Abstract: Unequal Fortunes, Unequal Firm Sizes and Close Corporations in the Gilded Age

Leslie Hannah

Abstract

Before 1914, Americans were concerned by their growing inequality, but unlike today—as Thomas Piketty shows—US incomes and wealth were then more equally distributed than Europe’s. Inequality was associated with higher capital/income ratios and more extensive stock exchange development in Europe. Stock exchanges enabled the divorce of ownership from control, incidentally weakening the (hitherto strong) link between inequality of firm sizes and inequality of personal fortunes. This separation was most noticeable in the UK, though appears to have been compatible with more concentrated (and more diversified) personal fortunes there (except in the hyper-plutocratic, $100m+ wealth class, which was distinctly larger in the US). The NYSE listed only a fifth of US corporate stocks by value, much less than in the UK (where two-thirds of corporate share capital was tradable on the LSE). France and Germany were nearer the UK than the US on this dimension. Closely-held corporations were more common than in Europe among both giant firms and SMEs in the US. Yet the more numerous US corporates apparently spread wealth more widely, before their shareholdings became widely dispersed. Several puzzles raised by international corporate/financial comparisons remain unresolved.

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