The real Gilded Age - The US economy's best performance ever

Libertarians looking for the cause of the younger generation’s infatuation with socialism need look no further than the PBS series American Experience and the episode aired in February, “The Gilded Age.” A press release described the age this way:

By the end of the 19th century, the richest 4,000 families in the country — less than one percent of all Americans — possessed nearly as much wealth as the other 11.6 million families combined. The simultaneous growth of a lavish new elite and a struggling working class sparked passionate and violent debate over questions still being asked today: How is wealth best distributed, and by what process? Should the government concern itself with economic growth or economic justice? Are we two nations — one for the rich and one for the poor — or one nation where everyone has a chance to succeed? A compelling portrait of an era of glittering wealth contrasted with extreme poverty...”

Jobs were abundant, but employers often expected everyone —including children — to work 12-hour days, six days a week.

Throughout the Gilded Age the economy grew at a furious pace, but financial markets were wracked by instability. On May 4, 1893, Wall Street investors saw much of the nation’s wealth disappear. As many as a million workers lost their jobs. People starved to death.

J.P. Morgan, Cornelius Vanderbuilt, and Andrew Carnegie were the richest men in history without doubt and their opulent lifestyles shocked many people. But does that mean inequality had risen? Not at all. Gini coefficients for the US in the 19th century are hard to find, but according to Nobel Prize-winner Robert Fogel in Escape from Hunger and Premature Death, inequality fell during the 19th century in the UK and we can extrapolate that to the US because it had freer markets and a faster growing economy.

According to Robert Higgs in The Transformation of the American Economy, 1865 – 1914, per capita income rose from $147 in 1860 (about $3,734 today) to $268 by 1908 ($6,809 today). In the last decade, the “gilded age,” it rose from $213 to $234. Meanwhile, the population exploded from 36 million in 1865 to 101 million in 1915. Some decades in the 20th century may have witnessed equal growth in per capita income, but none with the massive immigration and population growth of the gilded age. Such growth in standards of living against the headwind of immigration has never been seen since and is as close to an economic miracle as we can get. According to Higgs,

The greatest volume of immigration in recorded history augmented the natural increase of the population. After the Civil War the rate of alien arrivals reached an unprecedented high, and the trend continued upward until the First World War reduced the inflow to a trickle. In the 1920's the imposition of legal quotas finally closed the doors on the age of massive, unrestricted immigration.”

A comparison of the American economy in 1865 with the economy in 1914 points up a variety of changes. On the eve of the Great War Americans consumed about three times more economic goods per capita than they had a half century earlier. They lived longer and healthier lives and spent less time at work and more at recreation. They were better housed and educated, traveled more, read more, and were better informed about their own and other countries. All of this we customarily call Progress.”

As for people starving to death during the recession of the mid 1890’s, that is unlikely. Churches, cities and private charitable organizations labored intensely to feed the poor during depressions. De Tocqueville noted six decades earlier that mutual aid and charity were distinguishing features of the young US and that didn’t change in the gilded age.

Eye-witness accounts of children dying in the slums existed. However, those witnesses were not doctors and did not perform autopsies. The most common cause of death among children in the 1890s was dysentery caused by dirty water and contaminated milk according to Fatal Years: Child Mortality in Late Nineteenth-Century America published by the National Bureau of Economic Research. A thin child collapsing in the street most likely died from that or a number of other diseases that were common. Those who diagnosed the cause as starvation were merely looking for anecdotes to promote socialism.

Readers should keep in mind that life in the US in the late 19th century was better than any other place in the world, but by today’s standards it was awful. To see how bad, check out The Good Old Days; They Were Terrible. People threw the contents of the chamber pot out the window into the street. That’s why “gentlemen” walked on the outside when escorting a woman. Garbage was tossed in the streets. The sanitation department consisted of pigs roaming the streets and eating the garbage, but they left behind large amounts of manure. Horses transported most goods and people and added to the collection of manure, which their hooves and wagon wheels pulverized into a fine powder that hung in the air and help spread disease. Only as people became wealthier through capitalism, and medical science improved, did they clean up cities and improve health.

Yes, most people worked six twelve-hour days, but that had been the standard for millennia. It would not have surprised anyone in the gilded age. Immigrants who spoke no English and had no skills earned the lowest wages, but Higgs shows that as they learned the language and acquired skills their wages rose rapidly. Children had begun working at the age of six for millennia as well; it was humanity’s grade school. Good fathers who had a skill would begin teaching it to their male children so that when they reached adulthood they could earn a better income than unskilled labor. If the father didn’t have a skill he would find a friend with one who would treat his children well and teach them. What is the purpose of public education if not skills for jobs?

How did PBS get the economics of the gilded age so wrong? It’s not completely their fault. They consulted the best historians available. But most historians are hard-core Marxists. I first learned that when I read the speeches of the presidents of the two organizations of professional historians in the US after the collapse of the Soviet Union. They wept rivers of tears and forecast a bleak future for the world without the “moderating” influence of communism. FA Hayek shows how socialist historians mangled the history of the UK in Capitalism and the Historians. They have been doing the same thing in the US for over a century. Finally, an article from the Economist magazine of 2002, “Marx's intellectual legacy,” demonstrates that while Marx lost the economic debate, he still reigns supreme in the humanities and social sciences at colleges.

So what really happened in the gilded age?

1. Many of the immigrants who flooded the US in the last quarter of the 19th century were socialists. Germany had created the first socialist state under Bismarck in 1870, but socialism was popular in France and Eastern Europe, too. Immigrants brought the disease with them, including unions.

2. Many wealthy Americans, especially those of German descent, preferred European universities to those in the US so they sent their children abroad for education. Most returned as devout socialists, such as Richard Ely who founded the American Economic Association to promote German-style socialism.

2. Newspapers frightened readers with accounts of new technologies and new business organizations in the same way they scare people with artificial intelligence and large corporations today. Higgs points out that larger businesses reduced costs of production through economies of scale and that’s one reason wages and standards of living rose. Socialists employed the change in business structure to large corporations to frighten people into thinking Marx’s silly predictions were coming true.

3. The rise of liberal theology promoted socialism and increased envy. Traditional Christians had championed private property and free markets while suppressing envy. Liberal Christianity, which denied the deity of Christ and the credibility of most of the Bible, chose socialism as its new gospel.

Economic historians like Robert Higgs have known for a century that Marx’s predictions about capitalism had failed. But socialist historians can control popular history and ignore the facts. They rewrite history to make it look like Marx was a prophet: socialism was inevitable because of the growing poverty and misery of the workers.

The gilded ages in the US and UK could not have witnessed growing poverty, misery and inequality because it didn’t happen; the data on wages, per capita GDP, and wealth distribution prove it. Still, how many people do you think will read this article? Thousands, maybe? Meanwhile, millions of millennials will have watched the PBS episode on the gilded age as well as the History Channel’s propaganda in "The Men Who Built America" and become more devout socialists.

Those of us who love freedom must find a way to produce high quality documentaries that can compete with socialist propaganda masquerading as history.