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- [00:01]
Bill Simmons
Hey, it's Bill Simmons letting you know that we are covering the White Lotus on the Prestige TV Podcast and the Ringer TV YouTube channel every Sunday night this season with Mallory Rubin and Joanna Robinson.
- [00:11]
Rob Mahoney
Also on Wednesdays, Rob Mahoney and I.
- [00:13]
Derek Thompson
Will be sort of diving deep into theories and listener questions. So you can watch that on the Ringer YouTube channel and also on the Spotify app.
- [00:21]
Bill Simmons
Subscribe to the prestigious podcast feed, subscribe to the Ringer TV YouTube channel. And don't forget, you can also watch these podcasts on Spotify. White Lotus Go.
- [00:36]
Joanna Robinson
This episode is brought to you by Audi the all new, fully electric Audi Q6E Tron is a huge leap forward featuring effortless power, serious acceleration, and the most advanced tech of any Audi ever. Experience technology that puts you center stage with a panoramic digital stage plus an optional screen for front seat passengers. The Q6E Tron is not just a new EV, it's it's a new way to experience driving. Learn more@audiusa.com always pay careful attention to.
- [01:06]
Rob Mahoney
The road and do not drive while distracted.
- [01:10]
Joanna Robinson
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- [01:45]
Richard White
Today the Gilded Age of the 19th century and the 21st century the first thing every book and essay about the Gilded Age will tell you is about Mark Twain. In 1873, Twain Co wrote a mediocre book, the entirety of which is forgotten except for its memorable title, the Gilded Age. Twain was satirizing ideas in his own time that are now as familiar as oxygen.
- [02:12]
Rob Mahoney
The juxtaposition of obscene wealth and poverty.
- [02:15]
Richard White
The conspicuous consumption of new money, the obsession with status in modern society. The era that Twain was trying to capture was a period of immense change. Imagine, for example, if you happened to fall asleep at the beginning of this period in New York city in the mid-1870s, and woke up after 30 years at the tail end of the Gilded Age in the early 1900s. As you shut your eyes, there is no such thing as electric light or Coca Cola or basketball or aspirin. There are no cars or sneakers. The tallest building in Manhattan is a church. When you wake up in 1905, the city has been remade with towering steel skeleton buildings called skyscrapers. The streets are filled with novelty automobiles powered by new internal combustion engines. People riding something called bicycles in rubber soled shoes called sneakers. All recent inventions, the Sears catalog, the cardboard box and aspirin. All new arrivals. People have enjoyed their first sip of Coca Cola, their first bite of what we now call an American hamburger. The Wright brothers have flown the first airplane. When you passed into slumber, nobody had taken a picture with a Kodak camera or used a machine that made motion pictures or bought a device to play recorded music. By 1905, we had the first commercial versions of all three. The simple box camera, the cinematograph and the phonograph. People sometimes say that we live in an era of constant change, but the Gilded Age was arguably the most transformative generation in American history. In some ways, it was a time very much like our own. Industrialists and titans of industry bestrode the country. Their technologies, like the transcontinental railroad, connected sea to sea. It was an age of economic domination. Thomas Scott and Vanderbilt and Jay Gould dominated the railroads. John Rockefeller dominated oil. Andrew Carnegie dominated steel. JP Morgan dominated finance. We can see the echoes here in our own time, like Bezos and the Waltons owning the world of commerce. Tim Cook and phones. Mark Zuckerberg and our attention. Elon Musk in space. A few weeks ago on this show, I described the way that Silicon Valley and Washington seem to be moving closer together as they negotiate their way toward managing technologies like crypto and industrial policy and AI and space travel. Elon Musk certainly has developed a, let's call it, unusually intimate relationship with the Trump administration. But in the Gilded Age, that sort of thing would not have been unusual at all. In 1895, during a severe depression, J.P. morgan struck a deal with President Grover Cleveland to save the US Gold reserve in exchange for treasury bonds. The president's defenders called this arrangement economically necessary. His critics called it sheer corruption. Sound familiar? Trump has been compared to several 19th century presidents. He combines the manifest destiny expansionist anxieties of James Polka with the love of tariffs of William McKinley. But his penchant for working out individual deals with business leaders is profoundly Gilded Agey. Last week, the Wall Street Journal reported that the Trump family has held talks to pardon a major crypto executive who's pled guilty to money laundering. In exchange, the Trump family would secure a stake in his company, Binance. Another businessman who gave Trump $75 million, had a civil fraud case against him. Dropped this vision of government as a series of interpersonal negotiations is ripped directly from the pages of the Gilded Age. This is the third episode of our miniseries Plain History, which has itself begun with a sort of triptych about 19th century America. My working hypothesis for these episodes is that I want to establish the relevance of each episode. Subject in the open. First, the assassination of president James Garfield, which was our first episode, was also a history of science. The exceptionally successful presidency of James Polk, which was our second episode, captured the dawn of American expansionism and the imperial presidency to themes of obvious relevance to today's news. But this show is surely the most obvious example yet of ancient history making contact with modern headlines. I also believe, however, in taking history on its own terms, which is why all of my interviews, all of my Plain History episodes will be 100% about the past and 0% about asking experts historians to analyze the present. Today's guest is Richard White, the award winning historian and author of the Republic for which it stands, A mammoth history of America between the end of the Civil War and the end of the 1800s. We talk about how corruption and monopoly and power worked in this period. We talk about Rockefeller and Carnegie and Morgan and how these giants typified the era with their business genius and their thin sense of morality. We talk about how the monopolies of this era used the government and how the government used the monopolies. But we also talk about the world the Gilded Age built. The moguls of the late 19th century remade Commerce in ways that were often ugly. But their giving endowed the world with knowledge and beauty, and that's what makes their legacy so rich and interesting. The merchant Johns Hopkins established the first research university with that name in 1876. Ten years later, Stanford used his railroad fortune to create Stanford University. Five years after that, John D. Rockefeller's gift established the University of Chicago. I'm currently writing this open from a hotel room in midtown Manhattan. As the New Yorker staff writer Adam Gopnik wrote, the most notable examples of New York architecture are plutocratic projects from the first Gilded Age. The great concert hall is named after Carnegie. A great art collection is named after the industrialist Frick. At the center of Grand Central Terminal, you will find a statue of Cornelius Vanderbilt. At the center of Manhattan itself, you'll find Rockefeller Plaza. The Gilded Age is over in a sense. And yet to understand it deeply is to see its legacy at the center of everywhere you look. I'm Derek Thompson. This is Plain History.
- [09:31]
Rob Mahoney
Richard White, welcome to the show.
- [09:35]
Derek Thompson
My pleasure to be here.
- [09:36]
Rob Mahoney
Derek, you've written two Books that I think are pretty sensational. Railroaded, which is about the history of the railroads and the republic for which it stands, which covers reconstruction and the late 19th century. I want to focus the vast majority of our conversation on what we call the gilded age, the industrial transformation of the late 19th century. The robber barons, the close and often corrupt relationship between the government and business in this era. But I would first like you to connect these projects for me, because the driving of the golden spike at promontory point in 1869 marked the completion of the transcontinental railroad, and many historians consider the gilded age to begin just after that, in the early 1870s. So build this bridge for me. How do the themes and the lessons of railroaded and the construction of the inter. Of the transcontinental rail system set us up to understand the character of the Gilded Age?
- [10:38]
Derek Thompson
1869 is four years after the end of the civil war. At the end of the civil war, the United States is a country of vast ambitions and relatively little money. It's greatly in debt from the war, and what it wants to do is build an infrastructure to connect California, in particular, to the rest of the United States. Because they'd feared losing it during the civil war, they don't have the money to do it. So what they resort to is a series of subsidies and cooperation with private capital. And private capital is going to be the transcontinental railroads. I won't go into a lot of detail, but basically any railroad man who knew anything about it did not want to build a transcontinental railroad. What they get is a group of entrepreneurs who essentially will operate without putting their own money into these railroads, but using government subsidies, land subsidies, and loans to build them. That means that Congress and these companies get into bed together very, very quickly in a way that benefits both the companies and Congress. They drive the golden spike. It is a great technical achievement. They have linked California, they linked the west to the rest of the country. But they've set up a system which is going to pretty much define the gilded age. It's going to be a system of insider dealing, a system of corruption, a system of stock manipulation, and a system in which people who accrue great wealth will accrue great influence over the course of the United States and a system.
- [12:07]
Rob Mahoney
Of paradoxical growth and depression. Correct me if I'm wrong, but this era that I think of as being a cauldron of innovation, we invent the incandescent light bulb, we invent the car, we connect the transcontinental Continental Railroad. You think of this as being a period of exceptional growth. It's a period of constant panics that at the times were called railroad depressions. How do we make sense of the fact that this was an era of simultaneously impressive growth and also constant panic?
- [12:40]
Derek Thompson
It's boom, bust. What they do is that since the railroads are the great corporations of the United States, they're at the core of the American economy. They are built on debt, they're built on competition. They build too many railroads, they're in competition with each other. And at a certain point, there is not the revenue, partially because of corruption, partially because of the way they're organized to sustain them. The railroads are in debt to the banks. The railroads can't pay their debts, railroads go bankrupt, banks go bankrupt, and the whole country loses the financial system and it crashes into depression. It does it in 1873. Does it in 1883. Does it in 1893. I mean, stated this way, it's like clockwork. You can depend. And these depressions are severe. 1893 depression until the 1930s is called the Great Depression. And it causes great suffering until the system corrects itself and then it begins all over again. I mean, it is the story of the 19th century.
- [13:38]
Rob Mahoney
You have a quote from the introduction of the Republic for which it stands that I think nicely sets the table for us in understanding the character of the Gilded Age. Quote. Historians once embraced corruption as diagnostic of the age, but for the past half century, they have downplayed its importance. They have been wrong to do so. The Gilded Age was corrupt and corruption in government and business mattered. Corruption suffused government and the economy. People know what corruption is. But there are two weighty words that you circle again and again in this friendship and cooperation. Words that might seem harmless and anodyne in the 2000 and twenties, but they carried a special power in the late 19th century. Describe for us as a thesis statement what corruption and friendship and cooperation meant to this era of American history.
- [14:31]
Derek Thompson
Friendship is a word that I first ignored. And it just kept coming up over and over and over again. People described each other as friends. What puzzled me is they hated each other. They weren't friends in any colloquial sense that we understand it. But what they did is they had common aims and knew that their cooperation with each other was to achieve those aims. So what friendship is in the 19th century sense is a relationship devoid of any affection, in which people can pursue common ends by essentially scratching each other's back. That railroad owners need. Congressmen, congressmen get Benefits from railroad owners and they become friends. Railroad businessmen are friends with politicians, they're friends with newspapermen, they're friends with bankers. Friendship is the word they use to describe their relationship. And friendship depends on cooperation. It's a dishonest cooperation. It's against the public interest, but it's cooperation.
- [15:28]
Rob Mahoney
There are so many incredible characters and incredible stories from this period of American history. You have Thomas Scott, maybe the OG Robert Barron and the Pennsylvania Railroad, Jay Gould, Collis Huntington. I want us to touch on three, maybe the three biggest titans of this period. Rockefeller, Carnegie and JP Morgan. And let's do them in that order. Who is John Rockefeller and how did his style of cooperation typify this era of business?
- [15:59]
Derek Thompson
Rockefeller I came in as kind of perverse way to have a great deal of admiration for. Because Rockefeller, I mean, it's hard to use the word honest with these guys. But let's say Rockefeller was frank. He was always very clear on what he's doing. He comes out of this sort of gothic corner of the United States. His father was a bigamist. He becomes a devout Baptist. And what he wants to do is to organize a system he sees as way too competitive a system that he sees as wildly inefficient. And to do that, he pays no attention to the pieties in the 19th century. Rockefeller wants nothing to do with laissez faire. He wants nothing to do with free markets. He's about organization. He's about, in fact, the ways in which we have to eliminate competition, eliminate opportunity, and have an organization which is efficient. Net efficiency is Standard Oil for him. He creates what becomes the model corporation. Unlike the railroads, which often go bankrupt, Standard Oil is a tremendous success. And what Rockefeller convinces people is that it's better to cooperate with them than to compete with them. He brings his competitors in and when they don't want to come in, he destroys them. And the means he often uses to destroy them is cooperation with other corporations like the railroads, or with legislatures like the Pennsylvania legislature. He wants favors. He sees all of this stuff as benefiting him, but also benefiting the country. It's going to lower prices, it's going to make things more efficient. I mean, his partner Henry Flager has adopts. He didn't invent it, but he quotes it all the this saying, do unto others as they would do unto you, but do it first.
- [17:44]
Rob Mahoney
I love that. That's in the book. I laughed out loud when I read that. It's an amazing inversion of the Jesus Christ principle. Yeah.
- [17:52]
Derek Thompson
And perfectly accurate. That's what they did.
- [17:54]
Rob Mahoney
Give me a little bit more detail on how Rockefeller achieved what he achieved in the construction of Standard Oil. I think before I read your book I had forgotten that his wealth was not built on drilling for the oil, but rather built in construction, consolidating the refinery system for turning the crude oil into a product that people could use to power the economy. And he did it by playing companies off of each other, playing railroad companies off of each other, finding ways to eke out these little deals that always won him favors so that his product could grow and grow and set up this system of permanent subsidies such the railroads were essentially, sometimes even paying him essentially for the privilege of carrying his material. How did he do it? How did he take a small oil refinery business and turn it into by some accounts the most successful business that America had ever seen?
- [18:51]
Derek Thompson
What he realizes is, just as you said, that oil's too abundant. There's just too much oil. You don't need much money to drill it and there's no way you're ever going to organize that industry. So he decides what I'm going to organize and organize refining. But even refining at the time you could build a refinery for $50,000. They're really quite primitive technolog. What Rockefeller realized, if you're going to get a real profit, we've got to eliminate the number of refineries. So what he decides to do is the real bottleneck here is transportation. Anybody can refine oil, but you got to get it to market from Cleveland or Pittsburgh. And you got the big markets are in the east and that demands the railroads. And he realizes it doesn't matter scale. What I will do is go to the railroads who have overbuilt or competitive. And I will say, here's the deal, I will give you all of my oil for this particular route. But you have to kick money to me. I'll pay you going rates, I'll pay you $1,000, but you kick back $300 to me and you don't do it for my competitors. So his competitors soon find they cannot compete with Rockefeller in the eastern markets. And then Rockefeller comes in and buys them out. Well, he makes a deal which is basically this. He says, you know, I will pay you cash if you want, but I'd prefer to pay you in shares of Standard Oil. Believe me, it will be much better for you if you take shares of Standard Oil than you take. And if you refuse this deal, here's what's going to happen to you. I am going to destroy you. I am Going to cut the prices till you cannot possibly survive and move on. And that's what he does. But he also needs very often cooperation from legislatures because he's operating against people who are just as big and shrewd as he is. And in Pennsylvania, he gets in a battle with Tom Scott. It's a battle of politics. And later on, when Pennsylvania, when people realize we never can beat Rockefeller as long as we're shipping by railroad, he controls the railroads, we're going to do pipelines, Rockefeller will resort to blowing up pipelines. He'll blow them up in Pennsylvania. And for a while, Rockefeller could not set foot in the state of Pennsylvania because he had a warrant out for him. He could not go there. So Rockefeller would prefer not to do those things, but he will do those things. He will do what's necessary. But he also really will have efficiency. And he's at the end by the 1890s, he's saying this talk about free markets, this talk about competition, this is ridiculous. This is a new age. It's an age of efficiency. It's an age of cooperation. And what he calls cooperation, his opponents call monopoly.
- [21:26]
Rob Mahoney
There's another word beyond cooperation and monopoly that is in the air in this era and that's a term called pull. Andrew Carnegie talks about pull, this idea of having pull with government. I would love you to use this concept of pull to introduce us to the fascinating character of Andrew Carnegie and maybe give us a sense of how at the level of character and business strategy, he and Rockefeller were twins or slightly different.
- [22:00]
Derek Thompson
Carnegie is fascinating. He creates himself and it's pretty much his own self creation as this self made man. And he is in the sense that he's poor Scottish immigrant. He comes in, he rises to great wealth, becomes a major industrialist. But mostly what he thrives on is friendship. I mean, he's friends with Tom Scott. Tom Scott is the person who brings him in. Tom Scott gives him favors. And favors in the 19th century very often is just information. Carnegie will deny it later, but he makes his first money, stock market manipulation. And he can do it largely because he's fed information. He's friends with Tom Scott, but he also illustrates the limits of friendship. In 1873, Tom Scott gets in trouble with the Texas and Pacific Railroad and he comes back to Carnegie and says, I need your help. And Carnegie looks at the deal and says, no, he doesn't do it. Tom Scott will go under. Carnegie is sorry to do it to Scott, but friendship isn't about affection. He likes Scott fine, but Scott is going to be an anchor dragging him down. Carnegie will make friends with politicians largely by giving them information and later on in the 1890s by giving them money. And what he wants in return is a tariff. Carnegie knows as he goes into steel making, he cannot compete with European steel makers. He can dominate the American steel and iron market and he does, and very often in ways that crushes labor. But what he knows is that if there's imports of steel without tariffs on it, he is going to lose. So he's paying for the tariff and he gets the tariff which is always associated with monopoly in the 19th century. And in exchange for that he builds up a tremendous empire. He creates a huge industrial corporations. When they buy him out, it's going to go into U.S. steel. He turns to philanthropy. But he again, like Rockefeller says, the American economy isn't about free competition. That's what it's about. And it's not about being on your own. To do this you need partners, you need friends, you need help and you need government. And he goes out to cultivate that and he succeeds at doing it.
- [24:14]
Rob Mahoney
The relationship between Rockefeller and Carnegie and the government is important not only because of what the government can say give in terms of international trade policy. Tariffs help Carnegie build his business. The government also provides, provides a heavy hand in terms of fighting down many of the labor disputes that threatened these businesses in the late 19th century. Can you tell me a little bit how corporations in this era use the state to take on their own employees, their own labor in the times of strikes and pressure to raise wages against these barons?
- [24:54]
Derek Thompson
What happens is that as these companies emerge as monopolies, which is the most hated word in the 19th century, anti monopolists organized against them. And anti monopolists are workers. But there are also others, they're small businessmen, but workers can threaten these because they're inside workers organize. And as they basically are adopting the same kind of tactics that Rockefeller and Carnegie did, we have to organize, we have to cooperate and we have our own interests and we're going to oppose that to our employers interests. The railroads cannot put down the strikes by themselves. What they want is use of National Guard militias and if necessary, and it comes about in the 1890s, federal troops and they get it. This is where politicians prove very, very cooperative. It's unpopular but the deal holds. I mean Carnegie in the Homestead strike and in later strike, he would not be able to put down those strikes without the government in the states of Pennsylvania and bringing the militia in the 1890s, they're going to crush The American railroad union by bringing in federal troops, which causes an upper uproar. You're not supposed to use federal troops to put down any sort of domestic order. That's up disorder, that's up to police departments and states. It's a wild departure from what Americans had done before. But they do it so without them they cannot control their own labor force. The courts of course then move in. They act against unions, they cripple unions. Government comes in heavily on the side of Carnegie and and until the 20th century on the side of Rockefeller.
- [26:29]
Rob Mahoney
This changes as you previewed in the 20th century, where government stops weighing in on these fights, always on the side of the state, begins to weigh in on some of these fights on the side of labor. But before we get to the early 20th century, because I want to save that for the very end, why does the state, why does the federal government make this decision again and again in the 1870s, 1880s, 1890s, to side so often with the industrialists against labor?
- [26:57]
Derek Thompson
Because at the time they can do a couple of things. It makes no sense in the sense that voters will be more in favor of labor than they will be in favor of government. But the way the American electoral system works, because the way you can do gerrymandering, the way that in fact much of the south is going to be disenfranchised, the popular vote is not going to weigh that heavily. And they also know that, that it's not going to be a class vote. People don't necessarily vote their economic interests. People in the 19th century are going to vote according to a sort of ethnocultural interest, whether they're Catholic, what part of the country they're from. So what they can do is through a series of other policies, split that vote apart. They don't have to worry about a democratic rebellion though the anti monopolists are getting closer and closer by the end of the 20th century of getting that kind of majority. The second thing is they themselves profit from these corporations. Very often the people in office are corrupt. What they do is that they're fed information becomes the critical thing to feed them. Bribery is really. Everything is falling apart. When you have to bribe a congressman, when you have to give them money, sometimes you do, sometimes you have to do it to buy a vote. But mostly what you do with Congress people and senators is for congresspeople who aren't going to be big industrialists, which you'll. What you'll say is when this is done, you're going to serve a term or two. Then come to work for us. I know that you're having hard times now, but let me tell you, if I had a few thousand dollars, which it just so happens I will loan you, I would invest it in this and you will get this. I have gotten the land grant from you, and in return, what I will do is use part of that land grant to kick back to you under a fake trustee and you get money. So there's all kinds of corruption and influence that comes in. I mean, Cosby Huntington writes this letter. I mean, a way they are very frank. He's writing to his associates and he says, I just bought a thousand wheels from Senator Barnum, who's from Connecticut, he's in the Senate and does pretty much what I want, hence the wheels. And that's. The whole thing works, that the whole thing is intertangled the whole time. And that's why when I look at my colleagues and they treat it as if, oh, of course there's always corruption. No, not like this. This is so, so basic in the system. They write frankly about it.
- [29:18]
Rob Mahoney
What was it about the character of government or the rules and customs of the time that you think made the late 19th century so corrupt as far as government goes? Because the opportunities for corruption surely existed in the mid and early 19th century as well. I mean, Thomas Jefferson surely had every opportunity to be as corrupt as a congressperson from Georgia in the 1880s. But we don't have, have this sense, I'm not a historian, I don't have this sense that the corruption that was normal in the 1880s was normal for the 1780s, let's say. What was it about this age, either the organization of government or the customs and culture of the time, that made government corruption so common?
- [30:03]
Derek Thompson
I think the answer is basically pretty simple. The United States is growing to be a major industrial country. It's getting to be a continental country. It's growing in scale, its population is growing, but at the same time, it is incredibly averse to taxes. It will not fund the necessary infrastructure, the necessary services that it needs. So it comes to what scholars have called fee based governance, which in the 19th century, to get something done, you would, you know, you'd subsidize a corporation to do it. And that's one source of corruption. The other thing is you take things like collecting the tariffs, somebody's got to collect it. Well, that's why the custom house becomes one of the plum appointments you can get in the United States Customs House. Head of the Customs house in New York City makes more than the President of the United States. But the salary isn't the key thing. What he really gets to do is he gets to keep a certain amount of the customs he collects, particularly if it's for some sort of penalty where somebody's done something wrong. So what you have is fees that are paid. Deputy marshals in the United States and elsewhere will collect a certain proportion of their fees. You make sheriffs and deputy marshals tax collectors. Tax collectors keep a certain proportion of the taxes. At each portion, there's a free fee, there's a bounty. There's a way in which somebody who's ostensibly a public official and is gets to rake off part of what's coming in. And that means that there's going to be corruption from the post office all the way up to the sheriffs, to the custom houses, to people who are appointed offices because they're going to be appointed Indian traders. Everywhere in this system there's going to be a fee, a bounty, an opportunity which allows private profit from performing a public service. And the results are going to be corruption, which is rampant throughout the whole system today.
- [31:54]
Rob Mahoney
I think we're used to corruption being used to empower the executive branch. But in the late 19th century, as you write, you have this blur of anonymous figures filling out the Oval Office. I mean, Rutherford B. Hayes, Chester A. Arthur, Benjamin Franklin. I would defy most Americans to name one thing about these men, except maybe a vague recollection that their faces are all obscured by enormous beards and mustaches. You, in fact, in the book, call it a golden age of facial hair. Where is political power centered in this era? Where is it concentrated within the branches of government?
- [32:31]
Derek Thompson
It's concentrated in Congress. And it's concentrated in Congress partially because Congress takes over. And this becomes something that's a controversy at the time. The executive power of appointment. Most appointments in most offices come from soliciting it from your congressman. So you're lobbying in Congress all the time. The President too, is going to be involved. But you're perfectly right. Most of these presidents were not corrupt, though many people around them were corrupt. But it's going to be in the congressman that in order to get office, you're very often going to have to have a service. And Congressman, because they can profit from their office, are going to set up a system in which political machines, and the Republican as well as Democratic, and though we emphasize the urban machines, they're just as much Republican machines in the states. What you do is you get in office, the price you pay is you kick back something to the congressman you kick back to the political machine. So the political machine and the political parties depend on kickbacks from people who have been appointed to office, which again sets up this other automatic source of corruption. And cleaning up that corruption is in fact going to cause a new, more modern kind of corruption.
- [33:45]
Joanna Robinson
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- [34:17]
Rob Mahoney
It's your turn.
- [34:19]
Joanna Robinson
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Rob Mahoney
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Joanna Robinson
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Rob Mahoney
The road and do not drive while distracted.
- [34:59]
Joanna Robinson
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Rob Mahoney
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Joanna Robinson
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- [36:17]
Rob Mahoney
I want to introduce the third business titan of this area, JP Morgan. And here I want to read from your book a quote. At the end of the era, JP Morgan said that the basis of the whole financial system was character. Character was not morality. A man of character might lie, cheat, steal, but he did not do those things to his friends. Friends were loyal and keepers of bargains. This was why Collis P. Huntington, a railroad magnate, could consider his political friend Roscoe Conkling a man of character, even as he asked Conkling to give him public goods in exchange for private favors. Character existed in a network of friends who judged it it and sustained it. Having character meant being someone who JP Morgan could trust. End quote. There are several fascinating things about this passage, but one of them for me is that it retraces something you mentioned earlier, which is that it is a myth to think of the Gilded Age as an era of unbridled individualism. This was rather an era of networks of privilege, of insider dealing. What is the significance of Morgan's definition of character here? Is it just another way of discussing what we've talked about, which is friendship?
- [37:39]
Derek Thompson
It is, but it's more than that. I mean, one of the things that Morgan's doing, by the time he's saying that late 19th, early 20th century, there's been mass immigration in the United States, and some of those immigrants have risen. I mean, one of the things, the character, the way Morgan's using it, it's going to be a sort of coded anti Semitism. There are people who I associate with, people who I know socially, people I go to the racetrack with, people I own yachts with, and they're not Jews, and they're probably not Catholics. People of character are us. We know each other. And secondly, the problem with us is when we get into it and we look at what's happened in the railroad system that these. Too many of these people lack character. You make deals, they set up rebates, they set up contracts, they're going to set prices, and somebody breaks the deal. And Morgan is essentially saying, saying, I need men of character. And I'm going to make sure the men of character are the ones who are going to be funded. I will move in because I control the capital, which you need, particularly in downturns, and I will use it to enforce character. People who keep deals. When we sign these deals, the deals may be illegal, they may be breaking the law, but that's not the point. The point is you keep the deal. And if you don't Keep the deal. You do not get money from J.P. morgan. So J.P. morgan is trying the same way Rockefeller is, the same way Carnegie is, the same way the unions are to bring order to what very often seems this totally chaotic system. A system which in the late 19th century seems out of control. It's generating great wealth, but it's also having these depressions, constant competition, bankruptcies. That's no good. We got to make that stuff go away.
- [39:24]
Rob Mahoney
We've talked about all of these wonderfully toxic euphemisms of the era. Friendship, cooperation, character. These words that sound like virtues but in the late 19th century were often being used for ends that were synonymous with avarice or self dealing or corruption. There is an alternate view and maybe a reality that the Gilded Age accomplished extraordinary things, built extraordinary things. JP Morgan might have been an anti Semite who was corrupt. He also, for many of these economic panics, served as a kind of one man central bank to rescue stocks in the financial system. Obviously the creation of Standard Oil and US Steel, despite the lack of ethics with which they were built, produced outcomes that were extraordinary for lifting America on the international stage. And the late Charles Morris wrote this book called the Tycoons, which was his own history of the era. And the subtitle of the Tycoons captures a certain flavor about that book. The subtitle is How Andrew Carnegie, John D. Rockefeller, Jay Gould, railroad Titan and J.P. morgan invented the modern super economy. And I know this book is popular in modern tech right circles. The venture capitalist Marc Andreessen has said it's one of his favorite books ever written. And Morris's book paints a slightly more positive vision of capitalism and entrepreneurship and what they did for America and general welfare in the 19th century. How much weight should we give this argument?
- [41:00]
Joanna Robinson
How much weight should we give the.
- [41:01]
Rob Mahoney
Idea that these tycoons were villains in many ways, but they were also visionaries who reshaped the US economy in some ways for the good.
- [41:13]
Derek Thompson
Well, what I do is I pretty predictably take a different view of that. What I would say is there are points where Rockefeller and Carnegie, when they're being honest, and very often they are being honest, or at least frank, point out a world that's very different from modern libertarian high tech views of it. They're talking about a world in which free markets are absolute nonsense. You people are, are crazy. If in fact you think this is about individualism, Rockefeller will say, what are you talking about? This is about organization. This is about the details. This is about how I bring these things together in any way. Purposeful if you think it's about individual effort, you don't know what you're talking about. The individual effort in the United States is going to be. The United States is technically innovative, but it's much like software is made. It's thousands of people making small innovations coming together. It's not one genius. Thomas Edison doesn't invent everything in the Edison lab he has a laboratory, he has an organization, he has a method. That's what the new age is about. What they realize is that the older way, the way that's celebrated is individualism, free markets. That's not the way the world works and they don't want any part of it. So in the way that they recognize what's going on. Yeah, but it's more recognizing and taking advantage of it, not necessarily inventing it themselves. I mean, it's the kind of thing where the ability to recognize something is there, does not mean you made it. And that very often it turns around. They have. So what I would celebrate is the other side of this. It's going to be the anti monopolist. The people who really begin to see that America is a dynamic, very innovative country and it brings in all kinds of people from abroad and it's these little innovations and what the danger of monopoly is, it blocks those innovations. Danger of monopoly is that people come up with ideas all the time. But who decides what ideas are going to work? At a certain point it's JP Morgan decides what he's going to finance. It's going to be John the Rockefeller. It's going to be is this going to compete with me and help me or is this not? And they say that's Monopoly. That's what's wrong now, that's what's changing.
- [43:37]
Rob Mahoney
There's a mystery to me about this era because Rockefeller, Carnegie, they were by modern standards horrendously unethical in their business dealings. And yet they were philanthropists in a way that is incredibly unusual for today's standards. Rockefeller gave to a really surprising range of causes. The foundation he set up was one of the top funders of all scientific research until World War II. He endowed Johns Hopkins. He provided major funding for an Atlanta Baptist Female Seminary. He opened a medical college in China. And Carnegie by some accounts gave away even more to libraries and world peace endowments and universities, museums. And I'm not interested in this question to use these gifts to obscure the record that we've covered. But I do think it draws a fascinating contrast with many billionaires today who do not seem as eager or proud or willing to use their wealth to create new institutions of learning and research and progress. And I wonder what you think was in the air. What was culturally miasmic in this period such that men like Rockefeller and Carnegie, who would never be confused for saints and were totally unscrupulous in business, were also shockingly generous in philanthropy.
- [45:10]
Derek Thompson
I think it's where they came from and where they stood in that society. Because part of what's happening in the Gilded Age is it's new money replacing old money money. And that new money has no status in the society. Carnegie is a poorly educated Scottish immigrant who makes a huge amount of money. What Carnegie will do is establish himself as a major funder of institutions at the same time. What's weird about Carnegie, he always intended to go back to Great Britain. What he really wanted to do is get a peerage. He wanted to become a duke or in Great Britain because he always considered himself British. And it's only in the end where he remakes himself as a patriotic American. The same kinds of things. Gould doesn't give money to anybody, so Gould keeps it there. But Huntington, Stanford, the university I taught at all of these. The money comes from people who are using it to get way to establish their status and standing for themselves and for their families in the United States. And I don't think that modern billionaires have that same need for them. It's just the money. The money is what gives them their power. The money is what gives them their standing. And in the 19th century and the early 20th century, Americans didn't have the same respect for money. I mean, it's just because you're rich. It was a sign that, in fact, you'd probably done something terribly wrong to get it that way. And it was a sign that you were connected with all kinds of privilege to begin with. This is a way to compensate for that. So I think the cultural framework in both of these is very, very different. And I wrote a little book on who killed Jane Stanford, one of the co founders of Stanford University, and why she was murdered. And part of the reason she was murdered is she was a philanthropist. Which makes you wonder why anybody ever would take money from a philanthropist. Because they exert a large amount of control over what happens next. That's the danger of philanthropy. It didn't happen with all these guys. They were after other kinds of things.
- [47:12]
Rob Mahoney
One paradox of this era is that it was both a decrepit time for human welfare and health, and also in some ways, an astonishing time for invention and material progress. And I Want us to end by tracing this tension? You write that the Gilded Age urban environment, the city environment of the 1870s, 1880s and 1890s, was so disgusting and despoiled and nasty and unhealthy that men and women in this era suffered, quote, the decline of virtually every measure of physical well being. Tell me how and why this period was such a local bottom for American health.
- [48:00]
Derek Thompson
I mean, I came on this because it's so hard to get good economic statistics. There's an argument about whether the standard of living was improving for Americans, but you can get health statistics. What I found was, and which economists had found before me, was that by 1880, and I'll just use that as a marker. It's the middle of the Gilded Age. If you live to be 10 years old, you would die at 48. If you're an American white male and you would be 5.5 inches tall, you would lead a briefer life and be shorter than your revolutionary ancestor. And you were one of the lucky ones because 20%, very often on average of infants are going to be die before 5. They're never going to reach 10. You're living in an environment as America urbanizes, which is there's no. No reliable sewage system. There's no pure water. There's no public health. And that seems to be the major cause of all this. The diseases will change over time. Tuberculosis was a big killer in the early part. It more becomes dysentery, cholera, waterborne diseases later on, and people are helpless from it. And part of it is it's not just the poor, the rich are too. The poor come into their houses as servants and as workers and bring the diseases with them. The rich cannot get better water than the poor. The sewage systems aren't there. So what you're faced with is you either have to reform the whole system, the whole city has to be made more healthy, or everybody in the city is going to suffer. There's no segregating yourself out. And that's going to be the long Chadwickian struggle to get filth out out and bring pure water in. And the argument is you can only do this by building an infrastructure. The only one capable of building that infrastructure is a public infrastructure. And it has to be under public control. And that becomes the major grounds for the improvement of health in the United states in the 19th and 20th century.
- [50:01]
Rob Mahoney
You said the word Chadwickian. That's a reference to Edwin Chadwick, who's one of my personal heroes. He was a British utilitarian, a protege of Bentham who in the 1830s conducted an ethnography of British cities, reported to the British government just how absolutely disgusting the living conditions of the typical British laborer were, and pushed for new laws to essentially introduce what we now call public health to British law. And his example in the 1830s, you're saying, inspired some American Chadwickians in the later part of the 19th century because we were a little bit behind the Industrial Revolution curve from Britain. I want to talk about two different ways in which the Gilded Age served as a kind of. As a rebound, a means of things becoming so bad that enough people got behind a cause and improved America because of it. You mentioned one, which is public health. And I would like to just spend a little bit of time here. The world of the 1920s, let's say, is not the urban environment of the 1880s. Things change. The city in 40 years changes dramatically. And it's not just the invention of the car, which, powered by gasoline on its own, is not going to make the city that much cleaner in terms of its air. It's also about what happens underground as well. The invention of modern sewage systems. How did the absolutely disgusting conditions of the Gilded Age set us up for the first revolution in American public health?
- [51:39]
Derek Thompson
I mean, Chicago's a pretty good example. I mean, what you had is we'll take the slaughterhouses in Chicago. Chicago slaughterhouses take the waste after killing the cattle and they dump it into the Chicago River. So what you're getting is incredibly polluted water source which will then go down into Lake Michigan and pollute Lake Michigan, which is the source of water. So you're putting the filth in the water. You're then bring that water back out to become your water source. Under the common law. The argument was those who created the hazard are the ones who have to clear it up. But the packing houses say, no, packing houses say, make us. We're pretty much the center of your economy. You're not going to kick us out, and we know it. So it becomes public health. I mean, in that way, in Chicago, they're blackness mailed into public health. But once they do it, it then becomes a public responsibility. The whole public is taxed to clean up what a few polluters have done. And that's the detriment to it. That's basically unfair. But the good part of it is the public now takes control of it. The public has a tax system where it can tax to build the infrastructure, to put out the ways to get water deeper in Lake Michigan to bring it in to clean up the sewage system. And it takes a long time. There's inequities all through it. But what you're finding is the law itself, the old common law, fails to do it. So what you need to create is a public health network. You're doing it initially, you can argue, to save private polluters the cost of cleaning up their mess. But the end result is going to be a much greater public function and a much greater public responsibility for doing these, these things. And this will take place in city after city, the kinds of things we take for granted that water from New York City is brought in from the Adirondacks. The water for San Francisco comes in from Hetch Hetchy. That all of these water systems and sewage systems which are created and are now in some ways decaying are. This is the sad part. They're products of the Gilded Age and the early 20th century reacting to what I've just described, this basic health and environmental crisis. I mean, we think of environmental crises now as something different, Global warming, the fisheries, something else. But in the 19th century, it was in the cities and it was killing people.
- [54:00]
Rob Mahoney
I wonder what you think the Gilded Age built that is most worth remembering. One could say that the creation of Standard Oil and US Steel required the breaking of so many moral norms. But the existence of an industrial base and a manufacturing sector in America produced enormous dividends for the 20th century. Not just in terms of our ability to win wars, but also in the raising of living standards by the 1930s, 1940s, manufacturing is the most important part of the economy. And blue collar workers in America are not just some of the richest workers in the world, some of the richest workers in the history of the world. JP Morgan, despite everything we talked about, inaugurated or created a model of a central bank that after the Panic of, I think it was 1907 or 1913, created the federal Reserve, which in many ways helped to allay the boom bust cycles of the previous century. In your mind. I feel like I'm leading the witness a little bit here, but in your mind, I didn't even touch on Edison and everything that he invented in this period, which to your very totally wise point, he built because of the invention of a corporate research lab, not just because he was up until 2am inventing incandescent light bulbs by his lonely self. In your mind, what did the Gilded Age build that's most worth remembering?
- [55:33]
Derek Thompson
One of them is the one we just discussed. It built a public infrastructure, began to build a public infrastructure which allowed Americans to live better, live longer and to be in better health. And that's a basic accomplishment. The other one is it does begin to build a transportation infrastructure, which is going to be the railroads. One of the things we neglect about American growth is the United States, unlike Europe, is this single country without tariff barriers between states, which can use the resources of the entire country and bring it together into places that can be thousands of miles apart. To be able to accomplish that is a tremendous accomplishment. Did we do it efficiently? No. Was the technology cutting edge? Very often not, but we did it. And in the end that it becomes the basic source for much of the growth that followed. The other thing we start to do in both labs, like Edison's, and in universities, universities which are beginning to come up at the end of the Gilded Age, is we began to build a way to create knowledge, particularly useful knowledge. We'd always been a nation of tinkerers. We'd always been a nation of inventors, but now we begin to systematize it. We begin to bring it together in a way that this knowledge will be used at least as sensibly for the public good. Those things are a great, great creation. The final thing we do, and it's one that's. That's not so popular anymore, is we begin to create a set of experts out of these things. And those experts organize into organizations which will themselves begin to take that kind of knowledge and try to put it to public use. So I'm less interested in the particular creation because most of those creations will inevitably decay. But the way in which we build, the way that we can constitute constantly create the build the ways we can constantly integrate. And the Gilded Age starts that the Gilded Age realizes. It starts out wanting to be a nation of small producers, and it reaches the end of the 20th century and realizes those days are gone forever. It's what Rockefeller and Edward Bellamy of looking backward have in common. No matter how much you want to romanticize that world, it is gone and it is not coming back. And we better adjust to a new one. That's going to be organization on a scale we have never, ever seen before.
- [57:56]
Rob Mahoney
I think we should end where your book ends, which is gesturing toward the next age of American government, which is the age of progressivism. How did the excesses of the Gilded Age set the stage for the next era of American history and government, which was the birth of the Progressive Era?
- [58:16]
Derek Thompson
I think the best way to understand the Progressive Era and the way they thought about government and the way they thought about American society writing, is they utterly rejected the sort of 19th century social Darwinism, which was never as influential as they say it was, but they said which saw society as an organism and it was going to evolve and you just let it evolve. You didn't interfere. And the progressive see society as a machine. You don't let a machine evolve, you design a machine. When a machine breaks down, you repair the machine. When you can get a better machine, you build a better machines. So progressives begin to think this is as something which is going to have to be created and managed all the time. The great advantage of progressivism is that it did, in terms of distribution, in terms of equity, improve things a great deal, but not universally. Many progressives are racist and other things. But the major drawback to progressivism, and we struggle with it still today, is that in essence it becomes undemocratic because it is. If it's a machine, it depends on experts. And the experts will listen to what the public wants, but then go away and we'll fix it ourselves. And there's a tension in a democracy between rule of experts and having a country which ostensibly is under the control of people through their votes and setting the goals. That tension appears in, in the Progressive era and it has never ever gone away. Anti monopolists might have been romantic, but they saw that coming. And so the progressives are not just anti monopolists in new clothes. They are really people who take the goals of anti monopolism. But the way they go about achieving it is very, very different.
- [60:01]
Rob Mahoney
The book is the Republic for which it stands. It's sensational. The heir is the Gilded Age. Richard Dwight, thank you so much.
- [60:08]
Derek Thompson
My pleasure.