Chapter 3: The Gilded Age and the Progressive Era, 1870s-1920

Why is there no singular reason for why the U.S. underwent such a large transformation in the period after 1870?

many related factors played a part

What were the many factors that came together to make the period of 1870 and after one of great economic development?

• the effects of the Civil War

• rapid population growth and the availability of food to feed a growing population

• the availability of land for factories, housing, transport, and food production

• a rapidly expanding transport system

• access to raw material

• supportive federal and state legislatures and the absence of regulation

• great technological and business innovation and active support for both

• the availability of capital, a developed banking system, and a good supply of money

• unrestricted growth of large businesses

• protective tariffs and growing export markets

• strong social attitudes

How did the Civil War help to stimulate the U.S’s industrialization?

It encouraged economic growth in a variety of ways

In what ways did the Civil War encourage economic growth in the U.S.?

The economy had to adapt to the unprecedented need for weapons, clothing, and transportation for the Northern army, leading to mass production to accommodate the army’s needs and development of new methods of distribution to raise money to pay for the war

What did the need for the government to raise money for the Civil War lead to?

The development of a capital-raising system centered on Wall Street in New York called the stock market, as well as the development of a new paper currency called the U.S. Note or ‘greenback’

Why did the banking system need to develop?

It had to evolve to cope with the increasing amount of money in circulation and the government’s growing need to borrow money, and the banking system was vital in ensuring that industrial expansion could be financed

Why were tariffs raised during the Civil War?

To gain income for the government but also to protect American goods from cheaper imports

Why was the growing population significant in industrial development?

It provided the workforce necessary for industrial expansion, the agricultural workforce that was needed to feed the growing population, and provided consumers to buy the industrial goods

What was the principal reason for a growing population during the Gilded Age?

Living conditions such as sanitation, housing, and medical treatment led to lower child mortality rate and higher life expectancy

What was the secondary reason for a growing population during the Gilded Age?

Immigration

What are the 3 major factors that usually lead to industrial growth?

Labor supply, availability of natural resources, and availability of capital

Why was the rise of real wages significant during the Gilded Age?

It meant there were more and more people in work earning money to buy products with

How did the availability of land in the U.S. help industrial development?

Between 1800 and 1860, much land was acquired by the U.S. (via events such as the Louisiana Purchase and Mexican Cession), and the Homestead Act (1862) led to settlement of the land by farmers and later increased farm productivity

What was the Homestead Act (1862)?

It allowed farmers to settle millions of acres in the U.S., and any U.S. citizen who paid a small fee would receive 160 acres of land in the West

Why did farm productivity increase during the Gilded Age?

Mechanization increased and greater knowledge of farming techniques was spread, partially due to the creation of the Department of Agriculture in 1862

Why was the growth of railroads necessary during the Gilded Age?

Manufacturers needed a way to bring in the right raw materials and the coal needed to power the engines as well as to distribute the goods they produced, all in a cheap and efficient way

How did railroads transform the U.S.?

They opened up the West and interlinked every major city and their surrounding areas

Why were low railroad transport costs vital to both the producer and consumer?

If the cost of transporting a finished product or bringing in raw materials is too high, then the railroad is useless, and the producer has to drive up prices for the consumers

In what ways did the growth of railroads stimulate the U.S. economy?

• they created jobs for almost a million people

• they required a sophisticated capitalization process, stimulating the money and capital markets even more

• they stimulated demand, and new engines and rolling stock seemed to pour out of factories

• the safety and efficiency requirements generated an urgent demand for technological innovation

• new stations, bridges, and tunnels were built, so engineers and architects and builders gained contracts and made profits

• farming was boosted as American corn could easily be exported

What was the significance of coal in industrial development?

It could be used to power textile factories, steel mills, and railway engines, as well as to provide warmth for growing city populations, and the surplus could be exported using the new railroads

What were examples of various areas of the U.S. having essential raw materials and what they were used for?

• nearly 20 states had substantial deposits of coal

• the South could produce the cotton needed for the textile mills in New England

• the forests of the West and North could provide the timber for housing and railway sleepers

Who was Andrew Carnegie?

A Scottish immigrant that came to the U.S. as a child and ended up dominating the production of steel in the country

What was the Bessemer process and how does it relate to Carnegie?

The Bessemer process was a method of making steel that Carnegie witnessed in Britain and brought to the U.S.

How did the Bessemer process revolutionize the steel industry?

It made improved steel quality, sped up production, and lowered production costs, which cut the price of steel by 80%

Why was steel produced by the Bessemer process better for railways?

It was stronger and more hard-wearing

How did Carnegie become in control of the entire steel process?

Carnegie’s companies investing in new manufacturing plants and equipment allowed him to control the whole process, from manufacturing to distribution

Why was Carnegie considered ruthless?

He opposed any attempts by his workers to form labor unions, and when his workers went on strike, Carnegie used armed guards to exercise violence upon them, wounding and even killing them

Who was Thomas Edison?

An almost entirely self-educated inventor that made electricity ‘commercial’

What made Thomas Edison an excellent example of the entrepreneurship of the Gilded Age?

• he was responsible for a large number of inventions

• he had the skill to industrialize inventions, make them commercially viable, and produce and sell them on a very large scale

• he developed the first industrial research laboratory, with chemists, engineers, and mechanics to work on inventions

Who was Alexander Graham Bell?

A Scot that moved to Canada and then Boston, where he experimented with electricity to produce what became the telephone. He developed and patented it, seeing the vast commercial potential of it

How was the Bell Telephone Company achieve a monopoly by 1880?

By buying up patents in the technology necessary to expand the telephone system on a national scale and by making use of the holding company system

What did the development of the telephone mean for the U.S.?

There could be communication within towns and cities, and then intercity communication became possible by 1890, which was very important to business development

How were funds raised to pay for the expensive processes of railroad-building, factory-running and city electrification?

The stock market was created, in which the profits generated by the Civil War were invested, in the hopes that there would be a return on the investment

In what ways did the federal government have virtually no role in managing the economy?

• there were no laws restricting the hours of labor

• there were no taxes on profits

• there were no rules about how business had to be conducted

• the law provided few, if any, obstacles to entrepeneurship

What was the issue with state legislatures and judiciaries being in the position to bring in rules and regulations in their own states?

They were usually dominated by local business or agricultural interests, and businessmen soon learned how to use money and pressure to ensure that the limited state control there was didn’t interfere with their interests

What was the Sherman Anti-Trust Act (1890)?

An attempt to restrict the concentration of economic power in too few hands so there wouldn’t be interference in trade or economic competition

How were labor unions divided?

The skilled and unskilled labor unions had very different interests, and some were willing to use peaceful methods to achieve better pay and conditions while others were not

What would state and federal authorities do when industrial disputes arose?

They would use troops to assist owners in defeating worker protests for improved pay and conditions

What were state assemblies, local judiciaries, and police forces’ attitudes toward strikes?

They showed little tolerance toward those who went on strike during an industrial dispute

What was an employer able to do within his own workforce?

He could manage his workforce in any way he wanted as there were no laws or other sanctions to protect his workers

What did the absence of any formal rules or regulations until the Sherman Anti-Trust mean?

Businessmen were free to create organizations that could manage national expansion, and the corporation emerged

What could a corporation do?

• own a large number of railways

• hire the management it wanted to run them

• sue (and be sued)

• buy, sell, and own property in many states

• merge with other railways and take over companies which maid

• become big enough to undercut the prices of rivals and force them out of business before raising their own prices

Why were corporations the perfect way for giant industries to grow?

• corporations eliminated competition and gained the advantages of a monopoly

• they could attract investors and speculators

• its managers could own shares in their companies and run it for their own benefit

• there were no rules about keeping accounts or reporting to anyone

What were trusts?

A legal loophole that allowed companies established in one state from owning property in another state or shares in other companies, even if there were state laws against it

What were trusts vital for?

Creation of monopolies

Who created trusts?

Henry Flagler

Who was Henry Flagler?

The secretary of Standard Oil who established trusts by appointing himself as a ‘trustee’ for the stocks and properties and assets the company was not allowed to own. He and 2 other employees became trustees of all the properties and assets of Standard Oil outside Ohio.

What were the results of Henry Flagler’s actions?

He created a simple and perfectly legal device to allow his company oil supply, refining and distribution in America, and Standard Oil ended up controlling almost the entire U.S. oil industry

What were advantages of competing businessmen making informal agreements together to divide up the trade and share the profits?

• they avoided business threats, such as sudden recession and overproduction

• they lowered their risks so they could survive through hard times

• it enables them to control or collectively negotiate the prices of things like coal and freight

• combined size meant greater strength and increased profits

What occurred with the growth of trusts?

A significant number of major industries gradually came under the control of one man

Who were trusts usually controlled by?

A single individual

What was the first industry to become controlled by one man?

Oil

Who were the major robber barons?

• John D. Rockefeller

• Andrew Carnegie

• J.P. Morgan

• Gustavus Swift

What major industry did John D. Rockefeller control?

Oil

What major industry did Andrew Carnegie control?

Steel

What major industry did Gustavus Swift control?

Meat packing

What major industries did J.P. Morgan control?

Banking and railroad systems

What were characteristics of robber barons?

• they had monopoly control over their industries and eliminated competition

• they nearly always became multimillionaires

• they were well known for efficient management methods but usually treated their workforce badly

• they focused on profit and dominance

Who was John D. Rockefeller?

The creator of the Standard Oil company who started out as a bookkeeper in 1862, then made an investment in oil, and by 1870 built up a thriving business in oil refining, and eventually in 1880, he was able to control the price of oil in the U.S.

What was Rockefeller’s aim?

To dominate the entire oil business

How did Rockefeller gain monopoly control?

He gave rail owners share in his company to get cheaper freight rates than his rivals, which allowed him to undersell them and force them out of business. He also enlisted his younger brother, William, in utilizing trust system to gain more control of oil production, much of the transport system and significant parts of the national banking system

How did Rockefeller control the price of oil in the U.S. if his company only produced 2% of it?

He controlled 90% of the refining capacity

Why did Rockefeller take great care to gain influence in stage legislatures?

To ensure they didn’t restrict his business

How did Rockefeller respond to legislation passed against trusts to prevent his commercial methods?

His large team of lawyers came up with a legal device called the holding company, which allowed him to maintain control over the industry

What is a holding company?

A business formed to sell and buy shares of other companies which it then controls

What did Rockefeller control by 1900?

He controlled the domestic and foreign oil market and the whole industry from the oil wells to the automobile’s lubricating oil and petrol tank

Who was J.P. Morgan?

The son of a wealthy and successful investment banker that followed in his father’s footsteps

What opportunities did Morgan see in the growing railway industry in 1860?

Some railway companies were having financial difficulties due to overbuilding and falling prices, so he invested in many and took control of them

What enabled Morgan’s company to build up substantial profits?

As he bought up railroad companies in the heavily populated northeast U.S., he gradually gained control of passenger and freight prices

What did Morgan accomplish by 1900?

He had enormous influence on railroads as well as capital market in the U.S. through investing and buying out a large number of banks, insurance companies, and investment trusts

What major companies got their start from funding by Morgan?

Edison Electric (the new electrical industry) and International Harvester (farm machinery)

What did Morgan play a substantial role in?

The resolution of two financial panics in 1893 and 1907

How did Morgan become extremely influential?

He took over Carnegie Steel and created the Northern Securities Corporation in 1901, which controlled much of the rail network in the northeast. He also bought out the struggling New York Times to ensure he got favorable reports in the newspapers

How did Morgan come into control of most of the steel industry and capital in the U.S.?

In 1901, he took over Carnegie’s steel empire and created the United States Steel Corporation, which became the world’s first billion-dollar corporation

Why was Congress largely influenced by business interests during the Gilded Age?

Presidents and their cabinets were highly responsive to the needs of U.S. industry and overseas expansion

What helped commercial expansion?

The economic policies of the government, including passing of protective tariffs by Congress and enforcement of them by the government

What was the intention behind tariffs?

To ensure that foreign-made goods were always more expensive than home-produced ones, therefore protecting U.S. producers by forcing people to buy American goods

Why were tariffs unpopular with many consumers?

They pushed up prices of the imported items that they needed to buy (i.e. sugar)

What was the principal source of the federal government’s income set out by the Constitution?

Tariffs

Why was there little chance of significant change in tariffs?

Business interests controlled Congress and the government needed income to pay for the civil service and the military

Why did tariffs remain controversial, especially in the 1880s and 1890s?

Manufacturers liked them, as they reduced competition from abroad, but the farmers of the South and West did not as they increased their operating costs

Which political party supported tariffs?

Republicans

Which political party opposed tariffs?

Democrats

Why did tariffs remain despite opposition from Democrats?

Republicans were dominant in the presidency and Congress

What did the McKinley Act (1890) do?

It raised the rates imposed on imported goods, hitting consumers very hard

What did the Sugar Trust do?

It controlled the whole market and kept sugar prices artificially high and made even greater profits when the rate on imported sugar was cut, angering many voters

Why did tariffs become a major issue in the 1890 elections?

The Republicans, the party of business, supported them, while the Democrats strongly opposed them

Why did the Democrats do well in the House of Representatives elections in 1890?

They ran a campaign arguing that high food prices were caused by the Republicans and their tariffs and that ‘two thousand millionaires were running the country in their own interests’

What was the Wilson-Gorman Bill (1894)?

A bill the Democrats put through Congress to cut many tariffs, but Republican senators added so many amendments that there were hardly any reductions in the end

What did Republican senators adding amendments to the Wilson-Gorman Bill lead to?

A growing demand to change the way Senators were elected

How were Senators chosen at the time of the Gilded Age?

They were chosen by State Legislatures, which were often business-controlled, and Senators were not directly elected by the people like Representatives were

How did the government provide assistance to the industrial process with foreign policy?

• great care was taken to ensure that much of the Caribbean and Central America was open to U.S. business, as well as the Philippines, China, and Japan

• a growing U.S. navy ensured that American trade was protected overseas

• the State Department did all it could to support U.S. commerce, especially in the potentially vast markets of China and Japan

Why was there rapid industrialization in the last three decades of the 19th century?

Due to a combination of human dynamism, unlimited resources, bold entrepreneurship, plenty of labor, great demand, and a lack of serious obstacles or regulation

What were the principal criticisms for rapid growth in the U.S. economy and industry?

• the accumulation of political power, and the abuse of that power, by powerful men in the rapidly growing cities who became known as ‘bosses’

• the concentration of wealth and political power held by the robber barons

• the impact that economic recession had on industrial workers and their families

• the impact of urbanization on living conditions, housing, health, and safety

Why was an extensive supply of immigrant labor that was desperate for employment and prepared to work long hours significant?

It was very important to the industrialization process

Why did the largely unskilled immigrant workforce provide one of the most important elements in any industry?

Few of the second-generation Americans were willing to tolerate the conditions in most factories in the cities

Where did most of the migrants come from in the early part of the industrialization process?

From northern and western Europe, mainly England, Scotland, Ireland, and Germany

Where were the majority of the immigrants coming from by the end of the 19th century?

Countries like Italy, Greece, the Balkans, Russia, and the Austro-Hungarian Empire in southern, eastern, and central Europe

What were push factors for immigrants in the late 19th century?

Religious persecution, poverty, and unemployment

What were pull factors for immigrants in the late 19th century?

A desire for political freedom, economic opportunity, and a demand for cheap labor