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The
American economy was profoundly and
radically changed in the decades following the Civil War. In
1865, more than half of American workers toiled in agriculture.
Anyone contemplating the prospects for manufacturing would have been
struck by the obstacles: a poorly developed transportation
system; limited amounts of capital; an unsophisticated system for
mobilizing funds; and an uncertain labor force. Some, however,
would have pointed to the great potential evident in America's vast
natural resources and skilled workers. A generation later, by 1900, much of that potential had been realized, and the United States stood as a major industrial power. The changes in the nation's economy far exceeded the wildest expectations of Americans living in 1865. Many then probably anticipated economic growth, but few could have imagined that steel production could increase a thousand times by 1900, or that railroads could operate nearly six times as many miles of track, or that farms could triple their harvests. In this new economy, many Americans had to make choices between conflicting values of competition and cooperation. As the industrial economy took off, many people found themselves in a love-hate relationship with competition. Andrew Carnegie, a leader in the new steel industry, loved it, arguing that competition "insures the survival of the fittest" and "insures the future progress of the race" by producing the highest quality, largest quantity, and lowest prices. Other entrepreneurs saw competition as the single most unpredictable factor they faced and a serious constraint on economic progress. Although many entrepreneurs publicly applauded the idea of "survival of the fittest," most loved competition in the abstract but preferred to find alternatives to it in their own business affairs. Other Americans found themselves making choices about cooperation. Individualism was a deeply entrenched American value, but the increasing complexity of the economy presented repeated opportunities for cooperation. Railroad executives sometimes cooperated by dividing up the market rather than competing in it. Sometimes, workers cooperated by joining together into unions, which gave them more power to demand better wages and working conditions from their employers. Farmers sometimes cooperated to form organizations that would help them buy and sell their own products without having to pay the fees demanded by railroads. In this unit, the student will follow this transformation of the American economy as well as the responses of individuals to these changes. At the end of the unit, he or she should be able to detail these changes and their impact on the American nation. |
| Economic
Overview Before proceeding with individual lectures, an overview of the economic changes of the period may help provide some useful context. As mentioned aboved, America possessed the potential for a successful industrial economy: vast resources and skilled workers. It also possessed the building blocks for large-scale industry in its banking system and stock exchanges. Farmers had already developed 407 million acres of farmland, and were able to move their goods to market thanks to an improved network of canals (primarily in the North) and port cities. During the Civil War, government policies helped spur many of the changes witnessed in the following decades. With the exit of Southern delegates from Congress, Northern congressmen felt free to pursue long-delayed plans for settling and developing the West. First and foremost among their plans was the passage of a protective tariff in 1861. The tariff increased the price on imports to equal or exceed the price of American-made goods in order to protect American products from foreign competition, as well as to encourage investment in manufacturing. Second was the construction of a transcontinental railroad. This would open the American West to farmers, and provide a transportation network for exchange of raw materials and finished products. (We will deal with this topic in the first lecture on The Transcontinental Railroad.) They passed a number of laws to further this goal, such as the Pacific Railroad Act, the Land-Grant College Act, and the Homestead Act, all passed in 1862. Thanks to this foundation, America after the Civil War expanded dramatically in the late nineteenth and early twentieth centuries. For example, between 1865 and 1920, the nation's population increased by nearly 200 percent, from 36 million to 100 million. During the same years, railroad mileage increased by more than 1,000 percent, from 35,000 miles to 407,000 miles. The output of manufacturing increased by a similar margin. Agricultural production grew faster than the population. Perhaps most significantly, the total domestic product per capita, in constant dollars, nearly tripled. Much of this growth was sporadic, passing through cycles of expansion (growth) and contraction (recession or depression). Though this alternation is predictable, there is no predictability or regularity as to the duration of any given up or down period. During the late nineteenth century, contractions were sometimes severe, producing widespread unemployment and distress. After 1865, a postwar recession lasted until late 1867, reflecting sharp dislocations as the economy shifted from wartime production to other ventures. This was followed by several expansions and contractions of varying lengths. A major depression began in October of 1873 (The Panic of 1873) and lasted until March of 1879. The period from March 1879 to 1893 was generally a period of expansion, spurred in particular by railroad construction, but the growth was interrupted three times by brief contractions. Then another major depression began in January of 1893 (The Panic of 1893) and lasted until June of 1897, followed by alternating periods of expansion and contraction. A long expansion occurred between 1904 and 1907, followed by long contraction (1910-1912). During boom periods, companies advertised for labor and ran their operations at full capacity. When the demand for manufactured goods fell, companies reduced production, cutting hours of work or dismissing employees as they waited for business to pick up. Some businesses shut down temporarily; others, permanently. Thus, Americans living in the late nineteenth and early twentieth centuries expected that "hard times" were likely in the future, regardless of how prosperous life seemed at the moment. Federal intervention in the economy was limited largely to stimulating growth through the protective tariff and land distribution programs. Unemployed workers had little to fall back on besides their savings of the earnings of other family members. Families who failed to find work might go hungry or even become homeless. In a depression, jobs of any sort were scarce, and competition for every opening was intense. Most Americans therefore understood the wisdom of saving up for hard times, whether or not they were able to do so. The depression that began in 1873 was both severe and long lasting. Between 1873 and 1879, 335 banks closed down--a number equivalent to one in nine that had existed in 1873. Nearly 54,000 businesses failed, also equivalent to one in nine operations in 1873. No reliable unemployment data exists, but evidence indicates that these contractions hit urban workers hardest. Workers who kept their jobs saw their work weeks reduced, and their daily wages drop by 17-18% from 1873 to 1879. Thus, though long term economic trends reflected dramatic growth, the short-run boom-and-bust nature of the economy repeatedly claimed its victims. |
| Political
Overview The politics of the Gilded Age were dominated by political parties. Both major parties, Republicans and Democrats, operated according to the spoils, or patronage, system, which was the major "engine" driving both parties. This system promoted corruption as office seekers helped big business in return for money. The Grant administration, the first in this period is remember most for corruption. This situation caused some people to demand reform, but the government was slow to respond. Following Grant's example, successive administrations left most domestic policy in the hands of Congress, which was too divided (and too easily swayed by corporate influence) to generate many reform measures. Neither Congress nor the courts provided much in the way of effective, meaningful regulation of corporations. The ineffectiveness of both parties gave rise to a powerful reform movement in the last decade of the nineteenth century, the Populist movement. Fueled by agrarian discontent, the movement evolved in time into a political party, the People's Party, better known as the Populist Party, which offered a radical alternative to the economic and political status quo. Although the Populists failed to triumph politically, their efforts forever changed the nation's politics for the better--and, in the case of African-American voters in the South, for the worse. Return to Index or Proceed to Next Lecture |