The Concentration of Wealth

Excerpt from "The Concentration of Wealth: Its Economic Justification"

By William Graham Sumner

Written in the 1880s

Reprinted in Social Darwinism: Selected Essays of William Graham Sumner, 1963

William Graham Sumner (1840–1910) was one of the leading social philosophers during the period of the Industrial Revolution known as the Gilded Age, which began in the early 1860s and extended to the turn of the century. The Gilded Age was marked by a rapid growth of industrialism and big business throughout the United States. Many Americans objected to the political and financial power the industrialists and big corporations gained during these years and were concerned that some businessmen were becoming very wealthy while a large number of workers were barely able to live on their wages. By the 1880s citizens were demanding the government regulate big business in order to lessen the influence of the giant corporations and their leaders. Sumner spoke with passion and intelligence against this call for reform. He strongly opposed government intervention in the economy and workplace. He believed that the possible effects of such interference were not understood by those requesting it and could damage the progress of the nation through a lack of understanding of possible consequences.

Sumner was born into a modest home in Paterson, New Jersey, to parents who had emigrated from England. His father, an uneducated machinist, loved reading and believed deeply in the value of education. Sumner went to public schools in Hartford, Connecticut, and in 1859 he entered Yale University. After graduation he went to Germany and England to study for the Episcopal priesthood, and in 1870 he became rector of a church in New Jersey. However, he soon found that his interests lay in social and economic matters rather than religion. Sumner left the ministry in 1872 when Yale invited him to accept a newly created position as the head of political and social science at the university. During his employment at Yale he helped develop the new field of sociology (the scientific study of human behavior), which had been founded several decades earlier in Europe. Sumner helped set the framework for the study of sociology in the United States, replacing philosophical contemplation of human behavior with scientific analysis. He became known as one of the college's most effective educators.

While he was a student Sumner read a series of articles by English philosopher Herbert Spencer (1820–1903) that were later collected in the book The Study of Sociology (1873). Spencer first used the phrase "the survival of the fittest" and argued that the wealthy and powerful took their place at the top of society because they were the best adapted to their environment, while those who did not compete well became poor and eventually died out. He developed his theory based in part on the work of biologist Charles Darwin (1809–1882) and the theory of evolution, which stated that all plant and animal species changed over time because of biological differences passed from one generation to the next. Spencer's social Darwinism, which promoted the idea that people succeeded or failed due to certain natural laws (principles that originated only in nature and governed human interactions) was considered by many to promote a laissez-faire system, or one in which the government did not interfere with commerce and industry beyond the minimum necessary. Sumner was particularly drawn to Spencer's view that natural laws dictated human survival, and the philosopher's ideas about society remained a strong influence on Sumner over the years.

Sumner considered himself to be a scientist of society. He took some of the most well-loved American concepts—democracy, equality, rights, duty, liberty—and examined them in their purest forms, without the emotions people usually attached to them. In his writings he tried to base his search for truths about the world on factual evidence rather than on feelings, reasoning, or imagination. Sumner believed social progress could only be determined in this way, and that investigation using only ideas and theories rather than hard evidence lacked practical use. In his early years as a professor at Yale, he was fascinated by the social and economic aspects of the industrializing nation. He measured the success of the new society in material terms, particularly in how effectively its technology and industry had transformed the nation's resources to make human life better. During the 1880s, when Sumner wrote his article "The Concentration of Wealth," industrialization had brought about an overall rise in the national earnings and placed more products on the market. The average standard of living had been raised, which Sumner believed proved his theories to be correct.

Reformers, socialists, and labor leaders, however, disagreed with Sumner's positive view of society and spoke out against the majority of the nation's wealth being held by just a few people. In 1860, 2 percent of the U.S. population owned one-third of the nation's riches. This state of economic distribution was called concentration of wealth, which meant that most of the nation's capital (wealth or goods devoted to the production of other goods) belonged to a very small portion of its people. In contrast, by 1890 eleven million of the country's twelve million families earned less than $1200 per year. For this eleven million, the average annual income was $380, well below the poverty line. Industrial workers lived in overcrowded cities, received low wages, and worked long hours in dangerous and unhealthy conditions. Young children worked in factories. Manyofthe nation's laborers were victims of racial and gender discrimination. A large number of people believed that the democratic ideal pictured by the men who had written the U.S. Constitution had been destroyed by the rise of huge corporations. While a small group of Americans became rich and passed their money from generation to generation, others were born into poverty they could not rise out of. The reformers believed this went against the American notion that all men were created equal.

In the late nineteenth century, corporate monopolies were on the rise. A monopoly is the exclusive possession or right to produce a particular good or service, or the ownership of all companies producing a certain product. When corporations found that competition among them was driving prices down and lowering their profits, the largest companies began to work together, dividing up territories to limit competitors within an area. Without competition, the companies could set higher prices for their goods. The combined businesses became large and powerful creations that could remove unwanted competition. The first trusts were also being organized in this period. A trust was formed when several companies in the same industry joined their properties and stocks together under a single board of trustees who then ran all the companies. As the trusts got bigger and stronger, they were able to buy out more and more of their competitors, and it became nearly impossible for new companies to get started. Capital became concentrated in just a few huge corporations, particularly transportation and heavy industry, which includes industries such as steel and oil refining that convert large volumes of raw materials into products of higher value, usually requiring a very large investment in large machinery.

The monopolies produced millions of dollars for a few industrialists, such as financier J. P. Morgan (1837–1913), steel businessman Andrew Carnegie (1835–1919), and oil refiner John D. Rockefeller (1839–1937), who became a billionaire by the early twentieth century. J. P. Morgan's United States Steel Corporation was the nation's first billion-dollar enterprise. Some Americans saw these industrialists as robber barons, ruthless men who cared only about their own fortunes, but others, including Sumner, considered them captains of industry and credited the progress and financial health of the country to their daring, if often dishonest, business deals. But it is worthy to note that Sumner did not like or trust the robber barons of his day. He was a very proper man who, on a personal level, found their corruption contemptible. But he did not believe it was the place of the government to interfere with their work, and he feared that the government was more likely to become corrupted by business than to eliminate the corruption.

Things to remember while reading the excerpt from "The Concentration of Wealth: Its Economic Justification":

• Sumner was highly influenced by Darwin's theory of evolution, especially his thoughts on natural selection. Darwin concluded that some individuals in a species were better equipped to find food, survive disease, and escape predators than others. He reasoned that these individuals were more likely to survive, mate, and produce offspring, while those that were not as well adapted to their environment were less likely to prosper. As a result, each generation of a population would consist of individuals that were better and better adapted to their environment, and the characteristics of the population would change to reflect this. Darwin believed these changes took place at a biological level, however, and had nothing to do with human social organization.
• In "The Concentration of Wealth," Sumner argues against the belief system of the Enlightenment, a philosophical movement that arose in seventeenth- and eighteenth-century Europe. The Enlightenment, also called the Age of Reason, celebrated the rational powers people used to help them understand the universe. Enlightenment philosophers believed that through self-examination and the use of reason, humans could achieve their highest goals: knowledge, freedom, and happiness. Sumner did not believe these goals were necessarily something that could, or should, be pursued, and he maintained that no human being who worked for a living was truly free.
• Toward the end of the excerpt Sumner defends the industrialists by comparing the telegraph system, which was created before the rise of big business, and the telephone system, which was invented after corporate practices were in use. Samuel F. B. Morse (1791–1872) first demonstrated his telegraph machine in 1837, but it was not until 1843 that he succeeded in convincing Congress to pay for a test line to be installed between Baltimore, Maryland, and Washington, D.C. Although the experimental line worked, communication remained limited to stations linked by a cable, and few people had the money or technical knowledge to attempt to build lines to cross the entire country. By the 1850s a small number of promoters and stockholders began to organize local companies to install cables. A line was completed in California, and gradually investors ran cables to other locations. Despite the country's great need for a communications system, progress remained slow, and it was not until 1866 that the first successful transatlantic telegraph connection was established between Europe and the United States.
• When Alexander Graham Bell (1847–1922) invented the telephone, however, U.S. businessmen moved quickly. Bell patented his design in 1876, and the Bell Telephone Company was formed within a year. By 1880 there was already one telephone for every one thousand people in the United States. Theodore N. Vail (1845–1920), Bell's operations director, built the American Telephone and Telegraph Company (AT&T) to provide long-distance calling to Bell customers. The first long-distance lines from New York City to Albany, New York, and Boston, Massachusetts, werebuilt in 1887, and new lines began to open steadily thereafter, offering instant communications nationwide and eventually worldwide. By 1899 the net worth of AT&T was approximately $120 million, and the company had essentially monopolized U.S. long-distance service.

Befooled: Deceived.

Deductions: Conclusions reached through reasoning.

Dogmas: Ideas that are widely held to be true but are not proven by facts or evidence.

Analogies: Comparisons based on things resembling each other.

Republican: Characteristic of a state in which the supreme power lies in the body of citizens who vote for the officers and representatives of their government.

Democratic: Characteristic of a state in which the majority rules and social equality is in some way enforced. A democracy is governed by its people, usually through a system of representation involving regular free elections.

Joint-stock companies: Groups that form business organizations and sell shares of the organizations to people who then claim part of the profits as well as the business risks.

Oligarchies: Ruled by a small, powerful group.

Monarchies: Ruled by a single person who rules with absolute authority.

Vigor: Intensity.

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What happened next …

Sumner's beliefs were based largely on his distrust of government and its interference with the economy. He was not a supporter of big business. As years passed, he observed with great unease the influence of the industrialists and capitalists on the government, and he remained uncertain about the possibility of human progress throughout his life. Late in Sumner's career he began exploring the evolution of social institutions such as religion, marriage, and family. His most famous work, Folkways (1907), was about social customs and mores, the informal group habits that emerged and shaped society.

Despite Sumner's assurances that the general public was better off with a market free from government interference, during his life the nation experienced three economic depressions, one in 1873, one in 1884, and the last, which was especially destructive, in 1893. Many labor strikes against large corporations and railroads ended in violence during these years.

Observers such as newspaper editor Henry Demarest Lloyd (1847–1903) disagreed with Sumner's philosophy. Lloyd was an early reformer who fought against the concentration of wealth. He became one of the leading journalists of the late nineteenth century after writing an article criticizing the Standard Oil monopoly for the Atlantic Monthly in 1881. With this article he became the first, and one of the best-known, muckrakers, journalists who investigated and exposed the dishonesty and misconduct of corporations and their leaders. His attack on Standard Oil and other monopolies was the focus of his 1894 book Wealth Against Commonwealth.

The national protest against big business finally moved the U.S. government to attempt to restrain the monopolies, although few politicians wanted to fight against the powerful corporations. The Sherman Antitrust Act was passed by Congress in 1890 in an attempt to break up corporate trusts that limited competition or restrained trade. The language of the act, though, lacked a clear explanation of what exactly restraint of trade was, which meant the nation's courts had to try to define the term themselves. Federal judges were as reluctant as Congress to challenge big business. In the decade after the act's passage, the federal government prosecuted only eighteen antitrust cases, and court decisions did little to break up monopolies. The demands of the reformers did not lessen, however, and at the beginning of the twentieth century, government began to strongly regulate business. In 1911 the U.S. Justice Department won important victories against two monopolies, breaking up John D. Rockefeller's Standard Oil Company of New Jersey and James B. Duke's American Tobacco Company. These decisions demonstrated a new national intolerance toward monopolistic trade practices.

Did you know …

• Sumner's belief in the concentration of wealth in the hands of the few was complicated by the fact that some of the millionaires he defended were not behaving very gracefully at that time. A description from "Andrew Carnegie: The Gilded Age," in American Experience: PBS, describes the upper-class New York scene: "Americans who achieved wealth celebrated it as never before. In New York, the opera, the theatre, and lavish parties consumed the ruling class' leisure hours. Sherry's Restaurant hosted formal horseback dinners for the New York Riding Club. Mrs. Stuyvesant Fish once threw a dinner party to honor her dog who arrived sporting a $15,000 diamond collar." Sumner himself was a very moral and economical man who disapproved of such wasteful spending.
• Although Sumner's beliefs were highly varied he was generally considered to be a follower of conservatism, a political philosophy that valued traditions and institutions that were already established and sought to avoid sudden changes.

Consider the following …

• Was the concentration of wealth during the Gilded Age a positive or negative factor in the development of the American society? Prepare yourself to participate on either side of a debate on this issue. List at least five arguments for the reformers who sought government regulation over the corporations and more equality in the economic system. Then list five or more arguments for the laissez-faire policy and the social Darwinists.
• In the excerpt Sumner questioned the ideas of democracy, liberty, and freedom in the industrial organization, and perhaps in human society in general. Does his questioning of these concepts seem shocking? What do you think he is trying to say about the way Americans tend to use these concepts?

For More Information

Books

Cashman, Sean Dennis. America in the Gilded Age: From the Death of Lincoln to the Rise of Theodore Roosevelt. New York and London: New York University Press, 1984.

"The Concentration of Wealth: Its Economic Justification." In Social Darwinism: Selected Essays of William Graham Sumner. Englewood Cliffs, NJ: Prentice-Hall, Inc., 1963, pp. 150-57.

Smith, Page. The Rise of Industrial America: A People's History of the Post-Reconstruction Era. Vol. VI. New York: McGraw-Hill, 1984.

Web Sites

"Andrew Carnegie: The Gilded Age." The American Experience: PBS. http://www.pbs.org/wgbh/amex/carnegie/gildedage.html (accessed on July 6, 2005).

On Liberty, Society, and Politics: The Essential Essays of William Graham Sumner. Edited by Robert C. Bannister. Liberty Fund Press, 1992. http://www.swarthmore.edu/SocSci/rbannis1/AIH19th/WGS1.html (accessed on July 6, 2005).