Back to the Future at Forbes?

Forbes has crowned Bill Gates as the world’s richest man (again), with a fortune of $76 billion. Like many wealthy and generous predecessors, Gates has already given a considerable portion of his money to charity, but clearly he has enough left to manage.

How rich is Gates? Let’s say you earned $100,000 a year, a rather good income. Let us also say you managed to save 100% of what you earned. At that rate, it would take you 760,000 years, or slightly more than ten times as long as Homo Sapiens Sapiens (modern man) has existed as a species, to accumulate Gates’ wealth.

Well, perhaps $100,000 is too modest a base to consider. Let us say you earn $1 million per year, and again manage to save all of it. Then it would only take you 76,000 years, or somewhat more than ten times as long as all of recorded history, to reach Gates’ bracket.

This is not to say that Gates doesn’t deserve his wealth.  I just wish to point out the huge gap that exists in our society between earnings based on control of capital, which generally enjoys exponential growth, and earnings based on wages.  There were periods in history when people earning wages did enjoy faster income growth than those whose earnings came from capital, but those days are now long gone.

There was an earlier period in which America also had business elites with enormous wealth.  In his day (c. 1914), John D. Rockefeller was even richer than Gates.  His fortune in 1914 is estimated at roughly $1 billion — in those days Rockefeller was known as the world’s only billionaire.  That year, average US wages in manufacturing were $2 per day, or about $500 per year.   Since today, average manufacturing wages in the US for union labor is just under $50,000 per year, Rockefeller was about one-third richer than Gates, in the level of his fortune compared to the average manufacturing wage level of his day.

So we are back to the period of the “Gilded Age,” before the great losses of the Depression, and the gains of middle-class workers in the half-century from 1940 to 1990, started to tip things a bit away from the very wealthy.

Of course, it must be said that the actual living standards — the health and longevity and access to consumer goods — of today’s middle class, and even more the poor, are far, far higher than those of their counterparts a century ago. Indoor plumbing, big-screen TV, and access to an automobile are almost universal aspects of American life. So much has improved, and most people would prefer to live today than a century earlier, or even several decades ago.

Still, in relative terms, we are almost back to where we were c. 1914.
Interesting how quickly a century of change can melt away.

About jackgoldstone

Hazel Professor of Public Policy at George Mason University
This entry was posted in The Global Economy. Bookmark the permalink.

3 Responses to Back to the Future at Forbes?

  1. Zhengbin says:

    The other manufacture factors also attribute to the great gap. So if we emphasize on the key function of the human labour,just as the Maxisim said,can we get a shallow gap?

  2. John Plant says:

    This return to the economic dynamics of the early twentieth century should give us pause to reflect on how we currently finance our governance. In 1914 the US government was funded predominantly by tariffs. Only after the failure of Smoot-Hawley tariff in the 1930s did we transition to an income-tax as the primary source of government revenue. Growing wealth disparity and the decline of the American middle class mandates this approach be rethought. Mr, Gates and his peers built their wealth within the hospitable environment and under the protection of American governing institutions, Yet, as positive as their philanthropic endeavors are, their contributions to government finance are not commensurate to the benefits they have and continue to receive. A new logic behind government finance is needed that recognizes this fact and demands a greater contribution from those who benefit the most, while retaining the ability in our market economy for talented individuals to generate and amass great wealth.

  3. It’s simple. You create wealth, you get rich. There are too many people starting their career or stuck somewhere in low paying job thinking that they’re entitled to better pay. As I write this comment, I’m using Windows Operating system in an Internet Explorer browser, all Microsoft product which contributes to Gates’ wealth. Good for him.

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