Why the Gilded Age Was Golden

This video was made possible through a generous donation from the Robert W. Plaster Foundation.

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Script:

We are living in a second Gilded Age.

That’s the argument of many commentators, especially those who would like to increase taxes on the rich.

Or marshal squadrons of lawyers to mount an antitrust battle against monopolists like Google or Amazon.

The reason the commentators cite the Gilded Age is that that period, 1880 to 1900, had its own Elon Musk, Sergey Brin, and Jeff Bezos. These were the titans who built up big steel or the railroads.

Our textbooks tell us that those men were robber barons who captured all the wealth.

The robber barons locked in their monopolies, and barred the door to advancement for everybody else. The poor stayed poor, with no opportunity for their children. As economist Henry George wrote at the time, the tendency was for “[…]the rich to become very much richer, the poor to become more helpless and hopeless, and the middle class to be swept away.” The HAVES had everything over the HAVE NOTS. Only antitrust assaults on big companies or new taxes, could make America fairer.

Or so say those textbooks.

But the reality was different. In fact the Gilded Age was a good time for many Americans. Even poor Americans.

The claim that the rich were richer was true: Jay Gould made a fortune in railroads, John D. Rockefeller built the stunningly successful Standard Oil, and Andrew Carnegie’s steel company gave him a net worth as big as a whole country. These men did build giant mansions. And sailed around in yachts.

That the poor were poor is also accurate. But that poverty was not permanent for most. The years 1880 to 1900 were bumpy ones. But many poor Americans saw life improve. Food prices for example dropped sharply.

Meanwhile, wages rose––and dramatically. Real wages for workers in factories climbed by 45%.

In these hopeful years, illiteracy dropped by more than a third. Fewer babies died. Life expectancy rose by 21%. And the quality of life improved. In the olden days, especially before the Civil War, it was hard to get away from your home town. Now the expanding network of rails meant anyone tired of the plow could ride a train to the city. Americans enjoyed a new freedom to live where they wanted––riding on rails supplied by one robber baron in a train built by another.

Most important of all: the door of opportunity was open. The single most important tool for advancement is education. And education exploded. High schools were the engines of education. In the four decades after 1870, the number of high schools in America climbed to 10,000 from 500. Immigrants bet that if they did not escape the sweatshop, their children would. And that was a bet they won.

And what about those permanent monopolies? It turned out they were not so permanent. And that wasn’t because of antitrust action. It was because of competition. The best example was the almighty railroads. Even as Congress passed laws to try to curb big profits, the railroads’ power to dominate was already doomed. On the horizon stood the new trucking industry, ready to roll in.

Of course politicians ignored these realities. It was more fun to go after the rich with antitrust suits. President Theodore Roosevelt claimed that bringing down trusts would give the worker a “Square Deal”. Some say TR’s trustbusting caused a financial panic, the Panic of 1907. As it happened that Panic hurt the very workers Roosevelt aimed to protect, driving up joblessness to eight percent from 3 percent. Hardly a “Square Deal”.

Congress crafted a new institution to punish the rich: the income tax. This tax likewise failed to get the result its advocates advertised. Lawmakers insisted on high rates. They made the same arguments we hear today: higher rates reduce inequality and squeeze money out of the top 1%. In response however, companies simply curtailed business. At least one in ten men was unemployed. In the 1920s, Congress responded by lowering taxes for top earners. Companies grew, and workers got what mattered more to them: jobs. And along the way came new innovations, such as electricity, even better than kerosene.

Given this record, it’s surprising that we vilify the Gilded Age. One problem is that most books portray this period as a kind of anti-wealth cartoon. Another problem is our politicians. The story of HAVE and HAVE NOTS is a story that evokes envy. And politicians enjoy playing on our envy.

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