GILDED AGE

BeckerUS History

Era of Good Stealings

Grant’s administration is quite corrupt Grant is not personally corrupt Grant is a poor judge of character

Fisk and Gould attempt to take advantage Buy up gold production/distribution Grant unwittingly participates in the scheme Treasury Dept begins selling off stockpiles Foils the two millionaire's plan

Jay Gould

The Tweed Ring

“Boss” Tweed runs group of corrupt politicians Tammany Hall is corrupt Democratic machine Runs rigged elections: “he who counts the votes

wins” Pass legislation centralized power in mayor’s

hands Tweed embezzles $75-200M in NYC money Creates a city debt of $136M by 1870 Charges city $13M to build a courthouse Actual costs were $3M, giving Tweed a $10M

profit Finally arrested and convicted in 1876, dies in jail

Boss Tweed

“Everything revolves around the Boss”

Credit Mobilier Scandal

Next in series of Grant admin scandals Credit Mobilier Railroad Co contracted by

govt Charges gov’t $47M for construction of

800mi Bribes Congressmen with shares of stock Dozens of Congressmen implicated Company profits $22M at US govt

expense

Whiskey Ring

Yet another Grant admin scandal This time, involves Republican politicians Divert liquor taxes into own pockets Grant’s personal secretary involved

Orville Babcock – Grant trusts implicitly Grant then challenges the investigation Ultimately, 110 politicians are arrested About $3M in taxes recovered, unknown

lost

Election of 1872

In spite of scandal, Grant re-nominated Reform party nominates Horace Greeley As usual, a dirty campaign

Greeley: atheist, commie, vegetarian, S sympathies

Grant: drunkard, mental retard, corrupt swindler

Still, Grant carries both the popular vote and the Electoral College to a second term

Panic of 1873

Overexpansion of railroads becomes a problem Industrialization has gone too far

Prices drop, owners compensate, inflation follows Greenbacks issued during Civil War exacerbate

US govt had issued paper money to pay war bills Not backed by any specie- “soft” or “cheap”

money Govt now tries to recall greenbacks, sparking

protest “Hard” money supporters blame recession on

paper

Panic of 1873, cont’d

Hard money supporters win, for now Grant signs Resumption Act of 1875

Continues recall of greenbacks Established gold standard: $ backed by

gold Supporters of silver continue to protest

Issue not going away until 1900s CO, western states support silver However, silver is cheaper, might cause

inflation

The End of Sound Money

Election of 1876 brings new leadership 1878 Bland-Allison Act reverses Grant’s policy

US Treasury Dept purchases $2-4M of silver/month

Very popular in W states, with farmers, blue collars

Bankers, industrial leaders fear economy will suffer

As feared, inflation does begin- slowly at first Eventually, will decline into another depression

Entering the Gilded Age

Mark Twain first uses the term Describes period of massive industrial growth US becomes world’s economic leader American GNP exceeds that of most other

industrial nations – combined Yet, under an attractive surface, corruption

thrives Abuse of labor and consumers by industry Abuse of political power for personal gain in

govt

Stalwarts and Half-Stalwarts and Half-breedsbreeds

Republican party split over spoils system Stalwarts retain old patronage system

You get me votes, I get you a cushy govt job Roscoe Conkling of NY is a master of the system

Half-Breeds lobbied for Civil Service Reform Govt jobs based on qualifications, not

connections James Blaine of ME leads this faction

In reality, both mainly sought political power Dissatisfaction w/ these led to nomination of

the rather boring Rutherford B. Hayes in 1876

Election of 1880

Hayes lacked any sort of luster or popularity “Rutherfraud” B. Hayes (Tilden should have won) Uneventful: Reconstruction ends, Jim Crow returns No sweeping reforms or agendas for Hayes

James Garfield/Chester Arthur nominated by Reps Bloody shirt prevails, Garfield wins

1881 Charles Guiteau shoots Garfield in the back One of Garfield’s supporters in 1880- not rewarded Vision from God tells him to punish ungrateful Garfield

Death of a President

Garfield is shot twice in the back at a RR station 'I am a Stalwart of Stalwarts...Arthur is

President now!” Garfield paralyzed, lives in agony for 11

weeks, dies Does bring attention to pathetic state of

spoils system Guiteau is tried and convicted- landmark case

First time an insanity defense is used Guiteau executed by hanging

Guiteau’s Last Words

I am going to the Lordy, I am so glad, I am going to the Lordy, I am so glad, I am going to the Lordy, Glory hallelujah! Glory hallelujah!I am going to the Lordy. I love the Lordy with all my soul,Glory hallelujah! And that is the reason I am going to the Lord,Glory hallelujah! Glory hallelujah!I am going to the Lord.

I saved my party and my land, Glory hallelujah!But they have murdered me for it, And that is the reason I am going to the Lordy, Glory hallelujah! Glory hallelujah!I am going to the Lordy!I wonder what I will do when I get to the Lordy, I guess that I will weep no more

Arthur: Unlikely Reformer

Chester Arthur is a Stalwart, classic spoils system Garfield’s assassination forces Reps to reform 1883 Pendleton Act is passed

Bans compulsory campaign contributions Merit system and aptitude tests rather than

“pull” Arthur surprisingly turns back on Stalwarts Vigorously prosecutes fraud & advocates reform Vetoes the Chinese Exclusion Act (overridden)

Election of 1884

James Blaine is nominated by Reps Reform Republicans jump ship, “Mugwumps”

Democrats chose Grover Cleveland Dirty campaign: mudslinging

Reps found that Cleveland had illegitimate child Reps: “Ma, Ma, where’s my Pa?” Dems: “Gone to the White House, Ha, Ha, Ha!” Reps: “Rum, Romanism, and Rebellion” Reps accused of fraud/corruption

(Blaine=Stalwart) Dems: “Burn this letter.” (Blaine and RR

scandal)

Mugwumps hanging themselves by bolting from

the partyand supporting Democrat

Grover Cleveland

"Blaine! Blaine! James G. Blaine!

Continental liar from the state of Maine!"

Cleveland by a Nose

Cleveland wins by less than 20,000 popular votes

First Democrat since Buchanan, pre-Civil War Very principled politician Takes on tariff as one of his major missions 1881 tariff yielded US Govt $145M surplus Congress is still strongly Republican: no

chance Does bring issue into open, but kills

Cleveland’s re-election hopes

Cleveland’s Presidency

Cleveland Dawes Severalty Act Surveys and divides Indian communal tribal

lands Allots 160/80/40 acres per individual Indians will become citizens in 25 years In reality, breaks up reservation system Further breaks down the cultural ties of

natives Intended to complete assimilation process

Cleveland’s Presidency Railroads have grown from 35K to 192K mi 1862, Union Pacific Railroad begins building

West from Omaha toward CA Irishmen are main labor source: 10 mi/day

Central Pacific Railroad builds east from SF Employs mainly Chinese immigrants Dangerous : 130 documented deaths,

possible 1200 Blasting, avalanches, cold, hunger, smallpox,

etc May 10, 1869 completed near Promontory,

Utah

Other Railroads

Northern Pacific from Lake Superior to Puget Sound

Atchison, Topeka, and Santa Fe From Kansas to New Mexico

Southern Pacific from New Orleans to San Francisco

Great Northern from Duluth to Seattle

Railroad Corporations

First modern-day corporations Extremely expensive to build RRs Cornelius Vanderbilt becomes THE name in

RRs New York Central Railroad is his creation 1883 creates time zones to align RR

schedules Stock watering: overinflating value of stocks Trust: combination of companies to control

prices Pool: Division of markets to control prices

Cleveland’s Presidency

Interstate Commerce Act Expansion of railroads plus “combination” trend Giant railroad companies began to abuse

consumers High rates, bribery, trusts and pools, price-setting ICC set up requiring "reasonable and just” rates Forbids secret rates and rate rebates Covers any business conducted across state lines

Election of 1888

Democrats re-nominate Grover Cleveland His tariff pursuit has become a liability Also appointed former Confederates to

cabinet Returned captured flags to S states

Republicans nominate Benjamin Harrison Civil War vet, grandson of William Henry

Harrison Cleveland wins 5,534,488/5,444,892: popular Harrison wins 233/168 Cleveland loses his home state, New York PA Senator Quay buys ~10,000 votes

                                                            

The Robber Barons

Cornelius Vanderbilt railroads Andrew Carnegie steel John Rockefeller oil JP Morgan banking

•Formed a steamship company in 1829

•Dominated shipping along the Atlantic

•1849 established steamship that carried people from New York to San Francisco in

Gold Rush days

•Leading U.S. steamship owner, nicknamed “The Commodore”

•Gained control of the Hudson River Railroad

•Formed a steamship company in 1829

•Dominated shipping along the Atlantic

•1849 established steamship that carried people from New York to San Francisco in

Gold Rush days

•Leading U.S. steamship owner, nicknamed “The Commodore”

•Gained control of the Hudson River Railroad

• After Civil War Vanderbilt bought most railroad lines from New York to Chicago

•1877, controlled 4,500 miles of railroads

•Worth over $100 million

•Philanthropist--donated $1 million to Vanderbilt University

• After Civil War Vanderbilt bought most railroad lines from New York to Chicago

•1877, controlled 4,500 miles of railroads

•Worth over $100 million

•Philanthropist--donated $1 million to Vanderbilt University

Captain of IndustryCaptain of Industry•Monopolized the steel industry

•Rags to riches story---came from Scotland very poor.

•Used scientific ideas (Bessemer Bessemer ProcessProcess) to develop a better way

to produce steel and sell a quality a product for an inexpensive

price.

•Used Vertical integration.

Captain of IndustryCaptain of Industry•Monopolized the steel industry

•Rags to riches story---came from Scotland very poor.

•Used scientific ideas (Bessemer Bessemer ProcessProcess) to develop a better way

to produce steel and sell a quality a product for an inexpensive

price.

•Used Vertical integration.

PhilanthropistPhilanthropist

• Gave millions to colleges Gave millions to colleges and libraries.and libraries.

• It was the sacred duty of the wealthy to give back to society who has given to him.

• Stressed education as a means to better one’s self.

• Carnegie HallCartoon Carnegie

Gospel of Wealth

Gospel of WealthGospel of WealthGospel of WealthGospel of Wealth

““On Wealth”On Wealth”““On Wealth”On Wealth”

Andrew CarnegieAndrew Carnegie

Inequality is inevitable in all societies.

Wealthy should act as “trustees” for their “poorer brethren.”

Religious Responsibility: wealthy are “trustees” of God’s possessions

Inequality is inevitable in all societies.

Wealthy should act as “trustees” for their “poorer brethren.”

Religious Responsibility: wealthy are “trustees” of God’s possessions

• Controlled the railroad by forcing them to pay him rebatesrebates because of the volume of business he gave them

• Nicknamed““Rock a Rock a Fellow”Fellow”

•Ruthless business man: “Pay no man a profitPay no man a profit”

Cartoon Rockefeller

Rockefeller/Control Govt

Rockefeller was so wealthy, he dictated to the U.S. Government to protect big business---- laissez fairelaissez faire

Rockefeller hated by many because of control in oil industry

Gave money to hospitals Gave money to hospitals and colleges.and colleges.

•University of ChicagoUniversity of Chicago•Spellman CollegeSpellman College•National ParksNational Parks•United NationsUnited Nations•WilliamsburgWilliamsburg•Cancer ResearchCancer Research

Gave money to hospitals Gave money to hospitals and colleges.and colleges.

•University of ChicagoUniversity of Chicago•Spellman CollegeSpellman College•National ParksNational Parks•United NationsUnited Nations•WilliamsburgWilliamsburg•Cancer ResearchCancer Research

Rockefeller

Social DarwinismSocial Darwinism

British economist, Herbert Spencer.

Adapted Darwin’s ideas of natural selection to business and to society

There is a natural upper & lower class.

“Survival of the fittest”

British economist, Herbert Spencer.

Adapted Darwin’s ideas of natural selection to business and to society

There is a natural upper & lower class.

“Survival of the fittest”

Social DarwinismSocial Darwinism

• In the economic world the strongest companies will survive

• “The growth of a large business is merely a survival of the fittest.” - J. Rockefeller

• In the social world, the strongest individuals will survive

• The poor are poor because they are not as well suited to life in the modern world

• In the economic world the strongest companies will survive

• “The growth of a large business is merely a survival of the fittest.” - J. Rockefeller

• In the social world, the strongest individuals will survive

• The poor are poor because they are not as well suited to life in the modern world

Social DarwinismSocial Darwinism•Social Darwinists believed that Social Darwinists believed that

companies struggled for survival in companies struggled for survival in the economic world and the the economic world and the

government should not tamper with government should not tamper with this natural processthis natural process. .

•The fittest The fittest business leadersbusiness leaders would would survive and would improve society.survive and would improve society.

•Belief that hard work and wealth Belief that hard work and wealth showed God’s approval and those showed God’s approval and those

that were poor were that were poor were lazylazy and and naturallynaturally a a lower classlower class..

•Social Darwinists believed that Social Darwinists believed that companies struggled for survival in companies struggled for survival in

the economic world and the the economic world and the government should not tamper with government should not tamper with

this natural processthis natural process. .

•The fittest The fittest business leadersbusiness leaders would would survive and would improve society.survive and would improve society.

•Belief that hard work and wealth Belief that hard work and wealth showed God’s approval and those showed God’s approval and those

that were poor were that were poor were lazylazy and and naturallynaturally a a lower classlower class..

Rockefeller

• Founds General ElectricFounds General Electric

• Gets into bankingGets into banking

• Buys Carnegie SteelBuys Carnegie Steel

• Forms steel monopolyForms steel monopoly

• US Steel (horizontal)US Steel (horizontal)

• world’s 1world’s 1stst $1B company $1B company

• Morganization of businessesMorganization of businesses

• $65M loan to the US in 1893$65M loan to the US in 1893

• By time of death, controls By time of death, controls $22.5 billion in assets$22.5 billion in assets

Who’s really Who’s really running the US running the US

economy?economy?

New Business Strategies Companies organize to maximize

profits

horizontal integration Trusts Pools Monopolies

vertical integration

• Corporation:Corporation: • group of people authorized to act as a single person • ability to sell shares of stock to raise “capital”

• Shareholders or stockholdersShareholders or stockholders• investors who receive a share of ownership• if corporation makes a profit, investor gets ““dividenddividend””

• Limited liability:Limited liability: • Shareholders receive profits if company successful• Shareholders NOT liable for the company's debts

• Risk spread over Risk spread over shareholdersshareholders so if the company so if the company goes bankrupt, the loss is not as devastatinggoes bankrupt, the loss is not as devastating

New Business Strategies

Trust or MonopolyMonopoly

• Companies in related fields

• Combine under the direction of a single board of trustees.

• Shareholders had no say.

• (Outlawed today)

BIGGER IS BETTER

A trust or monopolytrust or monopoly controls an entire industry

• makes production cheaper

• lower prices to customer

• also eliminates competition

Monopoly or Trust

Coke fields

purchased by

Carnegie

Coke fields

Iron ore deposits

purchased by

Carnegie

purchased by

Carnegie

Coke fields

Iron ore deposits

Steel mills

purchased by

Carnegie

purchased by

Carnegie

purchased by

Carnegie

Coke fields

Iron ore deposits

Steel mills

Ships

purchased by

Carnegie

purchased by

Carnegie

purchased by

Carnegie

purchased by

Carnegie

Coke fields

Iron ore deposits

Steel mills

Ships

Railroads

purchased by

Carnegie

purchased by

Carnegie

purchased by

Carnegie

purchased by

Carnegie

purchased by

Carnegie

Vertical IntegrationVertical Integration You control all phases of production from the raw

material to the finished product

Horizontal IntegrationHorizontal Integration Buy out your competition until

you have control of a single area of industry

Integration of Industry

Vertical Integration Advantages Vertical Integration Advantages

You are always in control of supply of the products you need

In control of labor cost, land/resources

Always in control of the cost

Schedule your production of autos because you are in control of all factors

You are always in control of supply of the products you need

In control of labor cost, land/resources

Always in control of the cost

Schedule your production of autos because you are in control of all factors

Modern Vertical IntegrationsModern Vertical Integrations

Ford Motor CompanyFord Motor Company Boeing Aircraft CorporationBoeing Aircraft Corporation Anheiser-Busch Brewing CompanyAnheiser-Busch Brewing Company McDonald’s RestaurantMcDonald’s Restaurant Oil companies: Exxon, etc.Oil companies: Exxon, etc. AOL Time WarnerAOL Time Warner

Ford Motor CompanyFord Motor Company Boeing Aircraft CorporationBoeing Aircraft Corporation Anheiser-Busch Brewing CompanyAnheiser-Busch Brewing Company McDonald’s RestaurantMcDonald’s Restaurant Oil companies: Exxon, etc.Oil companies: Exxon, etc. AOL Time WarnerAOL Time Warner

Modern Horizontal IntegrationModern Horizontal Integration

Examples Standard Oil Carnegie Steel Swift & Company: meat producers United Fruit Company: bananas Dole Pineapple De Beers diamonds

Examples Standard Oil Carnegie Steel Swift & Company: meat producers United Fruit Company: bananas Dole Pineapple De Beers diamonds

Responses to Responses to CombinationCombination

Monopolies are eliminating competition

Prices rising instead of falling

US gov’t passes laws to regulate business

Interstate Commerce Act Sherman Anti-Trust Act

Organization of Labor

Rise of Labor Unions----Why? Knights of Labor American Federation of Labor

Strikes and labor disputes Eugene Debs Great Railroad Strike--1877 Haymarket Riot--1886 Homestead Strike--1892 Pullman Strike--1894