Frances Trollope, mother of the novelist Anthony, was one of the wittiest and most observant of the early travelers to the United States. After two years pursuing a business venture in Cincinnati, broke and nearly fifty, she wrote The Domestic Manners of the Americans (1832), which was a bestseller on both sides of the Atlantic and launched a brilliant writing career.
Cincinnati was an ideal keyhole for examining the American Zeitgeist. It was one of America’s fastest-growing cities, the “Queen City of the West,” dominating shipping, trade, and manufacturing for nearly the entire region bounded by the Appalachians and the Mississippi above the Mason-Dixon Line.
Compared with Boston and New York, Cincinnati was nearly free of class distinctions. During her stay there, Trollope “neither saw a beggar nor a man of sufficient fortune to permit his ceasing to pursue it.” She admired an illiterate young farmer who, besides tending to his farm, opened a store, built houses, split logs, and sold lumber. She “had no doubt that every sun that sets sees him a richer man than when it rose.” The farmer hoped his son would become a member of Congress, and Trollope was sure he would, and “the idea that his origin is a disadvantage, will never occur to the imagination of the most exalted of his fellow-citizens.”
If one sets aside the massive exception of slavery, early-nineteenth-century America may have been the most egalitarian of any sizeable society in history. Abraham Lincoln liked to point out that farm laborers and factory hands worked harder in America because they knew they could one day own their own farm or machine shop. Britons who came to appraise the competitive threat from America agreed. While British workers tended to sabotage new machinery, Americans helped the shop owner improve it.
The post–Civil War Gilded Age created a moneyed royalty of sorts—the Vanderbilts, the Rockefellers, the Astors—that was force-fed by a wave of corporate mergers and buyouts. The research of economists Thomas Piketty, Emmanuel Saez, and their colleagues tracks upper-class incomes from 1913 on. In that year, just after a peak in big financial transactions, the top 1 percent of earners accounted for 18 percent of the nation’s personal income. That zoomed even higher during the 1920s boom, until by 1928, the top 1 percent was taking nearly a quarter (23.9 percent) of personal income, an all-time high.
It was not a good omen. The implosion of the stock market in the 1930s, and wartime price controls and high taxes, brought the top 1 percent’s income share down to about 9 percent by the end of the war, and it stayed there until the late 1970s. The Reagan and Thatcher revolutions and the mesmeric rise of extreme free-market “Chicago School” economics engineered a steady diversion of income to the very top of the economic ladder. By 2007, the income share of the top 1 percent had climbed to 23.5 percent, or just a hair below its 1928 level.
Once again, it was not a good omen, triggering the Great Recession of 2008. But this time, unlike the 1930s, when President Franklin Roosevelt’s opposition was on the left, demanding even more radical steps, President Barack Obama is trapped by the hard-right anti-government wing of the Republican party. So the very rich are almost alone in achieving their pre-crash eminence, with the 1 percent’s share of personal income climbing all the way back to 22.5 percent.
We can put some dollar signs around that number. In 1975, the income share of the top 1 percent was 8.9 percent. How much extra cash did their new income share generate in 2012? The answer is about $1.6 trillion—in just that one year. That’s more than annual outlays for Social Security payments, and about twice as large as budgeted Defense Department appropriations. It’s enough to pay off the federal debt held by the public in about seven years.
The aristocratic credo holds that all of society benefits from a well-fed super-rich. They are the ones who supply the high-octane financial fuel to maintain America’s advantage in high technology and keep its job-creation machinery humming. But that is hardly the recent experience. The private-equity and hedge funds that cater to the super-rich have been in the vanguard of outsourcing American production to low-income countries, creating “flash trading” protocols to collect a miniscule cash toll on other people’s trading, and building a wall of cash around their tax breaks and other special privileges.
American politics turns in slow-motion cycles. Millions of people have recently discovered the benefits of government-funded health care. Millions more baby boomers are realizing that their 401(k)s aren’t nearly large enough to finance a decent retirement. Change will come when the mass of Americans understand that the antitax and antigovernment anthems of our new aristocracy do not speak to their best interests.
