excerpted from the book
a history of wealth and power
in a democracy
by Steve Fraser and Gary Gerstle
Harvard University Press, 2005,
[America] is a democracy. The people rule. And yet the people
do not rule; elites, patriciates, castes, classes have ruled in
Beginning sometime after World War II, and with increasing force
in the wake of the Reagan "revolution," a gathering
consensus concluded that events, "History," the impersonal
forces of the market, or some other analogous abstractions rule,
not classes or elites.
Every president of enduring reputation up to John F. Kennedy is
remembered for some vital crusade against a usurping or entrenched
elite. Washington and Jefferson overthrew the minions of the British
monarchy and then fended off attempts at aristocratic counterrevolution
by home-grown Tories. Andrew Jackson waged war against a "Monster
Bank" that presumed to monopolize the credit resources of
a fledgling nation and turn enterprising citizens into its vassals.
Lincoln purged the nation of its mortal sin by extirpating the
"slaveocracy." Teddy Roosevelt unleashed rhetorical
thunderbolts against those "malefactors of great wealth"
whose gargantuan corporate combines showed no regard for the public
welfare and bought and sold senators and congressmen like so many
pigs at a market. Woodrow Wilson promised, if swept into office,
to take on the "money trust," that financial octopus
whose tentacles were strangling to death the economic opportunity
and democratic independence that were every citizen's birthright.
In the midst of the greatest calamity since the Civil War, FDR
chased the "money changers from the temple" and declared
that his New Deal would henceforth police and punish the "economic
royalists" who had brought on the Great Depression. Even
the mild-mannered Dwight Eisenhower left office cautioning the
country against the overweening power of the "military-industrial
[The] proliferation of power centers ... produced a fissure within
the "leisure class" between those absorbed by their
own self-interest and self-regard, psychologically and politically
deaf and blind to the economic mayhem and social antagonisms accumulating
around them, and a fraction of that same universe-people such
as the Roosevelts, for example, or those to-the-manner-born Establishment
figures of the next generation - who self-consciously took up
the challenge of ruling on behalf of the whole commonwealth, even
if that meant now and then risking the enmity of their social
peers. Within these circles, a sense of social trusteeship subdued
the instinct for self-indulgence.
As late as the 1790s, a powerful group of Anglophiles, calling
themselves Federalists and led by Alexander Hamilton, wanted to
establish a British-style aristocratic republic in the United
States. And they might have succeeded had they not overreached
themselves and, panicked by the French Revolution, imposed repressive
measures that, ironically, caused a democratic opposition to coalesce.
That strategic error opened the way for Thomas Jefferson's election
in 1800 and made ... a "decentralized and ... democratic
structure of power" an enduring feature of American politics.
By 1820, the Federalists had all but disappeared as a political
force. Subsequent elites had to accommodate themselves to a democratic
politics that had become a defining feature of the American republic.
Older elites also accommodated themselves to the New Deal and
found ways to exercise political influence in this liberal age.
The most celebrated was the Establishment, a fragment of the Progressive
Era plutocracy that kept its wealth and its wits during the Great
Depression. These circles did not fall into the rabid hostility
to the New Deal that characterized the plutocracy in general.
Instead, its members found a way to demarcate themselves from
the Roosevelt haters, to nurture links to the New Dealers, and,
when war came in the 1940s, to exercise extraordinary influence
in foreign affairs.
Where the "robber barons" had
no tradition to speak of, and the Morgan milieu still gave precedence
to private over public concerns, the Establishment came closer
than anything else since the first fifty years of the republic
to defining itself in terms of public service... its members were
patricians in the manner of the antebellum merchant grandees and
Virginia planters, convinced that their wealth, education, and
disinterestedness had endowed them with a special capacity for
rule. They disliked the messy world of mass politics but found
ways to tolerate or circumvent it. Ultimately, however, the arrogance
of the Establishment, and its disdain for popular politics in
an age infused with democratic desire, not just in the United
States but throughout the disintegrating European colonial world,
did it in.
Elite rule in a nominally democratic political system seems to
generate counterrevolution ... elite campaigns to roll back or
contain democratic advances... The Constitution ... was meant
to arrest the devolution of power downward and outward into the
middling ranks of the postcolonial world. Gilded Age industrial
titans were likewise driven into the political arena only by social
upheavals on the land and popular eruptions in the great cities.
It was, moreover, the challenge of populism in 1896, more than
the giant corporate amalgamations at the turn of the century which
implanted a nationwide class consciousness among the people ...
The ideological conviction and cultural self-consciousness of
today s conservative elites derive ... from their determination
to reverse what they regard as the revolutionary momentum of the
... the two Roosevelts attempted to police and humanize the marketplace
and, in the process, earned the undying hatred of their peers
as "traitors to their class." While the Establishment
... worked to constrain or defeat revolutionary movements for
national independence all over the world, it also erected a framework
of multilateral relations ...
At Philadelphia, America's aspiring elites flirted with several
reactionary ideas before drafting a form of government that they
believed could legitimize their desire to rule by successfully
appealing to the shared values of the Revolution.
Two-thirds of the fifty-five delegates
who gathered in Philadelphia were rich; three-fifths either came
from genteel families or, like New York's Alexander Hamilton,
had married into one. Most had served in Congress, and three had
been generals in the Continental Army, including George Washington,
who presided over the convention's deliberations. The delegates
agreed to meet in secret sessions with no outsiders present, which
allowed them to be far more candid about the dangers of popular
rule than they would have dared to be in an open forum.
Charles Pinckney, South Carolina delegate to the Constitutional
If slavery be wrong, it is justified by
the example of the world ... In all ages one half of mankind have
Madison, Jefferson, and their Republican allies developed a three-pronged
strategy to prevent the consolidation of a national ruling class
along Hamiltonian lines. First was the argument for "strict
construction" of the federal Constitution, particularly in
regard to the powers of the national government
... The second and most important prong
of Madison's and Jefferson's opposition strategy was the coordinated
mobilization of voters to support Republican candidates in state
and federal elections. In Federalist no. 10, Madison had warned
against the dangers posed by factious majorities, and he had championed
a far-flung polity with large electoral districts as "a republican
remedy for the diseases most incident to republican government.
In the summer of 1798, congressional Federalists, with Hamilton's
encouragement, pushed through the Alien and Sedition Acts aimed
at silencing the government's critics in the Republican press.
Out of desperation, Jefferson and Madison
in the fall of 1798 formulated ... the assertion of residual sovereignty
in the states and of the rights of states to defy federal laws
they deemed unconstitutional.
... What really undermined the Federalists
was the Sedition Act itself. It angered printers so greatly that
they established new Republican newspapers faster than Federalist
courts could shut down the older ones. Between 1798 and 1800,
the number of Republican papers rose by over 50 percent nationwide.
The Federalists' attempt to silence their opponents did just the
opposite: it energized them and prepared the way for a Republican
victory in 1800.
Jefferson's election marked the end of anglicization in American
politics and ushered in a new, more decentralized and more democratic
structure of power-one much closer to that envisioned by the Antifederalists
than by the Federalists during the debates over ratification of
Under this new structure, members of the
middling sort exercised far greater political influence in the
United States than anywhere else in the Western world. In the
early decades of the nineteenth century, the right to vote in
most states was extended to nearly all adult white men. Equally
important, the culture of politics shifted. Ordinary citizens
increasingly expected their elected representatives to reflect,
rather than refine, their views when making government decisions.
Candidates for public office presented themselves as the people's
"friends" rather than as their "fathers."
Yet democratization in the political realm did not produce an
egalitarian social order. Even as they lost political hegemony,
the elites grew richer, and class hierarchy remained an important
feature of American life. In the North, enterprising merchants-most
famously the coterie of Bostonians who erected the nation's first
integrated textile mills at Waltham and Lowell-pioneered new forms
of business incorporation to protect property rights and to promote
capitalist development in lieu of direct federal assistance. In
the South, large planters responded with alacrity and impressive
economic efficiency to skyrocketing global (particularly British)
demand for cotton. In ways not anticipated by the framers of the
federal Constitution, political democracy proved highly compatible
with the preservation and accumulation of private wealth and with
the persistence of economic inequality.
Slavery went unmentioned in Jefferson's famous inaugural address
of March 4, 1801. That speech is rightly celebrated for its inspiring
and conciliatory presentation of the democratic side of Jefferson's
political vision. While he affirmed that "the will of the
majority is in all cases to prevail"-a precept profoundly
at odds with Madison's approach to majority factions in Federalist
no. 10 - Jefferson proclaimed as a "sacred principle"
that the will of the majority, "to be rightful, must be reasonable;
that the minority possess their equal rights, which equal laws
must protect." He envisioned a "wise and frugal government"
that would barely act on society, serving mainly to "restrain
men from injuring one another, which shall leave them otherwise
to regulate their own pursuits of industry and improvement, and
shall not take from the mouth of labor the bread it has earned."
Within this context, he characterized "the general government
... as the sheet anchor of our peace at home and safety abroad,"
yet he called for "the support of the state governments in
all their rights, as the most competent administrations for our
domestic concerns and the surest bulwarks against anti-republican
tendencies." In short, Jefferson limned in his own graceful
words the Antifederalist alternative to the Federalist synthesis
of 1787-88: a continental confederation of sovereign states whose
central authority would possess enough power to repel foreign
intrusion, sell public lands to eager farmers, and deliver the
mail, but play no other major role in the lives of ordinary American
Jefferson and his Republican supporters
repudiated the British model of government in both style and substance.
As president, Jefferson went out of his way not to appear monarchical-to
the point of personally answering the front door of the White
House in slippers and other casual attire. He considered himself
a natural aristocrat but also a true embodiment of the people's
will. Because he possessed abiding faith in the virtue of the
nation's agricultural majority, he was sure that, once freed from
Federalist deceptions, the citizenry would recognize as self-evident
the same political principles and governmental policies that he,
as their president, knew to be right.
Under Jefferson's leadership, the Republicans
abolished internal taxes, shrank the military, and slashed annual
expenditures of the federal government. Although they did not
dismantle the national bank or quash financial markets, by reducing
the size and scope of the federal government, they transferred
much of the responsibility for ruling the country to the separate
state legislatures, where men of modest fortunes and middling
status held more sway than they did in Congress. As a result,
the locus of political power shifted downward in the social order,
though not below the ranks of propertied white men.
The devolution of political power from
natural aristocrats to men of the middling sort had begun during
the 1780s, when localists wrested control from cosmopolitans in
many state legislatures. The process was interrupted, even reversed,
in the 1790s, when Federalists dominated the national government
and promoted a program of national integration, if not full-fledged
consolidation. With the Jeffersonian victory in 1800, state governments
once again became key battlegrounds in political disputes over
fiscal policy and economic development.
During the 1850s, fear of the "money power" gave way
to fear of the "slave power" in the North, and in 1860
Abraham Lincoln was elected president on a platform firmly committed
to the containment of slavery. Before he even took office, leaders
of the lower South-citing the Jeffersonian doctrines of 1776 and
1798 but defying the principle of majority rule-fulfilled the
threat made by South Carolina's delegates at the Constitutional
Convention of 1787: they took their states out of the Union.
The outbreak of the Civil War confirmed
Hamilton's darkest forebodings about the dangers of fragmentation
and democracy. In the absence of a national ruling class, the
American republic imploded.
How is it possible for a minority of citizens to get their way
time after time in an ostensibly democratic polity? That question
became central to northerners' discovery of a "slave power"
in the United States beginning in the mid-1830s. The slave power
signified not the power of slaves but the power that accrued to
slave owners by virtue of their owning slaves. Antislavery critics
charged that slave owners exerted power far out of proportion
to their numbers, and that they used their power to enlarge the
realm of slavery in violation of the country's founding tenets
of liberty and equality. The enlargement of slavery, critics argued,
threatened the rights of free people and corrupted the republic.'
As John Gorham Palfrey of Massachusetts wrote in 1846, the founders
of the United States would have been appalled to learn "that
a vast majority of the high offices in all departments [of government],
including nearly three-fourths of the offices in the army and
navy, had been held by slave-owners, that slavery had been the
great dictator of its policy, foreign and domestic, and that at
this moment none but slaveholders were ministers of the nation
at any foreign court, though there are more than three millions
of voters in the country, and only one hundred thousand of them
There was more than paranoia in Palfrey's
lament. Slave owners wielded power in the United States from the
American Revolution to the Civil War. The slave power originated
in the combination of terror and succor that slave owners used
to rule over enslaved people and compel them to labor. The wealth,
standing, and reputation that slave owning gave to slave owners
enabled them to assert political leadership among the broader
free population throughout the southern United States. Then constitutional,
partisan, and ideological mechanisms translated slave owners'
regional power into national power, resulting, as Palfrey observed,
in the conspicuous presence of slave owners in the highest echelons
of American politics. Slave owners disagreed among themselves
on many important political issues, yet they formed a dominant
element in the constellation of political forces that governed
the country and protected slavery through the first half of the
Abraham Lincoln's election to the presidency in 1860 finally convinced
southern slave owners that the only way to protect slavery, and
with it their whole way of life, was to have their own country.
The self-defense of slavery culminated in the secession of eleven
southern states and the formation of the Confederate States of
America; but secession turned out to be the downfall of the slave
power. It precipitated a war that ultimately linked the fate of
slavery to the survival of the Confederacy, and as the Confederacy
fell, so too did the slave system it was formed to protect. This
outcome was not part of some grand design but was accomplished
piecemeal during the war and in its wake as a consequence of complex
military and political pressures. In the end, defeat and emancipation
destroyed slave owners as a ruling class and forced the vestige
of that class to reconstitute itself in a new world of "free
labor" and black citizenship.
There were approximately eighty thousand house holds with slaves
in the United States in 1790, making up around 15 percent of all
American households. Although slave owners lost tens of thousands
of slaves during the Revolution, they retained almost 700,000
slaves, or roughly 18 percent of the total population of the United
States, under their dominion. Slavery was legal in every state
except Massachusetts, but slave owners were largely concentrated
in the southern states of Maryland, Virginia, North Carolina,
South Carolina, and Georgia. In none of these states were slave
owners a majority. Even in South Carolina, the state most thoroughly
identified with slavery, slave-owning households constituted only
one-third of all households. rice, and indigo - the three major
commodities grown by slave labor - accounted for almost one-third
of the value of the new country's exports.
Thomas Jefferson, about slavery, in 'Notes on the State of Virginia'
I tremble for my country when I reflect
that God is just.
In 1830, 69 percent of the most affluent Bostonians (those in
the top 1 percent of asset holders) were merchants. This top 1
percent owned 16 percent of the city's taxable assets in 1820,
33 percent in 1833, and 37 percent in 1848. By 1860, Philadelphia's
wealthiest 1 percent of the population owned o percent of the
city's assets. In New York, the concentration of wealth was even
greater: about nine thousand individuals - 1.4 percent of New
York's inhabitants, most of them merchants - owned roughly 71
percent of the city's real and personal wealth in the mid-1850s.
In the wake of the industrial revolution during the 1830s and
beyond, the mercantile community increasingly came under pressure,
especially from a newly emerging group of powerful artisans-turned-manufacturers
and an ever more mobilized and enfranchised populace. Most significantly,
the mercantile elite faced a challenge from "a rising industrialist
class." These men had accumulated capital in novel ways,
and largely outside the older kinship and social networks of the
northern mercantile elite. By the 1840s they were showing up in
the higher ranks of the tax rolls at a remarkable rate. The majority
of manufacturers were artisans who had expanded their shops and
transformed themselves into entrepreneurs. As one historian observed,
by mid-century "they were knocking at the doors of political
power and social prestige so long guarded by their commercial
The industrial revolution came late to
the United States, compared to England. But once it came, it arrived
vigorously. As elsewhere, cotton spinning expanded first as merchants
invested some of their capital in spinning mills built along the
fast-flowing rivers of New England and the mid-Atlantic states.
After 1830, railroads began crisscrossing the United States, devouring
fabulous amounts of capital and eventually spurring the growth
of coal mining, along with iron and steel production.
Merchants, emphasizing the importance of stability and predictability
to their business enterprises, shunned disruptions of any kind,
and desired a society orderly in its domestic relations and peaceful
in its relations to the larger world. To them, order still depended
to some extent on social hierarchies, and thus they struggled
to maintain their position as stewards of the community. They
also embraced an internationalist outlook, seeing themselves as
the bearers of a fundamentally cosmopolitan spirit, an outlook
undoubtedly strengthened by the memory of the devastating impact
that the War of 1812 had had on their business undertakings.
The merchants' worldview, meanwhile, contrasted sharply with that
of manufacturers, which emphasized the ingenuity and inventiveness
of America's mechanics as the basis for the United States' rapid
economic development. Furthermore, manufacturers were often hostile
toward the mercantile elite, whom they saw as non-producers living
off the labor of others, agitating for free trade, importing cheap
goods from Europe, and providing credit on harsh terms. American
industry, they believed, was a "wide-spread elm, with scores
of parasites clinging to its trunk," namely, merchants and
bankers)'6 Manufacturers asserted that, "unlike commerce,"
industry consists not merely in the exchange of goods but in "giving
them a new form and greatly increased value." Therefore,
"as an agent of civilization, all other pursuits fade before
it." Manufacturers often saw themselves as part of the "producing
classes," or just as "labor," drawing a dividing
line between themselves and the commercial or financial bourgeoisie.
Indeed, while historian Sean Wilentz correctly noted that "the
defense of the 'producing classes' [included] an amalgam of 'honorable'
anticapitalist small masters and wage earners," it also allowed
more substantial manufacturers to rally under the banner of an
ill-defined but deeply rooted producerism. This set manufacturers
clearly apart from the mercantile elite and, even more so, its
Central to the manufacturers' worldview
was a positive attitude toward labor, which was perhaps not surprising,
considering that many of them had risen out of the ranks of the
working class themselves. Glorifying the "mechanic arts,"
they saw "the dignity of labor ... in its results, and not
in the form of employment." For these manufacturers, free
labor was the basis of the republic, and in order to secure opportunities
for all, the prospects for industry and agriculture had to be
promising. Expanding opportunities for farmers, in effect, were
to defuse the rising tensions between industrialization and democratization.
Horace Greeley, the publisher of the New York Tribune and a leading
spokesman for this position, wanted for "each man ... an
assured chance to earn, and then an assurance of the just fruits
of his labors." To secure the promises of free labor, America's
fledging industries needed protection and farmers undisturbed
access to the rich lands of the West-a political program that
brought manufacturers into sharply drawn conflict with the nation's
Most of the nation's manufacturing was, in the 1880s and 1890s,
contained within a narrow belt that extended from New England
south through Pennsylvania and west through Ohio and parts of
the upper Midwest. Outside this manufacturing belt a large and
increasingly vocal segment of the population in the prairie and
southern states was convinced that it was being robbed of its
rightful share of the nation's newfound wealth by eastern capitalists
who controlled the nation's railroads and set its monetary policy.
It was these "agrarians," organized
into what became known as the Grange or the granger movement in
the 1870s and 1880s, and thereafter the National Alliances and
the People's Party, who posed the greatest challenge to the business
elites. Unlike the industrial workers, the agrarians had sufficient
votes in the statehouses and in Congress to translate their suspicions
of capital into legislation designed to rein in its manifest powers.
The agrarians' chief concerns were with
the railroad officials, who, they believed, were overcharging
them, and the upholders of the gold standard, who were taking
money from their pockets by deflating commodity prices. While
the question of the gold standard would be effectively removed
from the political agenda in the late 1870s, the question of railroad
rates would dominate the prairie state legislatures throughout
the 1870s and into the 1880s.
The issue of railroad regulation was,
in fact, the Trojan horse with which the politicians would breach
the walls protecting the economy from their interference. As corporations
chartered by the states, funded by them and by Congress, and charged
with moving the mails in peacetime and the troops in wartime,
the railroads were tied to government in a manner quite different
from other big businesses.
By the late 1880s, the Senate was already known as the "Millionaires'
Club" in recognition of the many businessmen who served there,
in large part to protect the interests of their regions and/or
There was, it appeared, only one issue on which all the business
interests could agree, and that was on the necessity of maintaining
the gold standard against those who wanted to inflate the currency
by coining silver. Those who held large amounts of capital, no
matter how or where it had been accumulated, did not want the
value of that capital diluted by inflation; those who bought and
sold securities in Europe (and that included most major bankers,
merchants, manufacturers, and railroad directors) feared that
an unstable dollar, not backed by and convertible to gold, would
be disastrous for business.
The Gilded Age millionaires' rhetorical adherence to the doctrine
of the survival of the fittest," first articulated by Spencer
and seized upon by a generation of businessmen, was not, as has
been so often and so mistakenly implied, a commitment to competition.
It was rather a celebration of the fruits of such competition:
bigness, monopoly, and trusts. The fittest firms and businessmen
had survived because they had bested, then eliminated, their competition.
This was evolutionary progress in its purest form.
There had appeared on the horizon a new political party, the People's
Party or Populists, which had as its raison d'être bringing
into the political arena agrarian demands for a decentralized
(and therefore inflationary) banking system, tighter antitrust
legislation, and the free coinage of silver. The Populists, in
their first election, in 1892, had
When the agrarian activists who had already formed their own Populist
Party took over the Democratic Party and nominated William Jennings
Bryan of Nebraska on a free silver platform, the die was cast.
Bryan-and the Democratic platform-made it clear that, if elected,
he intended to extend the political realm to encompass economic
policy making that had once been excluded from it: "We say
in our platform we believe that the right to coin and issue money
is a function of government." The platform also made explicit
the Bryan Democrats' intention to enlarge "the powers of
the Interstate Commerce Commission" and provide for regulation
of the "railroads as will protect the people from robbery
and oppression." There were also planks denouncing Republican
tariff policy for enriching "the few at the expense of the
many" and pledging reform.
The nomination of Bryan on such a platform
forced the business elites to look past their sectoral and regional
differences and unite behind the Republican candidate, William
McKinley, who stood for the gold standard...
The class coalition that formed to protect the economy-and future
prosperity-from the ravages of silver continued in place even
after the defeat of Bryan in 1896. With the exception of the western
silver interests, businessmen from every region and every sector
remained united not only against free silver but in opposition
as well to a decentralized banking system which, they believed,
would be structurally biased toward the overextension of credit.
This is not the place to discuss the movement
for banking reform in any detail. Suffice it to say that no mobilization
of business elites had ever been as broad or as deep or as persistent
as the one assembled in the New York Reform Club's currency committee,
the Sound Money Committees attached to city and state Chambers
of Commerce, the businessmen's clubs and associations formed to
support and fund the McKinley campaign, and the National Sound
Money League, which was chartered in 1896 to carry on the campaign
"for national honor and sound money" after McKinley's
The class mobilization that occurred around
the defense of the gold standard was critically important because
it cemented the political strategy that would carry the business
elites into the Progressive Era and the twentieth century. The
business elites had discovered that the best way to protect the
economic realm from political interference was to circumscribe
The business elites had been able to turn back the Populist threat
by outsized funding of their candidates and their messages and,
as important, by launching a preemptive ideological attack on
the notion, so central to the Populists, that in a democracy,
the people, through their elected representatives, had not only
the right but the obligation to determine economic and monetary
policies. The economic realm, as Herbert Spencer, and before him
Adam Smith, had taught the businessmen, and the businessmen now
attempted to teach the nation, was self-regulating and self-correcting.
It had to be left alone to obey its own evolutionary laws, not
those of the politicians. Democracy had its limits, beyond which
voters and their elected representatives dared not trespass
lest economic calamity befall the nation.
[Banking is] the privilege of taking the golden eggs laid by somebody
I think I can say with pride that we have
legislators [U.S. Congress] that bring higher prices than anywhere
in the world.
Of all the forms of tyranny the least
attractive and the most vulgar is the tyranny of mere wealth,
the tyranny of a plutocracy.