… and the Poor Get Poorer??

by Don Boudreaux on October 19, 2004

in Myths and Fallacies

NPR’s Marketplace yesterday ran a story on the widening income gap between Hispanics and whites in the United States. (I unsuccessfully tried to find a specific link to this story on Marketplace’s website.) One of the persons interviewed remarked that it’s a classic case of “the rich getting richer and the poor getting poorer” (or words very, very close to that effect).

This is an old and familiar saw – but one that doesn’t cut it.

Review the history of Americans who’ve become rich as entrepreneurs. A large percentage – my guess is a great majority of them – began life in modest circumstances.

Perhaps the most famous fabulously rich American of all time is John D. Rockefeller, founder of Standard Oil. He hailed from a poor, hard-scrabble farm in upstate New York, then moved with his family as a young boy to Ohio. He began his career at the age of 16 in Cleveland as a bookkeeper. He was quite the opposite of wealthy.

Or Andrew Carnegie. The son of a Scottish weaver, he immigrated to America, with nearly nothing, at the age of 13. Almost immediately he began his career – as a bobbin boy in a cotton mill. No riches here that launched Carnegie.

Or Aaron Montgomery Ward. He began his career working in a barrel factory at the age of 14; later he advanced to laboring in a brick yard. Even later, he earned his living as a traveling salesman. No riches here that launched Montgomery Ward.

Going back a few generations, consider John Jacob Astor. (See also here.) He was born in Germany, the son of a butcher, and worked in his brother’s factory making musical instruments. He did not amass any fortune until he came to the U.S. and started his fur-trading business.

Likewise for Cornelius Vanderbilt, descended from Dutch indentured servants and a man who quit school at the age of 11 to work on ferries. His family was of only modest means.

Or Gustavus Swift. He was the son of a farmer; he began his career as a butcher’s apprentice.

J.P. Morgan is something of an exception to the above cast of entrepreneurs. His father was a partner in a London investment firm.

More recently, Steve Jobs hails from a modest background. (Bill Gates is more like Morgan on this front; his father is a partner is the well-known law firm of Preston Gates & Ellis.)

I could go on, listing famous rich business people. I’m quite certain – without having yet done a detailed study – that the history of these people thoroughly disproves the tired adage that “the rich get richer and the poor get poorer.”

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