Us in the Gilded Age

1860-1900

• During the late 19th century and the early 20th century, the United States was not seen as a “world power”. As such its political and economic interests did not reach beyond its borders. The result was a lack of US involvement in foreign affairs and business. This would all change after the US’s involvement in the Spanish-American war (1898).

Investment Capital

• Investment capital is the availability of money and resources. Following the Civil War there was an excess of money and means of production, fueled by the northern war effort and the growth of the western United States. These circumstances, along with a body of entrepreneurs willing to risk investments and work to achieve success, resulted in unprecedented growth in American industry during this time period.

Entrepreneurial impact

• The advantage of larger corporations over smaller ones becomes clear when considering the idea of “Economies of Scale”. The idea is a simple one, a larger corporation will make more of a given product and as a result buy more of the raw materials needed in production and negotiate a lower cost for those materials. The result is that a bigger corporation will be able to offer the same product at a lower overall cost to consumers, giving it the advantage in the marketplace against smaller competitors. Corporations such as Standard Oil used this advantage to lower prices and drive many smaller companies out of business.

Laissez Faire Capitalism

• Laissez-Faire capitalism calls for the complete non-involvement of government in the economy. The approach is one of “hands-off”, in which prices, quality and competitive practices are solely determined by competition. This approach was advocated by the English economist Adam Smith in his work The Wealth of Nations and followed by the US government up until the late 1800’s, early 1900’s.

Economic nationalism

• Protective tariffs have been used throughout American history to protect US businesses from foreign competition. The idea is that by taxing imports the relative price of comparable US made goods will be cheaper, resulting in increased sales of US made goods which will aid US businesses. This approach was advocated earliest on by Alexander Hamilton as part of his 5 part economic plan to grow the fledgling US economy and protect US industry.

Social Darwinism

• Based on the work of Charles Darwin in explaining evolution, Social Darwinism is the application of “survival of the fittest” to society and business. It held that weaker (or unfit) companies would die off at the hands of stronger, better and superior corporations. It was seen as justification of laissez-faire capitalism, as government should not interfere in the natural economic evolution by which smaller, weaker companies are eliminated. This concept was also applied to individual success, by which the most successful in society were thought to be the smartest, hardest working and as such most fit.

“The growth of a large business is merely survival of the fittest. The American beauty rose can be produced in the splendor and fragrance which bring cheer to its beholder only by sacrificing the early buds which grow up around it. This is not an evil tendency in business. It is merely the working out of a law of nature and a law of God. . . .” -John D. Rockefeller, Jr.

Monopolies

• A monopoly is a business that controls a vast majority or all of the market for a specific good or service. Holding companies and pools are various forms of this idea in which one larger company may own many of the smaller companies within an industry. During the Gilded Age (late 1800’s) many areas of the US economy were dominated by monopolistic companies that drove competitions out of business, thereby reducing competition. It was not until the Sherman Anti-Trust Act of 1890 that the government made any attempts to regulate or control the business practices of these monopolies

Pooling and mergers and Holding Companies

• A monopoly is a business that controls a vast majority or all of the market for a specific good or service. Holding companies and pools are various forms of this idea in which one larger company may own many of the smaller companies within an industry. During the Gilded Age (late 1800’s) many areas of the US economy were dominated by monopolistic companies that drove competitions out of business, thereby reducing competition. It was not until the Sherman Anti-Trust Act of 1890 that the government made any attempts to regulate or control the business practices of these monopolies.

• A monopoly is a business that controls a vast majority or all of the market for a specific good or service. During the Gilded Age (late 1800’s) many areas of the US economy were dominated by monopolistic companies that drove competitions out of business. It was not until the Sherman Anti-Trust Act of 1890 that the government made any attempts to regulate or control the business practices of these monopolies.

Effect on Society

• The rise of American industry during the late 1800’s was mostly an urban occurrence. Areas such as New York City, Chicago, Boston and other major cities experienced huge influxes of population from rural locales as well as foreign immigration. This urbanization was occurring as people sought available jobs in the growing US factories, located in the cities. Another contributing factor was the increase in farming technology and efficiency, which reduced the need for farm workers and forced these displaced workers to seek other available employment

Immigration

• During the Gilded Age US industrial development was growing at an unprecedented rate. To fuel the increased demand for unskilled workers there was also an increase in immigration from southern and eastern Europe, Asia and elsewhere. These immigrants became known as “New Immigrants” as they were from different regions than the western European immigrants of “Old Immigration”.

• In her poem “The New Colossus” inscribed on the base of the statue of liberty, Emma Lazarus writes: "Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore. Send these, the homeless, tempest-tost to me. I lift my lamp beside the golden door!" The idea expressed is one of welcoming and openness to immigrants from all over the globe, a policy followed by the United States in the late 1800’s, in an efforts to fuel the demand for unskilled workers created by our rapid industrial growth during this time.

• There are two major ideas on the integration of immigrants into American society, cultural pluralism and assimilation. Cultural pluralism calls for the immigrant to retain his or her ethnic identity within American society, they may live in ethnic neighborhoods (like Chinatown in New York or San Francisco) and continue to speak their native language, continue traditions and retain a clearly identifiable way of life. Assimilation is the concept of shedding traditional practices and language for a more “American” way of life, as well as the adoption of English.

Fate of Organized Labor

• Many industry owners felt threatened by the growth of unions in the late 1800’s. They rightly feared that union growth could force them into conceding higher wages, improved conditions and shorter work hours.

• Craft unions such as the American Federation of Labor were successful at organizing skilled or craft workers. This was more successful due to the fact that skilled workers are more difficult to replace. Organizing unskilled workers proved much tougher, as companies could easily replace such workers with any number of newly arrived immigrants willing to work for the wages they offered.

• One of the greatest blows to union growth during this time was the Haymarket Riot in Chicago in 1886. During a labor rally at which the Knight of Labor union was represented, a bomb exploded killing nearly 20 people. The American public unduly blamed the KOL and as a result public support for the union movement was reduced.

• The policy of the US government during the era of early union growth was to support industry in strikes and worker conflicts. In strikes such as the Great Railway Strike of 1877 and the Pullman Car Co. Strike of 1894, the federal government sided with the business, forcing the striking employees back to work.

• In the Homestead Strike against Carnegie Steel in 1892, workers struck in protest of a cut in pay. The management of the plant brought in security guards (some from the famous Pinkerton agency) to guard the plant. Hostilities ran high and violence resulted. In the wake of these hostilities 16 men were killed. Subsequently the National Guard was called into the break the strike and it ended with a loss for the union and few of the striking steel workers were rehired.

• Many people during the Gilded Age were frustrated with business taking advantage of workers as well as the US consumers. There was a growing call in the late 1800’s for the government to step in and regulate the economy, insuring safety and fair practices. The best examples of this can be seen in the ICC and the Sherman Antitrust Act. The passage of the Interstate Commerce Act and the creation of the Interstate Commerce Commission was designed to regulate the railroads and their rates. The Sherman Antitrust Act of 1890 banned “combinations in restraint of trade” or basically any monopoly that reduced competition in the marketplace, a direct response to the growth of monopolistic practices in the late 1800’s.

• Steel magnate Andrew Carnegie is perhaps the most famous of all philanthropists in American history. He once stated "The man who dies thus rich dies disgraced.", in this he is encouraging the donation of excess wealth for the betterment of society. Carnegie and his contemporaries donated huge sums for the construction of libraries, hospitals, schools and other public institutions. This American tradition continues today in the one billion dollar donation by Ted Turner to the United Nations and the on-going work of the Bill and Melinda Gates Foundation.