Today, as in the last Gilded Age at the turn of the century, tremendous leaps in innovation has created an enormous concentration of wealth. Over the past 3 years, 4 trillion dollars of new wealth has been created in the stock market. The number of billionaires has increased from 13 in 1982 to 170 today; the number of deca-millionaires stands at 250,000 and millionaires at 4.8 million. As we enter the 21st century – The New Gilded Age – the rich have the opportunity to shape America and the world, just as profoundly as Carnegie and Peabody shaped the last century.
Economists from the time of Adam Smith have recognized the power of self-interest in the creation of wealth. The critics of capitalism, notably Karl Marx, emphasized the negative aspects of capitalism, especially the maldistribution of wealth created. What distinguishes American capitalism, from all others, are its entrepreneurial spirit and its philanthropic values. Though the wealthy entrepreneurs in the 19th century built large mansions for themselves, and provided the impetus for Thorstein Veblen’s description of the “leisure class”, at the same time, they were also great philanthropists.
What differentiates American capitalism from all other forms of industrial capitalism is its historical focus on both the creation of wealth (entrepreneurship) and the distribution of wealth (philanthropy).
The philanthropists of the 19th century made possible the basis for wealth creation and social stability. However, this has not been quantified and placed within the framework of private and social costs and benefits. As an example, consider the creation of the University of Chicago by the Rockefeller family. The number of Nobel prize winners at the University of Chicago is one measure of the social benefits that have been reaped by the Rockefeller family investment. Certainly, there was no immediate private benefit to the Rockefeller family, since the contributions occurred several generations later. This type of behavior does not fit neatly into economic theory.
Contemporary economic theory has largely ignored the possibility of philanthropic or altruistic behavior. The vitality of American capitalism is testament to the importance of philanthropy, hence an economic theory which ignores altruistic behavior cannot adequately explain the real world.