Economic historians studying early America remind one of archaeologists studying prehistoric civilizations. Instead of piecing together pot shards and bone splinters to help imagine cultural practices many millennia ago, the historians piece together fragments of tax records, tattered business ledgers, town regulations, and a few partial censuses (and sometimes pot shards and bones, as well) to describe our economy about three centuries ago.
Writing in the current Journal of Economic History, Peter H. Lindert and Jeffrey G. Williamson, esteemed scholars of American economic development, put together a picture of Americans’ incomes before and after the Revolution (gated here; earlier pdf version here.). By interconnecting complex varieties of data, they are able to estimate incomes and standards of living in American households in 1774 and in 1800.
At least three fascinating stories emerge: the cost of American independence, the fall of the South, and the roots of America’s image as the land of economic equality.
The Price of Revolution
One of Lindert and Williamson’s central findings is that the economic conditions of American households plunged during the Revolution, about a 20 percent drop in real per capita income by 1800. Fortunes started to recover in the 1790s, but were still notably distressed in 1800 contrasted to 1774. The authors compare the scale of the setback to that of the Great Depression. The War of Independence brought much physical destruction, disruption of the Atlantic trade, and the flight of Loyalists, many of whom were key investors and skilled workers.
The Fall of the South
In 1774, free people in the southern colonies had considerably higher per capita income than free people in the North had. The southerners were overwhelmingly independent farmers with still-fertile lands, while northern heads of households were more often laborers, urban employees, and poor. But the South suffered much more economic decline during the Revolution than did the northern colonies. Later, between 1800 and 1840, income surged in the North while stagnating in the South. As the nation entered the years of strife leading to the Civil War, white southerners had already experienced a relative fall from grace, now living in the poorest instead of the richest region.
The Egalitarian Nation
Incomes were more equally distributed across households in 1774 America than they were elsewhere. Lindert and Williamson can compare their numbers to income estimates for England and Wales and for Holland in the mid-1700s. They show that American income was notably less concentrated at the top and more equally shared in the middle. Other data (and travelers’ impressions) also confirm the conclusion that “there was no documented place on the planet that had a more egalitarian distribution in the late eighteenth century.” And this was equality at a high level of income. Except for those at the very top, colonists at every rank of the economic ladder (including slaves) made more than did the English at those same ranks.
Thus, when America gained the reputation centuries ago that it was the land of economic opportunity and economic equality, that reputation was based on reality. We must underline, of course, that this was opportunity and equality for free heads of households, i.e., largely white men. Equality across households does not take into account inequality within households, which is where much of early American inequality rested: between the male heads and the women of the household; between the masters and the household servants, apprentices, farm hands, and of course, slaves. That is another equality story altogether (told, e.g., here).
America’s egalitarian reputation has now been tarnished. Other western nations have in recent generations attained greater income equality across households than the United States. Additionally, American income equality is less now in absolute terms now than it was in 1774. Lindert and Williamson write, “Among all American households, slaves included, the richest 1 percent had only 7.1 percent of total income . . . . [In] the United States today . . . almost 20 percent of total income accrues to the top 1 percent.”
History as we remember it hangs heavily over our national discussions today. The memory of American egalitarianism so long ago — “Equality forever” says the stamp — too often makes us think that we are still the beacon of equal opportunity and thus too often undermines our efforts to realize that equality once again.