Wealth Inequality - 3

A couple of weeks ago, I was in New York City to attend a memorial service for a close friend who had died last fall. [ Mike Shatzkin was a brilliant and kind man and perhaps I might reference this memorial service in a future column, but here was Mike’s New York Times obituary ]

I love art and I love going to art museums. Having majored in Art History in college, I feel happily at home in art museums. Whenever I visit a city I first identify the art museums in the city to see if I want to go. New York City of course is home to some of the greatest art museums in the world. One of them, the Frick Collection, had been closed for about five years, undergoing a big renovation since the last time I was in town, in the Pre-Covid era. I had long regarded the Frick Museum as one of my favorite art museums in the world for several reasons.

One reason I loved the Frick so much is that it is housed in the New York City residence of Henry Clay Frick, one of the more prominent robber barons of the late 19th and early 20th centuries in America. After his death, the trust he had set up built an expansion of the home to convert it to a more proper museum. The reason this was done, and the Frick Museum is in existence is that Frick stipulated in his will, that his wealth was to be for the public’s enjoyment. More than 100 years after Frick’s death, I get to enjoy the incredible collection of old masters, due to his bequeathal to the public of his home and art collection.

The era of the robber barons, the time of Frick’s death creation, was the last time that the wealth inequality of America and the world was as great as it is today. Here is a chart from Thomas Piketty that I featured in Wealth Inequality - 1.

You can see that the highest level of wealth held by the top 0.1% of America was in 1913. It then took a huge drop, only recovering during the “roaring 20’s” up until the 1929 stock market crash. What happened in 1913 was the introduction of the first federal income tax.

In another chart from the same column linked above is overall wealth of the top 10% of the population. This chart shows how wealth inequality grew until the stock market crash. It was not until WWII - again with a war-necessary tax increase - that wealth inequality declined dramatically.

[Piketty - who I mention often in the first two columns on this topic- is, without question, the greatest economist/thinker/researcher/author on the topic of global wealth equality today. He broke out with his 2014 best seller “Capital in the 21st Century” where his basic premise - that capital increases faster than salaries and that the post-WWII era was a historical aberration. This was based on this chart where you can see that from WWII to the 1980s, highly progressive tax rates were responsible for more income equality. This chart also shows the dramatic increase in the wealth of the top 10% since the 1980s when the fiscal changes were led by Reagan and Thatcher. ]

We now have two historical examples: the introduction of the 1913 income tax of the reality of progressive tax policies and the increase in same during WWII. This is one of the conclusions that Piketty has drawn in his books, that one way to address this growing wealth inequality is through new, thoughtful progressive tax policies.

Back to the Frick. Visiting the Frick means viewing the incredible collection of one man initially, who wanted his art to be viewed by the public. This is what one robber baron did. Carnegie funded more than 2,500 public libraries prior to the stock market crash. Rockefeller and Ford set up large charitable foundations. Yes, many robber barons did not think of the public, or the poor, but Frick and Carnegie are my benchmarks to all the robber barons of today; billionaires.

This chart, again from this column shows the recent historical number of global billionaires. Of course the century-long view is that inflation must be taken into account. At his death, Frick had an estate of $150 million, which translates into roughly 3 billion today.

You can also see that the billionaires are worth much more individually that than they were in the 1980s. 50 years ago, a billionaire had a net worth of a billion or slightly more. Today there are billionaires who have tens if not hundreds of billions. These new robber barons are wealthier than the wealthiest people 75 years ago.

What will the billionaires of today do with their wealth? What can they do? How can they contribute to society. What will they do, not what they say. Elon Musk told the UN’s World Food Program that he would donate $6 billion to feed 42 million at risk of starvation. The UN did respond, Musk did not donate, but as we all know, Musk decided his money was better spent becoming the largest campaign contributor of Donald Trump in 2024.

Frick wanted the public to see his great Rembrandts, Vermeer’s and Piero della Francescas. Carnegie took an old idea- a library for citizens- and scaled it up laying the foundation for the wonderful American public library systems. Art and books became available to those that couldn’t buy. I love art museums and libraries a lot. These two guys came through, at least for me, but of course it came on the backs of workers with little or no rights.

According to the above chart, the approximately 1,500 billionaires today control some $6 Trillion in assets. How they put them to use will, to some degree, determine what humanity does relative to progressive tax policies that are the one answer so far that deals successfully with wealth inequality.

Wealth inequality, the coming transformation of AI, and the climate crisis are, in this futurists’ mind the big Three Horsemen of the Apocalypse of 2025. They must be addressed by humanity in the years ahead.