One of the most perverse treatments of the subject comes at the hands of two historians of the Harding presidency, who urge that without government confiscation of much of the income of the wealthiest Americans, the American economy will never be stable:
The tax cuts, along with the emphasis on repayment of the national debt and reduced federal expenditures, combined to favor the rich. Many economists came to agree that one of the chief causes of the Great Depression of 1929 was the unequal distribution of wealth, which appeared to accelerate during the 1920s, and which was a result of the return to normalcy. Five percent of the population had more than 33 percent of the nation’s wealth by 1929. This group failed to use its wealth responsibly. . . . Instead, they fueled unhealthy speculation on the stock market as well as uneven economic growth.8If this absurd attempt at a theory were correct, the world would be in a constant state of depression. There was nothing at all unusual about the pattern of American wealth in the 1920s. Far greater disparities have existed in countless times and places without any resulting disruption. In fact, the Great Depression actually came in the midst of a dramatic upward trend in the share of national income devoted to wages and salaries in the United States—and a downward trend in the share going to interest, dividends, and entrepreneurial income. 9 We do not in fact need the violent expropriation of any American in order to achieve prosperity, thank goodness.
8 and 9 are Woods' references.
8 Eugene P. Trani and David L. Wilson, The Presidency of Warren G. Harding (Lawrence, KS: University Press of Kansas, 1977), 72.
9 C. A. Phillips, T. F. McManus, and R. W. Nelson, Banking and the Business Cycle: A Study of the Great Depression in the United States (New York: Macmillan, 1937), 76.
To get to the root of the perversity, lets focus on this statement by Woods.
There was nothing at all unusual about the pattern of American wealth in the 1920s. Far greater disparities have existed in countless times and places without any resulting disruption. In fact, the Great Depression actually came in the midst of a dramatic upward trend in the share of national income devoted to wages and salaries in the United States—and a downward trend in the share going to interest, dividends, and entrepreneurial income.
Setting aside the naked assertion, - and irrelevancy - about greater disparities and other times and places, let's look at what's relevant to the discussion: wealth disparity in the U.S. specifically in the 20's. To do so, let's have another look at this graph, which I first posted here, in another context.
Unless Nolan McCarty, Keith T. Poole, and Howard Rosenthal have done something very strange, Woods (or his source) either has it exactly backward, is viewing the information through a strange lens, or has cleverly found a way to tiptoe around reality without actually lying. This seems unlikely, since increasing the wage and salary share is inconsistent with an increasing income share going to the top 1%. Hmmm.
As I read the graph, income share going to the top 1% made a double bottom somewhere north of 14% in 1920 and '22, then rose to its peak of slightly over 19% in 1928. While it's true that this share decreased from '29 through 31, it then leveled out and reached a secondary peak in 1936. It then dropped for two years, rebounded for two more, all the while never approaching the previous low from 1920 (of all years) then, finally, in 1941 began a multi-decade decline. For this to be "in the midst of a dramatic upward trend in the share of national income devoted to wages and salaries," requires a tortured and indeed perverse reading of the data.
And the graph I presented is typical. The first and 13th graphs here shows different slices, but a similar picture.
Similar information, and a whole more can be found here.
How can we conclude that Woods is anything other than a bare-faced liar?