May/June 1989 | Volume 40, Issue 4
How much money did it take in 1800 to be called rich? According to Henry Adams, in the first chapter of his History of the United States during the Administrations of Thomas Jefferson and James Madison , “In New York and Philadelphia a private fortune of one hundred thousand dollars was considered handsome, and three hundred thousand was great wealth.” By 1988 you didn’t make Forbes list of the four hundred richest Americans unless you could command at least $225 million. This year the minimum will undoubtedly be higher.
Clearly, a lot of things happened in the intervening years to the value of money, and that is the subject of John Steele Gordon’s cover story in this issue. For those who write or read about the past, the meaning of money through time has always been a difficult problem. How, for instance, does one determine the economic status of the leading man of American letters before the Civil War, a man who depended on lectures for which he was paid an average fee of twenty-five dollars? He supplemented this with book royalties, interest on a legacy, and small investments, altogether bringing him an income of three thousand dollars a year. On this sum he supported himself, his mother, his wife, four children, and five servants in a spacious house in Concord, Massachusetts, set on six acres. Only a rich man could do that today, and Ralph Waldo Emerson was not rich. Nor would we call rich his present-day counterpart, who would probably be a university professor lucky to have a maid in once a week.
To translate the nominal value of money in the past into economic reality we must also take into account such things as human mortality rates, the availability or even the very existence of certain goods and services (no telephone, no penicillin), and the number of hours people had to work in order to afford something. As Gordon points out, in 1939 a clumsy, undependable television set cost about $500—25 percent of the average annual income. Today the sum represents only 3 percent and buys a far better set. Technology and the law of supply and demand have made a rich man’s toy into a poor man’s necessity.
Salaries alone can be deceptive too, even taking inflation into account. Future historians may puzzle over the extraordinary wages being paid to first-year associates at major law firms. The answer lies in the hours worked. For forty hours a week, an annual salary of seventy-five thousand dollars is extravagant; working seventy-two or more hours at any salary is sweat labor. For what is a man profited, if he shall gain the whole world, and lose his evenings and weekends?
Whether the year is 1889 or 1989, we always measure wealth by our ability to be physically secure and healthy, to protect and educate our children, and to dispose of our time as we choose. (As Emerson wrote, “… the best good of wealth is freedom.”) Wages and prices of the past may be hard to interpret, but show us how people lived their lives and we’ll have no trouble finding their place on fortune’s wheel.