The Diffusion of Property Ownership

Magazine article

By: Herbert Hoover

Date: April, 1927

Source: Hoover, Herbert. "The Diffusion of Property Ownership."Proceedings of the Academy of Political Science in the City of New York. 11 (1925): 137–139.

About the Author: Herbert Hoover was the thirty-first President of the United States, serving from 1929– 1933. His presidency was marred by the stock market crash and the early years of the Great Depression. He spent his later years as an advocate for humanitarian and reform causes.

INTRODUCTION

Presidencies are often defined by economic events. This relationship is so commonly observed that political commentators frequently sum up the political importance of a healthy economy with the expression, "It's the economy, stupid." President Jimmy Carter was unable to reduce double-digit inflation and interest rates, contributing to his demise; his successor Ronald Reagan, though responsible for spiraling federal deficits, was reelected in a landslide due largely to the rapidly growing economy. President Bill Clinton's impeachment and removal might have succeeded had he not presided over one of the strongest economies on record.

President Herbert Hoover is frequently contrasted with his replacement, Franklin Roosevelt, who is credited with leading the United States out of the Depression and through World War II. Roosevelt's legacy is as author of the New Deal. Hoover's name was appropriated by individuals hard-hit by the Depression who named the small clusters of shacks they inhabited "Hoovervilles."

Hoover found himself traversing uncharted territory. His belief that the economy would quickly rebound was shared by most economists, thus he was reluctant to interfere in the economy. Hoover declined to take immediate steps to shore up the banking system, possibly failing to curtail the severity of the Depression. By the time Hoover formulated a relief program, the country was deep into decline.

In the years before his presidency, Hoover's extensive efforts in public service clearly demonstrated his genuine dedication to humanitarian concerns. Hoover was conducting business in London when the start of World War I stranded more than 100,000 Americans in the city. At the request of the U.S. government, he was instrumental in getting these citizens safely back to the United States. Later that year, the U.S. Ambassador to Belgium asked Hoover to coordinate humanitarian relief efforts to the beleaguered nation. From 1914–1917, Hoover guided an effort that gathered tons of food and thousands of dollars for relief. He later coordinated massive wartime efforts to save food in the United States for distribution to embattled Europe.

Hoover was named Secretary of Commerce in 1921, an office he held under two presidents. While in office, he helped end twelve-hour workdays in steel mills. He also organized numerous conferences to address social issues, such as child labor and sanitary housing.

PRIMARY SOURCE

The Diffusion of Property Ownership

I regret my inability to attend the dinner which you are so finely enjoying tonight. It is a little difficult, however, to attend two public dinners at the same moment, especially when they are two hundred miles apart, and I have had to compromise by making my participation with you through a ten-minute message by telephone.

I am deeply interested in your discussion tonight because I am convinced that one of the continuous and underlying problems of sustained democracy is the constant and wider diffusion of property ownership. Indeed I should become fatalistic of ultimate destruction of democracy itself if I believed that the result of all of our invention, all our discovery, all our increasing economic efficiency and all our growing wealth would be toward the further and further concentration of ownership. In the large vision we have a wider diffusion of ownership today than any other nation in the world. It has been so since the beginning of the Republic. In our enormous growth in wealth there have been periods when the tendencies were toward concentration of ownership and other periods when economic forces (and public action) made toward greater diffusion. Certainly the forces of diffusion were dominant during the great migration which occupied the West. And the economic shift of the last war has been still another period of increasing diffusion of ownership of property. Our high real wages during the past three years, with consequent general expansion of savings, have, I believe, also marked another period of wider diffusion of property ownership.

It is appropriate that the evidences and the tendencies in this matter should be earnestly examined. We are all fundamentally interested that our economic forces, our public and private policies, should be so directed that with our increasing wealth the tendencies of diffusion of ownership shall be greater than the tendencies of concentration. And if we would grow in standards of living it is equally important that we shall maintain this dominant tendency without destruction of the moral, spiritual and economic impulses of production.

We are woefully lacking in actual facts upon this most important question. From the vast fund of statistical information in the nation we can only indicate tendencies, and then only with some uncertainty. Aside from our inability to determine more than bare tendencies we are unable from the information we have to make the proper and necessary distinction between distribution of wealth, diffusion of ownership, and diffusion of control of wealth— all equally important in any consideration of social as well as economic questions.

For the purposes of analysis of diffusion of ownership we might divide property ownership into two categories: on the one hand bank deposits, bonds, mortgages, preferred stocks, in other words, the prior lien securities; and on the other hand the equities generally, as represented by common stocks, land holdings, stocks of goods, tools etc. If we were to make such a division I believe we should find that the high real wages and the vast increase of savings of the past few years have brought about an extraordinary diffusion of what we might call the prior lien ownership. No doubt savings among the people at large first seek the direction of greatest safety by their investment in such prior liens. The vast increase in number of savings banks and other distributed deposits, the great growth of industrial and life insurance, the large expansion of the building and loan associations, and the unprecedented absorption of all sorts of governmental securities in small sales all evidence this. In this direction there appears to be an undoubted increase in diffusion of ownership.

The ownership of common stock, land, homes, current goods and other forms which include the equity are, however, the part of the property which carries the control of management, and which in the long run participates most largely in the growth of national wealth. It is in increasing the diffusion of ownership in this area that we shall secure a contribution to the powerful forces which make for social stability. There are a multitude of problems in it when we come to close range. He who owns in this field must take larger risks. That here are many indications of a movement toward diffusion in this field also is indicated by your discussions. The increase in common stock holdings by employees, by consumers and the public, and in a way also the increase in mutualized banks and insurance companies, the increased volume of operations by farmers' cooperatives, tend toward such a movement.

But there is another field of equity ownership—that of home ownership—where I regret to say that we are going backwards. For twenty years the national ratio of owned homes has fallen slowly and slightly, but steadily. This may be accounted from by special reasons.

In the matter of distribution of wealth as distinguished from diffusion of ownership we have but little fact basis upon which to proceed outside of the income-tax statistics. While they show superficially that a diffusion of wealth is increasing yet the exemptions are such as to destroy much of their statistical usefulness. Again we have little information as to the diffusion or concentration of the control of wealth as distinguished from ownership. My impression is that the establishment of the Federal Reserve System and the effect of the Restraint of Trade laws and the inheritance taxes all tend to make for diffusion in this direction also. But at every turn in the study of distribution of wealth and of ownership of control we are confronted with a woeful lack of accurate data.

One of the first requisites for adequate economic discussion, and thus the development of any economic or social policy, must be the determination of the economic fact. We can adduce economic argument, we can point out economic tendencies, but until we have so searching an examination of these questions that we can evaluate them in actual quantities, whether it is dollars or good, we shall be far afield from the truth. I have seen forty economic arguments in opposition destroyed by one single affirmative argument when quantitative determination was attached to each of them.

I believe your discussions will be a valuable contribution to this subject. The elaboration and development of sound ideas is, of course, the first and fundamental step towards well directed national impulse and national action, and if from your discussion can come the development of method by which we can secure more searching, scientific investigation, more accurate determination of fact, you will have made a great accomplishment.

SIGNIFICANCE

Herbert Hoover was a consistent and vocal advocate of individual home ownership. In numerous speeches, he vividly portrayed the home as the economic and moral building block of America, noting that personal home ownership was a primary goal of virtually every citizen. In 1931, Hoover oversaw the Conference on Home Building and Home Ownership, at which he described home ownership as the key to happier marriages, stronger children, and better citizenship. While idealistic in his tone, Hoover was convinced of the benefits of widespread home ownership and firm in his commitment to make that vision a reality.

After his presidential term ended, Hoover remained active on behalf of numerous important causes. He continued to work for hunger relief in Finland and other nations and served on the boards of several educational and charitable organizations, donating his entire federal pension to benevolent causes.

In the twenty-first century, home ownership remains a top goal for most Americans. A 2002 federal report used language strikingly similar to Hoover's to describe home ownership, labeling it the cornerstone of healthy communities and the foundation of family financial security. Home ownership in 2005 was at an all-time high of seventy percent, up from sixty-five percent just ten years before. Disparities do remain: young families (those under age thirty-five) had ownership rates of less than forty-five percent. The report found that minorities were also less likely to own homes; Hispanic and African-American ownership rates remain below fifty-percent.

Some regions of the United States face particular difficulties related to home ownership. The state of California lags the rest of the nation in home ownership rates, largely because of median home prices that by 2005 were $300,000 above the national average. Residents of some rural regions and inner-city areas still face problems securing safe and sanitary housing. The U.S.-Mexico border region remains home to several thousand colonias, small unincorporated developments filled with substandard homes lacking plumbing and electricity and lying outside the reach of city zoning authorities.

FURTHER RESOURCES

Books

Dexter, Walter Friar. Herbert Hoover and American Individualism: A Modern Interpretation of a National Ideal. New York: MacMillan Co., 1932.

Myers, William Starr (ed). The State Papers and Other Public Writings of Herbert Hoover, vol. 2. Garden City, California: Doubleday, Doran and Co., 1934.

Nash, George H. Life of Herbert Hoover: The Humanitarian, 1914–1917. New York: W. W. Norton, 1988.

Periodicals

"Analysis of the Changing Influences on Traditional Households' Ownership Patterns."Journal of Urban Economics. 39(1996):318-341.

Masnick, George S. "Home Ownership Trends and Racial Inequality in the United States in the 20th Century." Joint Center for Housing Studies, Harvard University. 2001.

Nevin, Alan. "Homeownership in California." A CBIA Economic Treatise. (2006):1–11.

Web sites

Herbert Hoover Presidential Library and Museum. "Herbert Hoover Presidential Library and Museum." <http:// hoover.archives.gov/> (accessed July 5, 2006).

U.S. Department of Housing and Urban Development. "Fair Housing and Equal Opportunity." <http://www.hud.gov/offices/fheo/index.cfm> (accessed June 2,2006).

The White House. "Herbert Hoover." <http://www. whitehouse.gov/history/presidents/hh31.html> (accessed July 5, 2006).