Income Inequality Greater Than In 1774: A Marxist Perspective

Two professors Peter Lindert of the University of California – Davis and Jeffrey Williamson of Harvard have put together a study showing that income inequality today is greater than it was in 1774. In fact, their data shows that in 1774 on the eve of the Revolution, wealth was more equally distributed across the 13 colonies than anywhere else in the world they have a record of. Jordan Weissman warns that the study is based on a “thinly recorded past” and necessarily involves “lots of conjecture”.

Personally I have a hard time believing this to be true as I am a firm believer that the Soviet Union and Revolutionary China would have to have been more equal. This may primarily be due to the fact that those societies had a rural and urban divide that did not exist in 1774. Even in revolutionary societies there was inequality between rural and urban people. An inequality that was actively sought to be changed.

Regardless of my opinion on income inequality on that matter, the article quotes Weissman on exactly what difference we are seeing between today and 1774:

“By the time the Civil War came, the top one percent of U.S. households laid claim to 10 percent of the nation’s income, versus about seven percent during the founders’ era. Today, the same group accounts for about 19 percent…

…The paper only suggests that on a strictly dollars and cents basis, income was skewed less towards the rich during the colonial era than it is today.”

In actuality in modern times the top 1% own 36% of the wealth in the United States, whatever statistic he is quoting is horribly inaccurate. The wealth gap now is much greater than he portrays it to be.

Well, enough of that. The point of this post is to explain why this happened from a Marxist analysis. The events and description will be more complicated and contain more aspects than I am going to give here, but I will give the over all general idea of what took place.

In the time of 1774 the Industrial Revolution had not yet taken place in the United States. Most historians argue that it occurred in the US between (1820-1870) in Britain and Germany and then eventually made its way to Japan and North America [1]. There is disagreement among some as to the exact time, but generally the Industrial Revolution had not reached the United States yet. This means there was a large equalization in ownership of the “means of production”. In Marxism the ownership of the means of production is pretty much the determining factor in who receives profits as well as determining class position.

Artisan (or autonomous third class)
Own your own means of production and selling your products

Own means of production and employ others to work them and selling the product

Own no means of production and are employed to work them

In this time the economics of the society were roughly 80% artisan, meaning people produced for themselves. This goes into the foundation of Adam Smith’s economic writings. When he describes the functioning of economics it is done with examples of small producers who exchanged goods. A person produced for their own wealth and more often than not for barter. The Industrial Revolution by contrast concentrated the means of production into fewer hands through the mechanisms of socially necessary abstract labor time and its ever changing nature because of the introduction of more efficient means of production that not everyone could own.

These more complex means of production were far more efficient and reduced labour time making each commodity cheaper to produce. By doing this the price of the commodity was lowered and thus was able to out-compete the artisan. Essentially over time artisans were not able to compete with the growing capitalist institutions. Eventually this inability to compete forced artisans to sell their means of production out of hunger and become workers producing the same product for the capitalist as their labour is the only thing they had left. Thus by the “evolution” of production, the means of production were taken out of the hands of individuals who produced for themselves and placed them under the control of the capitalist who hired the artisan to produce the same thing while he collected a wage instead of the profits.

(This became true of agriculture as well. Which is important considering that in 1774 most of the population was agricultural workers. But it is not central to the explanation here, I’m just noting that this went for farming as well.)

In essence what happened was the advancement of the means of production caused the artisan to lose control of them and placed them into the hands of the capitalist. In society your class position is determined by your relationship to those means of production. People went from owning their own to being employed in the use of them. This transferred the wealth generated from many small producers into the hands of few capitalists. This literally means that profits and wealth went into fewer and fewer hands as capitalism progressed. This is what primarily caused the wealth gap to increase from 1774 to today.

There are other factors as well that also developed along the way. The outsourcing of jobs made the situation even worse for those on the losing side of the gap. The de-industrialization of the First World was a major contributing factor. Neo-liberalism, or globalization has taken the means of production out of the hands of workers in the First World and placed them in the hands of workers in the Third World. The workers here don’t even use the means of production at all in a manufacturing sense. Most of these manufacturing jobs have been replaced with retail and service jobs. Those means of production went from the hands of the artisan, to the hands of the worker under the capitalist, to out of the country under the capitalist.

By doing this the worker has lost more and more control of the means of production. Where once he produced commodities for himself, he went to producing them for the capitalist’s profit. Now he doesn’t even work them at all. This I believe is the primary source of the wealth gap being greater today than in 1774. There are also other factors such as financial capital that has also moved the worker farther away from the means of production and the creation of fictitious values. But I think this is the main reason why it began and the primary cause.

* * * Article: Income inequality greater than in 1774