Memo to Wall Street: Philanthropy, not bonuses
Lloyd Blankfein, the chief executive of Goldman Sachs Group Inc., has finally acknowledged that his company “participated in things that were clearly wrong.” Evidently he’s referring to the collapse of the U.S. economy, which has wiped out savings, pushed thousands into bankruptcy and left the country with a double-digit unemployment rate. As an act of contrition, Goldman Sachs will give $100 million during each of the next five years to help small businesses. Because the company has set aside more than $10 billion in employee bonuses for this year alone, paltry would seem a flattering description for the offer.
The public anger that the banking industry is now stoking echoes that of the late 19th century, when Andrew Carnegie and John D. Rockefeller succeeded in giving competition a bad name. The public excoriated them as “robber barons.” President Theodore Roosevelt dubbed their critics “muckrakers,” a neologism that has worked its way into our dictionaries. But unlike big bankers today, later in life Carnegie and Rockefeller matched their outsized appetites for making money with outsized appetites for giving.
Seeking to monopolize the kerosene market during the Civil War, Rockefeller gobbled up independent oil refineries like a hungry hippopotamus. When gas-guzzling automobiles came along a few decades later, he was positioned to turn Standard Oil into the largest corporation in the world. Still, he had paid a price for his calculated underselling and secret bargains with the railroads. One newspaper described Standard Oil in 1880 as “the most cruel, impudent, pitiless and grasping monopoly that ever fastened upon a country.”
Ida Tarbell’s exposé of Rockefeller’s bare-knuckle approach in her 1904 book, “The History of the Standard Oil Company,” finally pushed the industrialist to consider his reputation with the press and public. Rockefeller didn’t bother with apologies, though he did write a somewhat defensive memoir. Instead, he hired a public relations advisor who recommended philanthropy -- lots of it. With the largest estate ever garnered by one person, he could afford some public spending.
A devoted Baptist, Rockefeller had always tithed, but in the last three decades of his life, he drenched worthy causes with money. He founded the Rockefeller Institute for Medical Research, turned a small Baptist college into the renowned University of Chicago, and established one of the world’s largest foundations to further medical training, public health and the arts. He financed a college for African American women in Atlanta, named after his abolitionist in-laws, the Spelmans. His General Education Board helped pay for education at all levels, especially black schools in the South. And these were only the major gifts. In all, Rockefeller gave away $550 million at a time when the country’s GDP hovered around $34 billion.
Rockefeller’s contemporary, Carnegie, had equally fierce business practices. His slogan was “Scoop the market,” a rallying cry that drove many an iron-ore field into the orbit of the Carnegie Steel Co. Carnegie expanded his operations in Pittsburgh just as the country’s industrialization was taking off. By the end of the century, he ran the world’s most integrated iron and steel operation. When J.P. Morgan bought the company to form U.S. Steel in 1901, he pronounced Carnegie the wealthiest man in the world. The price would be close to $11 billion today; Carnegie got slightly less than half of it.
From then on, Carnegie devoted himself to philanthropy. He hadn’t suffered a muckraking tell-all about his tough dealings like Rockefeller or even a public outburst like that against Goldman Sachs, but the protracted and violent Homestead strike of 1892 had tarnished his name. He was also publicly identified as one of the 50 wealthy men who had built the large, but poorly maintained, earthen dam that failed and flooded Johnstown, Penn., in 1889, killing more than 2,000.
As a boy, Carnegie had benefited from the generosity of a local Scottish gentleman who opened his private library to the poor lads of the neighborhood. Carnegie reciprocated by funding more than 2,000 public libraries throughout the English-speaking world. Even before the slaughter of World War I, he established the Carnegie Endowment for International Peace and subsequently the Carnegie Council for Ethics in International Affairs. He donated New York’s Carnegie Hall and the Carnegie Institute of Technology, which was folded into Carnegie Mellon University. In the last 30 years of his life, he managed to give away half his fortune and secure a legacy of enlightened beneficence.
Today’s too-big-to-fail bankers are too small-minded to even contemplate generosity on this scale. Their excuse for using profits to bestow multimillion-dollar bonuses is that these are necessary to retain top talent. Because their competitors do the same thing, retention has become a euphemism for kiting salaries.
A collective action on their part to decimate those bonuses would free up enough money to launch a Rockefeller/Carnegie-style remake of their images. If the public keeps their feet to the fire, maybe we’ll still see those billion-dollar gifts.
Joyce Appleby is professor emeritus of history at UCLA and the author of the forthcoming “The Relentless Revolution: A History of Capitalism,” to be published by W.W. Norton next month.