The American economy in perspective

Today, many Americans puzzle over why the Great Recession happened. Amazon lists more than 1,000 books on the subject. But readers today might benefit from taking a longer view. Because, as Frederick Lewis Allen told the tale in The Lords of Creation nearly ninety years ago, the conditions that arose in the Gilded Age and the Roaring Twenties and lay at the root of the Depression bear an uncanny resemblance to those of the current era beginning late in the 1970s.

To understand why the Great Recession happened, start here

The Lords of Creation: The History of America’s 1 Percent by Frederick Lewis Allen (1935) 442 pages ★★★★☆

Wall Street during the bank Panic of 1907, one of many forerunners to the Crash of 1929. Image: Wikipedia

Common themes in America’s economic history

“Run out and buy Europe for me.”

The Progressives and the muckrakers

Contrasting Big Business in 1929 with today’s

Forerunners of the tech giants

Does any of that sound alien today in the age of Google, Apple, Facebook, and Microsoft? In a world where the managers of the top hedge funds take home pay of a billion dollars or more every year? Does the “pro-business” orientation of the Reagan, Clinton, Bush, and Trump administrations sound notably different from those of the men at the helm of the nation in the 1920s? And do the reforms introduced in the 1960s and under Barack Obama seem to have made enough of a difference to prevent another major economic reversal? Economists say they haven’t.

The men who defined capitalism as we know it today

The bankers

J. Pierpont Morgan (1837–1913), the grand old man of Wall Street. Allen calls him “Old Jupiter.” Architect of United States Steel, International Harvester, General Electric, and other market-dominating corporations. As Wikipedia notes, he “dominated corporate finance on Wall Street throughout the Gilded Age.” He was widely quoted to insist to an inquisitive reporter who asked him whether he owed the public an explanation about the stock market panic he had helped cause that “‘I owe the public nothing.’” His bank morphed into today’s JPMorgan Chase & Co. through many, many mergers over the years. Today, it’s by far the biggest bank in the US.

George F. Baker (1840–1931), Morgan’s right-hand-man. President of the First National Bank whom Allen describes as “solid, tenacious, and silent.” According to Wikipedia, “at his death he was estimated to be the third richest man in the United States, after Henry Ford and John D. Rockefeller.” As TIME magazine said of him in its 1924 cover story, “True, he is twice as rich as the original J. P. Morgan, having a fortune estimated at 200 millions. True, at the age of 84 when he has retired from many directorates, he dominates half a dozen railroads, several banks, scores of industrial concerns.”

James Stillman (1850–1915), “the brilliant and cold-blooded president of the National City Bank,” forerunner of today’s Citibank. Under his leadership, the bank may have become the biggest in the Western Hemisphere and was certainly the biggest in the US. As an investigation by the House of Representatives revealed, “the indirect influence of Morgan, Baker, Stillman, and their aides was prodigious.”

Jacob H. Schiff (1847–1920), German-born Jewish American banker, businessman, and philanthropist. In Allen’s words, “the shrewd and kindly head of the banking house of Kuhn, Loeb & Co.” Foremost Jewish leader in the United States for the last four decades of his life. At first, a rival to J. P. Morgan, later a close collaborator.

The industrialists

John D. Rockefeller (1839–1937), founder of Standard Oil, which trustbusters spun off into companies that today have the names ExxonMobil, Marathon Petroleum, Amoco, and Chevron, among others. The world’s richest man in his day. Some scholars estimate he would be worth $400 billion today, although I’ve seen other estimates putting the total at around $175 billion, which is slightly less than the net worth reported for Jeff Bezos of Amazon and Elon Musk of Tesla and SpaceX.

Edward H. Harriman (1848–1909), who built a nationwide railroad empire on the backs of the Union Pacific Railroad through mergers and stock market operations. J. P. Morgan called him “that little fellow Harriman.” The old man’s contempt notwithstanding, Allen points out, “Harriman may thus be regarded as two men in one — a sharp financier on the make, and an extraordinary railroad builder.” He was the father of Averell Harriman, one of the “Wise Men” who dominated US foreign policy in the 1950s and 60s.

The investors and speculators

William K. Vanderbilt (1849–1920), a grandson of Commodore Cornelius Vanderbilt. He was “the indolent chief representative of a family still powerful in the railroad and investment world.” Vanderbilt managed his family’s railroad investments and was active in horse-racing. His daughter Consuelo marrried Charles Spencer-Churchill, 9th Duke of Marlborough, a close friend of his first cousin Winston Churchill.

William Rockefeller (1841–1922), John D.’s younger brother, a cofounder of Standard Oil who turned to speculating in securities. Wikipedia: “He helped to build up the National City Bank of New York, which became Citigroup. He was also part owner of Anaconda Copper Company, which was the fourth-largest company in the world in the late 1920s.”

Henry Huttleston Rogers (1840–1909), a leader at Standard Oil and active in the gas industry, copper, and railroads. According to his biographer: “pitiless in business deals, in his personal affairs he was warm and generous.” Wikipedia: “After 1890, he became a prominent philanthropist, as well as a friend and supporter of Mark Twain and Booker T. Washington.” But in business he was contemptuous of any effort to look into his affairs. In one court case, he “refused to admit knowing where the offices of the Standard Oil Company of Indiana were” and added “‘It is quite immaterial to me what the Supreme Court of Missouri desires me to say to them, other than what I have testified.’”

James R. Keene (1838–1913), “a stock exchange operator of commanding skill and prestige.” He was a Wall Street stockbroker and, like William Vanderbilt, a major thoroughbred race horse owner and breeder.

Still famous, a century later

About the author

For more than three decades, Frederick Lewis Allen (1890–1954) edited Harper’s Magazine. Under his aegis, Harper’s held sway as one of America’s preeminent intellectual journals. He was the author of six books of history and biography, of which The Lords of Creation was the second to be published. Allen held a Master’s degree from Harvard, where he taught for a time before his first job as an editor at age twenty-four at the Atlantic Monthly.

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