In our last post, we considered that upon the eve of the American Revolution, New England was perhaps the most egalitarian place in the measurable world. That was precisely the conclusion of economists Lindert and Williamson in their study on American Incomes 1774-1860. This sentiment was echoed by Alexis de Tocqueville, who literally started his famous treatise Democracy in America by noting how egalitarian America was.
But let’s look at the numbers. We will start by calculating the social aspect ratio between the median and top household net worth at the country’s beginning. The social aspect ratio measures how much richer the top household is than the national median household net worth. We don’t have precise numbers, but we have enough to get the picture and draw the sharp contrast between America then-and-now.
The median household net worth in America in 1776 was about £175. This is a reasonable estimate based on economist Alice Hanson Jones’ research on the middle colonies in 1774. Applying a 1:4.44 GBP to USD conversion rate implies a household net worth of approximately $775 USD.
According to historian Walter Edgar, the richest American in 1770 was South Carolina slaveholder Peter Manigault, worth around £33,000. This implies a social aspect ratio of less than 200:1 in 1770. This means the richest American in 1770 was less than 200 times richer than the median American household.
Financier Robert Morris is frequently called the richest man in America in 1776, but he probably did not have the highest net worth. While he may have owned the most assets, he also owed the most debt. His fortune was annihilated in bankruptcy. At the end, Morris had a negative net worth, which is consistent with his pattern of frequently soliciting money and overleveraging himself. Any net worth he had was clearly mercurial, and heavily based on unique and non-recurring transactions with the fledgling federal government. Given this profile, it’s difficult to believe that his actual, unencumbered net worth would exceed 3X that of Peter Manigault from 6 years earlier. Let us therefore generously presume that the actual net worth of Robert Morris was around $440,000 in 1776. Against a median household net worth of $775, this implies a social aspect ratio of about 570:1. Thus, the richest American in 1776 was less than 600 times richer than the median American household. The following reinforces the reasonableness of this guesswork.
William Bingham (died 1804) is said to be the richest American for 1780. His wealth was eclipsed by Benjamin Franklin (died 1790) in 1785, who was in turn eclipsed by John Hancock in 1790. John Hancock died in 1793, and was surpassed by both George Washington and Elias Hasket Derby. Firm numbers for all are elusive. The figure of $350,000 is given for John Hancock’s fortune at the time of his death in 1793. George Washington appraised his estate at $530,000 at his death in 1799, and Elias Hasket Derby’s fortune is estimated at around $800,000 in the same year.
Notwithstanding the speculation, it seems clear that even 25 years after 1776, the top households still only hover around 1,000x the median household net worth as it existed in 1776. All of which is to say that no American was more than 1,000 times richer than the median household net worth on the day that America was born. American society was always shaped as a pyramid, perhaps, but originally as a very flat pyramid.