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Comment by todayiamme | Hacker News Reader

What's interesting to me is that the robber barons owned a disproportionate percentage of the GDP as compared to the most wealthiest individuals in the developed world today. For instance, it is estimated that Rockefeller's personal fortune alone amounted to ~1.5% of the US' GDP. I wonder why this is the case. What changed and why don't we have a Rockefeller equivalent today? Is it perhaps because of greater total prosperity and increased complexity it is harder to dominate large verticals and possess such great personal wealth? Or is it something regulatory?

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Rockefeller's personal fortune alone amounted to ~1.5% of the US' GDP

I'd have to dig for the references, but as I recall it was Rockefeller or Carnegie whose income (or at least that of their companies) comprised a percent or two of GDP.

In terms of wealth, Rockefeller is considered to be the wealthiest individual in modern times. From Wikipedia:

By the time of his death in 1937, estimates place his net worth in the range of US$392 billion to US$663.4 billion in adjusted dollars for the late 2000s (decade), and it is estimated that his personal fortune was equal to 1.53% of the total U.S. annual GDP in his day. When considering the real value of his wealth, Rockefeller is widely held to be the wealthiest person in history.

http://en.wikipedia.org/wiki/List_of_wealthiest_historical_f...

A related reference I strongly recommend (and Ida Tarbell makes an appearance there as well) is Daniel Yergin's The Prize (both a book and PBS/BBC TV series now available on YouTube). The arc inscribed by the development of petroleum is truly staggering.

As to what changed: 100:1 EROIE energy, high-yield mineral deposits, a lack of complexity brakes (pollution, NIMBY, anti-trust, and similar rules), as well as the vast potentials available through exploiting nascent energy and mineral wealth, as well as the huge technological advances of ~1880 - 1930 had a huge amount to do with the wealth accumulated at that time. I see this as more having to do with multiple low entropy resources than regulation, thought that has had some effects. And the negative externalities were tremendous as well, from economic instabilities (the late 1800s saw tremendous busts, despite a gold-backed currency) to corruption and abuse, to pollution and discrimination.

>the late 1900s saw tremendous busts, despite a gold-backed currency

You made a typeo.

but yeah. I'm not sure why the hard-currency folks think that a commodity-backed currency will result in a more stable economy. Boom and Bust is the natural state of capitalism, and perhaps the natural state of human society, at least in times of dramatic technological change.

typeo

Fixed. Thanks.

As for commdity/specie currencies, I like to point to the history of devaluation of the Roman Denarious (from 99% pure to around 4% silver) or of Adam Smith's very long exploration of devaluation of each of the three metalic standards of British currency (copper, silver, and gold -- no wonder pre-decimalised denominations were so confusing).

> I'm not sure why the hard-currency folks think that a commodity-backed currency will result in a more stable economy. Boom and Bust is the natural state of capitalism, and perhaps the natural state of human society, at least in times of dramatic technological change.

If you have a central bank constantly messing with interest rates and money supply, it distorts the market. That's why they do what they do. Whether we are better off or not I do not know, but to assert that it is irrelevant is incorrect.

I can agree that capitalism is more prone to boom and bust, but in a bust individuals will generally react accordingly in a mostly logical way. A central bank managed economy will (with the best intentions in mind I assume) often intervene in a way that promotes a continuation of the non (or negatively) beneficial economic behavior, if they didn't start it in the first place. This is where the hard money people are coming from, or at least this one.

All sorts of buried assertions in what you're saying: why are boom and bust "logical" in the first place? Do they not result from over- and under-valuing investments?

Central bank management has achieved pretty much exactly what it's been tasked with doing: price stability of the aggregate inflation measure. This is despite large variation in underlying commodities like oil. Housing went mad, but it wasn't included in the measure of inflation and far too many people were happy with asset price inflation to stop it.

(In any case, money supply is far more a function of lending than of currency issue. Hard currency does not prevent expansion or contraction of the money supply)

> why are boom and bust "logical" in the first place?

They're not, they result from humans not being logical creatures.

> price stability of the aggregate inflation measure.

Depending on how you measure.

> Housing went mad, but it wasn't included in the measure of inflation

Case in point. The largest lifetime investment of 95%+ of the population and it became a bubble/mania largely because of central bank intervention in interest rates.

> Hard currency does not prevent expansion or contraction of the money supply

That is not my understanding. If your currency must be backed by gold for example, then the money supply would grow slowly and prices would adjust accordingly. This is very different from today's practices.

> but in a bust individuals will generally react accordingly in a mostly logical way.

It's easy to check this against, for instance, the great depression where rational economic actors drastically reduced their consumption of goods like, say, "food" or "shelter".

Despite being highly rational behavior, it was at times deleterious.

> Despite being highly rational behavior, it was at times deleterious.

Very true, but the lesson of what can happen when caution is thrown to the wind would minimize irresponsible behavior for a very long time. Contrast that with current practice which is to drop interest rates to insane levels so people can continue doing what got them into trouble in the first place.

>If you have a central bank constantly messing with interest rates and money supply, it distorts the market. That's why they do what they do. Whether we are better off or not I do not know, but to assert that it is irrelevant is incorrect.

Not saying it's irrelevant. I'm just saying that the historical data does not support the assertion that fiat currencies result in markets that are less stable than commodity-based currencies.

The Walton family are worth a combined $150 billion. That's 1% of US' GDP.

Carlos Slim is worth $50 billion, 4% of Mexico's 1.1 trillion GDP.

Maybe it's the difference of a developing vs a developed economy.

The House of Saud (15,000 members, core of which is some 200-2000, holding most of the wealth), which effectively owns Saudi Arabia, is pretty hard to pin down. The richest individuals seem to be in the $15-20 billion range. Total family wealth may exceed $1.4 trillion.

Saudi Arabia's 2011 GDP was $576 billion, putting the family's worth at as over 240% of GDP.

Since Saudi GPD is about 1% of total global GDP, this means the family's wealth is about 2% of the world's GDP.

http://www.tradingeconomics.com/saudi-arabia/gdp

http://www.alearned.com/saudi-royal-family/ (I'm not convinced this source is accurate).

Anti-trust laws + a lot of other stuff that used to be kosher but is now super illegal. For instance, look up "credit mobilier". Or consider how Standard Oil used their size to control railroads and basically make it so their competitors couldn't ship at reasonable rates.

As another comment points out, Carlos Slim's net worth is something like 4% of Mexico's GDP. Carlos Slim is pretty much a monopolist though, which helps.

"What changed and why don't we have a Rockefeller equivalent today?"

We do, and quite a few of them, but through legal trickery and slight of hand they have learned how to compartmentalize, hide, and remove themselves from, their vast amounts of wealth. Through the use of corporations, trusts, estates, and other things, largely for tax purposes but also for other reasons, the kinds of people on the boards and the people behind them of The 147 (http://arxiv.org/PS_cache/arxiv/pdf/1107/1107.5728v2.pdf) do this all the time.

My opinion is that it's something regulatory. If we truly had a free market, we would almost certainly see much larger disparities in wealth distribution.

There may well be people who control that much of GDP nowadays but it's all been squirreled away offshore. Company ownership is often hidden behind offshore shell companies so who knows what the trillions parked in the Caribbean control.

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