- Americans live in a time of income and wealth inequality that mirrors the Gilded Age of the late 19th century.
- Historian HW Brands believes it reflects the tension between capitalism and democracy in the United States, a struggle that defines the country.
- He said the ways out of the New Gilded Age are a new era of progressivism, a financial disaster, or a major war.
- This article is part of Business Insider’s ongoing series on Better Capitalism.
The cultural backlash to America’s financial system in the wake of the Great Recession brought the topic of widening inequality into the mainstream. Ten years after the crisis, income and wealth inequality between the top 1% and the rest of the country are both still rising.
If you take a look at the last 40 years in the United States in the span of the country’s history, it becomes clear that it can justifiably be called a “New Gilded Age,” strikingly similar to the latter half of the 19th century. That period got its name from Mark Twain, whose coauthored novel of the same name portrayed a country with grand, ostentatious wealth providing a thin layer of gold, gilding, over a society in unrest.
HW Brands, a historian at the University of Texas at Austin, whose 2010 book “American Colossus: The Triumph of Capitalism, 1865-1900,” explores a thesis that explains both the Gilded Age and our current period, told Business Insider: “Tension between capitalism and democracy has characterised American life for two centuries, with one and then the other claiming temporary ascendance.”
In Twain’s Gilded Age, he said, “The influence of capitalism and the capitalists was greater in American life than it had ever been before. And arguably, than it ever would be, until maybe today.”
In the first Gilded Age, the ultra-rich shaped the US in their image
In the wake of the Civil War, capitalism, unrestricted, became a force in America, with a new class of ultra rich shaping the country in their image – people like John D. Rockefeller, Andrew Carnegie, Cornelius Vanderbilt, and JP Morgan.
Developments in industries like oil, steel, and finance brought never before seen prosperity to a small, elite class while ordinary Americans and waves of new immigrants struggled to get by, and cities had the poor stuffed into barely livable tenements.
Someone like Carnegie would use his influence to bust unions and lower wages for his steel workers, while also dedicating a major portion of his fortune to philanthropy. The capitalists would be both ruthless in their business and beneficent to the lower classes, according to what they considered best for them – in both cases, it was a solidifying of the power dynamic that defined the era.
The infrastructure built during this period helped develop the country, but industries like steel also quickly grew into monopolies, due to barriers of entry that small companies wither couldn’t overcome, or that led to soon getting bought by the giant dominating that industry. It’s a situation similar to what’s happening now with tech behemoths like Amazon and the main players in the pharmaceutical industry, argues economist Joseph Stiglitz.
Accompanying this shift in culture was a corrupt political system where bribery was a quick ticket to power, and the rich got richer.
Average Americans were aware of this imbalance, and it led to growing feelings of populism. Some of this was of the particularly nasty nativist strain. It’s not a coincidence that these issues are raised again today.
“There’s a feeling on the part of people, there was then and there is today, a feeling on the part of people who identify themselves as the ‘real Americans,’ that America is changing beneath them and there’s a sense of frustration,” Brands said.
The pendulum shifted from capitalism to democracy in the early 20th century, Brands said, with the Progressive Era. America entered a period that journeyed through progressive politics bolstering the federal government and regulating business, through the New Deal in the ’30s and the Great Society in the ’60s. This ascendance of democracy, as Brands puts it, was strengthened by the reactions to the Great Depression and two world wars, major catastrophes that required a stronger federal government to survive.
The New Gilded Age can’t last forever
Our New Gilded Age, then, can be considered starting with President Ronald Reagan taking office in 1981, and putting into place free market policies championed by economists like Milton Friedman. The economy boomed for stretches, and while the financial crisis of 2007-2008 caused Americans to question the capitalist system, it was nowhere on par with the Depression.
As populism remains strong with both Democrats and Republicans, income inequality rises, and wage growth remains slow, it’s apparent that while history never repeats itself exactly, we’re going to transition out of this reality at some point.
As Brands sees it, our emergence from the New Gilded Age could be through a financial catastrophe or major war, or, what he thinks is much more likely, through a peaceable political shift. He said that it looks as if it will come from the Democratic Party moving again toward the left, embracing policies like Medicare for all, for example, that would boost the power of the state. It will be yet another era in the constant struggle between capitalism and democracy.
“As long as people are free to make that case and as long as people are free to vote for or against that, then I think democracy will make a comeback,” he said. “I think the pendulum swings and it’s going to swing back.”
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