SOCIALISM NEVER took hold in America, John Steinbeck allegedly quipped, because the poor saw themselves not as an exploited proletariat, but as temporarily embarrassed millionaires. Yet in the case of southern slaveholders, who lost much of their wealth after the abolition of slavery in America and General William Sherman’s scorched-earth “march to the sea”, those millionaires who were indeed temporarily embarrassed seemed to recover quite quickly. That is the surprising result of a meticulous study of historical census data by three economists, Philipp Ager, Leah Boustan and Katherine Eriksson.
Before the civil war, the South was deeply unequal. Among white households, those at the 90th percentile of the wealth distribution owned 14 times as much as those at the median. By contrast, in today’s seemingly inegalitarian times, the ratio among white households is just 9.5 to one. Roughly 50% of the wealth in the antebellum South was held in slaves. After the surrender of the Confederacy in 1865, all this disappeared: wealth for the top 1% dropped by 76% between the censuses of 1860 and 1870. This had the effect of reducing inequality—but only temporarily. By the next census, in 1880, the sons of slaveholders had recovered the wealth standings of their fathers compared with those who grew up in non-slaveholding households. By 1900, they had surpassed them.
After ruling out other possible explanations, such as greater skills or business acumen, the economists interpret this recovery as the result of elite networks acting as an invisible safety-net. The sons of slaveholders married into wealthy families and obtained well-compensated white-collar work, reversing even large declines in fortunes.
A long line of economists, from John Maynard Keynes to Thomas Piketty, have noted that wealth begets wealth. But an opposite dynamic has been observed in studies of black Americans more than 100 years after the end of slavery. A study of all Americans born between 1978 and 1983, by economists Raj Chetty, Nathaniel Hendren, Maggie Jones and Sonya Porter, found that even the black sons of wealthy parents exhibited extraordinary downward mobility relative to whites. They also had much higher rates of incarceration. Unlike white slaveholders after the civil war, intergenerational transmission of black wealth one century later seems much more fragile.