. Some attribute the large numbers of Donald Trump and Bernie Sanders followers in part to the discontent created when the haves and have-nots are so far apart.
Proposals for a $ 15 minimum wage, more support for child care and education, and even an alternative minimum income did not come out of nowhere like radical notions imported from Western Europe. On the contrary: measures to reduce wealth inequality have been as constant in American business history as the growth in wealth inequality itself.