of $100,000 or more per year. Practically all of these fortunes are so invested and hedged about with restrictions upon expenditure that they are, to all intents and purposes, perpetuities.

An analysis of 50 of the largest American fortunes shows that nearly one-half have already passed to the control of heirs or to trustees (their vice regents) and that the remainder will pass to the control of heirs within twenty years, upon the deaths of the "founders." Already, indeed, these founders have almost without exception retired from active service, leaving the management ostensibly to their heirs but actually to executive officials upon salary.

We have, according to the income tax returns, forty-four families with incomes of $1,000,000 or more, whose members perform little or no useful service, but whose aggregate incomes, totalling at the very least fifty millions per year, are equivalent to the earnings of 100,000 wage earners at the average rate of $500.

The ownership of wealth in the United States has become concentrated to a degree which is difficult to grasp. The recently published researches of a statistician of conservative views2 have shown that as nearly as can be estimated the distribution of wealth in the United States is as follows:

The "Rich," 2 per cent of the people, own 60 per cent of the wealth. The "Middle Class," 33 per cent of the people, own 35 per cent of the wealth.

The "Poor," 65 per cent of the people, own 5 per cent of the wealth. This means in brief that a little less than two million people, who would make up a city smaller than Chicago, own 20 per cent more of the Nation's wealth than all the other ninety millions.

The figures also show that with a reasonably equitable division of wealth, the entire population should occupy the position of comfort and security which we characterize as Middle Class.

D. Distribution of the National Income, 1850-1910 3

The most careful and comprehensive study yet made of the distribution of the wealth and income of the people of the United States among the different factors of production is the book by Dr. King, from which this extract is taken. This

1 The income tax statistics, as a matter of fact, cover only a period of ten months in 1914.

2 Professor Willford I. King, The Wealth and Income of the People of the United States.

3 The Wealth and Income of the People of the United States. By Willford I. King (New York, 1915), 154-172, passim. Printed by permission of the author and the publishers, The Macmillan Company.

temperate and judicious study concludes that all the factors have shared in the increase in wealth, while the technical improvements and consequent increase of production of the past half-century have resulted in a great increase in the purchasing power of the earnings of all classes.

It is evident that the economic welfare of the individuals composing each group or class will depend upon three things: first, the size of the stream; second, the share going to the group or class; third, the number of persons within the class among which the share is to be divided. Any study, then, of the relative progress of any segment of the population involves a consideration of these three points. . . .

Rent has been estimated as a percentage of the value of the land. This involves an error in that it fails to account for the fact that land value represents the total present worth of future as well as of present rentals, and so takes account of increases in the rent which are expected to occur later. In a new country, where steadily rising rents are normally anticipated, the value of land is considerably greater than that obtained by capitalizing the present rent at current interest rates. An attempt has been made to offset any error from this source by using the low rate of four per cent of the value as an estimate of the rent of the land.

In computing the share of interest, the rates have been taken as from six to eight per cent of the estimated value of existing capital goods. Since there is no uniformity in the Census reports concerning the things classed as capital, the estimate of the total value of capital goods is necessarily a very crude one.

The remainder of the total product has been entered under the head of profits. The author realizes that some economists would prefer to class monopoly gains with rent but it was not feasible to do so in this case, even if such a course were desirable.

To sum up, it is believed that the share of wages is rather accurately set apart, that the share of rent is close enough to the reality to answer some of the questions commonly asked about it, and that the division of the remainder of the total net product between interest and profits, though admittedly very inaccurate, yet is as close to the facts as can easily be estimated from the Census material and indicates the truth in a broad way. The general estimates appear in Table XXX and the salient features are brought out by Fig. 18.

TABLE XXX

THE ESTIMATED TOTAL NATIONAL INCOME FOR THE CONTINENTAL UNITED STATES DIVIDED INTO RENT, INTEREST, PROFITS, AND RETURNS TO

1 Wholesale prices for year preceding the census. Bulletin 114 of the United States Bureau of Labor Statistics, p. 149.

2 The figures for wages and salaries are believed to be fairly accurate; those for rent are thought to have an error of not more than twenty per cent. The separation of the share of capital from that of the entrepreneur is very crudely done and no stress should be laid on the results. The total for all shares is thought to be more accurate than the mode of distribution and, for the last three census years, should come within ten per cent of the correct statement of the national

FIGURE 18

ESTIMATED DISTRIBUTION OF THE NATIONAL INCOME FOR THE CONTINENTAL UNITED STATES AMONG THE FACTORS OF PRODUCTION

220

5

But, after all, absolute figures are of but little interest to most of us. Fig. 18 shows that all the shares have greatly increased; but we have known that already. Which has been gaining at the expense of the others? Which has been losing out in the race? The answer to these questions is presented in Table XXXI and Fig. 19.

. . We have observed that labor has been fairly successful in retaining about a half of the total product, but this tells us nothing about the portion going to each individual and the last is a question

income. For earlier years, the error should not be over twenty per cent at the outside.

3 Wages and salaries were independently estimated, also, by the method of multiplying the estimated number employed by the average wage received. The variations for the different years between the respective results of the different methods are as follows: 1850-4 per cent; 1860 5 per cent; 1870 - 5 per cent; 1880-7 per cent; 1890- -1 per cent; 1900- -2 per cent, showing the improving accuracy of recent figures.

Profits

Wages

100

TABLE XXXI

THE ESTIMATED PERCENTAGES OF THE TOTAL NATIONAL INCOME RECEIVED RESPECTIVELY BY LABOR, CAPITAL, LAND, AND THE ENTREPRENEUR

ESTIMATED RELATIVE SHARES OF THE DIFFERENT FACTORS OF PRODUCTION IN THE NATIONAL INCOME FOR THE CONTINENTAL UNITED STATES

Percentage of the Total National Income

Census Years,

Interest