A LONGITUDINAL STUDY OF AMERICAN ECONOMIC

Adam Sauls

A Thesis Submitted to the University of North Carolina Wilmington in Partial Fulfillment of the Requirements for the Degree of Master of Arts

Department of and Criminology

University of North Carolina Wilmington

2012

Approved By

Advisory Committee

Yunus Kaya Cecil Willis

Steve McNamee Chair

Accepted by

Dean, Graduate School

TABLE OF CONTENTS

ABSTRACT ...... iv

LIST OF TABLES ...... v

LIST OF FIGURES ...... vi

INTRODUCTION ...... 1

LITERATURE REVIEW ...... 2

Classic Theory ...... 2

The Power Elite ...... 3

Wealth and The American Dream ...... 7

“Diversity” in the Economic Elite ...... 8

Self-Perpetuation of Elites ...... 11

Control by the Economic Elite ...... 13

The 400 ...... 17

DATA AND METHODS ...... 19

RESULTS ...... 22

Demography ...... 22

Source of ...... 33

Concentration ...... 37

Stability ...... 39

CONCLUSION ...... 41

REFERENCES ...... 47

ABSTRACT

Control of economic resources has long been a key focus of social research.

Studying the individuals who comprise the Forbes 400 a greater understanding of the economic elite in the is afforded. In this study, demographic trends, sources of wealth, concentrations of wealth, and stability of wealth are observed over the period of

1995 to 2010 to determine whether the upper echelon of economic elite in the United

States are becoming more diverse, or whether there remains a self-perpetuating, relatively closed group.

Using descriptive statistics and Pearson’s correlation for the 16 lists generated from

1995 to 2010 it was found that the Forbes 400 has not become noticeably more diverse and mobility into the list has been very minimal. There remain high levels of concentration even on the list, and it is still dominated by older, White men. With the ability of economic power to be readily converted into social and political power, such high concentrations of wealth demand attention by social researchers. This study adds to the existing body of literature by examining the pinnacle of economic elite in the United States through the perspective of contemporary .

iv

LIST OF TABLES

Table Page

1. Race Composition of the Forbes 400 ...... 24

2. Race by Source of Wealth ...... 27

3. Sex Composition of the Forbes 400 ...... 28

4. by Gender ...... 30

5. Age ...... 32 6. Forbes 400 Compared to 2010 US Population ...... 33

7. Source of Wealth...... 35

8. ...... 37

9. Nominal Stability ...... 40

10. Stability of Rank ...... 41

v

LIST OF FIGURES

Figure Page

1. Racial Composition of the Forbes 400 ...... 23

2. Gender Composition of the Forbes 400 ...... 29

3. Age Composition of the Forbes 400 ...... 31

4. Concentration of Wealth by Top 10 and Quintile ...... 38

vi INTRODUCTION

It is the purpose of this study to identify and analyze characteristics of the richest

400 Americans who comprise the Forbes 400 Richest Americans list over a span of 16 years. In 1956, sociologist C. Wright Mills coined the term “power elite,” to refer to individuals (or as he referred to them quite intentionally, men) in whose hands rested the power of three sectors of modern : the economy, the military, and the political structure of the United States (Mills, 1956). Since the 1950’s, the military and political elite have become more and more integrated into the umbrella of the economic elite. Through avenues such as the funding of politics, politicians, and policy; and private contracts for defensive military services, the power elite in the United States has become increasingly subsumed within the economic elite (Domhoff, 1987; Dye, 1987; Domhoff, 1990; Lasch,

1995).

This study examines the core of the American economic elite, the richest 400

Americans. Specifically, this study examines the demographic characteristics of the Forbes

400 richest Americans, their sources of wealth, and their degree of concentration and the stability of wealth. In a society that places great emphasis on individual merit, the Forbes

400 should represent the pinnacle of personal achievement. Following the logic of the

“American Dream,” the Forbes 400 should be relatively socially heterogeneous and access to the Forbes 400 should be relatively permeable, with shifts in economy greatly shaping who is included in the Forbes 400. If, however, there is little change in the composition of the list over time, and high levels in the concentration of wealth over time, this would instead suggest the existence of a small, cohesive, and self-perpetuating elite.

LITERATURE REVIEW

Classic Elite Theory

There has been a long tradition of scholarship on the sociology of elites. Gaetano

Mosca (1939) observed that in every society since the dawn of civilization there existed two classes of people, those who rule, and those who are ruled. Elites are often viewed as a necessary and functional characteristic of in which there is a specialized division of labor, often holding key positions politically that afford control over material and human resources (Marger, 1987).

Vilfredo Pareto (1971) defined elites as the highest achievers in any area of human activity, believing such achievement to be based in personal characteristics. Mosca and

Pareto shared the view that society was a basic dichotomy: the elites, and the masses. For both theorists the masses were unorganized, unable and unwilling to govern themselves, leaving elites to serve as the necessary functional leaders of society. The major difference between Pareto’s view of elites and that of Mosca was the ability to change. Both saw the elite class as a permeable group, with chances of mobility into and out of the elite by the masses, but disagreed as to the consequences of such mobility. Pareto saw change as superficial, with the only difference being the individuals filling the roles of the ruling class, entering positions of authority only to perpetuate the existence of such a class and use any available resources to maintain authority. Mosca saw potential for change, however, with new leaders bringing the potential for drastic changes in the power structure of society, namely in the political climate.

Robert Michels (1958) expanded upon the premise of elites and masses by formulating what is known as the “Iron Law of ” that power resting in the hands

2 of a few elite leaders is the natural social evolution of intricate divisions of labor in societies. To Michels the masses refused responsibility for certain societal issues, choosing to rely on the decisions handed down from those in positions of authority. Michels’ take on the stability of the elite structure more readily aligns with Pareto, however, in that once individuals come to power, their directive shifts from that of benefitting the masses to the perpetuation of their own authority.

Echoing the classic elite theorists, contemporary scholars have noted that with the shift of society from villages to cities, there is an increased capital interest for a select few when a large geographic area falls under common governance such as that of the United

States (Bodley, 1999). This provides higher levels of polarization and, according to Bodley, increasingly unequal living conditions and higher levels of stratification. In the case of the modern exercise of power, control of finite resources translates into economic power.

The Power Elite

The issue of powerful elites was rather dormant in sociology until C. Wright Mills returned it to center stage in 1956 with the publication of The Power Elite . This gave birth to the modern scholarship on the power elite, a term that was coined by Mills to refer to the men (a term that was deliberately used by Mills) who controlled the three major institutions in modern society: the military, the economy, and the political structure of government by being positioned in key authoritative positions within the bureaucratic structure of each (Mills, 1956). With the political climate and structure of the modern

United States, Mills observed that power did not rest in any one individual, but key organizations and with centralized bureaucratic forms of governance.

3 For Mills, power did not rest in individuals, and wealth did not guarantee that an individual was considered to be in the power elite. Mills saw the exercise of power, the existence of celebrity and the accumulation of wealth as “valued experiences” (Mills,

1956:10) as a result of accessing the three institutions and holding positions that allowed them to influence their own lives as well as the lives of others. It was through these avenues of control, the ability to make decisions that are of great fiscal consequence, that the power elite serve not only their own interests but also the interests of the .

Mills’ blend of Max Weber’s emphasis on organization and bureaucracy and Karl

Marx’s focus on class structure and exploitation suggest a class of elites with high degrees of fluidity between the three sectors of society, a fluidity proposed to exist among the individuals who occupy the positions of authority in the economic, government, and military structures in the United States.

Mills also provided the first modern profile of the power elite. Members of the power elite typically knew one another and generally traveled in the same social circles.

The power elite were disproportionately drawn from the upper and upper middle classes, had attended highly prestigious schools, were frequently listed on the social register of the upper class, and had high rates of marriage within the upper class, all of which further served to insulate them from the rest of society and helped to ensure the perpetuation of their elite status, working to effectively form what could be considered as a “loose coalition”

(Marger, 1987:143).

Power elite theory was met with praise and criticism. Shortly after The Power Elite ,

Floyd Hunter (1959) published a study addressing the existence of a relatively stable power structure in the United States. Hunter found that when surveying individuals

4 wielding great amounts of power in the government and corporate arenas, the assessments of who made up the top policymakers reported were returning the same names of individuals in positions of power. He concluded that there was not a conspiracy among the power elite, but rather a basic unity, and noted the high levels of interlock found in the individuals comprising the three basic spheres of dominance.

G. William Domhoff, in a series of works that began in 1967, furthered Mills’ and

Hunter’s works by suggesting the existence of a ruling class, that disproportionately controls the nation’s wealth, income, and number of individuals who are involved in key decision-making positions. Domhoff proposed that there was an increase in power among the economic elite, with a subsequent decrease in the power controlled by military and political elite. While coming to the same basic conclusions of Mills and Hunter that elites are self-serving, exploitative, and unresponsive to the needs of the masses (Marger, 1987),

Domhoff comes to the conclusion that economic leaders are, in fact, the same individuals who wield significant power in politics, or that they have political leaders directly acting on their behalf (Domhoff, 2006).

Finally, E. Digby Baltzell (1958) shares many of the same positions as Mills, Hunter and Domhoff on the existence of a relatively cohesive power elite. Contrary to the aforementioned three however, Baltzell sees the perpetuation of an elite class with room for the introduction of innovative thinking brought about by the existence of new members to the ruling class to be necessary for stable systems of authority. Baltzell’s work also contradicts Domhoff in that he sees no evidence of much overlap or intersection between the economic elite and political leaders (Marger, 1987).

5 While a great deal of scholarship exists in support of Mills’ theory of the power elite, it is not without its opponents. An alternative school of thought exists that refutes the existence of a unified power elite, and suggests that there are, indeed, multiple spheres of elites that control various realms of society, neither acting in concert nor having the same origins. Arnold Rose (1967) presented the idea of multiple elites as very specialized decisionmakers who exert influence over their own fields of specialty, and have very little overlap if any with other elites. Rose’s work echoed that of Suzanne Keller’s (1963) depiction of those in authority as autonomously working in their own spheres and in the interests of society. Marger suggests that this is the main discord between the power elite theorists and those who advocate a multiple spheres approach is that power elite theorists generally view elites as self-serving and exploitative of the masses, while the “multiple spheres” approach posits an elite, or rather several elites, who are more responsive to the needs of those over whom they govern, acting for the good of society rather than for individual gain (Marger, 1987). A final view in opposition to the power elite theory, which is rather unique, comes from David Reisman’s 1950 work . Reisman suggests that there is indeed no power elite, and that elites themselves are indeterminate.

To Reisman no one group has the ability or authority to control the actions of masses, but rather comprise “veto groups” (Reisman, 1950) which can only attempt to block unfavorable action advanced by another group, which the veto group feels is not in the interest of society.

The assessments by Mills and the other power elitists of the existence of a self- perpetuating climate found among the power elite highlights the main consideration of the

6 proposed study regarding the modern economic elite: Is there evidence of a relatively stable economic elite? If so, does this imply that the American Dream is a myth?

Wealth and The American Dream

It is important to explain the use of wealth rather than income as an indicator of who is part of the economic elite. Income refers to revenue individuals receive from wages, dividends, etc. and wealth refers to assets owned by an individual. The control of assets available for liquidation not only provides a buffer against economic hardship, but allows for investment opportunities to be realized, so that wealth may beget wealth, or at least security (Shapiro, 2004; McNamee and Miller, 2009). It has also been shown that while holding income constant, there exists great inequality in wealth holdings (Shapiro, 2004).

It is accumulated wealth that is transferred intergenerationally, not an individual’s income, that serves to perpetuate not only privilege, but also inequality (McNamee and Miller,

1989).

The general consensus among the authorities on the issue of wealth inequality is that inheritance, both at death, and as transformative assets passed from parents to children at pivotal points throughout the life course, known as inter vivos gifts (or gifts between the living) allows for the intergenerational transmission of privilege (McNamee and Miller, 1989; Shapiro, 2004; Elmelech, 2008; McNamee and Miller, 2009). Whether it is the ability to leverage real assets in times of investment opportunity, or the ownership of assets that can be used to weather temporary economic hardship, big money does not come from salaries or wages, but from owning resource-producing assets (McNamee and

7 Miller, 2009). In sum, wealth is of much greater consequence than income in the reckoning of .

There exists a widespread myth in the United States that being talented, working hard, having the right attitude, and playing by the rules is the pathway to great wealth.

McNamee and Miller (2009) systematically debunk this myth of “meritocracy,” a term they define as “a social system as a whole in which individuals get ahead and earn rewards in direct proportion to their individual efforts and abilities” (pg. 2). If meritocracy were actualized, there would necessarily be a high level of diversity among the economic elite.

This simply is not the case.

“Diversity” in the Economic Elite

In Mills’ analysis of the power elite, he observed the elite to be almost exclusively male, urban, white and Protestant. While this may be a rather accurate description of the demographics of the power elite, to avoid making overgeneralizations about the homogeneity of the economic elite, there does appear to be a moderate level of diversification (Zweigenhaft, 2001). Indeed, the power elite is more diverse in its present state than it has ever been in the United States, mostly in the wake of the Civil Rights and subsequent social movements (Zweigenhaft and Domhoff, 2006). For the first time in the history of the United States, Jews, women, Asians, Latinos and are all represented (using the term loosely, as they are grossly underrepresented) in the power elite. The popular media seems to delight in citing cases that “demonstrate” “diversity” at all levels of government, military and economy. Numerous examples selected to demonstrate this point actually illustrate the opposite. For instance, Colin Powell, the son

8 of Jamaican immigrants, advanced through the military to four star general and chairman of the Joint Chiefs of Staff and eventually served on the cabinet of George W. Bush as

Secretary of State. Madeline Albright, a woman with Jewish heritage, was selected as

Secretary of State and Robert Goizueta, a Cuban national, served as the CEO of The Coca-

Cola Company (Zweigenhaft, 2001). This was manifest most recently by the appointment of Sonia Sotomayor, a Latina, to the Supreme Court by President Barack Obama; himself being the first member of a racial minority to occupy the United States’ highest executive position. As portrayed in the media, there appears to be a more meritocratic America than

40 years ago.

It is not the intention to downplay increases in the presence of minorities into the historically white, Anglo-Saxon, Protestant, male-dominated power elite, but there are several realities that must be understood about those who are represented in the power elite. Both Albright and Goizueta came from wealthy families, with prestigious educations, and were ready and willing to assimilate into the dominant culture of the power elite

(Zweigenhaft and Domhoff, 2006). Though the frequency with which minorities are being included in the power elite is surely increasing, it is by no means as drastic an increase as presented by the media (which in many cases is coincidentally controlled by those with the means to produce media—the power elite). A rather pronounced willingness to assimilate the ideals, attitudes and behaviors of the white male-dominated elite, as well as a close aesthetic similarity to the existing elite are characteristic of minorities found in the power elite. Examples include lighter-skinned African Americans, white Jews who are not visibly different from Protestants, and other individuals willing to “play the part” through class- cultural assimilation. The latter was exemplified when Cecily Cannan Selby, the first

9 woman on the board for Avon, shocked the male-dominated guest list after a dinner party by lighting up a cigar with the boys. These are the kinds of individuals who are likely to make it to the power elite (Zweigenhaft, 2001; Zweigenhaft and Domhoff, 2006). In addition, the numbers of minorities who actually make it to great wealth, the Forbes 400 list, are very few and far between. There seems to exist a willingness to include those who look and act white, at the lower levels of the power elite, but the true litmus test of mobility into the economic elite is found in the permeability and composition of the Forbes 400.

Examination of the wealth holdings in the United States shows an extraordinary level of stratification. In fact, by 1995, wealth disparities were greater than at any time since the Stock Market Crash of 1929 (Wolff, 1995). Repeatedly throughout the time period of 1989-2008, whenever the wealth of the top 1% of Americans was measured, they were found to hold anywhere between 30% and 40% of the total household wealth in the

United States (Wolff, 1995; Domhoff, 2006; Gilbert, 2008; McNamee and Miller, 2009;

Domhoff, 2010). Another study found that since the 1930s, the top 1% of Americans have steadily held around 30% of total household wealth (Keister and Moller, 2000). Based on these findings, if those who comprise the pinnacle of the economic elite do not exhibit considerable change over time, there is support for the premise that much of the nation’s wealth lies in the hands of a select and relatively stable few who control much economic power. This has serious implications for the economy, especially in times of economic hardship, but even in times of prosperity. Under these circumstances there are major differences between those who benefit and those who actually pay the price for prosperity

(Wolff, 1995).

10 Self-Perpetuation of Elites

Closely related to the debunking of the myth of the American Dream of equality of opportunity, is evidence of a self-perpetuating characteristic of the power elite. With the increasing concentration of wealth among the top 1% and further concentration within the

Forbes 400, the economic elite has been observed to have become more and more self- perpetuating, which inherently contradicts the presumption of an open society (Bodley,

1999). Much emphasis has been placed on the existence of interlocking directorates in the corporate world to explain the self-perpetuation of elites (Jenkins and Eckert, 2000;

Mizruchi, 2004; Burris, 2005; Domhoff, 2006; Foster and Holleman, 2010). Interlocking directorates, as defined by Domhoff, exist when an individual sits on two or more corporate boards of directors (Domhoff, 2006) a phenomenon that dates back to as early as 1912

(Foster and Holleman, 2010).

Interlocking directorates serve many purposes for the power elite: they both control admission into the upper echelons of economic power and work together to better advance their collective interests. There are two primary ends that are satisfied by the use of interlocking directorates by the power elite: obvious financial gain (Mizruchi, 2004) and political cohesion (Burris, 2005). Political cohesion is more veiled than the increases in financial gains, but is nevertheless vital to maintenance of the power elite.

The existence of interlocking directorates serves to decrease competition among various corporations either in the same market or in complementary markets (Mizruchi,

2004). Not only do interlocking directorates logistically limit the number of required board members in the economy at large, they also imply high levels of integration among corporations that control sectors of the economy, in direct contrast to the ideal of a “free

11 market” (Mizruchi, 2004; Domhoff, 2006). For example, in 2006 Domhoff reported that the interlock between General Motors, Ford Motors, and ExxonMobile was extremely high, with General Motors and Ford sharing administrative members and working with a complementary company (ExxonMobile) whose entire business existence is hinged on the existence of automobiles that require gasoline (Domhoff, 2006). Quite simply, there is not much benefit to the production of energy efficient vehicles on a more grand scale, save for the last few years, because without the use of gasoline in combustion engines (which require regular servicing, ensuring that not only will GM and Ford Motors make money on the initial sale of a vehicle, but on subsequent maintenance costs) because it would potentially cripple one of the automobile manufacturers’ greatest business allies,

ExxonMobile.

Jenkins and Eckert (2000) when discussing corporate elite theory and the interlocking directorates association with policy and important ramifications for the practice of a democratic government stated, “the key architects of major policy change are the owners and directors of the largest corporations who hold multiple directorships in top corporations and are integrated into upper class social networks” (pg. 309). Their analysis provides an explanation as to why the study of the elite, and more specifically, the elite of the elite, is crucial to the discussion of mobility, opportunity, and policy. While the current study does not specifically examine interlocking directorates, they are an important mechanism that has been shown to facilitate communication and control among the power elite.

12 Control by the Economic Elite

Increasingly, economic power is being more easily converted into political power

(Domhoff, 1990). This power manifests itself multiple forms. Economic power can be used to fund political campaigns and in some instances provide a smooth transition from the private sector to positions in government. As Marger states:

“As economic forms of wealth become more important in modern societies,

for example, the significance of military might declines and the power of the

military class also declines. Those who are best able to gather and

coordinate economic wealth, now the most important social force,

consolidate political power and dominate the ruling, or political, class.”

(Marger, 1987:55)

This collapse of power also entails the control of the flow of economic resources to various regions by using decision-making positions to place factories and plants in areas that offer favorable accommodations for generating maximum returns. Such areas provide lower tax rates for corporations, effectively discourage organization among workers in the form of unions, and often will pass legislation to accommodate the new factories or plants in order to boost their local economy.

It is important to distinguish the upper class and economic elites from Mills’ definition of the power elite. For Mills, the power elite were often members of the upper class, or the upper middle class, and consisted of those individuals who were able to significantly impact policy, the economy, and military by virtue of their positions within each structure. The wealthiest individuals and families may not necessarily be a part of this power elite, as extraordinary wealth does not necessitate hands on decision-making.

The power elite, however, generally works in the best interest of the upper class, and the

13 individuals controlling such wealth, and serves to perpetuate and attempt to legitimate authority. The ruling class view, as previously discussed, proposed by Domhoff takes the power elite and integrates those holding great amounts of wealth. Whether or not a person who controls great economic means takes an active role in policy planning or the day-to- day activities of a large corporation, they indirectly exert control over the decisions made by Mills’ power elite by their ability to choose how to utilize their wealth. In sum, the mere existence of such vast wealth affords the current upper class, and more specifically, the elite of the elite in terms of wealth holdings, a certain degree of power, whether exploited or not, by virtue of the potential degree of control offered by such individual wealth.

Economic elites exert control over government through two primary means: controlling the means of policy making and controlling the means of funding for various forms of government activity. With the existence of a two party system in the United States, the American population has been divided into camps, neither of which satisfy the majority of concerns of the people (Domhoff, 1990). This system is exploited by the power elite, according to Lasch (1995), who claims that nearly all political issues have their origins in issues between economic elites with opposing perspectives and the power elite who represent their interests (Lasch, 1995).

The economic structure of the United States has led to a growing gap between politics and policy, with the majority of policy planning, organizing, and initiatives originating outside of the government in the form of think tanks, and other non-profit, non- government organizations (Dye, 1987; Domhoff, 1990). The non-profit self-definition of most of these policy generating organizations misleads the public into believing that there is no monetary motivation behind policies from these “experts”, who presumably are

14 offered freedom of thought as analysts and scientists for defending and deciding which policies to endorse, as well as the scope and ramifications of such policy (Dye, 1987). The reality is that most prominent think tanks and other organizations aimed at initiating or endorsing policy are funded by the same corporations and economic elite that stand to benefit from the potential legislation created by the policy. Although there does exist a degree of freedom in these organizations, the “experts” are ultimately funded by, and responsible to the boards of directors of the organizations for which they work, the same boards of directors whose interlocks examined above provide for decreased competition among corporations, and skyrocketing profit (Dye, 1987; Domhoff, 1987; Domhoff, 1990).

A prime example of such control over policy and government exists in the current

“Great Financial Crisis” in which there exists a private bank system that is “”

(Foster and Holleman, 2010). It could be argued that if banks which practice overly aggressive business models in order to obtain huge returns on investments, are allowed to go bankrupt when these reckless practices lead to loss rather than gain, and must be

“bailed out” by the federal government to avoid an even worse situation for the economy of the United States, then the federal government essentially is handcuffed to supporting these corporations, which are controlled by the power elite. Such actions have increased the visibility of the power elite, engaging in what Foster and Holleman (2010) have referred to as “state sponsored private profiteering.”

The best example of a private corporation influencing government and exercising control which served to perpetuate the status quo and protect the position of dominance by the power elite is found in the case of Robert Rubin, former Secretary of the Treasury under the Clinton administration. After the implementation of the Glass-Steagall Act of

15 1933, investment banking and commercial banking were federally required to be separate, in an effort to avoid another situation of bank failures which led to the Great Depression

(Foster and Holleman, 2010). In 1999, while working in the Clinton administration, Rubin began to broker a new piece of legislation, the Financial Services Modernization Act, which would repeal the Glass-Steagall Act of 1933, and open the door to more aggressive banking practices. One week after the repeal was set in motion, Rubin announced his resignation from the Clinton administration to take a job at Citigroup, perhaps the largest beneficiary at the time for the repeal. His salary was to be $1 million for 2000 and 2001, and then $14 million a year thereafter (Foster and Holleman, 2010).

With the conversion of economic power into political power, affording the economic elite with a measure of control over policy planning and the federal government in general, serious questions are raised for democracy at the national level. Mizruchi (2004) provides a simple analogy that suggests a façade of democracy both in the private and public sectors.

In publicly traded corporations, the board of directors, and especially the CEO, serve as the analog to national democracy in that they are the “elected” leaders of the corporation.

However, much like national politics, the “elected” officials are seldom responsible to the

“voters” or stockholders in Mizruchi’s example, a reality that is also manifested in the façade of national democracy (Mizruchi, 2004). It is for these reasons that the study of the upper echelons of the economic elite is essential to the field of sociology. When society is believed to be based on meritocracy and governance by publics, there should exist high levels of mobility. But as the literature suggests, the opposite is true. There are not high rates of mobility, or a true political democracy, but rather a system based on self- perpetuating super wealth, reflected in the stability and concentration of the Forbes 400.

16 The Forbes 400

Since the Forbes 400 was first published in 1982, studies have been conducted on the composition of the members of the list, their demographics, sources of wealth, and backgrounds. E. Ray Canterbery and E. Joe Nosari conducted the earliest study in 1985, observing that inheritance accounted for a great deal of the wealth of the Forbes 400, and that there was no evidence that wealth grew exponentially over the lifetimes of the respondents from the Forbes 400. The study suggested that inheritance prevailed over individual achievement or the result of personal ambition, and that the actual wealth comprising the Forbes 400 was more constant than the specific individuals who held that wealth in any given year (Canterbury and Nosari, 1985).

Canterbury and Nosari’s focus on inheritance was echoed in subsequent studies. An examination of the 1995 and 1996 Forbes 400 lists found that at least 56% of the respondents on the list inherited at least $50 million, and 14% came from families in the top 10% income bracket (Collins, 1997). Expanding on Collins’ 1997 findings, Domhoff

(2006) noted that the 30% of the Forbes 400 in 1995 and 1996 that were on the list as a result of upward mobility still retained significant advantages over others in their original socioeconomic class, specifically in the area of education at highly prestigious schools.

There were four inheritance level categories listed for the 1997 Forbes 400 list: inherited status, inherited significant wealth, inherited lesser wealth or advantage, and no inheritance (Gilbert, 2008). It was found that 42% from the 1997 list inherited an amount of wealth that would secure them a position on the list outright. These individuals were considered to have inherited status. Those who had inherited significant wealth comprised

13% of the list and included those who had inherited over $1 million, comparable start-up

17 capital, or an existing enterprise. Another 14% came from socially upper-class backgrounds, with of lesser wealth or advantage. Finally, 31% in 1997 had no apparent advantageous inheritance, but as was observed by Domhoff (2006), still likely retained advantages in education.

Changing patterns in the composition of the sources of wealth for the super-rich during the 1980s were observed by James Petras and Christian Davenport (1990). By using the reported sources of wealth from the respondents who made up the Forbes 400, there was an observed shift toward finance and real estate, and away from more traditional forms of wealth such as manufacturing and mass media (Petras and Davenport, 1990).

An in-depth look at the Forbes 400 with a blend of data from the Forbes lists, biographical and anecdotal content was provided by journalists Peter W. Bernstein and

Annalyn Swan in 2007. Importantly, Domhoff (2010) has warned of the potential to downplay important contributing factors to making it on the list when considering anecdotal information at face value. For example, , often highlighted as being a college dropout, actually left Harvard as the opportunity for cornering the market on new software was made manifest. Before becoming a “college dropout” he was the son of a prominent corporate lawyer in Seattle and a socialite mother, who attended the top private school in Seattle before attending Harvard. As Domhoff and others suggest, there is actually much more limited mobility within the economic elite than is often suggested or implied by anecdotal examples.

18 DATA AND METHODS

Analysis of existing data sets has long been used as a method for social research.

Dating back to Emile Durkheim’s Suicide , Max Weber’s The Protestant Ethic , and several of Karl Marx’s works such as Capital , archival data have been the central data source for sociological research that has shaped the discipline (Gidley, 2004).

Data were collected from the Forbes 400 List of Richest Americans from 1995 through 2010. According to Foster and Holleman (2010) “the best empirical data available for ascertaining the changing wealth distribution within the capitalist class [is found in the

Forbes 400]” (pg. 9). Other scholars such as Val Burris (2000) and journalists Bernstein and Swan (2007) have endorsed the integrity of the Forbes 400 as a data set.

The individuals on the Forbes 400 shape financial trends, shift leadership and policy initiatives, and are on the cutting edge of economic and technological innovation (Kroll,

2010). When formulating the list, Forbes considers several factors. Throughout the year, associates of Forbes interview list members, their business rivals, partners, and a number of other relevant individuals. The list also requires examining court and tax documents, assigning wealth values to assets, and including in the analysis, the debt held by each individual (Kroll, 2010). Calculating wealth for this elite 400 is no different than for any calculation of wealth discussed previously (when comparing wealth to income).

By examining those who are the epitome of economic elite over time, a number of methodological benefits arise. First, there is no need for estimates, as the list represents the universe of those studied. Next, by studying the 16 lists of the Forbes 400 from 1995 to

2010, trends can be documented. Potential changes in concentration of wealth among those included on the list, demographic shifts, and stability have been observed.

19 For each year, eight variables were coded for each individual who is included on the list: name, wealth rank, wealth amount, primary source of wealth, sex, age, and race. Sex was coded as a binary variable, age as continuous, and race was split into five categories:

White, Black, Hispanic, Asian, and other. Those included on the Forbes 400 are individuals.

This is important to note because it separates dynastic families such as the Waltons, heirs of the Wal-Mart fortune, into individual units. This allows for a dispersion of family members throughout the list, with a ranking on their own personal wealth holdings, and not necessarily that of their families.

Starting in 2000, wealth amounts were changed from “millions of dollars” to

“billions of dollars.” The maximum number of decimal places used by Forbes is three, which may suggest a possibility of an individual with more wealth being ranked in a tie on the list with an individual with less wealth. This would only be possible in cases in which the difference was less than $500,000. Considering the minimum wealth amount on the

2010 list was one billion dollars, this is an acceptable margin. This is not only a phenomenon that concerns the lowest wealth holdings on the list, but throughout the list, there are individuals who share a rank with “equal” wealth holdings. Any such “ties” can be treated as equal amounts of wealth for the purposes of studying individuals who hold vast amounts of wealth.

After a preliminary analysis was concluded of the major sources of wealth, thirteen categories were established to code the primary sources of wealth. The thirteen categories are as follows: Inheritance; Computers/Technology; Healthcare/Medical Services; Energy;

Finance/Insurance; Food; Manufacturing; Arts/Media/Entertainment; Wholesale/Retail

Trade; Real Estate/Rentals; Transportation/Storage; Services; and Miscellaneous. By

20 analyzing these sources of wealth from year to year, it will be possible to observe any existing shifts in sources of wealth that may suggest shifting patterns in the economy of the

United States. According to Foster and Holleman (2010) the Forbes 400 represent the overall direction of the economic elite (pg. 9).

By using the variables of race, sex, and source of wealth it was possible to determine whether or not the economic elite is more permeable than has been the case historically

(Zweigenhaft, 2001). By using the demographic variables race and sex, it was possible to determine if the White male dominated economic elite has become more diverse

(Zweigenhaft, 2001; Zweigenhaft and Domhoff, 2006), or if the changes have been negligible and possibly explained by assimilation of women and minorities into the economic elite, who differ only slightly from their White male counterparts (Zweigenhaft,

2001; Zweigenhaft and Domhoff, 2006).

Next, wealth concentration of the Forbes 400 was observed to determine whether there is an even, relatively flat, distribution of wealth among the economic elite, or whether it exhibits extremely skewed and stratified distribution as found within society at large, where the top one percent own up to forty percent of existing wealth (Wolff, 1995;

McNamee and Miller, 2009). In order to analyze the distribution of wealth within the

Forbes 400, six groups were distinguished, and the percentage of total wealth of the Forbes

400 will be determined for each group. The top ten individuals (top 2.5%) from each year comprise one group, and the list was divided into quintiles.

Closely related to the concept of the concentration of wealth is that of the stability of the Forbes 400. It is important to note the difference, however, as they are separate phenomena. Lists were generated of those individuals on the list who die from the year

21 before, or fall off due to changes in the economic makeup of the list. The changes from year to year in terms of the percentage of those who drop off due to financial conditions will suggest the level of mobility among the economic elite. In a society that places such a high emphasis on meritocracy, such as the United States, high levels of stability among the

Forbes 400, and a low level of movement into the ranks of the economic elite would serve as further evidence to challenge the ideal of the American Dream (McNamee and Miller,

2009). By analyzing the change in composition not only of sex and race each year, but also by the amount of movement into and out of the Forbes 400, conclusions were drawn regarding the amount of stability among the economic elite. To observe the stability of the

Forbes 400 over the observed period, each unique member of the list will be assigned an identification number along with his or her wealth ranking for each individual year.

Nominal stability was calculated by excluding mortality and calculating percentages of those who were repeat members of the list from the previous year. Further, rank stability was measured employing a Pearson correlation using pairwise deletion to determine the year-to-year stability of the Forbes 400.

RESULTS

Demography

During the examined period of 1995-2010 Whites have dominated the list each year, with a low of 94.75% in 2000, and a high of 97.5% in 1998 (See Figure 1). Rather than a steady increase in non-white members of the Forbes 400 from 1995 to 2010, the numbers fluctuate within a range of 94.75% to 97.5% for all years (See Table 1).

22

100.00%

90.00%

80.00%

70.00%

60.00%

50.00% White Non-White 40.00%

30.00%

20.00%

10.00%

0.00%

Figure 1. Racial Composition of Forbes 400

23

White Black Hispanic Asian Other Missing

2010 96.75% .25% .25% 2.75% ------

2009 96.25% .25% .25% 3% .25% ---

2008 95% .25% .25% 3.75% .25% .5%

2007 95.75% .25% .25% 2.75% .5% .5%

2006 95.75% .25% .25% 2.5% .5% .75%

2005 96.25% .25% .25% 2% .5% .75%

2004 96.75% .25% --- 1.5% .5% .75%

2003 96.5% .25% --- 1.75% .75% .75%

2002 97% .25% --- 1.25% .75% .75%

2001 96% .25% --- 2% 1% .75%

2000 94.75% .25% .25% 4% .25% .5%

1999 95.75% .25% .5% 2.75% .5% .25%

1998 97.5% .25% --- 1.75% .25% .25%

1997 97.25% .25% .5% 1.5% .25% .25%

1996 96.5% .25% .5% 2% .25% .5%

1995 96.5% .25% .5% 1.5% .5% .75%

Average 96.27% .25% .23% 2.3% .44% .52%

Table 1. Race Composition of Forbes 400

Throughout the 16 years examined, only one African American was included in the

Forbes 400, , making the list every year from 1995 to 2010, but leaving the

African American representation in the list at one-quarter of one percent (See Table 1), quite disproportionate to the national percentage of 12.6% in 2010 (U.S. Bureau of the

Census, 2010). The Hispanic makeup of the Forbes 400 is very similar. The maximum number of Hispanics on the list was 2, and only for the years 1995, 1996, 1997 and 1999.

24 In 1998, 2001, 2002, 2003 and 2004, there were no Hispanics to make the list. The remaining years included one Hispanic on the list, making the percentage range from zero to one-half of one percent for the examined period (See Table 1). In 2010, there was only one Hispanic member of the list, making the composition one-quarter of one percent

Hispanic, as opposed to the national composition of 16.3% (U.S. Bureau of the Census,

2010).

The last defined racial minority on the list, Asian, was represented every year on the

Forbes 400. With a low of 1.25% and a high of 4% (See Table 1) the Asian category, while fluctuating from 1995 to 2001, has seen a steady increase from 1.25% to 2.75% from 2002 to 2010 making Asian the largest defined racial minority group represented on the list as well as the only group which has shown increasing representation. The Asian composition of the Forbes 400 is the category that most closely resembles the national composition in

2010, with 2.75% of the list being Asian in 2010 and 4.8% of the national population (U.S.

Bureau of the Census, 2010). It is worth noting that Asians are disproportionately represented as a minority with relation to African Americans and Hispanics. When examining the source of wealth trend from year to year it is evident that the technological industry has grown from 7% of the list in 1995 to 11.5% in 2010. Further, when examining the racial breakdown with regards to source of wealth, the percentage of Asians on the list with a technology-based primary source of wealth averaged 67% (See Table 2), perhaps suggesting more permeability for Asian minorities in that particular industry.

The final racial category “Other” consists primarily of individuals of Middle Eastern descent, as well as other racial minority groups which were not represented with enough regularity

25 to observe any particular patterns of representation. The “Missing” percentage for each year in which race was unclear or indeterminate was relatively small, ranging from zero to .75%.

Much like the racial composition of the Forbes 400, the sex composition is quite one- sided. From 1995 to 2010 the Forbes 400 has been dominated by men (ranging from

84.25% at the lowest and 90.5% at the highest), with the percentages actually increasing from averaging 85% male from 1995 to 1998, then increasing to around 89% male for the following years (See Table 3), with a composition 89.75% male in 2010, nearly twice the national average of 49.16% (U.S. Bureau of the Census, 2010). While there has been fluctuation throughout the period from 1995 to 2010, men have consistently dominated the sex composition of the list (See Figure 2). At the peak of women’s inclusion on the list, women only comprised 15.75%, and held at around 15% from 1995 to 1998, when there was a decline to around 11% for the following years. While there has been minimal fluctuation throughout the examined period, the Forbes 400 has steadily remained a male- dominated group, and has actually become more masculine over the period from 1995 to

2010, suggesting a less permeable economic elite with regards to sex.

26

Inheritance Computers/Technology Health Energy Finance/Insurance Food Manufacturing Care/Medical

White 10.3% 9.7% 2.6% 6% 18.8% 7% 5.7%

Black ------

Hispanic --- 6.7% ------20% ---

Asian --- 67% 8.5% ------

Other --- 28.4% ------12.3% --- 1.2%

Arts/Media/Entertainment Wholesale/Retail Real Estate/Rentals Transportation/Storage Services Miscellaneous Trade

White 13.6% 6.5% 10.4% 2.2% 3.8% 3.5%

Black 100% ------

Hispanic 6.7% 6.7% 46.7% --- 13.3% ---

Asian 5.3% 4.3% 2.1% --- 3.2% 9.6%

Other 27.2% --- 4.9% 3.7% 6.2% 16%

Table 2. Race by Source of Wealth

27

Men Women

2010 89.75% 10.25%

2009 90% 10%

2008 89.5% 10.5%

2007 90.5% 9.5%

2006 89.25% 10.75%

2005 87.5% 12.5%

2004 87% 13%

2003 87.5% 12.5%

2002 88% 12%

2001 90% 10%

2000 88% 12%

1999 88.5% 11.5%

1998 85.25% 14.75%

1997 85% 15%

1996 84.75% 15.25%

1995 84.25% 15.75%

Average 87.8% 12.2%

Table 3. Sex Composition of Forbes 400

28 100

90

80

70

60

50 Percentage Men 40 Percentage Women

30

20

10

0

Figure 2. Gender Composition of the Forbes 400

The rates of inheriting wealth to gain admission into the Forbes 400 between men and women are also very telling (See Table 4). From 1995 to 2004 the rates of inheritance as the primary source of wealth for women on the list were from a low of 42.3% of women on the list to a high of 54.1%. By comparison, from 1995 to 2004 the highest rate of men on the list for whom inheritance was the primary source of wealth was 10.6%. These staggering discrepancies in the percentages of inherited wealth between men and women could suggest further limitations to women in the economic elite. These findings suggest that avenues to amass great personal wealth are more readily available to men than to women, who are already disproportionately represented in the Forbes 400. After 2004, however, the rates of inheritance as a primary source of wealth have steadily dropped

29 among women, paired with an overall decreased rate among men. In 2010 the rate of inheritance as the primary source of wealth for women was still seven times greater than that of men (9.8% for women; 1.4% for men), leaving a persistent gap in the percentage of individuals on the list from inheritance based on sex.

Source of Wealth Inheritance

Year Men Women

2010 1.4% 9.8%

2009 3.1% 17.5%

2008 4.8% 26.2%

2007 3% 21.1%

2006 4.2% 23.3%

2005 3.7% 26%

2004 4.3% 42.3%

2003 8.3% 54%

2002 6.8% 50%

2001 6.7% 45%

2000 6.3% 43.8%

1999 7.9% 50%

1998 7.9% 42.4%

1997 10% 48.3%

1996 10.6% 54.1%

1995 8.9% 42.9%

Table 4. Inheritance by Gender

The age demographic for the Forbes 400 has also shown very little change from

1995 to 2010 (See Figure 3). The mean age, modal age, and median age for the examined period have all been in the 60s, with the exception of the 1995, 1996 and 2007 modal age

30 in the early 70s, and the 1999 modal age of 57 (See Table 5). In 2010, the median age for the Forbes 400 was 67, compared with a national median age of 37.2 (U.S. Bureau of the

Census, 2010). There has been an increase from 63 for the median age in 1996 to 66 in

2010, which though subtle coincides with an increased life expectancy in the population of the United States. A further explanation for the ages of list members being consistently in the 60s could be that adult children are not as likely to inherit substantial estates and family wealth from their parents until later in life. Support for this hypothesis, however, would require more in-depth bibliographical data, beyond the reach of the current study.

80

70

60

50

40 Mean Age Modal Age 30 Median Age

20

10

0

Figure 3. Age Composition of Forbes 400

31 Mean Age Mode Age Median Age

2010 65.64 67 66

2009 65.73 65 66

2008 64.74 65 65

2007 64.59 70 65

2006 65.11 69 65

2005 65.1 68 66

2004 64.8 67 66

2003 64.94 66 66

2002 64.71 65 65

2001 63.4 64 64

2000 60.5 63 61

1999 60.83 57 61

1998 63.14 60 63

1997 63.06 60 63

1996 62.94 73 63

1995 63.61 70 64

Average 63.93 65.5 64.38

Table 5. Age

While there have been few notable exceptions (such as Mark Zuckerberg, founder of

Facebook being the youngest entry into the Forbes 400 at age 24 in 2008) the data for age of those who make up the Forbes 400, coupled with race and sex, suggest a regular composition of older, white men, with very little change over the 16 year period.

32 Forbes 400 2010 Forbes 400 2010 US Population 1995-2010 Percentage White 96.27% 96.75% 63.7%*

Percentage Men 87.8% 89.75% 49.16%**

Median Age 64.38 67 37.2

*2010 US Census White Not Hispanic or Latino (all ages) **2010 US Census (all ages) Table 6. Forbes 400 Compared to 2010 US Population

As shown above, the Forbes 400 is consistently comprised of White men with a significantly higher median age than the United States population (See Table 6). In 2010 men were represented at nearly twice the rate of the United States population, with an overwhelmingly high representation of Whites and a median age 30 years greater than that of the United States as a whole (See Table 6).

Source of Wealth

Using the reported primary source of wealth for each member of the Forbes 400 by

Forbes Magazine, thirteen categories were created to observe tendencies in sources of wealth for the Forbes 400 from 1995 to 2010 (See Table 7). Of the thirteen categories, seven showed marked change over time. Inheritance as the primary source of wealth showed the most change from 1995 to 2010 from 14.25% of the list in 1995 to only 2.25% in 2010. It is important to note that inheritance is conservatively measured by Forbes, being reserved for individuals who entirely inherit assets and wealth holdings that are the sole factors of their list membership. Being that it is the most ambiguous category on the list, most susceptible to the discretion of the creators of the Forbes 400 List, and that it does not take into account inheritance of social class or other significant factors leading to the accumulation of mass wealth, the inheritance category has shown the most change, but

33 also holds the greatest potential for this to be a matter of interpretation on the part of those who compile the list.

The category of Finance/Insurance showed the greatest raw growth throughout the observed period with a rise of 10% of the list from 1995 to 2010. Both Energy and

Computers/Technology showed an increase by 2010 of more than 50% from their starting rates in 1995. The final category showing an increase from 1995 to 2010 was the Real

Estate/Rentals group, which rose from 8.75% of the list in 1995 to 12% of the list in 2010.

Both the Food and the Manufacturing categories showed significant decline from

1995 to 2010, with declines of nearly 50% from their starting rates in 1995. The remaining six categories: Healthcare/Medical; Arts/Media/Entertainment; Wholesale/Retail Trade;

Transportation/Storage; Services; and Miscellaneous showed no significant trends or changes from 1995 to 2010.

34

Inheritance Computers/Technology Healthcare/Medical Energy Finance/Insurance Food Manufacturing

2010 2.25% 11.5% 3% 9.25% 23.75% 6.5% 5.5%

2009 4.5% 10.75% 3% 8% 22.5% 6.75% 4%

2008 4.75% 10.75% 3% 7.25% 24% 5.5% 5%

2007 4.75% 10.5% 3.25% 7.5% 25.75% 5% 4.5%

2006 6.25% 10.75% 3.25% 6.75% 22.5% 5% 5.25%

2005 6.5% 10% 3.25% 5.75% 20.75% 5.5% 5.25%

2004 9.25% 10% 2.5% 5.75% 20.75% 6% 5.25%

2003 14% 10.75% 2.25% 4.25% 17.75% 5.25% 4.5%

2002 12% 9.75% 2.5% 4.25% 16.5% 6.25% 4.25%

2001 10.5% 9.75% 2.75% 5% 16.5% 5.5% 4%

2000 10.75% 18.5% 1.5% 4.5% 13.25% 5.25% 4.75%

1999 12.75% 15.75% 1.25% 4.5% 14% 6% 5%

1998 13% 8.75% 1.75% 4.25% 15.5% 9% 6.75%

1997 15.75% 7.75% 2.5% 5.75% 13.75% 10.25% 8.25%

1996 17.25% 9.25% 3.25% 5% 12.5% 10% 8.25%

1995 14.25% 7% 2.5% 5.75% 13.75% 11.5% 8.5%

Table 7. Source of Wealth

35 Arts/Media/Entertainment Wholesale/Retail Real Estate/Rentals Transportation/Storage Services Miscellaneous Trade

2010 11% 6% 12% 2.75% 3.75% 2.75%

2009 11% 7.25% 13% 2.25% 4% 3%

2008 11% 6.25% 13% 2.25% 3.25% 4%

2007 11.5% 5.5% 12.75% 2.25% 3.25% 3.5%

2006 12.25% 6% 12% 1.75% 3.5% 4.75%

2005 12.75% 6.75% 12.75% 2% 4.5% 4.25%

2004 12.5% 7.25% 9.75% 2.25% 4.5% 4.25%

2003 12.5% 8% 9% 1.5% 5% 5.25%

2002 16.25% 7.25% 10.5% 1.5% 5.25% 3.75%

2001 16.75% 7.25% 9.5% 2.25% 5.75% 4.5%

2000 16.75% 6.25% 8.25% 2.5% 5.25% 2.5%

1999 16.75% 7% 8% 2.75% 3.25% 3%

1998 18.25% 5% 8.75% 2.75% 2.25% 4%

1997 14% 3.5% 8.25% 3% 3.5% 3.75%

1996 13.25% 4.5% 8.5% 2% 3.25% 3%

1995 14% 7% 8.75% 2% 2% 3%

Table 7. Source of Wealth (continued)

36 Concentration

An indicator of how permeable the economic elite may or may not be is the level of concentration of wealth within the Forbes 400. If there exists a relatively even distribution of wealth throughout the list there would be support for the position that there does not exist a self-perpetuating economic elite. Conversely, if there exists high concentrations of wealth even in the upper echelons of the economic elite, the existence of a relatively insulated group of individuals with whom great wealth and the potential for great influence is much more plausible. Such is the case with the Forbes 400.

Top 10 First Quintile Second Third Quintile Fourth Fifth Quintile Quintile Quintile

2010 18.97% 57.9% 16.38% 11% 8.33% 6.39%

2009 19.39% 55.8% 17.22% 11.26% 8.86% 6.86%

2008 18.13% 55.03% 17.27% 11.58% 8.94% 7.18%

2007 17.61% 55.06% 16.3% 11.98% 9.27% 7.4%

2006 18.57% 56.2% 16.2% 11.49% 9.04% 7.07%

2005 20.1% 56.17% 16.1% 11.54% 9.05% 7.14%

2004 22.64% 57.73% 15.68% 11.31% 8.53% 6.76%

2003 24.86% 60.95% 14.88% 10.42% 7.86% 5.88%

2002 25.35% 61.48% 15.09% 9.9% 7.7% 5.84%

2001 25.28% 60.7% 15.25% 10.2% 7.81% 6.03%

2000 24.8% 62.45% 15.24% 9.91% 6.99% 5.41%

1999 27.37% 61.56% 15.99% 9.84% 7.13% 5.48%

1998 25.63% 59.61% 16.02% 10.4% 7.97% 6.01%

1997 21.07% 56.29% 16.94% 11.38% 8.6% 6.79%

1996 16.46% 52.35% 18.07% 12.32% 9.48% 7.78%

1995 16.62% 54.36% 17.01% 11.79% 9.24% 7.61%

Average 21.43% 57.73% 16.23% 11.02% 8.42% 6.6%

Table 8. Distribution of Wealth

37 In order to determine the concentration of wealth in the Forbes 400 the list was analyzed in six groups: the top ten individuals, and the first through fifth quintiles (See

Table 8). In four of the years examined, the top ten wealth holders alone accounted for over one-quarter of the wealth held by the entire list. Further, in every year with the exceptions of 1995 and 1996, the top ten wealth holders on the Forbes 400 held more wealth collectively than the entire second quintile (See Figure 4).

70

60

50 Top 10 40 Top 20% Second 20% 30 Third 20%

20 Fourth 20% Fifth 20% 10

0

Figure 4. Concentration of Wealth by Top 10 and Quintile

As is the nature of a list ranked in order of wealth holdings each quintile should hold a smaller amount of wealth than the preceding quintile. The difference between quintiles, however, is very telling. For each of the 16 years the first quintile held more than half of the wealth that comprised the entire list. With fluctuation of only a few percentage points

38 each year, the top 80 wealth holders on the Forbes 400 have held around 55% of the wealth of the entire list (See Figure 5).

The concentrations of wealth observed in the Forbes 400 from 1995 to 2010 suggest that there exist great discrepancies in the amount of wealth even in this microcosmic view of the economic elite. The concentration of wealth among the list is disproportionately distributed, however this is only one-half of the indication of a self- perpetuating, insulated economic elite. The other half is the stability of the Forbes 400.

Stability

When examining support for a theory of a self-perpetuating economic elite, high levels of stability would suggest a high degree of insulation. Conversely, if there exists lower levels of stability, a permeable, fluctuating economic elite would be more plausible.

In order to determine the stability of the Forbes 400 the members who die between publications of the list must be excluded, as they do not have an opportunity to return to the list. By excluding those who die from the measure of stability, it is possible to observe the percentage of repeat members based solely on wealth. In order to obtain the most specific stability figures the stability was calculated year-to-year. The nominal stability was calculated as a percentage of those who were repeat members of the list divided by the resulting n after mortality was excluded. The nominal stability ranged from 83.97% in the

1998-1999 period to 94.86% in the 2002-2003 period (See Table 9). Throughout the observed period, the stability held around 90%, showing very little change in the composition of the list. Such high stability suggests that the list itself is relatively insulated.

39

N Repeat Members % Repeating

2009-2010 391 366 93.61%

2008-2009 394 362 91.88%

2007-2008 394 361 91.62%

2006-2007 393 343 87.28%

2005-2006 392 358 91.33%

2004-2005 392 358 91.33%

2003-2004 394 347 88.07%

2002-2003 389 369 94.86%

2001-2002 396 365 92.17%

2000-2001 397 346 87.15%

1999-2000 398 361 90.7%

1998-1999 393 330 83.97%

1997-1998 395 355 89.87%

1996-1997 394 357 90.61%

1995-1996 390 347 88.97%

Table 9. Nominal Stability

While the nominal stability of the Forbes 400 speaks to the insulation of the list itself, it is only one-half of the stability equation, speaking to the stability of the list from external forces. In order to observe the stability of individual rank, a Pearson’s correlation coefficient was calculated for each successive two-year period. Using pairwise deletion only individuals who appeared on both lists in each successive year were considered in the calculation of stability. It is important to note that the Pearson coefficient for each unit is based solely on individual rank on the list and not amount of wealth, though the two are directly related. While the stability of the Forbes 400 as a whole was shown with nominal measures above, the Pearson’s coefficient shows the level of internal stability of individual

40 rankings from year-to-year. Internal stability of the Forbes 400 is as important as external stability as it speaks to the fundamental self-perpetuation of an individual’s position in the economic elite. Lower Pearson coefficients would suggest greater levels of mobility within the list, while higher Pearson coefficients show greater levels of stability and insulation.

Pearson Coefficient N 2009 -2010 .931 366 2008 -2009 .883 362 2007 -2008 .892 358 2006 -2007 .871 342 2005 -2006 .910 358 2004 -2005 .900 357 2003 -2004 .904 346 2002 -2003 .920 369 2001 -2002 .881 365 2000 -2001 .824 346 1999 -2000 .856 343 1998 -1999 .841 330 1997 -1998 .886 353 1996 -1997 .877 356 1995 -1996 .838 347 Table 10. Stability of Rank

The Pearson’s correlation coefficients ranged from a low of .824 in 2000-2001 to a high of .931 in 2009-2010 with an average of .881 (See Table 10). These high levels of internal stability, coupled with the nominal external stability, show that not only does the list have a self-perpetuating characteristic, but that there exists a high level of the stability of rank for each individual on the list. Therefore the measured stability of the Forbes 400 from 1995-2010 suggests an insulated, self-perpetuating, highly stable economic elite.

CONCLUSION

It has been the purpose of this study to examine the applicability of elite theory to the current composition of economic elites in the United States. William Domhoff (2010)

41 describes a self-perpetuating insulated economic elite with the ability to wield significant power in several social arenas. Consistent with this view, this study has demonstrated that the longitudinal composition of the Forbes 400, representing the pinnacle of the economic elite in the United States, has shown significant and persistent resistance to change.

Though it has not been the aim of this study to observe or draw conclusions as to the possible political ramifications of this insulated and stable economic elite, the potential for a small group of individuals to significantly influence political systems through highly concentrated forms of wealth ownership cannot be dismissed.

This study has analyzed the demographic composition of the Forbes 400 from 1995 to 2010 and its degree of wealth, concentration and stability. Adding to the previous studies concerning the Forbes 400 (Canterbury and Nosari, 1985; Petras and Davenport,

1990; Collins, 1997; Gilbert, 2008) this study has expanded the understanding of the longitudinal composition and degree of stability of the Forbes 400.

The findings presented in this study support the existence of an insulated, self- perpetuating, homogenous economic elite. The demographics of the Forbes 400 have shown a consistent overwhelmingly white and male presence in the ranks of the upper echelons of the American economic elite. The median age of the members of the Forbes

400 has been in the mid sixties, with a slight tendency toward older ages over time. Given this profile, there is no compelling evidence found in the composition of the Forbes 400 to suggest any movement toward greater diversity or permeability. The lack of change in the observed group suggests that Zweigenhaft and Domhoff’s view on the increasing diversity of elites is not supported at this pinnacle of the economic elite.

42 While views on increasing diversity among elites are not supported in the Forbes

400, it is important to note that the Forbes 400 was selected intentionally as a data set that included only Americans. This afforded the opportunity of speaking to the perceived increase in opportunity of the accumulation of super wealth by women and minorities.

Also, while representing the elite of the economic elite in the United States, the top 400 individuals in terms of wealth are not the only members of the elite. While beyond the reach of the current study, Domhoff’s position of increased diversity may hold true for even the top 1%, but not the Forbes 400. Other analyses of economic elite have cited globalism as a mechanism for increased diversity (Taylor, Harrison and Kraus, 2009); however, limiting the study to the Forbes 400 Richest Americans, as opposed to using the World’s

Billionaires list compiled by Forbes, allows the discussion of findings to be centered around a sociological approach of factors operating in the United States shaping who controls massive wealth.

The concentration of wealth, even within the Forbes 400, as well as the stability of both the individuals on the list and their position on the list support what Bodley (1999) recognized as being inherently contradictory to the presumption of an open society. The concentration and stability of wealth among the Forbes 400 suggests the existence of a form of economic aristocracy, with new entrance typically only in the lowest ranks, and a well-insulated and established hierarchy among the key players. This characteristic of the

Forbes 400 directly violates the myth of the American Dream of a society with an open economic system based on meritocracy (McNamee and Miller, 2009). Further, with such a high level of wealth concentration comes higher levels of economic power, which has been suggested to have an inverse relationship with democracy (Mizruchi, 2004) leaving serious

43 considerations as to what effect such economic concentration has on the political system of the United States.

Perhaps the greatest contributing factor to the emergence of an economic aristocracy is that of inheritance. While inheritance as the primary source of wealth has shown a decline from 1995 to 2010 as reported by Forbes, it is important to note that the

Forbes measure of inheritance is very conservative, reserved for individuals who have entirely inherited an amount of wealth and assets that provide them with a spot on the list.

By using such a conservative measurement of inheritance, factors such as social class placement at birth and inter vivos transfers, which have been shown to have as significant an impact on an individual’s wealth prospects (McNamee and Miller, 2009), are not taken into account. In fact, being born to the “right” parents, that is parents who are able to use social and economic clout in order to advance their children’s social, educational and ultimately economical standing in life, has been found to be one of the most important factors leading to economic mobility and placement within the economic elite (Shapiro,

2004; McNamee and Miller, 2009). McNamee and Miller (2012) in a working paper entitled “American and British Economic Elites” found that the higher ranks of the Forbes

400 showed a greater likelihood for not only inheriting wealth, but also inheriting greater amounts. However measured, inheritance, in one form or another, remains a key component of wealth accumulation, with negative implications for meritocracy, and possibly even democracy.

While recognized as the most legitimate source for information on the wealthiest

Americans, the Forbes 400 list is limited in the respect that the user is at the mercy of

44 coding guidelines set forth by the original data-collecting agency. The main limitation of the current study is in the lack of in-depth biographical information for each member of the list. With 923 different individuals being on the list between 1995 and 2010, extensive biographical research on each member could not be obtained.

The current study, for instance, lacks data on religious affiliations of members on the list, making it impossible to draw conclusions as to the representation of the classic

White Anglo-Saxon Protestant (WASP) presence among the economic elite. In addition to religious affiliation, there were no data collected on social, political or other memberships and affiliations of the Forbes 400 other than their source of wealth. An in-depth analysis of such affiliations would address the degree of interconnectivity of Forbes 400 members, which has been observed among the economic elite at large (Jenkins and Eckert, 2000;

Mizruchi, 2004; Burris, 2005; Domhoff, 2006; Foster and Holleman, 2010). While there certainly exists the potential for great influence on political systems and government affairs, the political activism or involvement by members of the Forbes 400 has not been analyzed, making conclusions as to the degree of influence such wealth affords difficult to establish. In some cases, individual members of the Forbes 400 have donated substantial amounts of money to so-called Super PACs, made possible by the recent outcome of the US

Supreme Court decision in the 2010 Citizens United v. Federal Election Commission.

Without more systematic data, however, it is difficult to establish the degree to which economic elites influence political outcomes. Finally, while there is much literature to suggest the importance of intergenerational transmissions of privilege (McNamee and

Miller, 1989; Shapiro, 2004; Elmelech, 2008; McNamee and Miller, 2009) no data were collected on factors such as parental occupation, education, income or other socioeconomic

45 status indicators. Future studies would further the understanding of the pinnacle of economic elite by including more extensive biographical data on the Forbes 400, examining connections found in religious, educational, political and economic affiliations, as well as intergenerational biographical data.

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