Factual basis to 'More millionaires made during Depression" ?

September 7, 2018 11:12 AM

My boss has charged me with finding out if there's any factual basis to the assertion that more millionaires were made during the Great Depression than at any other time in American history.

...And there isn't, right?

The most common iteration of this saying, according to Google searches, seems to be "It's a little known fact that more millionaires were made during the Great Depression than at any other time in US history."

But the only people who are repeating this line - well, on the Internet, at least - are selling some kind of get-rich-quick scheme, or religious self-help book, and don't really provide any research to back it up. This is making me think the whole thing is apocryphal.

Does anybody here happen to know more about this than I do?

posted by southvie to Human Relations (13 answers total)

There are more millionaires being made now (as in approximately the current year) than any other time in human history. First is that some inflation has lowered the relative value of a 'million dollars', income inequality has dramatically shifted the gains of the economy to the top 20%, and financial innovation has allowed 'millionaire' to be an achievable goal for upper middle class earners.
posted by The_Vegetables at 11:25 AM on September 7, 2018 [5 favorites]

My google-fu is no better than yours, but to render an answer in the positive would require the question to be resolved as "a higher percentage of millionaires relative to the whole population" et cetera, and a possible clarification to real dollars. because myu guess is that more millionaires have been made in the modern lottery era than at any other time.
posted by beelzbubba at 11:27 AM on September 7, 2018 [1 favorite]

There are about 15 million millionaires (PDF) in the United States as of last year.
posted by Huffy Puffy at 11:31 AM on September 7, 2018 [1 favorite]

I've never heard this phrase before, but if I were looking into it, I would examine the data around investors buying into the market at incredibly low prices post-crash and then gaining significantly as the market recovered post-Depression.
posted by NotMyselfRightNow at 11:56 AM on September 7, 2018 [1 favorite]

The inflation thing makes a big difference. There's been about a 15:1 drop in the value of a dollar since 1930. If you want a reasonable comparison, you have to figure out either a) how many people crossed the $1 million mark in the 1930s versus how many people are crossing the $15 million mark now, or b) how many people crossed the $67,000 mark in the 1930s versus how many people are crossing the $1 million mark now.

However, if you don't care about inflation, and just want nominal millionaire numbers:

This is a comprehensive paper on new millionaires in the modern age. About 6.5 million new millionaires have been minted in North America since 2008.

This is close to what you're looking for. In 1929, there were 20,000 millionaires in the US. In 1944, there were 13,000.

This might also be useful:

Number of millionaires in America at time of stock market peak in 1929: 25,000–35,000
Number of millionaires in America at time of stock market bottom in 1932: 5,000

posted by clawsoon at 12:06 PM on September 7, 2018 [15 favorites]

In addition to the above points, you have to define "during the Great Depression".

Does it start on October 29th, 1929? if so, doesn't that discount all the people who were millionaires (on paper) before the stock markets crashed?

Does it end in 1933, when per-capita GDP started rising again? Or just before or just after the 1937-38 recession? or in 1941, when the GDP recrossed the 50-year trendline?

Does someone count as a "Great Depression millionaire" if they started the business that made them a millionaire in 1932, but they weren't officially a millionaire until after WWII?
posted by Etrigan at 12:18 PM on September 7, 2018 [3 favorites]

I think there are theories (with evidence) to suggest that the wealth gap CAUSED the great Depression, but certainly after the Great Depression the wealth held by the top 1% dropped pretty significantly. Who knows where and/or to whom the rest of that wealth went, but it's a start.

Income Inequality from 1913-2015

Underconsumption theories and Keynesian economics. Interpretations of the Great Depression

You might want to look into property ownership before, during and after the Great Depression. Here's a starting point. Try here, too.

I've seen some (perhaps somewhat questionable) articles about investors who have weathered all of the the Greats (Depression, Recession) but I can't help but feel like those people are either lucky or just muddling along most of the other times. Who knows.
posted by ancient star at 12:41 PM on September 7, 2018 [1 favorite]

I think there are theories (with evidence) to suggest that the wealth gap CAUSED the great Depression, but certainly after the Great Depression the wealth held by the top 1% dropped pretty significantly.

I started thinking about how to map number of millionaires to wealth percentiles, since that information is available, but... it's complicated. An increase in millionaires could mean one of any of these:

- The entire society got wealthier, so more people ended up as millionaires, with no change in wealth distribution.
- The top 0.1% lost money to the top 1%, evening out wealth distribution while creating more millionaires.
- The bottom 95% lost money to the top 1%, creating more inequality while also creating more millionaires.

So figuring out changes in number of millionaires based on changes in wealth distribution would be very difficult.

Looking further at the Credit Suisse report I linked, you could loosely map today's "ultra-high net worth individual" ($50 million or more) to a 1930s millionaire. (Well... to a 1930s $3-millionaire, anyway.) The number of UHNWI in North America:

~25,000 in 2007
~10,000 in 2008
~50,000 in 2017

That's similar-ish in scale to increases in the number of millionaires in both the 1920s and following the 1932 low point:

~10,000 in 1918
~20,000-35,000 in 1929
~5,000 in 1932
~13,000 in 1944

If you want to confuse things further, this report from 1927 talks about 207 millionaires in the U.S., but it's talking about million-dollar incomes rather than wealth.
posted by clawsoon at 1:12 PM on September 7, 2018 [2 favorites]

I suspect at least some of the claim is that families who started small business during the Great Depression later amassed wealth. E.g., Rooted In Recession: The Richest Families Whose Businesses Started During the Great Depression lists families like the Gallos and the Marriotts who started small businesses during the Depression.

I suspect the claim is still probably false, but "Many tycoon families trace their businesses back to the Great Depression" is a slightly more reasonable claim.
posted by lazuli at 2:24 PM on September 7, 2018 [6 favorites]

I was just reading this paper about the Civil War and how the few very wealthy being disrupted opened up the market and many poor Southerns propered greatly. It may be the same principle at work. (But even studying those very wealthy over the long term - they usually kept their wealth)
posted by beccaj at 2:47 PM on September 7, 2018

It’s bogus in real terms given reasonable interpretations, unless you’re interested in ignoring inflation (which is silly).
Clawsoon and lazuli have given links and references above to explain why the claim seems reasonable to many at first blush, much like snake oil is also sold as being reasonable.
posted by SaltySalticid at 7:55 PM on September 7, 2018

Response by poster: Thanks, everyone - this was really helpful. I figured the claim was false, but it’ll be good to have all this data in tow when I let my boss know one of his favourite sayings is essentially bullshit.
posted by southvie at 7:00 AM on September 8, 2018 [1 favorite]

It's one of his favourite sayings? Uh... well... good luck! :-)

It does seem that there was an increase in the number of millionaires from the low point of 1932 to the mid-1940s, so the saying isn't completely bullshit. Stock market numbers now are more like the late '20s or late '40s than like 1932, though, so the saying is inapplicable right now whether or not it's true.

It would have been a great saying for 2008, though. The stock market had crashed, banks were failing, credit was freezing up, and the following decade saw a whole bunch of newly minted millionaires.

One piece of data that I haven't been able to track down that's bugging me: How many millionaires were there in 1937? The rise in stock markets from 1932 to 1937 was very steep and could have created a lot of temporary millionaires who don't show up in the numbers we've found so far.

Either way... good luck! :-)
posted by clawsoon at 5:52 AM on September 9, 2018 [1 favorite]