The American Promise – Lecture Notes
Chapter 18 – Business and Politics in the Gilded Age, 1865-1900
I. Old Industries Transformed, New Industries Born (Slide 2) Page 523
A. Railroads: America’s First Big Business
1. Expanding on a Nationwide Scale—Military conquest of America’s inland
empire and the dispossession of Native Americans paved the way for an
elaborate new railroad system; by 1900, the United States boasted over 193,000
miles of railroad track, more than all of Europe and Russia combined; privately
owned but publicly financed by enormous land grants; epitomized the nexus of
business and politics in the Gilded Age.
2. Jay Gould—The era’s most notorious speculator; knew little about railroads or
their operation; operated the stock market like a shark; volume of stock on the
New York Stock Exchange increased sixfold between 1869 and 1901; Gould
became a master of corporate expansion through stock transactions and an
architect of the vast railway systems that developed in the 1880s.
3. Big Business Tycoons—The Pennsylvania Railroad by the 1870s boasted a
payroll of more than 55,000 workers; capitalized at more than $400 million
dollars, it was the largest private enterprise in the world; Gould and his
competitor “Commodore” Cornelius Vanderbilt amassed fortunes estimated at
$100 million; federal and state governments encouraged their growth by offering
generous cash subsidies and land grants.
4. The Communication Revolution—The telegraph, developed by Samuel F. B.
Morse, marched alongside the railroad; formed the nervous system of the new
industrial order; transformed business by providing instantaneous
communication.
5. Business Failures and Public Reaction—Lack of planning soon led to
overbuilding of the railways and increased competition between owners; because
railroad owners lost money from this competition, they attempted to set up
arrangements, or “pools,” setting rates and dividing territory among themselves;
these informal agreements invariably failed because men like Jay Gould refused
to play by the rules; the public’s opinion of Gould as “the most hated man in
America” illustrated the barometer of attitudes toward big business in general.
B. Andrew Carnegie, Steel, and Vertical Integration (Slide 4) Page 527
1. Andrew Carnegie and Carnegie Steel—Carnegie became one of America’s
heroes; he turned away from speculation, striking out on his own to build the
biggest steel industry in the world; self-made man who gave away more than
$300 million before he died, most notably to public libraries; his story and his
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philanthropy burnished his public image; Carnegie built the most up-to-date
Bessemer steel plant in the world on the outskirts of Pittsburgh; had easy access
to two railroad lines and the Monongahela River, a natural highway up to
Pittsburgh and the Ohio River and the coalfields farther north; cut the cost of
making rails by more than half.
2. Vertical Integration—To guarantee the lowest costs and the maximum output,
Carnegie pioneered a system of business organization called vertical integration;
all aspects of business were under Carnegie’s control, from mining to transport to
production.
3. Cutthroat Practices—The productivity Carnegie encouraged came at a great
price; pitted managers against each other; workers achieved the output Carnegie
demanded by enduring long hours, low wages, and dangerous working condition;
by 1900, Carnegie Steel had expanded to include several plants and stood as
the best-known manufacturer in the nation; only rival was the titan of the oil
industry, John D. Rockefeller.
C. John D. Rockefeller, Standard Oil, and the Trust (Slide 9) Page 528
1. Oil Competition—The amount of capital needed to buy or build an oil refinery
in the 1860s and 1870s remained relatively low; prompted rigorous competition
among many small refineries.
2. Rockefeller’s Tactics—John D. Rockefeller founded the Standard Oil Company
in 1870; while he was the largest refiner in Cleveland, Rockefeller demanded
secret rebates from the railroads in exchange for his steady business; enabled
him to undercut his competitors.
3. A New Corporate Structure—In 1882, Rockefeller pioneered a new form of
corporate structure—the trust; differed from Carnegie’s vertical approach; used
horizontal integration to control the refining process; allowed Standard Oil
trustees to hold stock in various refinery companies “in trust” and to coordinate
policy between the refineries; elaborate stock swap gave Rockefeller a monopoly
of the oil-refining business and eventually paved the way for the establishment of
trusts in other industries.
4. Holding Companies—The public pressured the federal government to outlaw
the trust as a violation of free trade; when the government threatened to outlaw
the trust, Standard Oil changed its tactics and reorganized as a holding
company; brought competing companies under one central administration; could
act in concert because they were no longer technically separate businesses; by
1890, Standard Oil ruled more than 90 percent of the oil business; became the
country’s first billionaire.
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5. Tarbell’s Exposé—Journalist Ida B. Tarbell exposed Rockefeller’s unsavory
business practices in a series of articles that appeared in McClure’s magazine
from 1902 to 1905; contributed to the American people’s unfavorable opinion of
Rockefeller as the symbol of heartless monopoly.
D. New Inventions: The Telephone and Electricity
1. Alexander Graham Bell—A Scottish immigrant; invented a way to transmit
voice over wire—the telephone; soon Americans were communicating locally and
across the country with long-distance telephone service.
2. Thomas Alva Edison—Embodied the old-fashioned virtues of Yankee
ingenuity and rugged individualism that Americans most admired; pioneered the
use of electricity as an energy source; electricity became a part of American
urban life by the late nineteenth century.
3. Corporate Dominance—The day of the inventor quietly yielded to the heyday
of the corporation; electric industry consolidated in 1892, alienating Edison but
dominating the market.
II. From Competition to Consolidation
A. J. P. Morgan and Finance Capitalism (Slide 11) Page 533
1. The “Money Trust”—John Pierpont Morgan loathed competition and sought to
eliminate it by substituting consolidation and central control; made him the
architect of business mergers; dominated American banking and exerted an
influence so powerful that his critics charged he controlled a vast “money trust.”
2. Reorganizing the Railroads—Morgan acted as a power broker in the
reorganization of the railroads and the creation of industrial giants such as
General Electric and U.S. Steel; efforts to consolidate the railroad industry
exacted a heavy toll; his overcapitalization of railroads saddled them with
enormous debt; the management style of the Morgan directors stressed shortterm profit rather than long-term innovation and growth.
3. Challenging Carnegie—In 1898, Morgan turned to the steel industry, directly
challenging Andrew Carnegie; supervised mergers of several smaller companies
that expanded to compete with Carnegie; purchased Carnegie Steel for $480
million.
4. A New Corporate World—The acquisition signaled the passing of one age and
the coming of another: Carnegie represented the old entrepreneurial order,
Morgan the new corporate world; in 1901, Morgan pulled Carnegie’s competitors
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into a huge new corporation, United States Steel, the largest corporation in the
world.
B. Social Darwinism, Laissez-Faire, and the Supreme Court (Slide 12)
Page 534
1. Comparing Business to Nature—Drawing on the work of the naturalist Charles
Darwin, Herbert Spencer and William Graham Sumner developed a theory called
social Darwinism; concluded that progress came about as a result of relentless
competition in which the strong survive and the weak die out; Sumner coined the
term “survival of the fittest.”
2. Justifying Inequality—Social Darwinism equated wealth and power with
“fitness” and argued that the unfit should be allowed to die off to advance the
progress of humanity; held that any efforts by the rich to aid the poor would
interfere with the laws of nature and slow evolution; in an age when the average
worker earned $500 a year, social Darwinism justified economic inequality.
3. “The Gospel of Wealth”—Andrew Carnegie softened some of the harshest
features of social Darwinism in an essay titled “The Gospel of Wealth”; preached
philanthropy and urged the rich to “live unostentatious lives” and “administer
surplus wealth for the good of the people”; earned praise but gained few
converts.
4. Scientific Racism—justified neglect of the poor in the name of “race progress”;
with so many of the poor coming from different races and ethnicities, social
Darwinism fueled a new form of scientific racism; buttressed the status quo and
reassured white Americans that all was as it should be.
5. Laissez-Faire Government—Social Darwinism’s emphasis on the free play of
competition and survival of the fittest encouraged the economic theory of laissezfaire; held that the government should not meddle in economic affairs, except to
protect private property.
6. A Conservative Court—The Supreme Court supported laissez-faire and used
its power to protect business interests; during the 1880s and 1890s, the Court
increasingly reinterpreted the Fourteenth Amendment and defined corporations
as “persons” in order to protect business from taxation, regulation, labor
organizations, and antitrust legislation; did nothing to curb the excess of big
business or promote the humane treatment of workers.
III. Politics and Culture
A. Political Participation and Party Loyalty (Slide 13) Page 536
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1. Patronage Politics—Politics in the Gilded Age was shaped by the spoils
system; political parties in power doled out government jobs on the federal, state,
and local levels to loyal supporters rather than the most qualified candidates.
2. Party Loyalty—Political affiliation provided a powerful sense of group identity
for voters who were proud of their loyalty to the Democrats or the Republicans.
3. Religion and Ethnicity in Politics—Also played a significant role in politics;
northern Protestants supported the Republican Party’s moral reforms; in the
cities, the Democrats courted immigrants and working-class Catholic voters,
saying the Republican moral crusades masked attacks on immigrant culture.
B. Sectionalism and the New South
1. The Solid South?—Voters in the old Confederate South remained loyal
Democrats in the years after Reconstruction; voted for Democratic candidates in
every presidential election for the next seventy years; however, this was not true
of politics at the state and local levels.
2. The New South—The South’s economy was devastated by the war and
foundered, while the North experienced an unprecedented industrial boom;
prompted a group of influential Southerners to call for a New South modeled on
the industrial North; many Southerners, men and women, black and white, joined
the national migration from farm to city, leaving the old plantations to molder and
decay; the Redeemers invited northern industrial development; railroads opened
up the region for industrial development.
3. Northern Control of Southern Industry—Southerners took pride in their iron
and steel industry, which grew up in the area surrounding Birmingham, Alabama;
but as long as control of southern industry remained in the hands of northern
investors, it could not pose a legitimate threat to northern industry; northern
owners inflated southern steel prices to benefit the North.
4. Industrial Illusions—In practical terms, the industrialized New South proved an
illusion; much of the South remained agricultural, still dominating the tobacco
industry, and caught in the grip of the crop lien system.
C. Gender, Race, and Politics (Slide 14) Page 538
1. Limited Access to the Public Sphere—The concept of separate spheres
dictated political participation for men only; blacks continued to face
discrimination, especially in the New South, where Jim Crow segregation laws
became more prominent.
2. Cross-Racial Alliances—In Virginia, the “Readjusters” formed as a coalition of
blacks and whites determined to lower the state debt and spend more money on
education; captured state offices from 1879 to 1883; cross-racial alliances rested
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on the belief that universal political rights could be extended to black males in the
public sphere without eliminating racial barriers in the private sphere; Democrats
fought against cross-racial alliances, charging that black male political power
threatened “white womanhood”; their argument prevailed.
3. Ida B. Wells and the Antilynching Movement—The notion that black men
threatened white southern womanhood reached its most vicious form in the
practices of lynching; in 1892, Ida B. Wells launched an antilynching movement;
described lynching as a problem of race and gender and insisted that the myth of
black attacks on white southern women masked the reality that mob violence had
more to do with economics and the shifting social structure of the South than with
rape; Wells’s strong stance met with reprisal, but she continued to hammer home
her message in the United States and abroad; lynching did not end in Wells’s
lifetime, nor did antilynching legislation gain passage in Congress; but her
forceful voice brought the issue to national and international prominence.
D. Women’s Activism
1. The National Woman Suffrage Association—Founded in 1869 by Elizabeth
Cady Stanton and Susan B. Anthony; first independent woman’s rights
organization in the United States.
2. Women’s Clubs—Despite their inability to vote or hold public office, women
found ways to act politically; women’s clubs proliferated between the 1860s and
1890s; devoted themselves to civic usefulness; not about racial equality; the
General Federation of Women’s Clubs barred black women’s clubs from joining
so as not to alienate southern women.
3. Temperance—Temperance movement attracted by far the largest number of
organized women in the late nineteenth century; women marched on taverns and
saloons and refused to leave until the proprietors signed a pledge to quit selling
liquor; brought the issue of temperance back into the national spotlight; led to the
formation of the Woman’s Christian Temperance Union in 1874.
4. The Limits of Women’s Politics—Despite the political power women exerted,
politics, particularly presidential politics, remained an exclusively male
prerogative.
IV. Presidential Politics
A. Corruption and Party Strife (Slide 16) Page 541
1. Reforming the Spoils System—The political corruption and party factionalism
that characterized the Grant administration continued to trouble the nation in the
1880s; small but determined group of reformers believed that powerful business
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interests often contrived to control state legislatures and, through them, U.S.
senators; championed a new ethic that would preclude politicians from getting
rich from public office; wanted a constitutional amendment calling for the direct
election of senators.
2. Republican Bosses—Republican Party remained divided into factions led by
strong party bosses who boasted that they could make or break any candidate;
Roscoe Conkling headed the “Stalwarts,” a faction that ridiculed civil service
reform and tried to get the Republican Party to run Grant for president in 1880;
James G. Blaine led the “Half-Breeds”; the “Mugwumps” consisted primarily of
Republicans who sought civil service reform.
3. The Election of 1880—Hayes managed to alienate all factions in his party and
decided not to seek reelection in 1880; the Republicans nominated a dark-horse
candidate, James A. Garfield, and a Stalwart, Chester A. Arthur, to be his
running mate; Garfield won.
B. Garfield’s Assassination and Civil Service Reform
1. Garfield’s Brief Presidency—Garfield, like Hayes, faced the difficult task of
remaining independent while pacifying the party bosses and placating the
reformers; after less than four months in office, Garfield was assassinated by
Charles Guiteau, a disgruntled office seeker who claimed to be motivated by
political partisanship.
2. Calls for Reform—Assassination led the press to condemn Republican
factionalism; attacks on the spoils system increased; the public soon joined the
chorus demanding reform, which came with the passage of the Pendleton Civil
Service Act in 1883; brought some fourteen thousand jobs under a merit system
that required examinations for office and made it impossible to remove
jobholders for political reasons.
C. Reform and Scandal: The Campaign of 1884 (Slide 17) Page 543
1. Blaine versus Cleveland—James G. Blaine assumed leadership of the
Republican Party after Garfield’s assassination and captured the presidential
nomination in 1884; Mugwumps considered Blaine the personification of political
corruption; bolted from the party and embraced the Democrats’ candidate,
Grover Cleveland, the reform governor of New York.
2. Scandal and Mudslinging—Despite the hopes and efforts of the Mugwumps,
the 1884 contest degenerated into scandal and mudslinging after a Buffalo
newspaper accused Cleveland of fathering an illegitimate child with a local
widow; Blaine tried to capitalize on this scandal, staging a national tour to drum
up support.
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3. Blaine’s Misstep—Blaine could not recover from the negative publicity
generated by a comment that linked the Democratic Party with drink, with
rebellion against the Union, and with Catholicism; Blaine, an Irish American, had
been counting on Catholic voters to desert the Democratic Party and vote
Republican; Cleveland won the election, and the Democrats won back the White
House after twenty-five years of Republican rule.
V. Economic Issues and Party Realignment
A. The Tariff and the Politics of Protection (Slide 20) Page 545
1. Debating the Tariff—In the 1880s, the tariff became a potent political issue; the
high tariff generated a huge surplus that sat in the U.S. Treasury’s vaults,
depriving the nation of money that might otherwise have been invested to create
jobs and roads; many Americans—including southern and midwestern farmers,
advocates of free trade, and political moderates—agitated for tariff reform; other
Americans, including industrialists and workers, opposed lowering the tariff.
2. A New Republican Coalition—Republican Party seized on the tariff issue to
forge a new national coalition; an alliance of industrialists, labor, and western
producers who benefited from the tariff in an effort to defeat the solidly
Democratic South; the tactic worked, and Republican Benjamin Harrison was
elected president in 1888.
3. Changing Views on the Tariff—Back in power, the Republicans passed the
highest tariff in the nation’s history in 1890; but the strategy backfired; Americans
had elected Harrison to preserve protection but not to enact a higher tariff; angry
voters swept Republicans out of Congress in the election of 1890, and in 1892,
Harrison lost to Grover Cleveland, whose call for tariff revision had lost him the
election in 1888.
4. Deeper Social Divisions—The debate over the tariff masked deep divisions in
American society between workers and farmers on one side and bankers and
corporate giants on the other.
B. Railroads, Trusts, and the Federal Government
1. Federal Regulation—Americans increasingly agreed on the need for federal
regulation of the railroads and federal legislation against the trusts; the Patrons of
Husbandry, or the Grange, spearheaded the midwestern states’ efforts to
regulate the railroads.
2. The Interstate Commerce Commission—The Supreme Court proved hostile to
state efforts to regulate the railroads; prompted Congress to pass the Interstate
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Commerce Act (1887), which created the nation’s first federal regulatory agency,
the Interstate Commerce Commission (ICC).
3. The Sherman Antitrust Act—Concern over the growing power of the trusts led
Congress to pass the Sherman Antitrust Act in 1890; outlawed pools and trusts;
ruled that businesses could no longer enter into agreements to restrict
competition; but the Supreme Court gutted this act, severely restricting its scope.
4. Government Intervention and Public Opinion—Both the ICC and the Sherman
Antitrust Act testified to a growing concern about corporate abuses of power and
to a growing willingness to use federal measures to intervene on behalf of the
public interest; as corporate capitalism became more powerful, public pressure
toward government intervention grew.
C. The Fight for Free Silver (Slide 21) Page 547
1. Gold versus Silver—Tariff reform and regulation of the trusts gained many
backers, but the issues surrounding silver stirred passions like no other issue of
the day; on one side stood those who believed that gold constituted the only
honest money; on the other side stood a coalition of western silver barons and
poor farmers from the West and South who hoped that increasing the money
supply with silver dollars, thus causing inflation, would give them some relief by
enabling them to pay off their debts with cheaper dollars; called “free silver.”
2. The Greenback Labor Party—Alliance of farmers and urban wage laborers;
favored issuing paper currency not tied to the gold supply; elected fourteen
members to Congress in 1878.
3. Free Silver Advocates—After the Greenback Labor Party collapsed,
proponents of free silver came to dominate the money debate in the 1890s; in
1890 with the Silver Purchase Act, Congress took steps to appease advocates of
silver by passing legislation that required the government to buy silver and issue
silver certificates; good for silver mining interests; did little to promote the inflation
that farmers desired, and they continued to call for the free and unlimited coinage
of silver.
4. Silver Politics—Democrats hoped to use the silver issue to achieve a union
between western and southern voters; despite his party’s support for it,
Democratic president Grover Cleveland’s repeal of the 1890 Silver Purchase Act
in 1893 dangerously divided the country.
D. Panic and Depression
1. The Panic of 1893—In 1893, President Cleveland had scarcely begun his
second term in office when the nation fell into a deep economic depression; it
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appeared that the U.S. Treasury might not be able to meet its obligations and fall
into bankruptcy.
2. Morgan’s Plan—J. P. Morgan suggested a plan whereby a group of bankers
would purchase $65 million in U.S. government bonds, paying in gold; Cleveland
accepted.
3. Continued Hardship—The press claimed incorrectly that both the president
and Morgan reaped tremendous financial benefits from this transaction;
Cleveland’s action managed to salvage the gold standard; did not save the
country from hardship as the depression continued.
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