Inequality of the Gilded Age
In class, we have discussed what it means to have an inequality of bargaining power, in which one party to an agreement has more favorable alternatives than the other party. In real life, this happens quite often, and parties are often not equal in their power to dictate terms and conditions, which makes it more likely that one party gets off with a better deal than the other.
Few historical examples elucidate this fact more clearly than the rampant social and economic inequality that characterized the Gilded Age of American history.
The term “Gilded Age” itself implies a period of history that could be seen as resplendent on the surface but brutal and corrupt underneath. Driven by the second Industrial Revolution, the Gilded Age saw rapid economic growth as large corporations took footing, unprecedented technological innovations were made, and an influx of millions of European immigrants flooded into the United States. The labor force expanded substantially as did overall wages, as improved transportation and revolutionary business practices combined to fuel overall economic growth.
Yet, this newfound prosperity was concentrated into the hands of the few, as financial trusts, monopolies, and “robber barons” of the likes of Rockefeller, Vanderbilt, Morgan, and Carnegie ran rampant during the time period and often exercised unjust and unethical practices to heavily exploit others and amass their great wealth. This was a period of pure, unchained capitalism. Because of the extreme supply of labor, many were left without jobs. Economic insecurity and downright poverty ran high, especially in urban areas, and crowded, unsanitary, crime-riddled tenements were essentially a sad fact of life for many during the Gilded Age. Moreover, the same economy that gave corporate titans the ability to amass among the largest fortunes in the history also required a massive amount of unskilled labor. Thus, those who found themselves a job in the industrial line of work often experienced extremely dangerous working conditions with no compensation for injuries, long working hours, and meager wages. Tweed’s Tammany Hall offered a front that provided services to the poor. However, even then, most of the revenue went right into Tweed’s own hands.
In essence, the root of the nation’s rapidly expanding underclass stemmed from the fundamental inequality of bargaining power held between them and the corporate giants. While many low-skill workers were vying for a limited number of jobs in an effort to sustain themselves, monopolies possessed an astronomical number of pleasing alternatives. In this case we can think of the corporation as a node linked to a large number of potential workers contending for its attention. Even if the corporation were not constrained to only making one interaction, we can see that it is in an obvious position of power. The monopoly can choose from a plethora of workers, while the workers, being relatively unskilled, have few other places to turn to (other large corporations they turn to will also be in similar positions of power). As such, potential workers have to offer the corporation “more” from their end (leading to worse working conditions) in order to be considered in an interaction with the corporation. In essence, corporations of this time period had very attractive outside options, while laborers did not.
The rise of labor unions was an effort by the disenfranchised workers in an attempt to organize and ban together to muster more power for themselves. Workers quickly realized that they had no chance in being heard under the combined forces of industrial owners and the government unless they coalesced into a group effort.
Needless to say, while social, economic, and political inequality certainly still exist today, conditions are better than they were before.
http://www.theatlantic.com/magazine/archive/2007/06/the-dark-side-of-the-gilded-age/306012/