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Between 1865 and 1898 the US economy
grew at the fastest rate in its history with real wages, wealth, GDP, and
capital formation all increasing rapidly:
- Wheat production increased
by 256%
- Corn production increased by 222%
- Coal production increased by 800%
- Miles of railway track increased by 567% -
railroad mileage tripled between 1860 and 1880 and had tripled again by 1920
- American steel production surpassed the
combined total of Britain, Germany, and France
There were several reasons why the US
economy grew so fast in the period between the end of the Civil War and the
turn of the century, among them were:
- The opening of the Western frontier
- The discovery of rich mineral resources
- The increasing
population
- The ability to attract capital
A modern industrial economy based on a
new national transportation and communication network was being created. By
the beginning of the 20th century per capita income and industrial production
in the United States exceeded that of any other country except Britain.
By 1906 the annual rate of US capital
formation was running at $5 billion. This rapid expansion went hand in hand
with the creation of enormous industrial and financial monopolies. In 1893
Drexel, Morgan & Company became J.P. Morgan & Company,
America’s premier investment bank. By 1904, more than 1,800 companies
had been consolidated into 93 corporations, a financial consolidation led by
J. Pierpont Morgan.
J.P. Morgan created United States Steel
in 1901 - the first American corporation with a capitalization exceeding one
billion dollars. Morgan was also responsible for General Electric,
International Harvester and the reorganization of American Telephone &
Telegraph Company (AT&T).
The Mellon brothers - Andrew and Richard
- were major stockholders in Gulf Oil Corporation and Aluminum Company of
America. With an aggregate wealth exceeding one billion dollars before the
stock market crash of 1929 they were the wealthiest bankers of the era.
Moses Taylor made himself a 40 million
dollar fortune by building City Bank into New York's largest.
James Stillman
built the assets of National City Bank to one billion dollars.
George Fisher Baker became the largest
shareholder of First National Bank of New York (today known as Citicorp) and
was head of the bank from 1877 until his death in 1930.
August Belmont was one of the most
influential Jewish bankers in America and an agent of the Rothschilds.
The Seligmans
established J & W Seligman & Company, an international banking house.
Founded by Abraham Kuhn and Solomon Loeb
in 1867, Kuhn, Loeb & Co of New York was the largest and most influential
of the American Jewish banking houses. Kuhn, Loeb & Company was related
to the house of M.M. Warburg of Hamburg, Germany.
Gild - to cover with, or as if with a
thin layer of gold, to give an often deceptively attractive or improved
appearance to.
Mark Twain called the late nineteenth
century the "Gilded Age” - meaning that the period was golden on
the surface but underneath the thin veneer was a cesspool of greed and graft,
shady business practices, scandal plagued politics and overt displays of
upper class consumerism and materialism.
Mrs. Stuyvesant Fish threw a dinner
party to honor her dog who wore a $15,000 diamond collar to the event. A
lucky dog was sporting diamonds while 11 million of the nation's 12 million
families earned less than $1200 per year in 1880 - their average annual
income was $380 which was well below the poverty line.
Rural Americans had moved to the cities
seeking jobs, new immigrants came into the country by the millions and joined
them. Massive and filthy slums teeming with crime were the new home for
millions of factory workers.
Government corruption was rampant and
extended to the highest levels of government - ie
President Ulysses S. Grant and his cabinet were implicated in the Credit Mobilier, the Gold Conspiracy, the Whiskey Ring, and the
notorious Salary Grab.
Long
hours and hazardous working conditions led many workers to form labor unions. On January
13, 1874 over 7,000 workers gathered in New York’s Tompkins Square Park
- the largest demonstration that New York City had ever seen.
Roughly 1600 policemen were stationed in
the surrounding area.
Shortly after 10 a.m., police entered
the square and dispersed most of the crowd by brutally beating them with
clubs. Other police on horseback cleared the surrounding streets.
Matthew
Somerville Morgan, Frank Leslie’s Illustrated Newspaper,
January 31,
1874—American Social History Project
"Mounted
police charged the crowd on Eighth Street, riding them down and attacking
men, women, and children without discrimination." Samuel
Gompers, legendary labor leader
The Tompkins Square riot marked the
beginning of an unprecedented era of labor conflict and violence. Workers
frequently went on strike using their only bargaining power – their own
labor. There were almost ten thousand strikes and lockouts in the 1880s with
700,000 workers striking in 1886 alone.
People feared a second Civil War - not
North against South – but government against citizen. Labors unrest was
just getting organized, the most violent labor conflicts in the nation's
history were still on the horizon and the government was fully prepared to
respond with force.
If we stop looking in the rear view
mirror right here and fast forward to the future we’re struck by the
many similarities to today’s present conditions.
We have at least equaled or
exceeded the extremes of inequality achieved by our late 19th
century predecessors. The
comparisons between Twain’s Gilded Age and our present circumstances
are numerous: crony capitalism and government, the mortgage and banking
crisis, tax breaks, the creation of complex financial instruments, small
factories and workshops closing, unemployment exploding, unemployed workers
demonstrating, corruption, ostentatious spending, wage depression, massive
urbanization and the use of police, armed force, to break up demonstrations.
But
something stands head and shoulders above the rest - income disparity.
"For at least the last 30 years, it
has been assumed by almost everyone — economists, politicians, civil
servants — that if the finance industry is doing well, that must mean
customers (and society more generally) were benefiting." The Civitas think-tank, You’re On Your Own
Unfortunately
the United States is the most economically stratified society in the western
world. As of 2008 the top .01 percent, or 14,000 American families hold 22.2
percent of the country’s wealth - the bottom 90 percent, or over 133
million families hold just four percent of the nation's wealth - collectively
the top 300,000 Americans have almost as much income as the bottom 150
million.
The average
pay per employee - which takes in secretaries, clerks, tellers and janitors -
at the five biggest American banks last year was $336,000.
Below is the
total compensation, for 2007, for some top bank executives whose banks
received the first government aid monies given out through TARP.
Bank of
America Kenneth D. Lewis Chairman and CEO $24.8 million
Citigroup
Gary Crittenden Chief Financial Officer $19.4 million
Citigroup
Charles Prince Former Chairman and CEO $15.1 million
Goldman Sachs
Lloyd C. Blankfein Chairman and CEO $70.3 million
Goldman Sachs
Gary D. Cohn President and Chief Operating Officer $72.5m
Goldman Sachs
Jon Winkelried President and Chief Operating
Officer $71.5m
Goldman Sachs
David A. Viniar Chief Financial Officer $58.5
million
Goldman Sachs
Edward C. Forst Chief Administrative Officer $49.1
million
JP Morgan
Chase James Dimon Chairman and CEO $27.8 million
JP Morgan
Chase Steven D. Black Co-CEO Investment Bank $20.9 million
JP Morgan
Chase James E. Staley CEO Asset Management $16.7 million
JP Morgan
Chase William T. Winters Co-CEO Investment Bank $21.2 million
Merrill Lynch
John A. Thain Chief Executive Officer $17.3 million
Merrill Lynch
Gregory J. Fleming President & Chief Operating Officer $27.4m
Merrill Lynch
E. Stanley O’Neal Former Chief Executive Officer $24.3m
Merrill Lynch
Dow Kim Former Executive Vice President $14.5 million
Morgan
Stanley Colm Kelleher Chief Financial Officer $21
million
Morgan
Stanley David H. Sidwell Former Chief Financial
Officer $14.6 million
Morgan
Stanley Robert W. Scully Co-President $15.2 million
Morgan
Stanley Gary G. Lynch Chief Legal Officer $11.9 million
New York
Mellon Bank Robert P. Kelly Chief Executive Officer $20.1 million
New York
Mellon Bank Thomas A. Renyi Executive Chairman
$22.2 million
New York
Mellon Bank Gerald L. Hassell President $11.8
million
New York
Mellon Bank Steven G. Elliott Senior Vice Chairman $19.7 million
New York
Mellon Bank Ronald P. O'Hanley Vice Chairman $11.5
million
State Street
Corp. Ronald E. Logue Chief Executive Officer $28.3 million
State Street
Corp. Joseph L. Hooley Vice Chairman $10.3 million
Wells Fargo
Richard M. Kovacevich Chairman $22.9 million
Wells Fargo
John G. Stumpf President & Chief Executive
Officer $12.6 million
 
aflcio.org
In 2010, the
top 20% of Americans earned 49.4% of the nation’s income.
According to a AFL-CIO analysis of 299 companies in the S&P 500
Index CEOs of the largest companies received, on average, $11.4 million in
total compensation for 2010. CEOs of the 299 companies in the AFL-CIO
Executive PayWatch database received a combined
total of $3.4 billion in pay in 2010, enough to support 102,325 jobs paying
the median wages for all workers.
aflcio.org
"Americans have the highest income
inequality in the rich world and over the past 20–30 years Americans
have also experienced the greatest increase in income inequality among rich
nations. The more detailed the data we can use to observe this change, the
more skewed the change appears to be ... the majority of large gains are
indeed at the top of the distribution." Economist
Timothy Smeeding, Social Science Quarterly
Income
disparity, and Tompkins Square, should be on every ones radar screen, while
history might not repeat exactly it certainly does rhyme. Are these issues on
your radar screen?
If not, maybe
they should be.
Richard (Rick) Mills
rick@aheadoftheherd.com
www.aheadoftheherd.com
If you're
interested in learning more about the junior resource sector, bio-tech and
technology sectors please come and visit us at www.aheadoftheherd.com
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***
Richard
is host of Aheadoftheherd.com and invests in the junior resource sector. His
articles have been published on over 300 websites, including: Wall Street
Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse,
Lewrockwell, Uranium Miner, Casey Research,
24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb,
321Gold, Kitco, Gold-Eagle, The Gold/Energy
Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, and
Financial Sense.
***
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Richard
Mills has based this document on information obtained from sources he
believes to be reliable but which has not been independently verified;
Richard Mills makes no guarantee, representation or warranty and accepts no
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