Economic Inequality in United States

Word Count: 4250

Economic Inequality in United States

INTRODUCTION

Economic inequality is the gap between the wealth of the richest people in a country and the wealth of the poorest people. Economic inequality was one of the causes of the Great Depression of the 1930s: although there were a few very rich people in the country, many people did not have enough money to buy the necessities of life, let alone any luxuries. Since people did not have the money to buy what factories and farms were producing, those factories and farms lost money, causing them to lay off employees, which then caused even more poverty. As a result of new laws passed during the New Deal in the 1930s, such as the legalization of labor unions, minimum-wage laws, and Social Security, economic inequality declined in the United States from the 1940s to the 1970s. Since then, however, economic inequality has worsened in the country.

Early America was often seen by outsiders as a paradise of equality, compared with aristocratic England and Europe. “Everybody has property here, and everybody knows it,” declared an upper-class Englishman during a 1764 visit to Boston. Nevertheless, while Americans may have been more equal in terms of wealth than Europeans, there was still quite a bit of inequality. It is difficult to come up with exact numbers since at that time there was no national income tax, and not everyone left a will detailing their income, but scholars estimate that in 1774, at the time of the American Revolution, the richest 10 percent of Americans owned almost 50 percent of the country's wealth. Many people in colonial America were completely devoid of wealth, such as slaves and indentured servants. By the time of the Civil War in 1860, the richest 10 percent of Americans owned 73 percent of the wealth, and by 1912, the richest 10 percent owned 90 percent of the country's wealth.

In addition to income inequality, wealth inequality is another aspect of economic inequality. Wealth includes not only income but also investments, such as land, real estate, and stock. Before the 1929 stock market crash that signaled the beginning of the Great Depression, the richest 1 percent of Americans owned 32 percent of the country's wealth. By 1949, this percentage had dipped to 27 percent. But by the late 1950s, the richest 1 percent owned almost 35 percent of the country's wealth. This percentage rose to almost 39 percent by 1995. The share of wealth owned by the top 10 percent of Americans rose from 67 percent in 1962, to 72 percent in 1995. As of 2004, the richest 10 percent of Americans owns 71 percent of the country's wealth. From 1983 to 1998, the poorest 40 percent of Americans saw their net worth (their wealth minus their debts) go down by 76 percent, whereas the net worth of the top 10 percent rose by 24 percent. As of 2004, the richest 1 percent of Americans owned a little more than 34 percent of ...