[Marxism] Doug Henwood on the new gilded age

Louis Proyect lnp3 at panix.com
Thu Jun 12 12:20:59 MDT 2008

Our Gilded Age
By Doug Henwood

This article appeared in the June 30, 2008 edition of The Nation.

It has become a cliché to say that we live in a new Gilded Age. True 
enough, up to a point. Money, mostly new money, rules politics and 
culture. Corporations merge into ever larger corporations. You have to 
go back to before World War I to match today's levels of income and 
wealth inequality.

In some ways, the second Gilded Age is worse than the first. Sure, we 
live longer now, more of us can read and you don't have to be a white 
man to be able to vote. But to prove my point, consider two big parties, 
thrown 110 years apart.

In February 1897 elite lawyer Bradley Martin and his wife, Cornelia, 
threw a costume ball at the Waldorf. J.P. Morgan dressed as Molière, 
John Jacob Astor dressed as Henry of Navarre and brandished a sword 
covered in jewels, and fifty women dressed as Marie Antoinette. But the 
hosts were so nervous about "men of socialistic tendencies" that they 
surrounded the hotel with Pinkertons and had the first-floor windows 
nailed shut.

In February 2007 Blackstone CEO Steve Schwarzman threw himself a 
sixtieth birthday party for hundreds of his closest friends. Rod Stewart 
sang for about half an hour, earning a million for his efforts. The 
party was at the Seventh Regiment Armory on Park Avenue--just seventeen 
blocks north of the Waldorf. The building has a rich history. In the 
second half of the nineteenth century the Seventh Regiment, nominally a 
state National Guard unit, was a kind of private militia staffed by the 
men of New York's upper class; though they didn't like to fight much, 
they did put down a strike or two. And the armory itself--decorations by 
Louis Tiffany--was built at the end of the 1870s (with private funds) as 
part of an urban-fortress building boom driven by the need to suppress 
the restive working class. We had populists in the heartland, socialists 
in the cities and labor radicals everywhere, who wanted to subdue 
corporate power and redistribute some income. The confrontations were 
sharp and often violent--but that history is largely forgotten. After 
the bomb-sniffing dogs had done their work, the biggest security 
challenge at Schwarzman's party seems to have been keeping the army of 
photographers safely penned up and nosy onlookers out. No worries about 
men with socialistic tendencies climbing in the windows to do their 
revolutionary mischief.

After the Martins' party, there was a huge public outcry at its 
egregious too-muchness, and the couple exiled themselves to England to 
escape their critics. After his party, Schwarzman got a little bad 
press, and some unpleasant questions were raised about the low tax rate 
his private-equity business operates under, but he was hardly driven 
into exile. In fact, Schwarzman remains comfortably lodged in one of the 
most spectacular residences in New York City, a Park Avenue apartment 
that once belonged to John D. Rockefeller Jr.

It's not just the absence of the socialist threat at Schwarzman's party 
that marks the difference between the Gilded Ages, though that's pretty 
striking. The contrast in social pretensions is almost as striking. As 
Sven Beckert shows in his excellent book The Monied Metropolis, the 
elite of the first Gilded Age dressed as royalty at the Martins' costume 
ball because they were consciously trying to project themselves as an 
upper class in a nominally republican, egalitarian society. Our elite, 
though obviously not afraid to spend on a grand scale, often affect a 
"just folks" presentation. So, though Schwarzman has his personal chef 
prepare him stone crabs that cost $400 apiece for a casual Saturday 
lunch, he hired the profoundly middlebrow Rod Stewart to croon at his 
birthday party. And though Schwarzman is usually photographed in a 
business suit, and occasionally in formalwear, many of his Wall Street 
colleagues prefer open-necked shirts and khakis as their work clothes. 
Class conflict was a lot more open, on both sides of the divide, a 
century ago.

Of course, the style of dress that's come to be known as hedge-fund 
casual isn't bought at your local Nordstrom's. A couple of years ago, 
the Wall Street Journal put together a representative outfit that a male 
hedge-funder would wear to work in Greenwich, Connecticut (the epicenter 
of the industry): shoes by Cole Haan, $365; trousers by Ermenegildo 
Zegna, $495; shirt by Armani, $315; messenger bag (no dorky briefcase!) 
by Tumi, $395. Total, not including underwear and socks: $1,570--not all 
that much below $1,874, the average household's annual expenditure on 
clothing in 2006. But that's just for the hedge-fund rank and file; for 
the top guys, who take in a billion a year or more, it's private jets 
and even personal submarines.

Still, that just-folks presentation, even if it does come with a high 
price tag, seems to help encourage aspirational overconsumption by the 
upper middle class. If they sort of look like you, then maybe you can 
sort of live like them. So, outfit the kitchen with a Sub-Zero 
refrigerator and a Wolf cooktop. You won't have an in-house chef to do 
the cooking for you, $400 crabs are a little beyond your reach and you 
may have to tap the home equity line to pay for the appliances--but you, 
too, can feel like a participant in the new Gilded Age. Or could, until 
the job market headed south and the credit markets froze up.

And what about the sources of the fortunes that dominated the two Gilded 
Ages? The elite of the nineteenth century was fresh from building a 
massive industrial infrastructure, like steel mills and a 
transcontinental railroad system. Yes, it came with massive amounts of 
securities fraud (a reminder that financial chicanery is hardly a recent 
innovation in American economic history), not to mention waste, surplus 
capacity and shoddy workmanship. But it did result in the transformation 
of the United States from a relative backwater to a global industrial power.

How did Schwarzman and his colleagues in the private-equity and 
hedge-fund rackets, probably the most prominent members of today's 
overclass, make their money? Mainly by taking over existing assets and 
milking them for fees, dividends and interest payments. Sure, there are 
some new fortunes that come from high technology, but the biggest of 
those are the piles accumulated by Bill Gates and his Microsoft 
colleagues Paul Allen and Steve Ballmer (respectively numbers 1, 11 and 
16 on the Forbes 400 list). Microsoft has made its money mainly from the 
monopoly status of its mediocre Windows operating system. The 
encouragement of innovation is one of the most common rationales for the 
accumulation of large fortunes put forward by the system's publicists, 
but it would be hard to name any significant ways Microsoft has been an 

Oh, and there's the Walton family (three tied at number 12 and one at 
16), whose fortune comes from Wal-Mart, whose low prices have helped the 
working class cope with the downward mobility that Wal-Mart has helped 

People on the left are always looking to recession or worse as some sort 
of wake-up call to the masses, who were narcotized during the boom times 
but will be awakened by harder times. The historical record on this 
isn't all that encouraging. There was the great example of the 1930s, 
but that may be the exception that proves the rule, since it was so 
extreme. We aren't likely to see a 25 percent unemployment rate again, 
as we did in 1933, and it's hard to wish for a rerun, unless you like 
the idea of putting 30 million more Americans out of work to make a 
political point. The 1950s, a decade that saw two recessions; the 1970s, 
a decade known for a deep recession and persistent stagflation; and the 
early 1980s, when the economy experienced its worst downturn since the 
1930s, are not known for progressive mobilization.

But you do have to wonder what will happen to the political culture now 
that the second Gilded Age seems to be drawing to a close. (The fact 
that Schwarzman and his partner, Pete Peterson, took Blackstone public 
in 2007 suggests that they agree: it looks like they were cashing in at 
a market top, as I suggested in the July 16/23, 2007, issue of this 
magazine.) The housing bust will probably be a drag on the economy, and 
on household finances, for quite some time; and the job market, which 
turned in its weakest performance of any post-World War II expansion 
between 2001 and 2007, is now contracting and likely to continue to do 
so. The first Gilded Age was succeeded by the corporate-friendly reforms 
of the Progressive Era--but whatever small-p progressive content they 
had was stimulated by all the political ferment during the boom. It's 
likely we'll see some kind of re-regulation of the economic system in 
the coming years, but what kind and how much will we see, when the fat 
years were so politically quiescent?

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