Distribution of Wealth and Income

Distribution of Wealth and Income

One of the most striking aspects of modern civilization is the inequality in the distribution of wealth. Granted that the difference between rich and poor is as old as the world, poverty has never been quite so apparent as it is today in the midst of suTL abundance of material good, Wealth and poverty are "course relative matters. No one would question the fact that the poorest classes of today have a greater variety of goods a hand than the most favored classes of the Middle Ages. But it is questionable whether there was as great a gap between nch and poor then as now exists. Both the rich and the poor today have leat r possessions and a higher standard of living than the nch and poor of 1000 years ago, but the rate at winch the rich increase their wealth is much greater than the rate at winch the standard of living of the poor rises. It is these great dispanties in economic position that are the source of unrest and discontent. The conflict of the "haves" with the "have-nots" is an out­growth of the envy and jealousy as well as the actual suffering which the great inequalities in wealth have fostered. In a day when political and religious inequalities have been brushed away it seems strange that inequalities in wealth should be more strongly emphasized. The problem of great wealth and great poverty is not merely the matter of the rich enjoying more leisure and more luxuries than the poor, though that might raise senous questions of ethics in the minds of some people, but also that wealth today is a source of power. Society is organized economi­cally by those who possess wealth, our judgments are primarily money judgments, and success is evaluated in money terms. The pecuniary elements in modern society became the chief point of emphasis in Thorstein Veblen's most stimulating analysis ot contemporary civilization.

A great preponderance of individual incomes are small, de­rived principally from wages. This great number of small in­comes really accounts for but a small proportion of the total in­come distributed. At the other extreme, a few persons have annual incomes running from several thousand to several million dollars and these incomes make up an extraordinarily large part ot the total income. The larger incomes are almost entirely derived from the ownership of wealth.

Closely related to the inequalities in annual income are similar disparities in the distribution of wealth. In a capitalistic economy such as ours, this is natural. Except for those material goods used in consumption, wealth is expected to earn a return for its owner; hence those persons who possess wealth in large quantities receive large incomes, while those who own no wealth can receive an income only through the sale of their labor. The power of wealth to beget more wealth, however, is like the growing power of a snowball as it rolls down a winter hillside. Its increase seems to be inherent in its very nature.

Although a more complete resume of distribution will be given later in the chapter, it might not be amiss to mention that in the United States in 1929, 40% of the families received an income of less than $1500. This was several hundred dollars below the in­come necessary for a decent living standard. As many as 65% had incomes of less than $2000. This latter group, the poorest two thirds of the population, owned but 15% of the total national wealth in 1929; while the very rich families, composing 2% of the population, owned 40% of the wealth. Such conditions could not for long escape the serious attention of economists. In Amer­ica especially, much effort has been devoted to the search for principles underlying the facts of distribution.

Generally speaking, economists distinguish two types of dis­tribution. First there is the distribution of income and wealth to individuals in the population, which has been discussed briefly above. This is known as personal distribution. The second type is the distribution which arises as a result of the remuneration paid to land, labor, and capital, for their services in production. The different types of income accordingly are: rent, wages, in­terest, and profit. This is functional distribution.