In the Wall Street Journal from Phil Gramm and Amity Shlaes.The ‘Gilded Age’ Myth, Then and Now:
Between 1870 and 1900, America’s inflation-adjusted gross national product expanded by an unprecedented 233%. Though the population nearly doubled, real per capita GNP surged by 90%. Real wages of nonfarm employees grew by 53%, and life’s staples, such as food, clothing and shelter, became more plentiful and much cheaper. Food prices plummeted by 174% and the cost of textiles, fuel and home furnishings fell by 70%, 65% and 70%, respectively. The illiteracy rate fell by 46% and life expectancy rose 12.5%. Infant mortality declined by 17%.
As American capitalism blossomed, some got rich. In 1892 there were 4,050 millionaires, with less than 20% having inherited their wealth. The rest created it and in the process reduced poverty, expanded general societal prosperity, and made it possible for millions of immigrants looking for opportunity and freedom to find both. That mattered little to progressives, who were so obsessed by the 4,050 millionaires that they turned a blind eye to the 66 million Americans whose economic well-being improved faster than any people who had ever lived on earth.
Had the Gilded Age suffered from monopolistic exploitation, as critics claim, output would have fallen and prices would have risen in the monopolized industries. In a 1985 study, economist Thomas DiLorenzo tested that hypothesis for steel, petroleum, railroads and other industries accused of being monopolistic during the debate on the Sherman Antitrust Act of 1890. He found that output in those industries actually increased by an average of 175% from 1880-90—seven times the growth rate of real GNP. On average, prices in the ostensibly monopolized industries fell three times as fast as the consumer price index.
While the period of industrial expansion did create both economic and political dislocations, the benefits were often overlooked in our history. The restraint on concentrations of political power in our constitution applied largely to economic power in an agrarian economy but this diverged in the industrial era. The great dilemma of the progressives was how to address the concentrations of economic power without losing the restraints on the concentration of political power.
The changes in wages do not include the improvement in living standards, the decline in the costs of living that made a dollar more valuable. This comes from innovation that requires a great degree of economic freedom. This freedom may lead to large enterprises with large market shares, but this is less of a threat than rent seeking enterprises that require the assistance of government regulators.
Like the first Progressive Era, political solutions focus more on headlines and outliers than the nuances of a dynamic economy.