tions.25 And it should be noted that these great accumulations of wealth which permit control of large corporations may contribute to a further increase in the concentration of wealth and of economic power, since since a wealthy family not only can afford to allow a corporation which it controls to use corporate earnings to buy stock in other corporations instead of paying dividends to stockholders but frequently finds it advantageous to do so. These investments by the corporation add to the value of the corporate stock, but the small stockholder may be obliged, in the absence of dividends, to sell his stock.

25 Ibid., p. XVI.

CHAPTER VIII

CONCENTRATION OF OWNERSHIP 1

Information concerning the ownership of wealth is important for a study of the concentration of economic power, since wealth is a source of power, and if wealth is concentrated in the hands of a few, then economic power is likely to be concentrated in a similar fashion. Ownership of a natural resource, for example, provides an obvious basis for monopoly. Whether ownership of wealth is, in fact, more important as a source of power than various methods of control which are exerted even without ownership, it is not the province of this chapter to decide. Here, the material on ownership is examined in an attempt to discover how the Nation's wealth is distributed.

Unfortunately, there is little precise information on the ownership distribution of wealth.2 Estimates of the total amount of the national wealth vary widely and are of doubtful significance. It is not possible, therefore, to proceed by ascertaining the ownership of a known aggregate of wealth. Nor is it possible to add together the separate segments of wealth concerning which there is some information. Too little is known about the ownership of many of the components of the national wealth, and these components involve duplications. Some of the material is concerned with capital goods, and some with claims. to capital goods, as, for example, the farm, and the mortgage on the farm. Another complication lies in the fact that the values placed upon wealth are based upon guesses as to what will happen in the future, and the guesses are subject to change with time. Unfortunately, the information on the ownership of various forms of wealth refers to different periods of time.

The material presented is necessarily, then, a collection of samples which gives an incomplete picture, but this cannot obscure the fact that great aggregates of wealth are concentrated in the hands of a relatively few individuals. And some conclusion as to the degree of concentration can be drawn from the available material.

Lack of time and means for original research has caused this chapter to be, in the main, a compilation and exposition of existing material. The available information is presented in the following sections: Savings, debt, real estate, and homes. The amount of space devoted to the different sections reflects in general the availability of information rather than order of importance.

There is considerable material on the intermediary holdings of such institutional owners as banks, life insurance companies, and nonfinancial corporations. It should be noted that institutional ownership of

1This chapter was written by Dr. Eleanor Poland, economist of the Temporary National Economic Committee staff. Some of the data were taken from Temporary National Economic Committee Monographs No. 4, Concentration and Composition of Individual Incomes 1918-1937, and No. 37, Saving, Investment, and National Income. The chapter was reviewed by Dr. Dewey Anderson, executive secretary, Temporary National Economic Committee; Dr. Maurice Leven, formerly of the Brookings Institution; and Dr. Oscar Altman, senior economist, National Resources Planning Board, Washington, D. C.

It should be noted that distribution of wealth differs from distribution of income primarily because the latter includes work income as well as property income and because some kinds of property yield higher returns than others. See Temporary National Economic Committee Monograph No. 4, Concentration and Composition of Individual Incomes, 1918-1937, by Adolph Goldenthal.

wealth is a significant aspect of the concentration of economic power, since the control of such wealth may be in the hands of a small number of individuals. Information on direct ownership by individuals is presented through income tax and estate tax data. The estate tax material gives a picture of the accumulated wealth in an individual's hands, while the income tax data shows the annual receipts from various types of property.

Much of the detailed material in the chapter deals with the ownership of wealth in income classes of $1,000 and above and in estate classes of $5,000 and above. It has been presented not only because, in most cases, it is the only available statistical material on ownership distribution of wealth but also because the extent of concentration within this group is of interest. Concentration within this group varies among the different fields considered. Yet any comments to this effect should not distract attention from the basic fact of great concentration of ownership, since only about 6,000,000 individuals out of a population of over 130,000,000, or less than 15 percent of the 29,000,000 incomereceiving families and 10,000,000 income-receiving individuals, make income tax returns.3

There is a tendency, in discussing incomes ranging from $5,000 to $1,000,000, to consider those people in the lower brackets as poor. And relative to the millionaires, they are poor. But compared with the two-thirds of the Nation receiving less than $1,500, they are rich. To avoid confusion, therefore, throughout this chapter the people receiving annually less than $1,000 are referred to as the "poor" or as the "low-income groups"; the people receiving from $1,000 to $5,000 are referred to as the "middle class" or the "middle-income groups," and those receiving $5,000 and more are called "the wealthy" or the "upper or high-income groups." Within this last class some comparison is possible by the use of the terms "the moderately wealthy” and “the extremely wealthy."

OWNERSHIP OF SAVINGS

The first material presented here concerns the amounts saved annually by different income groups, since there is little information available concerning the ownership distribution of the accumulated reservoir of savings. Such data indicate the process of accumulation, because they represent periodic additions to the reservoir of savings. If the annual additions are not evenly distributed among the members of the population, it is probable that the ownership of the accumulated savings will also be unevenly distributed.

Saving is done by individuals, by business, and by government. One estimate of the amounts saved by each group from 1933 to 1937 is given in table 21. Clearly individuals do by far the largest amount of saving, although the business depression existing in these years probably accentuates the difference between individual and business savings. Since the saving done by government is measured by the difference between current receipts and current expenditures, and since government receipts depend on taxation, a discussion of the ownership of government saving would involve a study of the incidence of taxation, which is beyond the province of this chapter.*

3 U. S. Treasury Department, Statistics of Income, 1937, pt. 1, p. 8, and National Re sources Committee, Consumer Incomes in the United States, 1935-36, Washington, 1938. See ch. XVI and Temporary National Economic Committee Monographs No. 3, Who Pays the Taxes?, and No. 20, Taxation, Recovery, and Defense, for discussion of this point.

TABLE 21.--Net savings in the United States, 1933-37 1

[Billions of dollars]

1

1 Net saving is considered as that part of the national income of residents of the United States earned during any year that is not spent during the same year on consumption goods and services. Gross saving is net saving plus depreciation allowances. These are the definitions used by R. W. Goldsmith in "The Volume and Components of Savings in the United States, 1933-37," Studies in Income and Wealth, National Bureau of Economic Research, New York, 1939, vol. III, p. 220.

Source: National Bureau of Economic Research, Studies in Income and Wealth, vol. III, New York, 1939, p. 237.

Individual Savings.

There have been a number of estimates of the extent of annual savings by individuals. Lough, using overall statistics, estimates the savings of individuals for 1929 to be 9.3 billion dollars; while a Brookings Institution study, deriving its estimates from sample family budgets, estimates the figure at 17.8 billion dollars. The National ReSources Committee report, Consumer Expenditures in the United States, estimated from sample consumer data that the savings of individuals for the year 1935-36 were 6 billion dollars, or 10.1 percent of income, while the Brookings figure for 1929 represented 19.1 percent of income. Even when allowance is made for the 6.2 billion dollars of capital gains included by Brookings in the savings total, their estimate of savings for 1929 is almost twice as large as that of the National Resources Committee for 1935–36.6

Probably the most important clues to concentration of ownership in savings come from estimates concerning the savings of families by income groups. The National Resources Committee study provides the most comprehensive and detailed study of this kind. It presents estimates of the average patterns of consumer spending at different levels of income for the population of the United States in 1935-36.

W. H. Lough and M. R. Gainsbrugh, High-Level Consumption, McGraw-Hill, New York, 1935, pp. 284-5; M. Leven, H. G. Moulton, and Clark Warburton, America's Capacity to Consume, Brookings Institution, Washington, 1934, pp. 260, 261, 265. Lough excludes capital gains, while the Brookings study includes 6.2 billion dollars of capital gains. For a description and comparison of the two methods used in these studies, see Lough, pp. 320-324. For a further discussion of the Brookings estimate for savings and for a calculation of the trend of savings, see Clark Warburton, "The Trend of Savings, 19001929," Journal of Political Economy, vol. 43, 1935, pp. 84-101.

The general similarity between the patterns of saving at different income levels in both studies suggests that the difference in the national agregates of savings must be due in large part to the differences in the number of families at the higher income levels. National Resources Committee, Consumer Expenditures in the United States, Washington, 1939, pp. 68-70.

300282-41- -13

Table 22 presents the general picture of income and savings of American consumers."

The authors of the study state that, although the sample data were more adequate than any previously available, the number of highincome families included in the survey was very small, and it was necessary, in estimating savings for incomes of $20,000 and over, "to rely almost entirely" on extrapolations based on data from the lowerincome groups. Even allowing for some error here, however, it is obvious that the high-income classes accumulate most of the savings of American families. Table 22 reveals that 59 percent of the consumer units, those with incomes below $1,250, incurred large net deficits instead of accumulating savings; that is, their expenditures for consumption were greater than their income in that year. On the other hand, 41 percent of the consumer units, those with incomes above $1,250, saved $7,511,000,000.

TABLE 22.-Aggregate savings of American consumers by income level, 1935-36

1 Includes all families and single individuals, but excludes residents in institutional groups. Source: National Resources Committee, Consumer Expenditures in the United States, Washington 1939, p. 48.

The National Resources Committee study further records the net savings for each tenth and for each third of the Nation. Those in the poorest six-tenths had net negative savings or deficits, aggregating $1,523,000,000. Those in the next three-tenths had net positive savings of only $1,216,000,000, but the top tenth-those with incomes of $2,600 and over-had net positive savings of $6,285,000,000, or 105 percent of the net-savings figure for all income levels combined. The lower two-thirds of the Nation had only negative saving: The lower third, $1,207,000,000; the middle third, $252,000,000. The top third, however, saved $7,437,000,000, an amount equal to 124 percent of the net savings of the Nation as a whole.

8

7 Savings are defined as the net change in assets and liabilities of the family or individual during the year, exclusive of gains or losses from revaluation of assets. Appreciation or depreciation in the value of stocks or other holdings are not considered. The authors derive their estimates from a sample of 60,000 families living in cities of different sizes, in villages, and on farms in 30 different States, and from a less extensive sample of single men and women. (Ibid., p. 22.)

8 Ibid., pp. 54-55.