6.12 Role of the Government in the Gilded Age

LEARNING OBJECTIVE: Explain the continuties and changes in the role of the government in the U.S. economy

INTRODUCTION

• Governments were in tune with laissez-faire economics and Social Darwinism

  • Business leaders and political supporters

    - opposed most govenrment regulation, taxes, and actions

    - agrued that economy would grow quicker w/o gov intervention

    - federal courts supported these views (narrowly interpreted regulaton)

  • Federal gov

    - involvement was meant to help business growth

    - provided land grants to railraods at expense of taxpayers

    - passed high tariffs to protect industries but cost consumers

    - followed hard money policies that aided banks but hurt farmers

GOVERNMENT ACTIONS

• Government was less active in the economy than in later periods

  • Took steps to premote growth and competition

FEDERAL LAND GRANTS

• Governments were willing to subsidize/support financially businesses

  • Federal gov provided railraod companies loans and land grants

    - gave more than 170 million acres of public land

    - expected railraods would sell land to new settlers

    - thougth completed railraods would increase land and provide preferred rates for carrying mail and transporting troops

  • Subsides had negative consequences

    - land grants and cash loans—→corruption in government

    - insiders used construction companies to bribe officials

    - citizens discovered railraods controlled half of the land—→ protest against land grants

INTERSTATE COMMERCE ACT (1887)

• State laws passed to regulate railroad rates ran into problems

  • Wabash v.Illinois

    - supreme court ruled that states could not regulatinterstate commerce

    - court decisions nullified state regulations acheived by Grangers

  • Interstate Commerce Act of 1887

    - response to the outcry of farmers and shippers

    - required railroad rates to be ¨reasonable¨

  • Interstate Commerce Comission

    - first federal regulatory agency

    - investiagted pools, rebates, and other discriminatory practices

    - helped railraods more than farmers (lost most federal cases, stabalized rates and curtailed competition, provided little help to farmers and other shippers)

ANTITRUST MOVEMENT

• Middle-class citizens feared unchecked power and old wealth resented influence of growing new wealth (trust came under scrutinity)

  • Sherman Antitrust Act

    - prohibited any concentration of power harmful to trade and competition

    - was too vaguely worded to stop development of trust

  • United States v. E. C. Knight Co.

    - ruled Sherman Antitrust Act only applied to commerce, not manufacturing

    - Department of Justice secured a few convictions (law was strengthend during progressive Era)

FOREIGN POLICY AND THE ECONOMY

• US government used foreign policy to shape economic changes

  - Purchased Alaska from Russia

  - Annexed Hawaii to premote trade w Asia

  - Became more involved in Latin American affairs

POLITICAL ISSUES: CIVIL SERVICE, CURRENCY, AND TARIFFS

• Congresses were concerned with patronage, money supply, & tariffs

  - Let state and local gov deal w issues of urbanization & industialization

CIVIL SERVICE REFORM

• Assassination of President Garfield—→ Congress removing certain gov jobs from control of party patronage

  • Pendleton Act of 1881 (set up civil service commission)

    - applicants for classified federal jobs would be selected by exam scores

    - prohibited civil servants from making political contributions

    - system was expanded until most federal jobs were classified

    - poltiicians adapted by relying more the rich to fund their campaign

MONEY QUESTION

• Most heated debate during Gilded Age was how much to expand money supply

  • More money was needed in circulation for economic growth

    - money question reflected tension between rich and poor

  • Debtors, farmers, and start-ups

    - blamed gold standard for financial hardship (Panic of 1873)

    - wanted more “soft” money in circulation (greenbacks & silver)

    - would allow them to borrow at a lower interest rate & pay off their loans

  • Bankers, creditors, investors, and established businesses

    - stood firm with “hard” money (currency backed by gold)

    - argued dollars backed by gold would value against infaltion (population and economy grew faster than numbe rof gold-back dollars)

GREENBACK PARTY

• Paper money not back by gold or silver was issued as emergency measure

  • Northern farmers received high prices

    - benefited from greenbacks

  • Creditors and investors

    - attacked unbacked paper money as violation of law

    - congress sided with creditors—→specie resumption act (withdrew all greenbacks from circulation)

• Supporters of paper money fromed the Greenback Party

  • 14 members of Greenback party were elected to Congress

    - James B. Weaver of Iowa (leader of populist party)

    - party died out, but goal of increasing circulation did not

DEMANDS FOR SILVER MONEY

• Removing greenbacks—→ stopping coining of silver (Crime of 1873)

  • Silver discovery in Nevada revived demand for use of silver

    - Bland Allison Act (limtied coinage of silver each month)

    - farmers, debtors, and western minors continued to demand unlimited coinage of silver

TARIFF ISSUE

• Republican congres raised tariffs to protect idustry and fund gov during civil war

  • Democrats objected to high tariffs

    - taxes raised prices for consumers

    - protective tarriffs—→ other nations placing retalliation taxes

    - American farmers lost overseas sales—→ surplus in corn & wheat (lower farm prices and profit)

    - Farmers viewed industry to be growing rich at expense of rural

CONTINUITY

• poltics of stalement & complacency began to lose hold on voters

  • Protest over corruption, money issues, tariffs, railraods, & monolpolies

    - politicans began to slowly respond

    - took 3rd party (the populist) & major depression to change lethargy