Obviously they didn’t have Wii, so their lives were clearly poorer quality compared to those of modern Australians – my God, this is the pre-vegemite era we’re talking about here – but this doesn’t mean financially they were poor. However, today, in a rather apocalyptic article of vague relevance to other topics on this blog recently, John Birmingham made the following claim:
In the hundred and thirty-nine years before the Great Depression, New South Wales produced just four millionaires.
That’s not a lot of lolly for a colony so ‘‘wealthy’’ that the British Parliament worried for a while that convict transportation was encouraging crime in London, by providing a guaranteed ticket to the promised land for the underclass of England. Partly that was a function of a more equal distribution of income in those days. The Australian colonies really were a promised land. But also we forget sometimes just how insanely wealthy we are, at least as a whole, compared with the past.
Now, I think this is wrong, and there are a few reasons why I think this sort of wrongness needs to be pointed out and combated:
- This sort of historical mistake is often used to flog modern people as weaker and softer than our forebears – though we seem to keep getting bigger and faster and stronger, this logic is common in describing our past
- It’s a type of hair-shirtism, arguing that because not every person who lives in a city can skin an animal, they must therefore not be able to survive a disaster that, let’s face it, since WW2 hasn’t happened – I have written about the pop-cultural belief that survivalism is more important than cosmopolitanism before and I don’t like it when this idea gets floated
I think this article is wrong from its very first premise, and over about 140 comments only one other person has noticed: due to inflation, a millionaire in pre-depression era Australia is a very different animal to a millionaire in modern Australia, which I don’t think Birmingham has adjusted for.
Fortunately, we can check his facts, because the Australian Bureau of Statistics has a copy of the 1904 report on life in Australia and New Zealand, which is about 1000 pages of untrammelled colonial-era goodness and includes a section on income. This report can be downloaded as a chunky pdf file from the ABS, and if we turn to page 512 we can see the section on income and capital. The document doesn’t describe the number of millionaires in detail, but we can get a few estimates as to how many there might have been. First of all, on page 519, we see a table of property ownership values, and we can see that in NSW, 987 people owned property worth more than 50,000 pounds; 1099 owned property worth between 25,000 and 50,000 pounds; and 2,397 people owned property valued between 12,500 and 25,000 pounds. Now, applying the Reserve Bank of Australia’s historic inflation calculator, we can see that these categories in 2001 dollars are: >$5,069,000; between $2,535,000 and $5,069,000; and between $1,268,000 and $2,535,000. Note also here the total value of the properties in the top bracket: 130,000,000 pounds spread between just under 1000 people, which is about 130,000 pounds per person – about 10 million dollars each.
i.e. There were actually about 5,300 property millionaires in NSW in 1901. Given the population of Australia was 1/7th what it is now, that corresponds with about 36,500 property millionaires today. Not quite the 192,000 reported by Merrill Lynch in 2011, but not quite 4 either. In fact, the inflation calculator tells us that an actual millionaire in 1901 would be worth $100 million today.
Next, if we look at page 516, we can see that 20,092 estates were bequeathed by deceased persons in 1903-4, and the average value of these estates was 2,402 pounds, or $244,000. It’s likely that in any reasonable distribution of wealth, more than 3 of those estates were worth more than a million dollars in today’s money. The report from 1903-04 is full of praise for the equality of Australia’s income distribution, which suggests a fairly even division of values across the range of estates and a fair chance that a sizable proportion of them were above the 10,000 pounds mark.
Next, on page 533 we see the average income of NSW residents earning over 200 pounds a year was 658 pounds (about $66000 in 2001 money) and on page 532 we see that incomes for people in this category constitute only 5.6% of their total private wealth. This means that the total wealth of people earning over 200 pounds a year is actually 11,75o pounds, or $1.2 million. Page 533 tells us that people earning more than 200 pounds a year constitute 6.6% of the population of NSW, which in 1901 was about 90,000 people (see page 158 for the population of NSW “exclusive of Aborigines”). That number, scaled up by 7, gives us 630,000 – a lot more millionaires than Merrill Lynch reports for Australia in 2011.
The basic problem with Birmingham’s account is that it ignores population and inflation. Four actual millionaires (worth 1 million pounds or more) in all of Australia in 1901 is equivalent to 28 people worth $100 million or more in modern Australia. The Forbe’s rich list tells us that there are a little more than 40 such people. I don’t know exactly when and where those actual millionaires appeared in the history of the colony, so it could be that there was only one in 1901, but even if we take that conservative assumption, that’s equivalent to 7 at any point in time in modern Australia, which is pretty good going for a society that hadn’t yet gotten around to the motor car. But once you adjust for inflation and population, it’s clear that actually Federation-era Australia was quite wealthy and materialistic, probably urbanizing rapidly and “getting soft.”
Reviewing these figures and adjusting them for inflation and population, I have to question how well Birmingham did his research for that book he mentions in his first paragraph. Perhaps he’s just applying false logic to the number of (billionaire-equivalent) millionaires he discovered in pre-Federation Australia, but I think more likely is that he and his editor completely missed the importance of inflation in making their calculations. Or am I missing something very obvious in my review of this 1903-04 report?
A few side notes on the ABS report
The ABS report is amusing for the insight it gives into the way that Australia was run in the era of Federation. When you download it, the download page warns you that it contains language that might not be considered entirely spot-on by a modern audience. In scanning the population and income sections, one can see why. In discussing the population (which totalled 3.8 million in all of Australia), the Commonwealth Statistician adds (my emphasis):
The figures are inclusive of half-caste aborigines living in a civilised condition, and if there be added an estimated population of 148,000 Australian aborigines in an uncivilised state and of 43,000 Maoris in New Zealand, the total population of Australasia at the date of the census would be about 4,737,000
Now, I grant you most Europeans in the modern believe that all Australians live in an uncivilized state (most of us having not discovered the joys of “football”), but they don’t say it! No such daintiness was observed by the Commonwealth Statistician back in the day, when talking about those who had been cast off their lands.
On page 517, in the section on income, we find that pride in Australian egalitarianism and the “great Aussie dream” of home ownership is not a particularly modern trait:
These figures show a distribution of property not to be paralleled in any other part of the world; and in a country where so much is said about the poor growing poorer and the rich richer, it is pleasing to find that in the whole population one in six is the possessor of property, and that the ratio of distribution has been increasing with fair regularity in every province of the group.
To this we can add the Commonwealth Statistician’s prescience concerning the Occupy Wall Street movement (page 519, beneath the table):
It would thus appear that 987 persons – that is to say, 0.13 (about one-eighth of one) per cent – were possessed of £130,521,000, or 35.4 per cent of the whole property of the community
Back in 1901 the top 0.1% had grabbed 35% of the wealth. I wonder how that has changed in 100 years?
There’s also a fairly detailed description of registered unions and their membership, showing that the unions have already been established as a key organization in Australian life.
In contrast, also from the section on income, we find this charming description of the calculation of the relative worth of men and women (my emphasis):
The unit for the most useful comparison in regard to incomes is the bread-winner; but as there are both male and female bread-winners it is necessary to take into account the less commercial and productive value of women’s work compared with men’s. Taking the productive employments of New South Wales and Victoria as a basis, it is found that the earnings of thirty-six men equal those of one hundred women, and if this wage efficiency holds good throughout Australia the work of the 1,560,784 male and 422,123 female bread-winners at the census of 1901 would be equivalent to that of 1,712,748 male bread-winners alone; and comparisons of earnings should therefore be made on the basis of this last number and not on the total 1,982,907 of male and female breadwinners taken together.
Now that is a statistic on inequality that has changed an enormous amount in just 100 years – I think now the earnings of about 85 men equal those of 100 women, and we don’t refer to this as “the less … productive value of women’s work” but recognize that it reflects a mixture of differing work patterns, current and historical discrimination, and industrial choices … once again the Commonwealth Statistician of 1903 was rather more forthright in his description of matters pertaining to the “second sex.” But note (page 519) that despite this huge inequality in wages, 18% of women still own property.
This report is an interesting insight into how we lived in 1901, and the attitudes towards lifestyle and economics that prevailed then. I’m not convinced that John Birmingham read it when he did the research for his blog post or his book, or considered the extent to which things have remained the same over the past 100 years, even while they have changed so much.
fn1: the Commonwealth Statistician didn’t bother counting Aborigines until 1969. But he did make an estimate, see the subsequent note.