James L. Roark ● Michael P. Johnson
Patricia Cline Cohen ● Sarah Stage
Susan M. Hartmann
The American Promise
A History of the United States
Fifth Edition
CHAPTER 18
Business and Politics in the Gilded
Age,
1865-1900
Copyright © 2012 by Bedford/St. Martin's
I. Old Industries Transformed, New
Industries Born
A. Railroads: America’s First Big Business
1. Expanding on a nationwide scale
•
•
•
•
•
•
•
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
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
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 -telegraph
5. Business failures and public reaction due to competition
I. Old Industries Transformed, New
Industries Born
B. Andrew Carnegie, Steel, and Vertical Integration
•
1. Andrew Carnegie and Carnegie Steel
• self-made man who gave away more than $300 million before he
died, most notably to public libraries; his story and his
philanthropy burnished his public image; Carnegie built the most
up-to-date Bessemer steel plant in the world on the outskirts of
Pittsburgh
2. Vertical integration
• 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
• 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
I. Old Industries Transformed, New Industries Born
C. John D. Rockefeller, Standard Oil, and the Trust
1. Oil competition
2. Rockefeller’s Tactics
•
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
3. A new corporate structure
•
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
4. Holding companies
•
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
5. Tarbell’s exposé
D. New Inventions: The Telephone and Electricity
1. Alexander Graham Bell Scottish immigrant-telephone
2. Thomas Alva Edison –electricity at Menlo Par in New Jersey
3. Corporate dominance
II. From Competition to Consolidation
A. J. P. Morgan and Finance Capitalism
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 short-term 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
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 into a
huge new corporation, United States Steel, the largest corporation in the
world.
II. From Competition to Consolidation
B. Social Darwinism, Laissez-Faire, and the Supreme Court
1. Comparing business to nature
• 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
5. Laissez-faire government
6. A conservative 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
1. Patronage politics-shaped by spoils system
2. Party loyalty
3. Religion and ethnicity 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?
• 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
• 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,
3. Northern control of southern industry
• 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
• South remained agricultural, still dominating the tobacco industry, and caught in
the grip of the crop lien system.
III. Politics and Culture
C. Gender, Race, and Politics
1. Limited access to the public sphere
2. Cross-racial alliances
• “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 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
3. Ida B. Wells and the antilynching movement
•
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
D. Women’s Activism
1. The National Woman Suffrage Association
• Association—Founded in 1869 by Elizabeth Cady Stanton and Susan B. Anthony; first
independent woman’s rights
2. Women’s clubs
3. Temperance
• 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
IV. Presidential Politics
A. Corruption and Party Strife
1. Reforming the spoils system
2. Republican bosses
•
•
; 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
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
•
•
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
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
IV. Presidential Politics
C. Reform and Scandal: The Campaign of 1884
•
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
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
1. Debating the tariff
•
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
•
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
B. Railroads, Trusts, and the Federal Government
1. Federal regulation
•
Patrons of Husbandry, or the Grange, spearheaded the midwestern states’ efforts to regulate the railroa
2. The Interstate Commerce Commission
•
Interstate Commerce Act (1887), which created the nation’s first federal regulatory agency
3. The Sherman Antitrust Act
•
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
V. Economic Issues and Party Realignment
C. The Fight for Free Silver
1. Gold versus silver
•
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
•
farmers and urban wage laborers; favored issuing paper currency not tied to the gold
supply; elected fourteen members to Congress in 1878.
•
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.
•
3. Free silver advocates
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
•
•
President Cleveland had scarcely begun his second term in office when the nation fell into
a deep economic depression; it appeared that the U.S. Treasury might not be able to
meet its obligations and fall into bankruptcy
2. Morgan’s plan
a plan whereby a group of bankers would purchase $65 million in U.S. government
bonds, paying in gold; Cleveland accepted.
3. Continued hardship