Economic disparity is a problem that has grown along with the nation.
In January of 1944, in the midst of the terrifying days of World War II, President Franklin Delano Roosevelt unveiled a huge idea in his State of the Union address. The nation had fought its enemies to ensure its residents remained free, he said, but American citizens could not be truly free if they were constantly worrying about where their next meal was coming from or if they could afford a roof over their heads. “People who are hungry and out of a job are the stuff of which dictatorships are made,” he said.
To remedy this problem, he proposed adding a new set of guaranteed provisions to supplement the country’s founding documents.
He wanted Americans to have the right to a “useful and remunerative” job in America’s industries, shops, farms, or mines. He wanted families to have the right to a decent home, and he wanted everyone to have the right to adequate medical care and the “opportunity to achieve and enjoy good health.” He thought Americans should have the right to a good education, and the right to adequate protection from the economic fears of old age, sickness, accident, and unemployment.
Today, these are things that could define the American Dream: a good job, a home, health care, and security. But it’s interesting that including such provisions in the country’s guiding documents weren’t mentioned until some 168 years after the America’s founding.
FDR styled these proposals a “second bill of rights.” The first Bill of Rights, of course, refers to the first 10 amendments to the U.S. Constitution, which allowed for, among other things, freedom of the press, the right to bear arms, and the right to a trial by jury. Those rights, at the time, were top of mind among the country’s founders, who were concerned most with getting Great Britain out of their affairs. The founders didn’t concern themselves with what people in their young country would do if they got sick and couldn’t pay their rent. In fact, neither the Bill of Rights, nor the Declaration of Independence, nor the U.S. Constitution talk explicitly about the nation’s role in making sure its citizens have jobs or homes or earned enough to avoid being impoverished. The only line that even comes close appears in the preamble to the Constitution, where “We the People of the United States” pledge to “promote the general Welfare.” But at no point in the founding literature do the founding fathers identify what constitutes general welfare, or how nation should be upholding it.
Founding documents of other countries that were ratified much later, talk more about equality. The Indian Constitution, for example, was adopted in 1949, and includes an article that requires the state to “secure a social order for the promotion of welfare of the people,” which includes instructions to the state to try and eradicate income inequality.
It raises the question: If Americans today are so concerned with income inequality and the “American Dream,” and if FDR believed so strongly in equality of opportunity, why didn’t the founders talk about these concepts at all in the documents that created the nation? Is it really correct to say that America is built on a foundation of opportunity and economic freedom when that type of equality isn’t mentioned at all?
Not necessarily. The lack of language about equality might not be because the founders didn’t believe it important, but because economic inequality was barely a problem then. In fact, the colonies were among the most egalitarian places on earth at the time they declared independence. In the late 18th century, “incomes were more equally distributed in colonial America than in any other place that can be measured,” authors Peter Lindert and Jeffrey Williamson write, in the recently released book Unequal Gains: American Growth and Inequality since 1700. The richest 1 percent of households held only 8.5 percent of total income in the late 18th century. Today, the richest 1 percent have 20 percent of total income. The Gini coefficient, which measures inequality on a scale from 0 to 1(with 1 being very high inequality) was just 0.367 in New England and the Middle Atlantic. It was 0.57 in Europe, in the late 18th century.
Early on, the colonies provided a level of economic equality that simply wasn’t possible in Europe. For one thing, there was a lot of land available once the colonists started taking it from Native Americans, and—as the game Monopoly shows us—owning property has historically been a good way to get ahead. Colonists were able to profit from the land. They farmed wheat, tobacco, and rice, and fished the seas for cod and hunted whales. With easy access to abundant resources, they sent goods to Europe and profited as a result. At the same time, population growth was slow. That meant those who wanted to work but didn’t own land could always find a job, And those who owned land paid a premium for labor because—with the exception of the South, which had slave labor—those seeking workers had few candidates to choose from. The scarcity of labor created an unintentional redistribution of wealth—inflating the earnings of non-landowners.
Upward mobility was also a lot easier to achieve around the time of the country’s founding, according to Gordon S. Wood, the author of the seminal book The Creation of the American Republic, 1776-1787. There were poor people in the early colonies and the Republic, but many fewer than there had been in Europe. About half the population of Britain in the 18th century was on the dole, Wood said. But there were far fewer poor people in America, partly because they couldn’t get there if they were truly impoverished.
This equality left the founders focused on one thing: freedom from aristocratic England and its laws, which allowed for rampant inequality. Hobble the aristocrats and the people keeping others down, the thinking went, and anyone, no matter how humble their birth, could succeed.
For example, after the revolution, John Adams advocated for laws that forced families to divide their estates among all their children, to prevent European-style feudal estates, according to Joseph R. Blasi, Richard B.Freeman, and Douglas L. Kruse in The Citizen’s Share: Reducing Inequality in the 21st Century. The goal of a republic, he believed, was “the greatest happiness for the greatest number.”
When, in 1786, the General Assembly of Pennsylvania debated giving a corporate charter to the Bank of America, a handful of representatives expressed concern that the bank would give too much economic power to one set of men, according to The Citizen’s Share.
“Shall we grant such an institution? Shall we give such an artificial spring to concentrated wealthy? By no means,” Representative William Findley said to the General Assembly of Philadelphia. The assembly then voted to deny the bank the charter—though later bank directors were able to drum up support by convincing Thomas Paine to lobby for a new assembly.
The founders also favored workers over owners, which helped kept a class of non-owners remain economically empowered. According to The Citizen’s Share, after the cod stock was decimated by the Revolution, Jefferson proposed a tax credit for cod vessels to help jumpstart the industry. He wasn’t sure, though, whether the credit should go to the owners of the vessels, or to the crew of the vessels, who were also suffering financially. In 1792, Congress passed a law mandating that five-eighths of the credit go to the crew, and three-eighths go to the owners. Those who controlled the means of production were regulated, then, from taking too big a share.“The leaders of the new Republic were not swayed by the cod fishery’s owners and financiers, who no doubt had the eighteenth century equivalent of K Street lobbyists pressing their cause,” the authors of The Citizen’s Share write.
These egalitarian principles didn’t last long. Between 1800 and 1860, inequality grew in America about as much as it has in the period since 1970, according to the authors of Unequal Gains. The Gini coefficient grew to 0.441 in 1774. By 1860, it was 0.529.
The problem was, in part, a lack of explicit laws that would maintain the economic balance as the nation grew and changed. Although Thomas Jefferson had written to James Madison that “legislators cannot invent too many devices for subdividing property,” few laws had been passed to regulate property ownership in the original colonies. The people who had been in the colonies early and bought land were able to profit from it, but as the population grew in the early 19th century, there was less land and more demand for it.
This rising inequality can be seen in the distribution of property incomes, which measure the amount of money people can make because of land or factories they own. In 1860, the top 1 percent collected almost one-third of property incomes. In 1774, they’d collected just 13.7 percent, according to Unequal Gains.
Land was more available on the frontier because of laws like the Harrison Land Act, which sold land to citizens in the Indiana Territory by giving them access to credit. But for those still in the cities of the original colonies, the people that owned the property were getting richer, while everyone else was competing against for jobs and land.
There’s one more reason inequality grew after the Revolutionary War, and it’s surprisingly reminiscent of some of the reasons inequality is growing today. To prosper, the new nation needed a financial sector; it needed to issue bonds and get investors to buy its debt. Thanks in part to the advocacy of Alexander Hamilton, the U.S. financial system soon became popular with foreign investors, who were eager to get into the new market. But the financial sector favored only those people who were able to get into the market early, and those who were already financially sound enough to invest.“The wealthy pulled ahead of the rest of society, especially in the cities of the Northeast, on the strength of their savings, access to credit, and capital gains,” the authors of Unequal Gains write.
It wasn’t until the period between 1910 and 1970, which historians call “the greatest leveling of all time,” that some of those disparities were eradicated. Population growth slowed and education increased among most Americans. And perhaps most importantly, after the crash of 1929, strict regulations were placed on the financial industry, and incomes in the sector declined.
One more factor made that period egalitarian once again: Leaders such as FDR put in place policies that the founding fathers hadn’t had to think about. The government started to redistribute wealth, and to make sure that there were social programs for the poor. But that second Bill of Rights that FDR proposed never got anywhere. So even now, there’s no law in America that guarantees its citizens a job, a roof over their heads, or a meal to eat.
Written by Alana Semuels for The Atlantic, April 25, 2016.
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