In the post-Civil War era. John D Rockefeller, Andrew Carnegie, JP Morgan and others rose to wield unparalleled financial power. Emerging industries in oil, steel, and mining had grown into monolithic trusts, using innovative banking practices that fed an explosion of wealth. Titled “The Gilded Age,” these and other industrial giants earned another moniker “Robber Barons,” for not only the fortunes they built, but the ruthless practices that bred those millions.
The American public both admired and loathed these magnates. Critics argued the nature of such concentrated treasure was damaging to the lower rungs of American society. In pushback, journalists and economists lay bare the cruel tactics these industrialists utilized. Notable critics included Ida Tarbell, who investigated Rockefeller’s shady dealings in creating Standard Oil, Upton Sinclair did much the same through his novel, “The Jungle,” leaving readers both outraged and nauseous. And social reformer, essayist, Henry George, argued Carnegie had in no way improved the quality of American life, despite Carnegie’s philanthropic efforts.
President Theodore Roosevelt found no friendship on either side. “Muckrakers,” he called these journalists, while still pursuing legal action against the excesses of what he termed the “wealthy criminal class.”
In response, Andrew Carnegie published a work titled, “The Gospel of Wealth.” Centered upon the principles of 18th Century economist, Adam Smith, Carnegie argued that his success was no more than God’s will, and a gift to mankind. To Carnegie’s way of thinking, the Almighty himself, had conferred upon each certain gifts, and Mr Carnegie’s talent lay in getting rich. Left unmentioned were the unmet talents of those condemned to labor in the fiery pits of Carnegie Steel, and other factories.
Confident in his beliefs, the tycoon believed he stood in God’s favor. And Americans swallowed the Gospel of Wealth, hook, line, and sinker, rendering reforms nearly impossible.
After World War One America went on an unfettered spending spree. Throughout the Twenties President Coolidge rejected T. Roosevelt’s moral crusade, holding firm that “The Business of America is Business.” Then in October, 1929, at the beginning of Herbert Hoover’s administration the bottom fell out of the New York Stock Market.
And somehow the rich no longer seemed quite as godly.
The 1932 Presidential Election issued a mandate for a “New Deal.” Desperate Americans were struggling, going hungry, losing their homes, writing the Franklin Roosevelt administration pleading for a hand up. And FDR acted quickly. Harnessing the power of the Federal Government, the President championed deficit spending, stimulating buying power to the underclasses. No longer would Americans tolerate the unregulated thievery of the past. By the 1960’s Lyndon Johnson’s “Great Society,” extended aid even further, so regular people could tap into the financial support to get ahead.
By 1980 the pendulum had swung to the right once again, regulation falling into disfavor. Laissez faire policies returned under Ronald Reagan. In turn, deficits blossomed, and the market crashed again in 1987 under the weight of the DotCom boom, and savings and loan scandals. Under GW Bush a scarier crash occurred in 2008, following the fallout of the mortgage market.
American laws, passed in the heart of crises, need to be remembered and embraced, not discarded during better times.
Much like America during and after World War Two, private, public, and global financial institutions cooperated for just and equitable progress. Enlightened self-interest with carefully crafted guardrails enhance prosperity, and promotes financial stability.
Those lessons in economic policy made the 20th Century, America’s Century. This isn’t a lesson we have to relearn, the path has been paved.