Will 2012 go down in history as the year money took over politics? Both parties will have spent more than a billion dollars electing the next president. More and more of that money comes from a handful of the wealthiest Americans and the corporations they run. On the Democratic side, Jeffrey Katzenberg of DreamWorks, telecommunications pioneer Irwin Mark Jacobs, and hedge fund manager James Simons have donated millions to re-elect the president, but the amount of money the Democrats have received from deep-pocketed supporters pales in comparison to what Republicans have received. A single billionaire, business magnate Sheldon Adelson, had by August spent more than $41 million and promised to spend up to $100 million defeating President Obama and other Democrats. All told, the top .07 percent of donors give more money than the bottom 86 percent. And it pays off. Candidates spend ever more time courting the super rich and then, once in office, try to keep them happy. This summer, for example, Mitt Romney held two fundraisers at which he raised almost $10 million from the oil and gas industry and then announced that as president he would end more than 100 years of federal restraint of oil and gas drilling on public lands. Things like that happen on both sides. How did we get into such a situation? What is to be done about it? Is it threatening our democracy? And doesn’t it go against everything the founding fathers stood for?

Many of the founders, including George Washington and Thomas Jefferson, were themselves among the wealthiest people in the country. They felt their prosperity made them obliged to serve their nation at the highest level. Yes, they declared independence and fought a Revolution to escape the tyranny of English monarchy and might, but they expected to replace aristocracy of birth with aristocracy of accomplishment, rule by elites who had created their wealth and influence, not inherited it. That was why they wrote a Constitution that stated the president was to be elected not by the people but by an elite Electoral College, and the Senate was to be chosen not by the people but by state legislatures. And that was why in most states only men who had money and property were allowed to vote at all.

It didn’t take long for the 99 percent of the day to rebel against that status quo. The notion of true democracy, rule by ordinary people, grew popular in the early 19th century. It was spearheaded by President Andrew Jackson, who hated bankers and banks, especially the national bank that had been founded by Alexander Hamilton. He destroyed the bank, partly to counter the power of the richest Americans. At the same time, a new generation of wealthiest Americans emerged, and they were a breed that had never existed in Europe—industrious, self-made men of humble origins, such as John Jacob Astor, a German immigrant who began working in a menial job for a fur merchant but came to dominate the trade in furs from the West, and Cornelius Vanderbilt, who rose from ferryboat captain to steamboat owner and then railroad baron. In 19th century America, the wealthiest really did have something in common with the common man.

Or at least that was true in the American North. The elite of the South were a breed apart. They grew fantastically rich and powerful from growing rice and cotton with all the hardest labor done by slaves. Seven of the first 12 presidents were from Virginia, the most prosperous part of the South. When the Civil War came, it was a fight not only over slavery but between the power of new Northern industry and urban wealth and the spoils of the Southern slave economy as well.

As extreme as the power of the wealthiest is today, it pales before that of the rich in the pre-Civil War South, for they could own human beings who had no rights whatsoever. Slave owners had such full support of the law that the Constitution originally counted each slave as three-fifths of a man for voting purposes, not so that slaves themselves could vote, but to add to the headcounts on which Congressional districts were based, giving their owners even more political and electoral power than anyone who didn’t keep slaves. Slavery was by far the highest point of the tyranny of the wealthiest in the United States.

But the kind of abuse of power that’s more familiar to us today took off after the Civil War, when four years of bloodshed costing more than a million lives left the South crippled and the North as a new industrial world power. That power corrupted, as it always does. The Gilded Age—which lasted from the end of the Civil War to 1900—was a festival of power grabs among the wealthiest. For instance, to build the Transcontinental Railroad, the owners of the Union Pacific Railroad set up a construction firm called Credit Mobilier to wildly overcharge for the work it did, just so they could bleed their own company and bondholders. Then, to make sure Congress didn’t complain, they gave assorted Congressmen both cash bribes and stock that paid huge dividends. The scam got exposed in 1872. It was estimated to have stolen $42 million in government and bondholder money, and it led to the disgrace of public figures as high up as the vice president, Schuyler Colfax.

By the 1880s the Senate was dominated by millionaires. And by 1892, wealth-fed scandal had become so commonplace that opposition to it gave rise to a new political party, the Populists, whose platform announced, “We meet in the midst of a nation brought to the verge of moral, political, and material ruin. Corruption dominates the ballot-box, the Legislatures, the Congress, and touches even the ermine of the bench. … The fruits of the toil of millions are boldly stolen to build up colossal fortunes for a few. … From the same prolific womb of governmental injustice we breed the two great classes—tramps and millionaires.”

When Theodore Roosevelt became president in 1901, he ushered in the Progressive Era­­, one of two major periods in U.S. history when the political tide turned strongly away from the wealthiest—the other was during the presidency of his distant cousin Franklin Roosevelt. Roosevelt railed against what he called “malefactors of great wealth” and the “criminal rich,” and he pushed through reforms like strengthened railroad regulations and the creation of the Department of Labor. A decade later, President Woodrow Wilson cemented Roosevelt’s accomplishments by establishing the federal income tax and the direct election of senators.

Though none of that prevented the wild financial bubble fed by coziness between the wealthy and the government in the 1920s. So in the wake of the Great Crash that followed, Franklin Roosevelt took office in 1933 as a rich New Yorker determined to look out for the common man. He wrote to a friend, “The real truth of the matter is, as you and I know, that a financial element in the larger centers has owned the Government since the days of Andrew Jackson. … The country is going through a repetition of Jackson’s fight with the Bank of the United States—only on a far bigger and broader basis.” He raised taxes on the rich and used much of the money that came in to put the unemployed poor back to work. In 1936 he wrote: “We know now that Government by organized money is just as dangerous as Government by organized mob. … I should like to have it said of my first Administration that in it, the forces of selfishness and lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master.”

America’s Wealth Gap The Saturday Evening Post

Click here to download “Swollen Fortunes” (December 22, 1906), or read below. (See also “America’s Wealth Gap” in the Nov/Dec 2012 issue.)

Swollen Fortunes The Saturday Evening Post

Quigley’s Building Supply—Putting Customers First

The St. John River in Maine swiftly and relentlessly surged over its banks. After a record snowfall and heavy spring rains in May 2008, the river’s waters rose more than 30 feet. The lumberyard of Quigley’s Building Supply in Fort Kent, Maine, became a grim yardstick of the floodwater’s progress. Foot by foot, plank by plank, the water swallowed pallets of wood until the 66-year-old family business was 12 feet under water. In just an hour, more than $200,000 of the small business’s inventory was either waterlogged or swept away by the murky currents.

Six months before the flood, owner Norman Ouellette died in a boating accident at just 51 years old. That left general manager Justin Dubois, Ouellette’s son-in-law, running the company. Then, only a few months after the flood came, the man-made disaster of the financial crisis hit. Fresh from college and only 24 years old, Dubois felt a little like the Biblically unfortunate Job.

But Dubois wasn’t alone. Many other businesses throughout the country were submerged or swept away in the overflow of the financial meltdown. However, Quigley’s and many others survived and even thrived through these tough times.

Despite an economic mess and big businesses outsourcing labor and manufacturing, the spirit of small business continues to drive the growth of our nation with enterprise, ingenuity, and craftsmanship. Small businesses still create most of the nation’s new jobs, employ half of the country’s private sector work force, and produce more than half of the private sector gross domestic product, according to the Small Business Administration. Much like the hardworking Americans that came before them, the modern-day entrepreneurs you’ll meet here are striving for success against all odds, whether the problems are thrown at them by the economy or Mother Nature herself. These small businesses keep their doors open with a mix of smarts, guts, and determination, even in the face of unexpected hardship.

After the floodwaters crested, Quigley’s buckled down, adapted to the changes and challenges, and notched one of their highest sales years ever, with a 21 percent sales increase from 2008 to 2009.

“Just like everywhere else in the United States, there was a slumping economy and the housing market was nonexistent,” Dubois recalls. “If we just sat back and allowed it to happen, we’d fall. We looked at the slump as a chance to increase sales, customer traffic, and loyalty.”

To increase customer count, Quigley’s needed to find their niche. The store increased advertising, and management looked to long-term employees for new revenue suggestions. Of the 16 employees, many have been working for the company for 12 years or longer. Their know-how helped identify that customers were requesting more and more products they saw on television or the Internet. The bottom-line result for the store: The special order department has increased 50 percent in the past three years. “This has changed the way we do business,” Dubois says. “We’re increasing customer service. No matter where a customer sees a product, we can get it for them.

“The employees are the reason we changed,” he says. “I looked to them for advice and knowledge. We couldn’t have done that without their knowledge and support.”

Schacht Spindle Company—Woven to Success

From its humble origins, Schacht Spindle Company has grown to world-class status with a reputation as a maker of quality hand-made looms and spinning wheels.
Photo courtesy Schacht Spindle Company.

Pulling together the similar fibers of employee knowledge, Barry Schacht has spun the Schacht Spindle Company into the kind of American success story that’s vanishingly rare these days. The Boulder, Colorado-based company began in Schacht’s garage about 
40 years ago and has grown into a 35,000-square-foot factory with 35 employees. Today, Schacht’s is the second-largest weaving supply and loom manufacturer in the world.

“In those early years, I made a point of finding people who knew more about the business than I did,” says Schacht, who owns the company 
with his wife, Jane Patrick. “That employee knowledge helped me 
create a better product.”

Schacht says he constantly strives to improve relations with his staff and provide them the right tools and benefits—both at work and in their personal lives. In addition to health insurance, the company offers two months of unpaid leave, assuring employees that they’ll still have a job when they return. Schacht and Patrick also built a special, environmentally controlled room for an employee with asthma and allow flexible schedules for workers with children.

“We hire people for their skills, then work with their schedules,” Patrick says. “We emphasize family values, getting back to what’s important. If employees need time to take care of a sick parent or child, it’s not a problem.”

The work atmosphere Patrick and Schacht created has paid off: The duo’s philosophy has fostered long-term staff retention. One employee has worked with the company for 39 years, a few others for more than 20, and several for more than 15. And Schacht is quick 
to credit those employees with the company’s ongoing success. For example, staffers recognized a market for lower-priced, entry-level, easy-to-use spinning wheels. Their input led to the development of the company’s new Ladybug spinning wheel. Adding to the company’s handmade cachet, each is unique, with a ladybug logo individually placed somewhere on the wheel. During the past two years, such entrepreneurship has helped Schacht Spindle Company to post a 35 percent sales increase. But the company can’t rest on such successes, and its bottom line can be dramatically affected by the fortunes of suppliers and profit-driven big box retailers. “Some of the companies I have dealt with over the years have disappeared,” Schacht explains. “I have had a more difficult time finding suppliers.”

Schadt’s hard work has paid off: The company’s spindles, looms, and winders are in just about any weaving supply store in the country, and they ship orders worldwide.

Yet, Schacht’s garage-born business roots are never far from his reach. On his desk is the first spindle he ever made. Constructed from an old, used doorknob and wooden stick, it’s the genesis of his business. “It reminds 
me of the complex, yet simple, beginnings,” he says. “When I started, what was most inspiring was making new products and solving old problems with a creative touch.”

Hudson Beach Glass—Hearts of Glass

Touch of glass: Operating out of a renovated firehouse, the artisan owners of Hudson Beach Glass prove that pursuing their passion makes good business sense.
Photo courtesy of Hudson Beach Glass.

The glass-blowing furnace in Hudson Beach Glass burns 24 hours a day. Visitors to the converted firehouse in Beacon, New York, feel the heat and hear the hum of the furnace that glows white hot, full 
of molten glass. For the 26-year-old company’s owners—John and Wendy Gilvey, Michael Benzer, and Jennifer Smith—that furnace is the source of their art and entrepreneurial freedom.

“In the last 26 years, we’ve been able to make the work we want to make,” John Gilvey says. “Doing that has been satisfying. I feel like I’ve done it my way. That’s so corny. But true.”

The different blown glass styles of the artist-owners are on the shelves throughout the store. John, for example, crafts Tiffany-like vases with leaf-like patterns. Benzer’s trademark work is hand-cast tiles and bowls that have been Hudson Beach Glass signature pieces for more than 20 years. Wendy Gilvey and Smith produce fluid-form pieces, often with opaque, sandblasted finishes.

“Every object we make, we’re proud of it,” Benzer says. “We’re not making big money, but we’re not sure we could work for anyone else.” John likens the Hudson Beach Glass business model to subsistence farming. “Or subsistence artists,” he says with a laugh. “We know we have done something right at the end of the year if we’re still in business.”

The four originally opened Hudson Beach Glass Studio in 1984 in a warehouse-type building and sold through distributors and trade shows. Seven years ago, they opened their retail store in an old firehouse on 
Main Street. In 2008, John’s son, 
Sean, opened his own Hudson Beach Glass storefront in Philadelphia. Works from the studio have been featured in the book 500 Glass Objects, and plates from the Philadelphia store were used by 
chef Jose Garces when he competed 
on the cooking reality show Iron Chef.

Such success came after riding more than two decades of up-and-down economic trends. The downturn 
of 2009 definitely caused some scrambling. “Our business took a big hit,” John says. “No one was calling with orders, no one was buying.” And they had to make the difficult decision to lay off four full-time employees. Knowing that their business could 
turn in a season, John and Benzer continually look for new markets and different ways to distribute their work. In recent years, they have expanded to include etched glass awards and table settings for high-end restaurants. 

“We adjust to what’s happening in the marketplace,” John says. “We’re also continually experimenting with new colors, forms, and processes. In our business, new is everything.”

They learned that lesson in the mid-90s. After 20 percent to 30 percent growth per year, their business became flat. When attending a business consulting seminar, they realized the studio hadn’t been rolling out enough new products. “After that, we didn’t go to a trade show without something new,” Benzer says.

Enterprising Endurance The Saturday Evening Post

More than that, I found myself thinking about the one thing I’d really like to see made in America—more jobs.

So, where are they? It’s a question on a lot of minds, especially in the wake of economic conditions that saw nearly 7 million jobs vanish. When the 2009 multibillion dollar stimulus package was unveiled, the government promised that stimulus would create and save some 3.5 million jobs, but making that promise was much easier than actually keeping a job tally, and many believe that the actual number will ultimately fall short of the mark.

The pundits say things are getting better. But it’s hard to be upbeat about the economy when most

of us are still reeling from one of the worst downturns since the Great Depression. Meanwhile, stimulus funding to date seems to be favoring Wall Street more than Main Street. Small business, the very heart of American private enterprise, is also the engine that drives the creation of

new jobs, yet recovery funds don’t seem to be making their way down to entrepreneurs—and the people they might employ—with a speed or efficiency that has made a real difference yet. Until it does—if it does—it’s hard to look on the bright side.

But it is surely there. While we may lament our ongoing economic woes, there’s something about tough times that brings out the best in us, that makes us roll up our sleeves and work harder, like the men and women profiled in writer Doug Donaldson’s story, “Enterprising Endurance.” Reading their stories reminded me that even in difficult times, America has an abundance of ambition, motivation, and even optimism. Thankfully, these things, too, are still made in the USA.

Stephen C. George

Editor-in-Chief, The Saturday Evening Post
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