The Gilded Age and income inequality: Have we learned anything?
By Vanessa De La Rosa
Sure, we’ve benefited tremendously from the lessons of the Gilded Age, and we’ve gained integral legislature because of those lessons. But shouldn’t the middle class be doing better than they were when they were working the steel mills?
Three events inspired this article. First, I was recently sucked into the marvelous world of The History Channel’s "The Men Who Built America." Second, I dusted off a box of photos from my formative years. And third, I came across this video highlighting America’s skewed perception of the nation’s wealth disparity.
I’m ashamed to say it, but four episodes of "The Men Who Built America" taught me more American history lessons than my four years of high school. The series focuses on the tycoons who fueled America’s Gilded Age, Cornelius Vanderbilt , John D. Rockefeller, Andrew Carnegie and J.P. Morgan. They “were the engine of capitalism as they transformed everything they touched in building the oil, rail, steel, automobile and finance industries.”
Their extreme business strategies also eliminated the chief ingredient in American capitalism: competition.
Vanderbilt established a steamboat monopoly, was guilty of stock-watering and was accused of paying off public officials. When Rockefeller was building Standard Oil, he used horizontal integration to effectively buy out his competition. Carnegie used vertical integration to jettison the middleman companies when creating his steel empire, which would later be purchased by J.P. Morgan and become the monopoly known as U.S. Steel.
Most of their tactics would be highly illegal today, and when you factor in how much of the economy they were controlling, it is clear to see why. In 1910, Rockefeller’s net worth was equal to 2.5 percent of the entire nation’s economy — that’s the equivalent of $250 billion today, which is double Bill Gates’s net worth. At the peak of their careers, Rockefeller, Carnegie and Morgan were worth over $1 trillion in today’s money. That’s more than the net worth of the 40 richest people alive today… combined.
These lords of capitalism and their business ventures exploited the American working class, further widening the gap between the rich and the poor. As the History Channel notes, the disparity in income was as big as it had ever been. As companies were bought out and consolidated, thousands of workers were laid off, and the ones who remained were compensated with even smaller wages.
Advertising mogul Danny Deutch notes that “one of the things of an evolving society is the wealth distribution. It’s the core of all politics: Is it better with wealth in the hands of the few versus distributed among the many, whether from a moral or an economic point of view?”
In the 1890s, over 90 percent of Americans were struggling to make ends meet on less than $100 per month. The average worker was earning a dollar a day — significantly below the poverty line. Working conditions were unbearable, and a large number of Americans were desperate and vengeful. When Democrat William Jennings Bryan campaigned for the U.S. presidency in 1896, he appealed to the working class by vowing to take down big trusts. Carnegie, Rockefeller and J.P. Morgan wouldn’t have that, though. They conspired and bribed politicians to get their preferred president, McKinley — who would look the other way as they continued their business practices — into the White House, instead of Bryan. Each of them spent the equivalent of more than $20 million to do so. And in 1900, the tycoons planned to silence Theodore Roosevelt, who campaigned to represent the oppressed majority, by tacking him onto McKinley’s ticket as vice president. When McKinley was assassinated during his second term, however, Roosevelt took office and finally prosecuted many of the major trusts.
And here’s where my box of old photos comes in. As I looked at awkward middle school portraits and snapshots of high school antics, I thought about how I could not be where I am today had I not learned from the choices and mistakes I've made. Most of the pictures made me realize just how far I've come in attaining my personal and career goals, while some photos served as painful reminders of how much baggage I haven't cleared out of my life. It is essential to look back every once in a while, to make sure we're not replicating our missteps — to ensure we're improving with time and experience.
Which brings me to Edmund Burke’s statement, “Those who don’t know history are destined to repeat it.” This Burke quote rings true for my own personal history, and it’s true for our country, as well. Had these entrepreneurs not taken risks and capitalized on the early benefits of the American Dream, many of the innovations and industries that have made the U.S. one of the most powerful countries might not have been. For instance, when Henry Ford perfected the assembly line a generation later, who do you think was responsible for the electricity, steel and oil that powered his factories, and who do you think was providing the gasoline to fuel his Model-Ts?
Vanderbilt, Carnegie, Rockefeller and Morgan may have exposed the darker side of unchecked capitalism, but their careers built the foundation for a better system down the road. And had these magnates not striven to monopolize their industries, the federal government would not have stepped in and enforced the Sherman Antitrust Act, which helps protect and promote free-market competition, a foundation of the American Dream.
Unfortunately, another quote also comes to mind, this one from John Brunner’s novel "Stand on Zanzibar." “Papa Hegel he say that all we learn from history is that we learn nothing from history.” It appears that we haven’t learned as much as we could have from the income inequality of 100 years ago. And here's where that video comes in. It’s created by Adam Mordecai and based on research by Harvard professor Michael I. Norton, who found that 9 out of 10 respondents to his surveys "universally think that wealth is more evenly distributed in the United States than it actually is.”
When asked what the ideal distribution should look like, 92 percent of respondents said that the wealthiest would be 10-20 times better off than the poorest Americans, the poverty line would not be on the chart, and the middle class would be booming and healthy, with a seamless transition into wealth. Republicans and Democrats both labeled this curve as ideal.
Survey participants were then asked how they think the actual distribution compares to the ideal. The overwhelming majority said that the poorest 20 percent to 30 percent are beginning to suffer, while the middle class is slightly struggling, and the wealthy are making around 100 times what the poorest are making and 10 times what the middle class are making.
But the reality isn’t even close to this picture. Instead, the poorest Americans don't even register on the chart, and the middle class is virtually indistinguishable from the poor. In fact, even the top 10-20 percentile is suffering. Only those at the very top are doing considerably better. So much better, in fact, that the top 2 percent to 5 percent are literally off the chart. The top 1 percent reaches up 10 times higher than the chart will even allow.
You’ll have to watch the video or read Norton’s research to truly see how skewed the disparity is. One percent of Americans hold 40 percent of the nation’s wealth, while the bottom 80 percent only hold 7 percent of the wealth between them. Meanwhile, the top 1 percent is earning almost a quarter of the country's income. In 1976, they took home 9 percent. Those top earners also own 50 percent of our country’s stocks, bonds and mutual funds, while the bottom 50 percent of earners own only 0.5 percent of these investments.
Are we looking at photos of our formative years and seeing how much we’ve improved, or are we repeating ourselves? Such a gap between the wealthy and poor is not ideal, according to the majority. It’s so far from ideal that we might be in denial about just how little has changed — or even how much worse things have become. Sure, we’ve benefited tremendously from the lessons of the Gilded Age, and we’ve gained integral legislature because of those lessons. But shouldn’t the middle class be doing better than they were when they were working the steel mills?
I’ll agree with Mordecai’s conclusion:
“I’m sure many of these wealthy people have worked very hard for their money. But do you really believe that the CEO is working 380 times harder than the average worker in his company? Not the lowest paid worker, the average worker. The average worker needs to work more than a month to earn what the CEO makes in one hour. We certainly don’t have to go all the way to socialism to find something that is fair to hardworking Americans. We don’t even have to achieve what most of us consider might be ideal. All we need to do is wake up and realize that the reality in this country is not at all what we think it is.”