Is the New Gilded Age a Myth?

Above: A suffering capitalist of the Gilded Age

In a bizarrely argued article, historian James Livingston says yes and that’s because capitalists were the ones getting screwed in the original Gilded Age.

The late 19th century, supposedly the golden age of laissez-faire capitalism, was actually a nightmare for capitalists. They whined incessantly about their falling profit margins and, more significantly, about how the American people didn’t appreciate their contributions to economic growth. “The manufacturers want a greater profit,” as E.S. Meade, the authority on trust finance, put it, “without such a desperate struggle to get it.” By the time the crisis of the 1890s arrived, capitalists figured they had lost the class struggle, and they were right. According to reputable businessmen, journalists, economists, and politicians, the so-called Gilded Age of the late 19th century was one long depression, and workers rather than capitalists were the principal beneficiaries.

The capitalists were, of course, poor-mouthing and propagandizing, but the numbers validate their accounting. Income shares shifted toward labor and away from capital in this period, in an exact inverse of what we have witnessed over the last 40 years (when, not incidentally, wages and median family incomes have stagnated, corporate profits have soared, and executive compensation has skyrocketed). By 1890, this possibly disturbing distribution of income between capital and labor had become so significant a public issue that the Senate Finance Committee commenced hearings to investigate it.

From the standpoint of capitalists, why did income shares perform so badly in the so-called Gilded Age? It’s all about the relation between real wages and productivity. If real wages are rising and productivity isn’t, labor’s share of national income will rise at the expense of capital’s share. That’s what happened in the late 19th century. If real wages are stagnating and productivity is increasing, capital’s share of national income will rise at the expense of labor’s share. That’s what happened in the late 20th century.

In the so-called Gilded Age, real wages increased dramatically but labor productivity didn’t, so capitalists suffered. Extraordinary economic growth happened, no doubt about that then or now, but workers were, as the capitalists complained, the principal beneficiaries. For example, real wages in the nonfarm sector increased roughly 30 percent between 1884 and 1896 (unemployment wasn’t rising), but productivity flatlined. The opposite is true of our time.

Why, then, did workers win the class struggle of the late 19th century? Not because they were represented by trade unions. Only 10 percent of the labor force belonged to such a thing. And not because they weren’t militant — between 1881 and 1905, when the Bureau of Labor Statistics kept meticulous records, the number of strikes, lockouts, establishments affected, and participants increased at a rate that would panic contemporary observers. With almost no union representation, workers won — they were the victors in the majority of strikes and lockouts measured in the late 19th century by the BLS.

They won because skilled workers, not bosses, controlled machine production in the factories — until the late 1890s, they had the decisive voice on hours, conditions, even compensation — and refused to cede that control. They won because they shared their gains with unskilled workers, who then followed their lead when bosses tried to enforce new work rules and push came to shove.

And most important, workers won because the labor movement of the so-called Gilded Age was a cross-class construction. Like the larger socialist movement, then as now, it was never the exclusive property of “the” working class, just as the pro-capitalist movements of our own time aren’t the exclusive property of people with the unlikely pedigree of Donald Trump. Workers won those strikes in the late 19th century because the local middle class — farmers, journalists, lawyers, merchants, shopkeepers — stood with them in defiance of what it perceived, correctly, as a threat to its own existence: the distant leviathan (usually a railroad company) that would cut any cost and gut any custom in the name of the bottom line.

This is quite odd. And it’s not that Livingston is a right-winger; Jacobin has published him several times. He is however a professional contrarian and fundamentalist believer in consumerism. And that’s what this is really about–Livingston sees himself as opposing the big bad historical establishment. I would say a good general rule is that when historians as great as Glenda Gilmore, Jefferson Cowie, Thomas Sugrue, Steve Fraser, and many others (including myself in the far less great category), not to mention people like Krugman and Piketty and Stiglitz, and cultural commenters around the nation and world are noting the very clear connections between the inequality, exploitation, political corruption, and corporate domination of the current United States and the manifestations of these problems in the late 19th century, that there’s probably a lot of truth to it. Contrarians love to see themselves as challenging staid establishments. The problem, as it is for Livingston, is that you have to squint really hard and look past a lot of reality to make points that might have a grain of truth in them.

To say the least, capitalists did not lose the Gilded Age. This is utterly laughable and I’d say an embarrassing argument to make. Now, you can say that capitalists often didn’t understand what was in their best interests and that the modern corporation that would maximize efficiency and long-term profits still needed to be solidified. That did take until the 20th century. And certainly skilled labor was trying–but ultimately failing–to hold onto the labor theory of value and control production. But most of the claims here are half-truths. Workers did not win these strikes in the Gilded Age. I’ve documented that plenty here. In fact, the only major strikes workers did win were those like at Cripple Creek or the Pennsylvania anthracite strike of 1902 where government intervened to mediate or stop private armies from killing the workers. The Great Railroad Strike, Pullman, Homestead, the 8-hour day strikes up to the Haymarket, the entirety of the Knights of Labor–these were all crushed through a combination of violence, hostile judges, organized anti-union business cartels, and politicians. It is true enough that real wages did grow a bit during this period, but this is hard to compare to today’s economy, because in the Gilded Age the nation was transitioning from a rural economy with a small urban population to an urbanized population with enormous industrial capacity. Moreover, it’s far from clear in the literature whether labor’s actual share of the economy grew. And skilled workers may have won short strikes to protect their control over work–but they were losing the overall war over this issue by a landslide. Livingston’s “up to the 1890s” bit is doing a lot of work here–the capitalists were wresting control from workers and succeeding by this time, something that the Taylorites would finally win decisively by the 1910s.

If Livingston wants to take the words of capitalists so seriously, maybe he should also take the words of workers and their advocates seriously, whether Upton Sinclair or Sam Gompers or Emma Goldman or P.J. McGuire. Whether anti-capitalists or pro-capitalists, workers and activists consistently talked about the great oppression faced by workers in the era. Gompers and McGuire might have focused on the decline in power among skilled laborers, Goldman and the IWW on the industrial classes, Sinclair on immigrant laborers crushed in Chicago meatpacking. But all agreed on the broader issue that industrial capitalism as presently construed was very bad for workers. Yet Livingston completely ignores all of this to make his contrarian argument. He does because you have to ignore it. And that’s the root of the problem with the whole essay–it’s cherrypicking at its historical finest.