make. A less crude factor is the progressive shift in Americans’ attitudes: Polling suggests that the electorate has moved significantly to the left on domestic issues since the 1990s, and race is a diminishing force in a nation that is, truly, becoming steadily less racist.
Movement conservatism still has money on its side, but that has never been enough in itself. Anything can happen in the 2008 election, but it looks like a reasonable guess that by 2009 America will have a Democratic president and a solidly Democratic Congress. Moreover, this new majority, if it emerges, will be much more ideologically cohesive than the Democratic majority of Bill Clinton’s first two years, which was an uneasy alliance between Northern liberals and conservative Southerners.
The question is, what should the new majority do? My answer is that it should, for the nation’s sake, pursue an unabashedly liberal program of expanding the social safety net and reducing inequality—a new New Deal. The starting point for that program, the twenty-first-century equivalent of Social Security, should be universal health care, something every other advanced country already has. Before we can talk about how to get there, however, it’s helpful to take a good look at where we’ve been. That look—the story of the arc of modern American history—is the subject of the next eight chapters.
2 THE LONG GILDED AGE
Looking at the political economy of the United States before the New Deal from the vantage point of the Bush years is like looking at a sepia-toned photograph of your grandfather and realizing that he looked a lot like you—in fact, that in some ways you resemble your grandfather more than you resemble your father. Unfortunately the family features that seem to have reemerged in your face after skipping a generation are deeply unattractive.
Pre–New Deal America, like America in the early twenty-first century, was a land of vast inequality in wealth and power, in which a nominally democratic political system failed to represent the economic interests of the majority. Moreover the factors that let a wealthy elite dominate political life have recognizable counterparts today: the overwhelming financial disadvantage at which populist political candidates operated; the division of Americans with common economic interests along racial, ethnic, and religious lines; the uncritical acceptance of a conservative ideology that warned that any attempt to help the less fortunate would lead to economic disaster.
You might be tempted to say that I’m overstating the resemblance, that America today isn’t as unequal as it was before the New Deal. The numbers, however, say otherwise. As Table 1 shows, the concentration of income in the hands of a narrow elite today matches its concentration in the 1920s.
| Table 1. Share of High-Income Groups in Total Income, Excluding Capital Gains | ||
|---|---|---|
| Highest-income 10% | Highest-income 1% | |
| Average for 1920s | 43.6% | 17.3% |
| 2005 | 44.3% | 17.4% |
Source: Thomas Piketty and Emmanuel Saez, “Income Inequality in the United States, 1913–1998,”
Now, it’s true that the oligarchic nature of pre–New Deal politics and the often bloody way the power of the state was used to protect property interests were more extreme than anything we see today. Meanwhile, though the inequality of income was no greater than it is now, the inequality of living conditions was much greater, because there were none of the social programs that now create a safety net, however imperfect, for the less fortunate. All the same, the family resemblance between then and now is both striking and disturbing.
Before I say more about that resemblance, however, I need a better name for the period I’ll be discussing than “pre–New Deal,” which defines the era only by what it wasn’t. Historians generally say that the Gilded Age gave way to the Progressive Era around 1900, and they have a point. The cultural and political tone of the country shifted considerably around 1900. Theodore Roosevelt, who became president in 1901, was less reliably proplutocrat than his predecessors; the Food and Drug Administration was created in 1906; the income tax was reintroduced in 1913, together with a constitutional amendment that prevented the Supreme Court from declaring, as it had before, that it was unconstitutional. These changes, however, had little impact on either the inequality of income and wealth in America or the minimal role that the U.S. government played in mitigating the effects of that inequality. As best we can tell, America in the 1920s, although richer than it had been in the late nineteenth century, was very nearly as unequal, and very nearly as much under the thumb of a wealthy elite.
So at the risk of annoying historians, I’ll refer to the entire period from the end of Reconstruction in the 1870s to the coming of the New Deal in the 1930s as the Long Gilded Age. It was a period defined above all by persistently high levels of economic inequality.
We don’t have detailed statistics on the distribution of income and wealth in America during most of the Long Gilded Age. There’s enough evidence, however, to show that America was a vastly unequal society circa 1900—an observation that won’t surprise anyone. Perhaps more surprisingly, the evidence also suggests that the level of inequality remained almost unchanged through the twenties.
That’s important to know. The persistence of extreme inequality right through the Jazz Age is a first piece of evidence for one of this book’s central points: Middle-class societies don’t emerge automatically as an economy matures, they have to be
What’s the evidence that the Gilded Age persisted, in crucial respects, right through the 1920s? One useful number that we can compute, even lacking extensive statistical data, is the number of extremely rich Americans. J. Bradford DeLong, an economist and economic historian at Berkeley, has calculated the number of “billionaires,” whom he defines as those with wealth greater than the annual output of twenty-thousand average American workers. (That was about a billion dollars in the mid-1990s, when he devised the measure, but close to $2 billion today.) In 1900 there were, by DeLong’s count, twenty-two American billionaires. By 1925 there were thirty-two, so the number of billionaires more or less kept up with population growth right through the Progressive Era. It was only with the New Deal that the billionaires more or less vanished from the scene, dropping in number to sixteen in 1957 and thirteen in 1968.[1] (Around 160 Americans meet DeLong’s criterion now.)
The Gilded Age billionaires were exactly who you’d expect: the robber barons, the men who made fortunes off railroads, manufacturing, and extractive industries such as oil and coal. In 1915 John D. Rockefeller topped the list. Behind him were two steel magnates, Henry C. Frick and Andrew Carnegie, then an array of railroad builders and financiers, plus Henry Ford.
The count of billionaires fits with other evidence, such as the sizes of large estates, suggesting that the concentration of wealth at the very top was about the same at the end of the 1920s as it was in 1900. That concentration then declined dramatically with the coming of the New Deal. During the first few decades after World War II, the inequalities of the Gilded Age became a thing of myth, a type of society that nobody thought would return—except that now it has.
The high level of inequality during the Long Gilded Age, like high inequality today, partly reflected the weak bargaining position of labor. For most of the era, large employers were free to set wages and working conditions based on whatever the job market would bear, with little fear of organized opposition. Strikes were often broken up by force—usually involving strikebreakers hired by employers, but sometimes, as in the 1892 strike at Carnegie’s Homestead steelworks and the 1894 Pullman strike, by state militias or federal troops. Unionization rates and union influence gradually rose after 1900, temporarily reaching a peak soon after World War I. But a counterattack by
