The Lowdown on Wealth

__"Who Owns What: The Things We Know That Are Not So" by John C. Weicher, in American Outlook (Spring 1998), 5395 Emerson Way, Indianapolis, Ind. 46226.__

"The rich get richer and the poor get poorer," says the old Depression-era song, and it’s a theme that’s been heard a lot in recent years. Supposedly, wealth in America has been becoming more concentrated, with the rich claiming a fatter and fatter share, especially during the 1980s, that terrible "decade of greed." It’s a nice, scary story, but Weicher, a Senior Fellow at the Hudson Institute, says it’s not true.

The "rich" (i.e. the wealthiest one percent of U.S. households) since 1983 have generally owned between 30 and 35 percent of total U.S. wealth, Weicher says, and there is no clear trend. The percentage was 31 in 1983, 36 in 1989, 30 in 1992, and 35 in 1995, the last year for which data are available. These fluctuations could be just statistical variations, but Weicher thinks they correspond to the business cycle, with the rich suffering a greater decline in the value of their assets during recessions.

"The rich did get richer during the Reagan boom," he writes, "but so did the poor, and at about the same rate. Both rich and poor enjoyed an increase in wealth of approximately 20 percent between 1983 and 1992." (Income, however, is another story, he points out: "Income inequality has been increasing steadily since approximately 1967." Just why that hasn’t resulted in more inequality of wealth is a mystery.)

The rise of the stock market since 1983 might have been expected to increase inequality of wealth, since stocks are owned mainly by the affluent. However, the rise has been offset by growth in home equity. Housing values have been rising since the early 1980s, and for most Americans, their home (some 65 percent of all households own their own) is their biggest asset.

As a matter of fact, the rich don’t park much of their money (only 10 percent in 1992) on Wall Street. And less than 15 percent of wealthy households (many of them elderly) have stocks as their most important asset. "Surprisingly few among the rich have received any significant inheritance," Weicher observes. Most have gained their wealth the old-fashioned way—by earning it in small businesses, as retailers, small manufacturers, independent professionals such as doctors and lawyers, owners of rental or com-mercial real estate, and farmers. Their most important asset is an unincorporated or closely held business. In a sense, then, it seems, Scott Fitzgerald was wrong: the rich are not very different, after all. Except, of course, for all their money.