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Economic giants drive income inequality in a second Gilded Age

Can we look to history for reform ideas in the age of big tech robber barons?

Adam M. Sowards Nov. 27, 2019 From the print edition

Reckoning with History is an ongoing series that seeks to understand the legacies of the past and to put the West’s present moment in perspective.

In 1866, San Francisco was at a turning point. California officials had confirmed that the city owned roughly 8,000 acres of land near the waterfront, a remnant of Mexican land claims. That meant San Francisco faced a decision: Sell it off to speculators or retain much of it for public space. The burgeoning city chose immediate profit over long-term community interest. A local journalist named Henry George covered this issue carefully and with deepening objections.

Over the next two decades, George developed a stinging critique of concentrated land ownership, which he saw as driving inequality and poverty. His radicalism sprang from the particular Western experiences he observed. And it still speaks to us across more than a dozen decades, at a time when inequality is again rising, common resources are becoming more concentrated in private hands and equity remains under attack. George’s solution? Tax reform. 

Today’s economic giants — think Google and Amazon — function much like 19th century railroads and mining corporations in driving up land prices and concentrating wealth while poverty swells. These echoes have led some to call this era a Second Gilded Age. Perhaps it’s time to reconsider the radical ideas of the past and the boldness and creativity they showed in diagnosing and attacking persistent problems.

George was born in 1839 to a large lower-middle-class Protestant family. He landed in California in 1858, amid a society that was fluid with opportunities for both upward mobility and failure. His most recent biographer, Edward T. O’Donnell, notes in Henry George and the Crisis of Inequality: Progress and Poverty in the Gilded Age that George’s “restless personality and an unpredictable economy” kept him constantly insecure and frequently insolvent. He fell into the newspaper business — typesetting, printing, writing — and moved from one paper to another in San Francisco and Sacramento. When his prospects sputtered, which they did frequently, he sent his wife and children to live with his family in Philadelphia. Although this instability grew partly out of George’s temperament, it also exemplified the era’s economic cycling, the booms and busts that brought calamity every couple decades. 

Seeking stability, Americans tried to promote economic growth through legislation — but those laws often failed, or exacerbated inequalities. The Homestead Act of 1862 epitomized this approach: It took Indigenous land acquired by conquest, theft and treaty out of the public domain and gave it to citizens and immigrants who promised to become citizens. Another central initiative was the Pacific Railway Act. Congress gave two railroad corporations, Union Pacific and Central Pacific, massive land grants the size of states and set them loose to connect the continent across its wide middle. These government investments in individual and corporate enterprises constituted an enormous subsidy that wholly transformed the West, from who owned and controlled the land to how value was extracted from it through mines, timber towns and ranches. 

Henry George warned that promoting economic growth would only exacerbate existing Hinequalities in wealth. Schaidner/Library of Congress
Henry George warned that promoting economic growth would only exacerbate existing inequalities in wealth.

While most Westerners welcomed the trains, George viewed the Transcontinental Railroad with skepticism. In Overland Monthly in 1868, he penned a speculative but prescient essay titled “What the Railroad Will Bring Us.” Writing merely six months before the line bridged the coasts, George understood that “the completion of the railroad and the consequent great increase of business and population, will not be a benefit to all of us, but only to a portion. As a general rule (liable of course to exceptions) those who have, it will make wealthier; for those who have not, it will make it more difficult to get.” When California and the West became “netted with iron tracks,” he warned, both progress and poverty would increase, refuting the presumption that economic growth helped all, or even most.

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Top Image:  An 1849 print shows San Francisco, California’s waterfront before a large section was sold to developers.
Schmidt Label & Litho. Co./Library of Congress

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