Americans are grappling with economic and political inequalities and a deep divide that threatens the core of the American Dream. Millions of working people are making impossible choices: pay rent or buy groceries, fill the gas tank or keep the lights on.
Census data indicates that nearly half of all American renters now spend more than 30% of their income on housing alone—a record high. Meanwhile, after adjusting for inflation, the average American worker's hourly wage has roughly the same purchasing power it did in 1978. Meanwhile, technological innovation in areas such as AI threatens to transform the labor market.
Against this backdrop, the richest among us are amassing outsized influence over American society. Take the world’s wealthiest man, Elon Musk. Musk has accumulated more than $800 billion in wealth, earned himself the title of “Kingmaker” for his hand in re-electing President Donald Trump, and unleashed a war on Washington. The members of Musk’s small but powerful economic class live lives few Americans can relate to—or even imagine. Look no further than Amazon founder Jeff Bezos, who rented much of Venice, Italy, for his wedding.
The contrast is stark: the wealthy maintain lavish lifestyles in segregated mansions, as millions of hardworking Americans lose good-paying jobs and livelihoods, putting democracy at risk. But this story is not new. This is history—specifically, the Gilded Age—repeating itself.
The First Gilded Age, roughly from 1870 to 1914, was also a period of technological and economic progress, during which many major inventions were made, including electricity, the combustion engine, and the telephone. However, this era also saw the rise of lavish lifestyles among the wealthy, alongside severe economic and political inequality. The Robber Barons, who dominated the age, did not believe competition was the right way to run the economy. These leaders believed they were superior men destined to create a better society. To them, monopolies were progressive, and industry monopolization was unstoppable because, as John D. Rockefeller stated, it was “the law of God.”
But religious persuasions aside, there are economic laws that can help us understand how our society is formed. The question is: How did we reach this Second Gilded Age, and why?
Policy, culture, and technology
The answer begins in the 1970s, when the U.S. faced two major oil shocks, with inflation and high unemployment. These conditions challenged the economic thinking that had prevailed since the Great Depression. In search of change, President Ronald Reagan made a radical shift by adopting a free-market policy to improve incentives to work, invest, and innovate. Declaring that steep progressive taxation was "un-American," he lowered both personal and corporate tax rates and began an effort to eliminate regulations and reduce the federal budget. Over the next 50 years, Democratic and Republican administrations alike eliminated regulations, while government lawyers, supported by some academics and favorable judges, gradually weakened the effectiveness of antitrust laws, allowing firms broad freedom of action. This free-market policy ultimately became “The Washington Consensus,” adopted by many countries around the world.
Free-market policy appeared to align with the American tradition of free enterprise, but it also entailed an individualistic culture that, in pursuit of meritocracy, condones greed and selfishness. It stressed self-reliance and full personal responsibility, without expecting government assistance. This culminated in the dismantling of the welfare system under President Bill Clinton through the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, which replaced the Aid to Families with Dependent Children (AFDC) with Temporary Assistance for Needy Families (TANF), capping benefits and imposing work requirements and time limits.
The third factor was the digital revolution, marked by the release of Apple's first personal computer in 1976. To understand its impact on the labor market, consider the standard manufacturing technology of the pre-digital age. The moving assembly line, invented by Henry Ford in 1913, was developed to lower the high costs of employing skilled workers to build early automobiles. It broke production into simple repetitive tasks, enabling unskilled workers to reduce the Model T's assembly time from over 12 hours to just over 90 minutes—contributing to the rise of a middle-class blue-collar workforce earning good wages without a college degree.
Since the 1980s, computer and robot technologies have had the opposite effect: eliminating repetitive jobs and wiping out the livelihoods of millions of unskilled workers, roughly 60% of the American workforce. The consequences were severe. Families faced devastation as incomes fell sharply, and drug addiction and suicide rates climbed. These developments were so grave that economists Anne Case and Angus Deaton documented how they shortened the lifespans of white workers without college degrees. Globalization compounded the damage, as free-market policy accelerated both rising foreign imports and the relocation of American firms abroad.
The rise of market power
These job losses were worsened by increasing market power and the monopolization of the American economy. Unlike the First Gilded Age, when trust-building was illegal, modern capitalism leverages technology to create market power through legal means.
While innovations improve living standards, their owners gain the protection of patents or trade secrets, allowing them to sell products without competition. In unregulated markets, innovators expand this initial advantage through several strategies: releasing periodic updates (also patented), acquiring potential competitors or their technologies—Google, for example, acquired more than 200 companies between 2004 and 2019—suppressing rivals, and creating ecosystems of interconnected products under a single proprietary system. Such strategies create barriers that make it very difficult for new competitors to enter the market. Market power becomes so deeply entrenched that potential rivals often prefer acquisition over competition. Without competition, market power persists as either a monopoly (control by one firm) or an oligopoly (control by a few).
In the digital age, established innovators gain an additional structural advantage: platforms become more efficient as they grow, lowering production costs in ways competitors cannot match without first achieving massive scale. In rare cases where a challenger does displace an incumbent, all that results is a new monopolist replacing the old one—the monopoly itself remains.
This explains why, despite Silicon Valley’s frequent talk of “disruption,” genuine technological competition is rare. For competition to occur, rivals must invent something both new and superior to current products—a formidable barrier. Many new technologies are either developed by young innovators who plan to be acquired or by incumbents who already control the current technology and seek to reinforce their monopoly position. The result is that technological monopoly often remains unchallenged, making market power a permanent feature of modern capitalism.
The political consequences of the Second Gilded Age
In today’s modern economy, a company with market power over technology can earn profits across all markets for products or services whose provision requires that technology. The firm sets prices above production costs, producing and selling fewer goods and services than a competitive market would. When this behavior is widespread, it reduces demand for both labor and capital, depressing workers’ incomes while monopoly profits rise. Unlike the traditional Marxist-socialist view that labor is exploited by capital, in a technology-driven economy, technology exploits both labor and capital.
The scale of these monopoly profits is staggering. My estimate is that between 1980 and 2019, monopoly capital gains on U.S. stock exchanges totaled $25.1 trillion—more than 50% of the total value of all stocks traded on American exchanges in 2019. Most of this accrued to a small fraction of the population. Those who profit most from innovation are typically the innovator, a narrow circle of financial advisors, and venture capital investors who acquire shares at very low prices before a company goes public. When an innovation is successful, the firm's stock becomes publicly traded, and its value skyrockets, and this small group becomes wealthy overnight. It is the only mechanism by which a person can amass immense wealth within a single lifetime, helping explain why the U.S. has more than 900 billionaires.
The rise of the MAGA movement, Donald Trump's election to the presidency, and the erosion of American democracy are the culmination of these forces. The dominant group within the MAGA coalition consists of workers without college degrees, many of whom feel betrayed by American democracy and the economic landscape. To build a winning coalition, Trump drew on the accumulated grievances of people whose livelihoods were destroyed over decades.
For any democracy to have legitimacy, citizens must trust its institutions and value public service. But technology and neoliberal economic policies drove a sharp rise in market power, which produced economic inequality, which in turn produced political inequality—depriving ordinary people of agency while giving the wealthy excessive political influence. The “pick yourself up by your bootstraps” culture of free markets caused Americans to overlook the suffering, or even just self-perceived suffering, of millions. It is no surprise that these workers, their families, and the regions where they live have lost faith in democratic institutions.
As a result, many voters turned to Trump’s anti-establishment, if authoritarian, tone and affordability assurances. Trump promised to lower costs. Instead, he raised them—and he raised the deficit while he was at it. Meanwhile, American billionaires have benefited greatly.
The decline of democracy is therefore a consequence of increasing market power. As political inequality has grown, democratic institutions have failed to serve the public interest—and autocrats like Trump have stepped into the breach. In this way, the threat of authoritarianism is a reinforcing feature, not a bug, of the Second Gilded Age.
How this era is different—and more urgent
Unlike the trusts of the First Gilded Age, which were illegal, the technological monopolies of the Second Gilded Age are mostly legal. Current antitrust law aims to ensure free entry for competitors into any industry, based on the belief that open entry will enable competition, which, in turn, will diminish market power. But in practice, companies are able to dominate entire industries without breaking any laws.
Consider Apple. In 2021, iPhones accounted for only 15% of smartphone units sold worldwide. Apple holds no legal monopoly over the smartphone market—anyone can enter it. What Apple owns is its technology, which it perhaps understandably prevents others from using. To capture Apple's market share, a competitor must invent a smartphone that consumers regard as superior in quality or price. Fair enough, right? But this has proven extraordinarily difficult. Apple's advantage is so durable that its 15% unit market share accounted for approximately 44% of global smartphone revenue in 2021—a margin that reflects deep, durable market power.
This example illustrates why the regulatory tools that worked on Ford, Carnegie, and Rockefeller do not work on Microsoft, Google, or Meta. The law needs restructuring.
The wealthy’s worldviews have also shifted. Andrew Carnegie argued in his 1889 essay The Gospel of Wealth that the wealthy were custodians of society's resources and therefore obligated to donate to worthwhile causes—a view that produced the Ford and Rockefeller Foundations, the Guggenheim, the Frick Collection, and Carnegie-Mellon University. Today's technology leaders have largely abandoned that ethos.
For instance, Microsoft founder Bill Gates cited Carnegie’s essay in his announcement to wind down his eponymous charitable organization, the Gates Foundation. “I don't think some document I write today will necessarily be wise in terms of how money should be spent more than 20 years from now,” Gates told TIME. “And I don't care if there's an institution having my name on it.”
Others seem more focused on building economic and political power than on contributing to the public good. Venture capitalist Marc Andreessen's The Techno-Optimist Manifesto captures this shift well: in it, Andreessen envisions a future in which advancing technology creates a "techno-capital machine" that produces everything at near-zero cost, and in which technologists are not merely wealthy entrepreneurs but are rightfully in charge and stewards of the social order.
What's more, the pace of AI disruption is without precedent. The technological displacement that previously unfolded over decades will now compress into a few years, and no governmental response is remotely positioned to address it in time.
We have been here before and found a way out
In 1901, America confronted the power-worshipping oligarchs of the First Gilded Age. It responded with reform—first under President Theodore Roosevelt, then under President Franklin Roosevelt's New Deal. That era ended with the introduction of the progressive income tax, the Federal Reserve, and New Deal policies that restored democratic stability for a century.
To restore democracy's legitimacy again, several reforms are essential. Politically, we must remove money from politics, eliminate the Electoral College for presidential elections, and remove the president's absolute immunity from prosecution while in office.
Economically, reform must rest on two principles. First, we must contain market power. We can achieve this through restructuring the patent system, placing limits on mergers and acquisitions, higher taxation of corporate monopoly profits, and higher top marginal personal income tax rates.
Second, we must ensure a more equal sharing of technology's benefits. Establishing guardrails on AI that favor innovations which compliment human labor rather than replace it, upskilling service jobs to increase their productivity and pay, and a federal legal obligation to restore the earning capacity of any worker whose job is eliminated by a publicly supported act could help achieve this goal. Policies along these lines have been successfully developed in Scandinavia, Germany, and Japan, and have helped stabilize democratic institutions in those countries.
The Second Gilded Age has resulted from forces at work for nearly 40 years—but its continuation is not inevitable. Like the First Gilded Age, it can be redirected by reform-minded public policy. We have done it before, and we can do it again.
