Although there are a few differences, the parallels between the Gilded Age and the present day are striking.
During this period, extreme wealth imbalances, hyper-partisanship, virulent anti-immigrant prejudice, and heightened concern about money in politics became widespread. Union-busting, cheating, intimidation, and violence are all back in vogue. Using political connections to gain an edge is a common practice once again. Isn’t it strange how similar things have happened?
The Rise of the Financial Industry
Personal, consumer, and corporate financial services are the three main categories of business in the financial industry. Personal finance includes services such as banking, insurance, investments, and retirement planning. Consumer finance encompasses credit, loans, and debt management. Corporate finance includes activities such as mergers and acquisitions, venture capital, and initial public offerings (IPOs).
The financial industry has grown rapidly in recent decades, and it now accounts for a significant portion of the economy. In 1970, the financial industry made up about 2.5% of the economy. By 2016, it had grown to 8.5%. This means that the financial industry now makes up a larger share of the economy than it did in the Gilded Age and its profits are increasingly going to the top 1%. In 2016, the top 1% of financial workers made an average of $2.7 million, which is more than double what they made in 1980.
In the 1980s, there was a deregulation of the financial industry, making it easier for banks and other financial institutions to engage in risky behavior. This deregulation has led to increased instability in the financial system and has contributed to the 2008 economic crisis. In the 1990s, the industry lobbied for the repeal of the Glass-Steagall Act, which had been enacted during the Great Depression to separate commercial banks from investment banks.
The repeal of this law led to the creation of “too big to fail” banks, which are so large and interconnected that their failure would cause a financial crisis. The crisis led to the bailouts of several large banks, which were deemed “too big to fail.” The bailouts cost taxpayers billions of dollars and contributed to the growth of the national debt.
The financial industry has also been a major source of campaign contributions to politicians and has used its power and influence to get favorable treatment from the government. The industry has benefited from bailouts, tax breaks, and deregulation. The result is an economy that is increasingly rigged in favor of the wealthy and powerful.
The Privatization of Public Services
In the past, public services such as education and healthcare were provided by the government, which means that these services were paid for through taxes and were available to everyone. In recent years, there has been a trend toward the privatization of public services, which means that private companies are now providing these services. Typically, these businesses are for-profit and make money by charging consumers for their goods or services. This has led to a two-tier system in which the wealthy can afford to pay for private services while the poor are left with lower-quality public services.
The privatization of public services has been a boon for the companies that provide these services, but it has been a disaster for the people who use them. Privatization has led to the deterioration of public services because private companies are motivated by profit, not by providing a service to the public, and often cut corners and provide lower-quality services. The privatization of public services also has led to the growth of for-profit prisons, which are motivated by profit rather than by providing rehabilitation or reform. This has led to an increase in the number of people in prison, as well as to widespread abuse and mistreatment of prisoners. Consequently, most people believe that privatization is bad for the economy and bad for society.
The Growth of CEO Pay
Corporate Chief Executive Officer (CEO) compensation has increased dramatically in recent years. In the 1950s, CEOs made about 20 times the average worker’s salary. By the 1990s, they were making about 100 times the average worker’s salary. And, by 2016, they were making an average of 271 times the average worker’s salary. This trend is a result of the growing power of CEOs and the decline of unions. Unions used to provide a countervailing force to the power of corporations, but their power has declined in recent years. As a result, corporations have been able to increase CEO compensation without any checks or balances. This trend has contributed to the growing inequality in the United States, as the rich have gotten richer while the middle class has stagnated.
The high level of CEO compensation is due to several factors, including the deregulation of the financial industry, the trend toward privatization of public services, and the growth of CEO pay relative to worker pay. It is often justified by the argument that CEOs are paid for their performance. However, a study by economists at the University of California, Berkeley found that CEO pay is not correlated with company performance. In other words, CEOs are not paid more because they do a better job, but because they have the power to negotiate higher pay for themselves. This is why many people believe that CEO pay is excessive and contributes to income inequality.
The Growth of Tax Incentives
To attract businesses, produce jobs, and stimulate economic growth, many American cities and states offer financial incentives in the form of tax breaks, loans, and other subsidies. Big tech companies and other businesses have avoided paying billions of dollars in taxes thanks to the growth of tax breaks and loopholes. For example, Amazon paid no federal income taxes in 2017 or 2018 on profits of $11 billion. Meanwhile, small businesses and middle-class families are shouldering a larger share of the tax burden.
The use of tax incentives to attract businesses is a controversial practice. Studies have found that the vast majority of the benefits from these tax breaks go to shareholders and executives, not to workers. Critics argue that it is a form of corporate welfare that benefits wealthy businesses and CEOs at the expense of taxpayers. They also argue that these incentives are often ineffective and a waste of money. Proponents of tax incentives argue that they are necessary to compete for businesses in the global economy. They also argue that these incentives can create jobs and stimulate economic growth.
The use of tax incentives is likely to continue to grow in the United States, as cities and states compete for businesses. This competition can lead to a race to the bottom, as cities and states offer businesses more and more generous tax breaks. This can result in less money for the city or state, and this can lead to cuts in public services. The growth of tax incentives has thus contributed to the decline of the public sector and the growth of income inequality. Instead of providing incentives to businesses that have an actual or potential negative impact on our shared environment and community, a better way to create jobs and spur economic growth would be to invest in public goods and services, education, local job skills, land development, and infrastructure. All of these have a greater return on investment for local economies.
The Rise of Dark Money
Previously, wealthy individuals and corporations could only influence politics by donating to campaigns, and this was a more transparent process. But today, we have something called dark money, which is money that is spent on political activities without the requirement that the donors be identified. This allows special interests to buy influence without being held accountable by the public.
In 2010, the Supreme Court issued a ruling in the Citizens United case that allowed corporations and unions to spend unlimited amounts of money to influence elections. This ruling opened the floodgates for dark money in politics. Since then, dark money groups have spent about $1 billion on ads and mailers to try to influence elections. This has created a situation in which a small number of wealthy people have an outsized influence on our government.
Citizens who are inundated with political advertising paid for by anonymous contributors may be unable to evaluate the legitimacy and possible motives of the wealthy corporate or individual sponsors behind those messages. As a result, dark money has the potential to distort our democracy and create an oligarchy in which a small number of wealthy people have an outsized influence on our government.
In 2012, the IRS launched an investigation into whether dark money groups were violating their tax-exempt status by engaging in political activity. However, the investigation was hampered by a lack of transparency and was ultimately dropped. As a result, dark money groups are now able to operate with little oversight.
Control of the Media
A small number of individuals and corporations now control the majority of the media. Prominent examples of this include Rupert Murdoch, who owns Fox News, and Jeff Bezos, who owns The Washington Post. This concentration of media ownership allows these individuals and corporations to shape public opinion to further their interests. It also can lead to a situation in which the public is only exposed to one side of the story. This can make it difficult for people to make informed decisions about the issues that affect their lives.
Facebook and Google are also major players in the media landscape. Together, they control about 60% of the digital advertising market. This gives them a lot of power to determine what news people see. In 2016, Facebook was accused of allowing fake news to proliferate on its platform. This fake news had the potential to influence the outcome of the presidential election. As a result, Facebook has come under pressure to crack down on fake news. However, it is not clear how effective these efforts have been.