Chapter 62: An American Aristocracy
Americans had long believed their country was a classless society. But by the end of the 19th Century, that myth had been shattered. In the Gilded Age, a super-rich elite emerged. They spent lavishly on houses, parties, and luxuries, while also investing in education and philanthropy. In this chapter, we’ll discuss this new upper-class, as well as how wealth in the United States became so imbalanced. We’ll explore topics like homesteading, Reconstruction, immigration, political corruption, corporate consolidation, and more.
Sources for this episode include:
Bares, Annie. “Philanthropy and the Gilded Age.” JSTOR Daily. 9 Mar 2022. https://daily.jstor.org/philanthropy-and-the-gilded-age/
Beatty, Jack. Age of Betrayal: The Triumph of Money in America, 1865-1900. Vintage Books. 2007.
Broyles, Susannah. “Vanderbilt Ball: How a costume ball changed New York elite society.” Museum of the City of New York. 6 Aug 2013. https://www.mcny.org/story/vanderbilt-ball
Carnegie, Andrew. Autobiography of Andrew Carnegie. Constable & CO. Limited. 1920.
Carnegie, Andrew. “Wealth.” The North American Review, vol. 148, no. 391, 1889, pp. 653–64.
Hobsbawm, E.J. The Age of Empire 1875-1914. Vintage Books. 1987.
Kiernan, Denise. The Last Castle: The Epic Story of Love, Loss, and American Royalty in the Nation’s Largest Home. Touchstone. 2017.
“Mansions & Gardens.” NewportMansions.org. The Preservation Society of Newport County. https://www.newportmansions.org/plan-a-visit/mansions-gardens/
Morris, Charles R. The Tycoons: How Andrew Carnegie, John D. Rockefeller, Jay Gould, and J.P. Morgan Invented the American Supereconomy. Henry Holt and Co. 2005.
“The New Gilded Age.” Throughline. NPR. 28 Apr 2022. https://www.npr.org/transcripts/1094794267
Full Transcript
Reminder: Footnotes and an ad-free stream are available to our Patreon supporters. To sign up, go to Patreon.com/indrevpod.
In the late 1870s, the United States Congress was debating a problem. Despite their passage of the Homestead Act some 15 years earlier, the government was not seeing as much westward migration as it hoped. Many of the folks who did settle the western territories found the land too difficult to cultivate and too dangerous, because of the Native Americans they were displacing. Eastern cities, meanwhile, saw wave after wave of foreign immigrants come in as industrialization fueled urban growth.
Underprepared for an overpopulated east, some House members proposed new measures to further encourage Homesteading. In 1877, Congressman Hendrick Wright introduced a bill to provide government-backed loans to Homesteaders. The next year, his colleague, Benjamin Butler, proposed a bill to both fund and arm the migrants. This way, the workingmen of the cities would see some labor market relief, as their fellow workers would leave to settle the American West. Thus, wages in the cities would rise, and labor unrest would dissipate.
But by this point, the “Free Soil, Free Labor, Free Men” mantra of the old Republican Party was already dying out. In the aftermath of the Civil War, the Party of Lincoln dominated Congress, but it was also now more in tune with the corporate interests of the nation – interests that did not want higher wages; interests that dealt with labor unrest by calling up the governor to send in the National Guard.
Both Homesteading measures were defeated by wide margins. In their speeches against the bills, Congressional Republicans argued such proposals were unnecessary. It was not the role of government to support the working class. In fact, one stood up to challenge Butler’s bill with what was – in my opinion – one of the most remarkable statements of the late 19th Century. Representative (and future President) James Garfield exclaimed, “Thank God…here in America, there are no classes!”
I mean…what an extraordinary thing to say.
It was true that most contemporary Americans believed their country was a classless society. And it was also true that the United States had a very weak class system, at least compared to countries back in Europe.
And yet, it was also true that, during these same years, a new class system was emerging in America. The days of Thomas Jefferson and Andrew Jackson were long over. Their dream of an egalitarian nation of farmers was over too. Coming out of the Civil War, the United States entered a new “Gilded Age”. It was a time of extraordinary wealth and growing hardship; an era of expansion, corporate consolidation, and political corruption. And the nation would never be the same.
---
This is the Industrial Revolutions
Chapter 62: An American Aristocracy
---
Before we get started today, let me thank everyone who keeps the podcast going with their Patreon subscriptions! Special shout outs to Brad Rosse and new patron Tanner, as well as John Bartlett, Adam Bibby, Chris Bradford, Elizabeth Brooking, Harriet Buchanan, Tara Carlson, Matthew Frost, Michael Hausknecht, Jeremy Hoffman, Eric Hogensen, Naomi Kanakia, Brian Long, Mac Loveland, Andrew C. Madigan, Martin Mann, Duncan McHale, John Newton, Emeka Okafor, Ido Ouziel, Joshua Shanley, Kristian Sibast, Jonathan Smith, Ross Templeton, and Seth Wiener. Thank you.
…
On March 26th, 1883, a banquet was held in Midtown Manhattan – a banquet unprecedented in its extravagance. It took place at the Petit Chateau – part of the new “Triple Mansion” that took up an entire square block of Fifth Avenue between 51st and 52nd Streets. Today it’s the site of a skyscraper, housing businesses like investment banks, private equity firms, real estate developers, and more. At the time, it was the home of William Kissam Vanderbilt – grandson of our old friend, the Commodore – and his socialite wife, Alva.
Born in Mobile, Alabama in 1853, Alva was the daughter of a shipping magnate who frequently took his family on trips around the world. They relocated to England during the Civil War before returning to the States and settling in New York. There she met Willie K. Vanderbilt and, upon marrying him in 1875, took it upon herself to make the Vanderbilt name synonymous with high society.
The couple enlisted architect Richard Morris Hunt – the first American to graduate from the École des Beaux-Arts in Paris. After coming home, he was hired for such projects as the pedestal for the Statue of Liberty and the Great Hall at the new Metropolitan Museum of Art (the Met) in New York City. He was also commissioned for some of the most stately homes of the American east coast, including several mansions in Newport – more about those in a few minutes.
For the Vanderbilts, Hunt designed a startling urban manor. They used bright limestone, delivered by rail from Indiana – a stark contrast to the mostly brownstone buildings of the city. Much like the nouveau-riche industrialists of England had done in the preceding decades, they added symbols like crests and ancient-looking motifs to present the façade of noble linage. And to celebrate its grand completion, Alva hosted that incredible banquet – a “millionaires’ ball.”
To many at the time – and indeed, today – this banquet was a grotesque display of opulence and privilege. It was a luxurious costume party that cost the family an estimated quarter million dollars, at least. (And that’s 1883 dollars.) For context, this was a time when the average laborer brought home only two or three dollars a day. A whopping 1,200 of the richest New Yorkers attended. The party was covered by the New York newspapers like it was a royal wedding. And, fortunately for us, the Vanderbilts hired a photographer – Cuban immigrant Jose Maria Mora – to capture images of the ball for posterity.
Alva dressed as a Venetian princess, and there’s a great staged photograph of her in the costume, surrounded by flying doves. I’ll post that on Instagram this month. Willie K., meanwhile, dressed as the Duc de Guise. There were guests dressed as goddesses, historical figures, folk tale characters, Native Americans, monks, animals, and more. Perhaps the timeliest costume was worn by the Vanderbilts’ sister-in-law, Alice. An homage to Edison’s recent breakthrough, her “Electric Light Dress” featured gold and silver thread, a lightning-bolt pattern, and a battery powering a lightbulb she held over her head. I’ll post that photo too.
But what really got peoples’ attention that evening was another attendee: Caroline Schermerhorn Astor, Or, as her contemporaries knew her, the Mrs. Astor. The unofficial queen of New York society at the time, Mrs. Astor represented the city’s old money – she herself was a descendent of the earliest Dutch settlers – and she looked down on parvenues like the Vanderbilts. The Astors were members of “The Four Hundred”, as it was dubbed by her friend, the equally-snobbish Ward McAllister. They were the upper-echelon of society – an estimated 400 people total. In addition to the Astors, this elite included such Knickerbocker families as the Roosevelts, Livingstons, Stuyvesants, and so on.
After a dramatic back-and-forth snubbing between Alva and Mrs. Astor in the weeks leading up to banquet (and I do mean drama), the latter’s presence indicated her defeat. The Vanderbilts had joined that illustrious club, the Four Hundred.
Garfield’s assertion that there were no classes in America was never entirely true, of course. Whether it was Boston Brahmins or established Southern Planters, the country had always had its fair share of social and economic elites. This continued into the First Industrial Revolution, with families that made fortunes off new ventures like textile mills and steamboats. And class resentments could be seen, here and there, going back to Shay’s Rebellion and other incidents even before independence.
But the wealth generated during America’s railroad age (shout out Chapter 57) created something of an inflection point. The nation’s industrialists had always prided themselves on hard work, and they had usually prioritized reinvestment in their enterprises over spending on personal indulgences. But now, they had more money than they knew what to do with.
And while their children and grandchildren inherited vast fortunes, they did not always inherit the work ethic or the traditional bourgeois-capitalist mindset. As our old friend, Eric Hobsbawm, neatly put it:
“The modestly rising middle classes of the pre-industrial period were mostly excluded from such temptations by their inferior, if respectable, social status or their puritan and pietist convictions, not to mention by the imperatives of capital accumulation. It was the bonanza of mid-nineteenth-century economic growth which put them within reach of the successful, but which at the same time imposed a public lifestyle patterned on that of the older elites… A good deal of the late-nineteenth century bourgeoisie consisted of a ‘leisure class.’…”
There were plenty of ways that America’s new super-rich were spending their money on the model of the European aristocracy. For example, they increasingly traveled to and across Europe – much like the grand tours of old. I spoke about this a little bit in chapter 54, with the rise of the tourism industry. They spent more time devoted to sports and games – especially the “right sorts” of games for the upper echelon of society, like yacht-racing, lawn tennis, and golf – and established new yacht clubs and country clubs to play these games together. And they splurged on luxury goods – fine art, fine clothing, great personal libraries, and more.
But today, I want to focus on three areas of expenditure that set this new American Aristocracy apart from their ancestors: Great houses; Education; and Philanthropy.
In addition to their Triple Mansion in New York, the descendants of Cornelius Vanderbilt joined their millionaire contemporaries in building mansions in Hyde Park, Long Island, and, most notably, Newport, Rhode Island. Ironically called “cottages” by their owners, these served as the summer homes for the nation’s wealthiest families.
The first such Newport house was Kingscote, a gothic-revivalist manor, built in the spirit of Romanticism. (Shout out Chapter 44!) It had been built way back in 1839 by a wealthy southern planter. Come the Civil War, he abandoned the property and eventually sold it. But around the same time, a cottage-building boom took off in the neighborhood. In 1852, the Chateau-sur-Mer was built as an Italianate-style villa, with a high-Victorian exterior, for a trading merchant. Another such villa, Chepstow, was completed in 1860 for a cousin of Mrs. Astor.
There had been stately homes in American history, of course, but these were on a whole other level. Such houses provided space for the new leisure class to spend time together and away from the grind and pollution of the cities. Getting to Newport was easier than ever before, thanks to the railroads, and guests could easily come out to spend a weekend. Receiving an invitation to one of these cottages was seen as a mark of your distinction. Once there, the elites would gather at the Newport Casino – a complex of shops, restaurants, social clubs, and facilities for dances and theater.
With Newport becoming a cluster for the vacationing elites, it attracted serious attention and investment during the Gilded Age – especially from the Vanderbilts. Willie K. had “Marble House” built for Alva as a birthday present, with construction finished in 1892. He spent $11 million (more than $350 million today) on the monstrous neo-classical palace. It included 50 rooms, a Chinese Tea House, and 300,000 cubic feet of marble.
Willie’s brothers joined in on the fun. His younger brother, Frederick, purchased and demolished two smaller villas to erect Rough Point – an English manor that looked more like a hotel than a house and, indeed, would soon be used as one. Meanwhile, their eldest brother, Cornelius II, built Newport’s greatest house: The Breakers. Designed in a Roman palazzo style on a 13-acre parcel, it used steel, brick, and limestone to make it indestructible. In all, it contained 70 rooms – 48 bedrooms; a Morning Room; a grand dining room with Baccarat crystal chandeliers; a Billiard Room and a double loggia that had tile mosaics hand-set by European artisans; and a Music Room that actually had to be built in France, disassembled, shipped to Newport, and reassembled. In all, The Breakers had 27 fireplaces. It also included the necessary wiring for electricity – still very uncommon in new homes at the time.
But of all the Vanderbilt brothers, none had grander palatial ambitions than the youngest, George.
Unlike Cornelius II, Willie K., or Frederick, George Vanderbilt was not involved in the family business. He was much more interested in books than railroads, corporate mergers, and stock market manipulation. He delighted in learning and is believed to have been fluent in eight languages. Not that he really needed to work. As one of America’s earliest trust fund babies, he could enjoy a life of leisure. With his many inheritances, his net-worth was something like $13 million by the time he was 23, and he was bringing in an annual income of more than half a million dollars per year. (The equivalent of nearly $16 million per year today.)
In 1888, George turned his attention to building a new house for himself and his ailing mother. Worried about tuberculosis, he didn’t look to Newport but, rather, to the warmer climate of the South. To build it, he hired Hunt. And to design the grounds for this estate, he hired our old friend, Frederick Law Olmsted. After touring manors and chateaus in Europe (including some owned by their parvenue forerunners, the Rothschilds), George began buying up land in the Appalachian foothills around the railroad junction of Ashville, North Carolina.
Completed in 1895, the Biltmore Estate was, and still is, the largest privately-owned home in the United States. It’s a nearly 179,000 square-foot mansion, adorned with Chateauesque pitched roofs, turrets, and ornamentations. The interior was furnished with friezes, tapestries, high ceilings, grand staircases and chandeliers, and a 70,000-gallon indoor swimming pool. There were 250 rooms, including 35 bedrooms, 43 bathrooms, an organ gallery, and 3 kitchens – all in all, requiring 65 fireplaces. The 5,000-pounds of limestone making up the exterior covered over nearly 11 million bricks required to build it.
Construction was so extensive in this remote area that new roads were needed and a workers’ village had to be constructed nearby. Upon completion of Biltmore, the temporary homes would be replaced by a permanent and intricately designed Village of Biltmore.
For the rest of the massive estate, George planned for Olmstead to create a grand park, like those on the lands of English aristocrats. But Olmstead convinced him to use most of the land for forestry, like some of the Continental gentry. Using the new advancements of scientific forestry would provide an income for the estate. The tree-farming at Biltmore could be used for the nation’s growing timber needs: supplying paper mills, construction sites, and more. The local newspapers predicted George was well on his way to being the largest and wealthiest landowner in the state.
Though, to be sure, Biltmore stuck out like a sore-thumb. The forest manager George hired for the estate wrote years later:
“Its setting was superb, the view from it breath-taking, and as a feudal castle it would have been beyond criticism, and perhaps beyond praise. But in the U.S. of the nineteenth century and among the one-room cabins of the Appalachian mountaineers, it did not belong. The contrast was a devastating commentary on the injustice of concentrated wealth.”
But such displays of inequality were necessary for the Vanderbilts’ signaling of their upward class mobility. Perhaps their greatest triumph in this regard was in the marriage Alva arranged for her daughter, Consuelo, to Charles Spencer-Churchill, the Duke of Marlborough. After inheriting a bankrupt dukedom, Marlborough became among several British nobles to save their holdings with cash injections from American heiresses. Of course, there was plenty of drama involved. That same year, Alva shocked the world by divorcing Willie K. And decades later, the Marlborough marriage was dissolved as well.
Marriage wasn’t the only way the American industrial bourgeoisie sought social advancement and entrenchment. Another was through education.
The United States had one of the best systems of primary and secondary education for the masses in the world. For half a century now, the public-school movement had brought the benefits of education to white Americans from all walks of life. And, thanks to the Morrill Act of 1862, this movement was being replicated for higher education, as the states could establish new public universities from the proceeds of federal land grants. And with the abolition of slavery, it seemed plausible, for a time, that such educational opportunities might expand to Black Americans too.
The richest Americans may have risen through this egalitarian educational system on their own merits, but they would not subject their children to the same rigors.
As working-class families, especially immigrant families, felt the need to send their children into the mines and factories, middle-and-upper-class families sent their kids to school. For the upper-class, it couldn’t be just any school. Across the country, and especially in the northeast, new private secondary schools proliferated during the Gilded Age. Modelled on the “public schools” back in Britain, these boarding schools could hire the best instructors and provide exclusive spaces for the children of the super-rich. The country’s most established universities, meanwhile, became bastions for the young men (and, increasingly, the young women) of the elites.
To some extent, sending your children to these institutions demonstrated your (and by extension, their) upper-class bona fides. More and more, the wealthiest families found themselves attracted to so-called “ivy colleges” – later called the “Ivy League” for sports competitions – which increasingly took on the prestige of old-world universities like Oxford and Cambridge.
And within the universities, further layers of exclusivity emerged. Fraternities spread across American colleges (and indeed, the world) with the express aim of building relations between young men of similar social status. Upon graduation, these men could join alumni associations to continue this exclusive networking. As an 1890 survey of fraternities put it, they were “circles of cultivated men who would otherwise not know each other.” These “old boys” institutions provided important social connections, not only for men of the same age, but among men of different generations within their class.
Such networking opportunities allowed them to further entrench themselves in that upper echelon of business and politics. In 1889, Delta Kappa Epsilon boasted that it had six senators and 40 Congressmen among its members. By the end of the Second Industrial Revolution, they were boasting bankers and corporate managers among its ranks as well.
Through quality instruction, opportunities for networking, and increasing exclusivity, institutions of private education were deliberately used to cement the children of bourgeois capitalists into a new aristocracy.
But this new focus on education also gave the capitalist class some of its first forays into philanthropy.
In 1873 – following a visit from his wife’s cousin-in-law, a Methodist bishop – Cornelius Vanderbilt donated a whopping $1 million to get a new Methodist university up and running in war-ravaged Nashville, Tennessee. Shortly thereafter, it was renamed “Vanderbilt University.” At the time, it was the largest charitable contribution in the history of the United States – especially noteworthy, coming from the notoriously self-interested Commodore.
He was hardly alone. In 1869, Purdue University was founded thanks to a large donation of funds and land from John Purdue, a local dry goods merchant, factory owner, and investor. In 1891, our old friend, the rail baron and former California governor Leland Stanford, built his Stanford University in honor of his late son. That same year, the eccentric capitalist William Marsh Rice founded Rice University in Houston. And Gilded Age businessmen Andrew Carnegie and Richard Mellon formed a pair of colleges in Pittsburgh that later merged into – that’s right – Carnegie Mellon University.
The super-rich of the Gilded Age found other philanthropic outlets as well. Churches, medical research, literacy programs, public arts, and various social endeavors received their attention and dollars too.
For most of the history covered in this podcast so far, charitable giving just wasn’t something the bourgeoisie was especially interested in. The landed gentry back in Europe was charitable. That was their thing. The rising middle classes didn’t have much experience with it. If anything, their ancestors would have been more likely to be on the receiving end of it.
But this was starting to change, and for a few reasons.
First of all, the daughters of rich industrialists and capitalists didn’t have much to do. They had servants to attend to their needs, and they didn’t have any need for an income. What’s more, they were becoming increasingly educated – many were earning college degrees – and they wanted to do something with that education. But working for work’s sake wasn’t exactly popular among their generation – many of the young men were turning to lives of study and leisure – nor was it considered respectable for women to do so. Philanthropy gave rich women an outlet for their time, energy, and education. They both patroned and volunteered for schools, libraries, hospitals, cultural organizations, and more. Alva Vanderbilt even used the Chinese Tea House to host fundraisers for causes like women’s suffrage. And when the wives and daughters went asking their husbands and fathers for money for worthwhile causes, the husbands and fathers were often willing to hand it over.
Second, the huge concentration of wealth in the hands of so few people wasn’t lost on the general population. Many capitalists probably saw philanthropy as good for PR.
Third, as they retired, the notable capitalists of the Gilded Age needed something to do as well. And by establishing new foundations with their fortunes, they could try to tackle specific problems they saw. The Rockefeller Foundation, for example, provided money for medical research that led to a new yellow-fever vaccine and significantly advanced germ theory, saving who knows how many lives. This foundation also helped establish some of America’s National Parks as well as several museums and performing arts centers – in short, pet projects of the Rockefeller family.
Fourth, many of them legitimately believed they should give some money away because it was the right thing to do. Cornelius Vanderbilt wasn’t exactly among that group, but other big names were. John D. Rockefeller, the oil man and devout Baptist, was encouraged to launch his foundation when his minister scolded him, “Your fortune is rolling up, rolling up like an avalanche! You must keep up with it! You must distribute it faster than it grows! If you do not, it will crush you and your children and your children’s children!” Within the first decade of the 20th Century, he had given away $130 million – it was only about a tenth of his fortune, but apparently, parting with it was enough scary enough for him to have a nervous breakdown.
Of course, when it come to this fourth point, nobody was a greater devotee to philanthropy than Andrew Carnegie.
Even before his retirement, Carnegie had started endowing causes he deemed worthy. He initiated a fund for injured steelworkers and began donating to schools, churches, museums, and other public institutions.
But once he was retired, the giving really took off. You can see the mark he made in all the institutions that bear his name today. In addition to Carnegie Mellon, there’s Carnegie Hall in New York, the Carnegie Institution for Science, the Carnegie Endowment for International Peace, the Carnegie Hero Fund (which gives medals and prizes to people who randomly risk their lives to save others), the Carnegie Corporation (one of America’s first grantmaking foundations), various trusts in Britain (especially in his native Scotland), and more.
And then there were all the libraries.
Back in Chapter 59, I mentioned how Carnegie read vociferously as a teenager – educating himself while he worked as a bobbin boy, messenger, and eventually telegraph operator. This self-education was in large part thanks to a certain Colonel James Anderson, a veteran of the War of 1812 and a prominent Pittsburgh businessman during the days of Carnegie’s youth. Anderson had opened his personal library of 400 books to the “working boys” of the city. It changed Carnegie’s life. Thus, in addition to commissioning a statue of Anderson in Pittsburgh, Carnegie provided the funds to build more than 2,800 public libraries across the world.
In fact, such philanthropy was central to his world view. At some point following the Civil War, he decided to write down his approach to maximizing one’s life, the so-called “Andrew Carnegie Dictum.” “To spend the first third of one’s life getting all the education one can. To spend the next third making all the money one can. To spend the last third giving it all away to worthwhile causes.” By the time of his death, Carnegie had given away $350 million – nearly three fourths of his net worth.
And by 1889, he was preaching philanthropy to his fellow millionaires. That year, he wrote an essay for the North American Review titled “Wealth” – or, as it is often called today, The Gospel of Wealth. This rather paternalistic take on redistributing vast fortunes is perhaps the most influential polemic in the history of American philanthropy, shaping the field for more than a century to come.
He begins by explaining, “The problem of our age is the proper administration of wealth, so that the ties of brotherhood may still bind together the rich and poor in harmonious relationship. The conditions of human life have not only been changed, but revolutionized, within the past few hundred years… 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.”
The problem, as he sees it, is that industrialization has created two disparate classes that no longer know each other. “We assemble thousands of operatives in the factory, in the mine, and in the counting-house, of whom the employer can know little or nothing, and to whom the employer 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.”
Yet he also believes capitalism has done more good than harm, and pulverizing its underpinnings will do more harm than good. “Objections to the foundations upon which society is based are not in order, because the condition of the race is better with these than it has been with any others which have been tried. Of the effect of any new substitutes proposed we cannot be sure. The Socialist or Anarchist who seeks to overturn present conditions is to be regarded as attacking the foundation upon which civilization itself rests…” Keep the system as it is, but let’s do something with the surplus of wealth.
Ultimately, Carnegie argues, there are three things the millionaire can do with his fortune as he nears death. He can either (A) leave it for his heirs; (B) let the taxman get it; or (C) administer its distribution to the masses. (A) is the least preferable to him. He hated the leisure class he saw forming among the children of his peers. (B) was preferable to (A) – in fact, Carnegie believed that governments should be raising taxes on the estates of the diseased rich. But most preferable was (C).
Carnegie believed that roughly 95% of charitable contributions were used wastefully, and that successful businessmen – like himself – would be the best judges of where their dollars should go. In fact, he argued, “In bestowing charity, the main consideration should be to help those who will help themselves... He is the only true reformer who is as careful and as anxious not to aid the unworthy as he is to aid the worthy, and, perhaps, even more so, for in alms-giving more injury is probably done by rewarding vice than by relieving virtue.”
Thus, Carnegie explains:
“This, then, is held to be the duty of the man of Wealth: First, to set an example of modest, unostentatious living, shunning display or extravagance; to provide moderately for the legitimate wants of those dependent upon him; and after doing so to consider all surplus revenues which come to him simply as trust funds, which he is called upon to administer, and strictly bound as a matter of duty to administer in the manner which, in his judgment, is best calculated to produce the most beneficial results for the community—the man of wealth thus becoming the mere agent and trustee for his poorer brethren, bringing to their service his superior wisdom, experience and ability to administer, doing for them better than they would or could do for themselves.”
And he concludes with the verdict “The man who dies rich thus dies disgraced.”
This philanthropic spirit impressed many, but not everyone. Take, for example, the nation’s burgeoning socialist leader, Eugene V. Debs, who denounced the steel tycoon in a leftist newspaper in 1901. Influenced by Das Kapital – which he had read in prison a few years earlier – Debs argued that Carnegie’s fortune had been amassed through the exploitation of labor.
“Let honest workingmen everywhere protest against the acceptance of a gift which condones crime in the name of philanthropy. Let them put themselves upon record in terms that appeal to the honor of their class and the respect of all mankind. We want libraries and we will have them in glorious abundance when capitalism is abolished and the workingmen are no longer robbed by the philanthropic pirates of the Carnegie class. Then the library will be as it should be, a noble temple dedicated to culture and symbolizing the virtues of the people.”
In fact, Debs’ complaints underscored a broad feeling across the United States at the time – that the great fortunes to be found in this Gilded Age had been built on a rotten foundation.
---
In 1873, a lawyer-turned-magazine editor named Charles Dudley Warner teamed up with a friend of his to write a novel. This friend of his was the humorist Samuel Langhorne Clemens, now writing under the pen name, Mark Twain. The novel they composed follows characters trying to get rich off land speculation by lobbying Congress, and it satirizes the growing culture of greed and corruption in post-war Washington, D.C.
They called the novel, The Gilded Age: A Tale of Today. And this is how the Gilded Age got its name.
The Civil War had been a tremendous boon to northern capitalists. They made fortunes suppling the Union army and buying wartime government bonds. After the war, the expanding railroads kept demand up, requiring the continued production of iron, steel, and other heavy industrial products. Plus, these railroads allowed speedier distribution than ever before. Whether it was in steel, or beef, or petroleum, or wheat, or whatever, the fortunes just kept amassing.
Estimates of exact figures are all over the place, but it seems generally agreed that the richest 10% of Americans during these years controlled the lion’s share of the nation’s wealth, including most of its real estate, while the bottom half of Americans had virtually nothing to their names. It’s also generally agreed that the disparity of wealth in the United States today far surpasses that of the Gilded Age, a trend that’s really only come into being since the 1970s. But in the 19th Century, it was still a fairly new phenomenon – and folks didn’t take too kindly to it.
And of course, then as now, the higher you went (up to the top 1% or 0.1% of income earners) the higher the concentration of wealth became. And, yes, there were some rather gaudy displays of it – such as stories of parties at mansions where the hosts would plan treasure hunts, burying diamonds in the lawn and giving their guests golden shovels to dig for them.
But at the same time America saw this rising aristocracy, it also saw a rising upper middle class. As corporations grew larger, they needed to hire ever more executives and managers, whose incomes were derived primarily from salaries, rather than stock dividends or interest payments. And often they were obsessed by the opportunities of upward class mobility – even the lower-paid clerks and accountants. They were doing non-manual labor that often required some degree of formal education. And, in their minds, this put them above the working-class. They aspired to their own material grandeur, even if they couldn’t quite achieve the lifestyles of the Vanderbilts.
In these years, such upper middle class professions began sprawling out, more and more, into the suburbs of the great cities. The town house on a respectable street in a busy city would no longer do. Now respectability meant having more space and more greenery on a winding country road. Front lawns were adopted in American middle-class neighborhoods, allowing the homeowners to mimic (in a small way) the great gardens of manor estates. And the distance from the cities allowed them to form social circles with similar sorts of people. As one bourgeois Bostonian told his sons around 1900, the city “holds nothing for you except heavy taxes and political misrule. When you marry, pick out a suburb to build a house in, join the Country Club, and make your life center about your club, your home, and your children.”
And they enjoyed the trappings of luxury. Maybe they couldn’t afford servants, but they still wanted to enjoy service. These were the years when luxury hotels started popping up in cities across the country, with restaurants and bars catering to a high-end clientele. In fact, it was in these bars that some of the world’s first-ever cocktails were invented.
But how did it even come to all this? How did the United States – the country that had so long defied the class conventions of the old world – during an era in which class dynamics were becoming murkier in the old world, suddenly become such a class-oriented society in such a short matter of time?
Perhaps what we should really ask is, how did the United States suddenly find itself with such a great imbalance of fortunes to make this class-orientation possible in the first place?
It’s a complicated question without a straightforward answer. But there are a few areas we can touch upon. Now, they’re all a bit intertwined and I can’t perfectly break them up, but I’ll do my best. Among other things, there were the failures of Homesteading and the failures of Reconstruction. There were major demographic changes that helped keep wages from rising too quickly. There was a lot of corporate consolidation, which helped keep prices from falling too quickly. And there was a lot of help from Congress, the Supreme Court, and the political culture of the day.
Let’s start with the failures of Homesteading and Reconstruction.
Even before the Civil War, there was growing concern that America was becoming too industrial, too urban. It threatened the traditionally agrarian character of the republic. The Homestead Act was meant to fix this and return the United States to its rural, egalitarian roots. It also fit nicely with the concept of Manifest Destiny, which I expect we’ll talk about in a future episode.
But the Homestead Act also served as something of a safety valve for American labor. As long as there was land to settle and cultivate, American workers wouldn’t be crushed by an oversaturated labor market. As the historian Frederick Jackson Turner put it, “In Europe, labor said, ‘raise wages or we fight.’ In the United States, labor said, ‘raise wages or we will go west.’” 19th Century progressives like Horace Greeley and Henry George promoted this concept as well. As Greeley put it in one editorial, “Young men! Poor men! Widows! Resolve to have a home of your own.”
And in some respects, the safety valve appeared to work. The rate of urban growth compared to rural growth slowed, and it would take another half century or so before America was more urban than rural.
But it turned out to be a mere delay of the inevitable – and a delay based on some faulty premises. For one thing, farming the Great Plains states turned out to be difficult. Water and timber were scarce; the ground, hard. The startup costs of moving a family west and establishing a farm typically exceeded the average worker’s annual wages. Between 1860 and 1890, about 400,000 homesteading claims were filed, in a population closing in on 50 million people. But two thirds of them failed. Hundreds of thousands of the migrants abandoned their farms and filled into cities that were previously tiny outposts of five-to-ten thousand people – cities like Los Angeles, Denver, Kansas City, and Seattle. By 1880, the West was actually more urbanized than the East!
And back east, workers learned of the limitations of homesteading and elected to stay behind. Unemployment grew and wages fell. As one journalist put it, “Our young men can no longer go west; they must go up or down.” Mass immigration exacerbated the problem. Because few immigrants came with to the U.S. with more than a dream and the clothes on their backs, they were willing to compete for low-paying jobs, helping keep wages low. This is one of the demographic shifts I was talking about, which helped increase the wealth gap during the Gilded Age.
The failures of homesteading helped suppress wages so the capitalist employers could rake in greater profits, yes, but these failures also meant that capitalist investors could now gobble up the failed farms. Railroads bought up Western lands at rock-bottom prices, while eastern banks foreclosed on countless properties.
Some migrants chose to simply settle land regardless of whether or not they could lay legal claim to it. But, in time, the railroads made these holdings untenable. Surveyors came in and auctioneers would sell off the farms the squatters had built up. As Jack Beatty put it in his book, Age of Betrayal, “Squatters on land acquired by speculators fell from the status of independent farmers to tenants overnight, becoming vassals of Prairie Kings, Lumber Kings, and Cattle Barons…” If the squatters wanted to buy their farms, they would have to turn to lenders who charged brutal interest rates. At one point, three out of four farms in Minnesota had liens on them.
In the South, meanwhile, white supremacist attitudes helped the elites there to maintain their land holdings in the aftermath of the Civil War. Not only was the idea of “40 acres and a mule” abandoned, a concerted effort was made by whites from all backgrounds to prevent ex-slaves from building wealth. Laws were passed that both required workers to maintain employment (or else be arrested for vagrancy) and forbade employers from “enticing” workers with jobs of better pay. And, you guessed it, these were mostly enforced when it came to Black workers. The only way a Black worker could escape this predicament was to physically leave and head north. But when some tried, local whites would kidnap them and either return them to the plantation or lynch them as a warning to others.
And while Planters couldn’t literally enslave people anymore, they could do the next “best” thing and entrap them in peonage. They would sign sharecropping contracts with the ex-slaves, loaning them land to farm, with interest rates ranging between 20-and-75%. As they were designed to do, these contracts indebted the sharecroppers enough to tie them to the land indefinitely. This is another of the demographic shifts I was talking about: Black Americans were no longer property – they were, instead, impoverished. What’s more, landowners soon realized this practice of “lien slavery” could be forced on poor white farmers too. By the end of the century, a quarter of all southerners were trapped in this peonage system.
Together, the country’s post-war agricultural policies helped prevent millions of Americans (Black and white, immigrant and native-born) from building any wealth. But they sure did help wealthy land speculators get rich. A network of land agents, with connections to government auctioneers, helped eastern investors score millions of acres across the Midwest, West, and South. By 1862, two thirds of Iowa was controlled by capitalists back east. As late as 1900, one man owned an entire county in Illinois. Another owned 322 farms across the state, as well as 845 in Missouri.
Congress and the state legislatures did little to alleviate the pressures facing poor farmers. In fact, they occasionally got in on the action. And this leads me to the next problem in late 19th Century America which helped make the Gilded Age possible: a widespread culture of political corruption.
The extent to which ideology played a role in Gilded Age politics was usually about rehashing the Civil War. Republicans hated the traitorous Democrats; Democrats hated the Party of Lincoln. Within the north, partisan differences usually had to do with religion. When Democrat Grover Cleveland ran for president, one Protestant minister asked how a true Christian could go “to the Lord’s table on Sunday and vote Cleveland on Tuesday”, while a Catholic priest quipped, “Catholics think one is not a good Catholic if he is a Republican.”
Policies and reforms were of lesser concern. This allowed for a very transactional approach to politics. As the Economist explained in 1880, “there was no significant disagreement between the parties on business issues.”
The foundation of this culture was the practice of patronage. The Republican and Democratic parties employed armies of operatives who canvassed voters year-round. Cities like New York and Philadelphia had political machines that spent millions of dollars on tens of thousands of such workers. And when they won elections, these workers would be rewarded with government jobs. The size of the federal bureaucracy doubled between 1870 and 1887 in order to accommodate these operatives.
And this made winning elections all the more important. A quarter million federal jobs changed hands between the Republican administrations of Chester Arthur and Benjamin Harrison, and the Democratic administration of Grover Cleveland in between them. And when you got that government job, you were expected to hand over a percentage of your salary every paycheck to the party that patroned you – thus employing even more party workers.
No figure is better remembered for this culture than William Magear Tweed, boss of the Democratic Party political machine in New York City, known as Tammany Hall. After winning the most meaningful offices in the 1869 election, Boss Tweed stacked New York City government with loyalists and proceeded to defraud taxpayers of millions of dollars.
Just as politics was important for people’s wallets, people’s wallets became integral to politics. Bribing lawmakers, tax assessors, and other officials became common practice. One Kansas railroad gifted nearly $300,000 worth of stock to nine members of Congress – including the Chairman of the House Ways & Means Committee – in return for a small land grant. The Central Pacific Railroad spent half a million dollars on bribes every year from 1875 to 1885. As the Railway Review put it in 1884, “No legislative body would dare to inaugurate or carry out… any measure without first knowing the pleasure of the manufacturing and commercial interests.” And again in 1890, “Business and politics are now inextricably mixed up.”
Yet, not even this was enough for the business community. As one business journal complained of Gilded Age democracy, “too many caucuses, too many elections, too many officers chosen directly by the people.”
You see, corruption was so widespread that it sometimes served as a check and balance on itself. When the New York Stock Exchange and Chamber of Commerce teamed up with the state’s governor to push through a bill disenfranchising non-property owners, the Tammany Hall machine worked with local socialists and upstate farmers to win the state legislature and defeat the proposal.
But monied interests still got plenty of what they wanted. Bribery allowed them to control gerrymandering – the favorable redrawing of elected office districts – to get business-friendly elected officials. Businessmen stacked presidential cabinets – railroad executives, directors, and lobbyists made up nearly two thirds of all cabinet positions from 1868 to 1896. And they financed the political parties to the extent of controlling their operations in many states.
But when all was said and done, perhaps the greatest friend of the capitalist class was the United States Supreme Court.
Stephen Johnson Field was born in Haddam, Connecticut in 1816. His father, a Congregationalist minister, and his mother, a teacher, moved the family to Massachusetts shortly after. Several of the children in this family would go on to have impressive careers. For his part, Field studied law before heading to California to set up a law office at the height of the Gold Rush. Not only did his law practice do well, but his burgeoning political career did too. He was soon made mayor of his town, then got elected to the State Assembly, before finally winning a seat on the California Supreme Court. By 1859, he had become Chief Justice.
Field was a Democrat, but his brother was a Republican and a large contributor to the Lincoln campaign. So, when it was time to choose a new U.S. Supreme Court justice in 1863, “Honest Abe” nominated Field because, well, that’s what Field’s brother wanted. Field would serve on the court for another 34 years and became known as the “father of laissez-faire constitutionalism.”
The key to it was the new 14th Amendment to the Constitution. Passed and ratified to reconcile the country after the Civil War, it contained a total of five sections which wildly transformed the constitution from its origins in the late 1780s and 1790s. Most critical was Section I, which extended the rights and privileges of citizenship to “all persons born or naturalized” in the country. This was a huge blow to state’s rights in favor of individual rights. And although it was primarily intended to protect the rights of emancipated slaves, it didn’t say that explicitly – it said, “all persons.”
Field first used this reasoning in a dissent, arguing that the Reconstructionist state of Louisiana had violated the rights of white slaughterhouse owners by preventing them from building upstream from Black residents, polluting their waters. He claimed the 14th Amendment protected an “unalienable right” (like those from the Declaration of Independence – shout out Chapter 19) to pursue one’s “lawful calling.” He then cites our old friend, Adam Smith, in a footnote: “The property which every man has in his own labor, as it is the original foundation of all other property, so it is the most sacred and inviolable.”
In the years to come, this “lawful callings” doctrine was used to strike down social legislation, labor reforms (like 8-hour workday laws), health and safety regulations, and more. But perhaps the most pivotal case came in 1886, when the Southern Pacific Railroad took Santa Clara County in California to the Supreme Court over property tax assessments.
A few years earlier, the Southern Pacific was fighting a similar battle with San Mateo County. Their lawyer – an eccentric former Senator who actually sang a stanza from an Emerson poem during oral arguments – put it to the Court that the framers of the 14th Amendment deliberately used the word “persons” instead of “citizens” because “persons” would include corporations. Field agreed, stating “The defendant, being a corporation, a person within the meaning of the 14th Amendment” was “entitled, with respect to its property, to equal protection of the laws.” While he conceded corporations were “artificial persons”, they nevertheless “consist of aggregations of individuals united for some legitimate business purpose.”
The idea that corporations were people went back into English law, pre-American independence. Still, those had always been chartered corporations, not these new private corporations like railroad companies. Field was breaking new ground in corporate jurisprudence.
The San Mateo case was eventually dropped, so no precedent was set. But it was effectively set in the Santa Clara case. At the start of oral arguments, the Chief Justice warned the attorney for Santa Clara County that “The Court does not want to hear argument on the question of whether the Fourteenth Amendment to the Constitution, which forbids a State to deny any persons within its jurisdiction of equal protection of the laws, applies to these corporations. We are all of the opinion that it does.”
This remark was captured in notes by a Court reporter. It was these notes that established the precedent. As Justice William Douglas put it 65 years later, “Thus without argument or opinion on the point, the Santa Clara case becomes one of the most momentous of all our decisions… Corporations were now armed with constitutional prerogatives.”
And as Justice Hugo Black put it, in the 1930s:
“of the cases in this Court in which the Fourteenth Amendment was applied during the first fifty years after its adoption, less than one-half of one percent invoked it in protection of the Negro race, and more than fifty percent asked that its benefits be extended to corporations.”
Field’s influence over the rest of the Court continued to grow in the years to come, even as he suffered dementia in the late 1890s. During his years on the Court, he helped sanction government injunctions to break strikes, as well as racial segregation, through the “separate but equal” doctrine of Plessy v. Ferguson. He helped limit the scope of the Sherman Antitrust Act, finding it unconstitutional in one case pertaining to large manufacturing corporations the government tried breaking up, but constitutional when it came to breaking up labor unions.
Another law he helped find unconstitutional was a national income tax. First passed by the Lincoln Administration during the Civil War for much-needed wartime funding, the income tax was loathed by the newly rich of postwar America. By 1872, only about one quarter of one percent of Americans were wealthy enough to qualify for the income tax, but they were also wealthy enough to hire the lobbyists and lawyers needed to defeat it.
Traditional taxes were regressive, not progressive. As Senator John Sherman put it in 1872:
“We tax the tea, the coffee, the sugar, the spices the poor man uses. We tax every little thing that is imported from abroad, together with the whiskey that makes him drunk and the beer that cheers him and the tobacco that consoles him. Everything that he consumes we call a luxury and tax it; yet we are afraid to touch the income of Mr. Astor. Is there any justice in that? Is there any propriety in it? Why, sir, the income tax is the only one that tends to equalize these burdens between the rich and the poor.
Field was not swayed by such arguments. He called it an “assault upon capital”, warning:
“It will be but the stepping-stone to others, larger and more sweeping, till our political contests will become a war of the poor against the rich,—a war constantly growing in intensity and bitterness.”
It wouldn’t be until the Progressive Era that the 16th Amendment was ratified to allow Congress to levy an income tax. Other judicial reforms to curtail Field’s legacy wouldn’t come until the New Deal Era.
And these constitutional precedents, business-friendly legislation, and other actions of the American government came during a time of great corporate consolidation. As I’ve touched on in previous chapters, it had started with the railroads – which needed corporate structures to cover vast distances and large workforces – and had eventually spread to other industries. Railroad companies still made up the bulk of such corporations, but they were being joined by the likes of Standard Oil, American Tobacco, General Electric, and U.S. Steel.
The drive to establish such corporations and corporate trusts wasn’t merely about greed – or, if it was merely greed, the capitalists building them did a good job deluding themselves into believing it wasn’t. To them, it was about protecting the marketplace from “ruinous competition.” They believed that too many competitors in the market drove prices down, thus drove profits down, thus limited capital investments critical for turning good ideas into reality. If you wanted the benefits of modernization – skyscrapers, trains, telephones, etc. – you needed big corporations. Progress demanded them.
Nobody exemplified this thinking more than the banker, J.P. Morgan, who not only handled the financing of most major American corporations, but also held enormous sway over their operations. But more on Morgan next time.
The so-called “Great Merger Wave” of the late 1800s touched several, unrelated industries. But this wasn’t the only form of consolidation. So-called “pools” – what we would call cartels – helped fix prices too. The “Big Four” Chicago meatpackers – including our old friends, Armour and Swift – controlled 90% of the beef market and colluded to keep prices high.
To the capitalists of the time, this wasn’t just the outcome of good, laissez-faire economics – it was Social Darwinism. Those who grew bigger through consolidation deserved to survive because, clearly, they were better – they were smart enough to adapt in the evolving economic landscape.
This era of mergers, acquisitions, and collusion might have prevented low, low prices from derailing technological advancement, but it also made the men involved fabulously rich. You could see this, for example, in Morgan’s pleasure yachts, all named Corsair. (These steam-powered vessels were so big and fast that one was later purchased by the U.S. Navy and converted into a battleship.) And as the corporations and trusts grew larger in size, their major shareholders grew larger in political influence.
And corporate influence (and corruption) in politics helped make one more facet of the Gilded Age possible: State-sponsored capitalism.
Government helped the railroads get hundreds of millions of acres of land through grants and the power of eminent domain, even from sovereign Native American lands. It passed tariffs to help American manufactures avoid competition with European imports. It used armed violence through police and National Guardsmen to break labor strikes. And it provided infrastructure improvement and even subsidies to encourage development. “Laissez-faire” was the order of the day only insofar as regulating private enterprise was concerned.
In some cases, for example, state and local governments were desperate to have the benefits of rail transportation brought to their constituents. Local government debt increased more than 33-fold between 1840 and 1880, mostly to pave the way for railroad companies to set up and rake in the profits for themselves. As one Mississippi editor put it, “We can stand a pretty big ‘steal’ if we can get railroads in the state.”
But in the aftermath of the Panic of 1893, Americans had had enough. Much like was being seen around the world, a populist reaction set in, and the Gilded Age order was under attack. As one widely shared editorial put it, parodying Psalm 23:
“The Politician is my Shepherd, I shall not want for anything in this campaign. He leadeth me into the saloon for my vote’s sake. He filleth my pockets with five-cent cigars and my beer glass runneth over. He inquireth concerning the health of my family, even unto the fourth generation. Yea, though I walk through the mud and rain to vote for him and shout myself hoarse, when he is elected, straightway he forgetteth me. Yea, though I meet him in his own office he knoweth me not. Surely the wool hath been pulled over mine eyes all the days of my life, and I shall dwell in the house of a chump forever.”
There had already been a few meaningful reforms. President Chester Arthur – who had risen through the ranks of machine politics all the way to the White House – surprised everyone when he professionalized the bureaucracy in 1883 with the establishment of the Federal Civil Service. No longer would party loyalists be entitled to government jobs. (Albeit, he sold the move by promising the business community it was to protect them from “spoilsmen” who “burden the country with debt and taxes” and “prostrate the trade and industry of the nation.”)
And then there was the Sherman Antitrust Act of 1890, prohibiting secretive price collusion and authorizing the Department of Justice to break up potential monopolies.
But it was only after the Panic of 1893 that an age of reform really got rolling, and the Gilded Age transitioned to the Progressive Era.
But before we can get to all that, we need to talk about numerous other topics. And among them is a key sector of the Gilded Age economy: The financial industry – next time, on the Industrial Revolutions.
---
If you enjoyed this episode, please consider supporting the podcast! You can sign up with a Patreon subscription or make a one-time donation via PayPal. You can find links to both options by going to www.IndustrialRevolutionsPod.com/supporters. Thanks again!