Chrystia Freeland - Plutocrats

Carnegie was, of course, supremely confident that the benefits of industrial capitalism outweighed its shortcomings, even if the words he used to express its advantages—“it is best for the race”—make us squirm today. But he could also see that “the price we pay… is great”; in particular, he identified the vast gap between rich and poor as “the problem of our age.”

Living as he did during the first gilded age, Carnegie intuitively understood better than most of us today how remarkable that chasm was, compared to the way people had lived in previous centuries. “The conditions of human life,” he wrote, “have not only been changed, but revolutionized, within the past few hundred years. In former days there was little difference between the dwelling, dress, food, and environment of the chief and those of his retainers. The Indians are to-day where civilized man then was. When visiting the Sioux, I was led to the wigwam of the chief. It was like the others in external appearance, and even within the difference was trifling between it and those of the poorest of his braves. The contrast between the palace of the millionaire and the cottage of the laborer with us to-day measures the change which has come with civilization.”

Carnegie, himself an immigrant who rose from bobbin boy to the top of America’s first plutocracy, understood that the distance between palace and cottage was merely the outward sign of the gap between rich and poor—the scoreboard, if you will.

The change in power relations started in the workplace, and that is where it was most intensely felt: “Formerly, articles were manufactured at the domestic hearth, or in small shops which formed part of the household. The master and his apprentices worked side by side, the latter living with the master, and therefore subject to the same conditions. When these apprentices rose to be masters, there was little or no change in their mode of life, and they, in turn, educated succeeding apprentices in the same routine. There was, substantially, social equality, and even political equality, for those engaged in industrial pursuits had then little or no voice in the State.”

Before the industrial revolution, we were all pretty equal. But that changed with the first gilded age. Today, Carnegie continued, “we assemble thousands of operatives in the factory, and in the mine, of whom the employer can know little or nothing, and to whom he is little better than a myth. All intercourse between them is at an end. Rigid castes are formed, and, as usual, mutual ignorance breeds mutual distrust. Each caste is without sympathy with the other, and ready to credit anything disparaging in regard to it.”

That shift was particularly profound in America—one reason, perhaps, that even today the national mythology doesn’t entirely accept the existence of those “rigid castes” of industrial society that Carnegie described a hundred years ago. The America of the national foundation story—the country as it was during the American Revolution—was one of the most egalitarian societies on the planet. That was the proud declaration of the founders. In a letter from Monticello dated September 10, 1814, to Dr. Thomas Cooper, the Anglo-American polymath (he practiced law, taught both chemistry and political economics, and was a university president), Thomas Jefferson wrote, “We have no paupers…. The great mass of our population is of laborers; our rich, who can live without labor, either manual or professional, being few, and of moderate wealth. Most of the laboring class possess property, cultivate their own lands, have families, and from the demand for their labor are enabled to exact from the rich and the competent such prices as enable them to be fed abundantly, clothed above mere decency, to labor moderately and raise their families…. The wealthy, on the other hand, and those at their ease, know nothing of what the Europeans call luxury. They have only somewhat more of the comforts and decencies of life than those who furnish them. Can any condition of society be more desirable than this?”

Jefferson contrasted this egalitarian Arcadia with an England of paupers and plutocrats: “Now, let us compute by numbers the sum of happiness of the two countries. In England, happiness is the lot of the aristocracy only; and the proportion they bear to the laborers and paupers you know better than I do. Were I to guess that they are four in every hundred, then the happiness of the nation would to its misery as one in twenty-five. In the United States, it is as eight millions to zero or as all to none.” Alexis de Tocqueville, visiting America two decades later, returned home to report that “nothing struck me more forcibly than the general equality of conditions among the people.”

America, in the eyes of Jefferson and Tocqueville, was the Sweden of the late eighteenth and early nineteenth centuries. Data painstakingly assembled by economic historians Peter Lindert and Jeffrey Williamson have now confirmed that story. They found that the thirteen colonies, including the South and including slaves, were significantly more equal than the other countries that would also soon be the sites of some of the most vigorous manifestations of the industrial revolution: England and Wales and the Netherlands.

“If one includes slaves in the overall income distribution, the American colonies in 1774 were still the most equal in their distribution of income among households, though by a finer margin,” Professor Lindert said.

In addition to seeing America as egalitarian, contemporary visitors and Americans believed the colonists were richer than the folks they had left back home—that was, after all, part of the point of emigrating. Lindert and Williamson have confirmed that story, too, with one important exception. Egalitarian America was richer, apart from the super-elite. When it came to the top 2 percent of the population, even the plantation owners of Charleston were pikers compared to England’s landed gentry. Indeed, England’s 2 percent were so rich that the country’s average national income was nearly as high as that of the United States, despite the markedly greater prosperity of what today we might call the American middle class.

“The Duke of Bedford had no counterpart in America,” Professor Lindert said. “Even the richest Charleston slave owner could not match the wealth of the landed aristocracy.”

In egalitarian America, and even in aristocratic Europe, the industrial revolution eventually lifted all boats, but it also widened the social divide. One reason that process was traumatic was that it was pretty dreadful to be a loser—from their personal perspective, the Luddites, skilled weavers who wrecked the machines that made their trade unnecessary, had a point. But, as in all meritocratic 1 percent societies, the creative destruction of the industrial revolution was also traumatic for the many who made a good-faith effort to join the party but failed. Indeed, it was the pathos of these would-be winners that inspired Mark Twain to write the novel that gave the era its name.

As Twain and coauthor Charles Dudley Warner explained in a preface to the London edition of their novel, The Gilded Age : “In America nearly every man has his dream, his pet scheme, whereby he is to advance himself socially or pecuniarily. It is this all-pervading speculativeness which we tried to illustrate in The Gilded Age . It is a characteristic which is both bad and good, for both the individual and the nation. Good, because it allows neither to stand still, but drives both for ever on, toward some point or other which is ahead, not behind nor at one side. Bad, because the chosen point is often badly chosen, and then the individual is wrecked; the aggregations of such cases affects the nation, and so is bad for the nation. Still, it is a trait which is of course better for a people to have and sometimes suffer from than to be without.”