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Table of Contents
Unit 6 Overview: The Industrial Revolution (1865-1898)
6.1 Context of Industrialization and the Gilded Age
6.2 Westward Expansion: Economic Development
6.3 Westward Expansion Social and Cultural Development
6.4 The "New South"
6.5 Technological Innovation
6.6 The Rise of Industrial Capitalism
6.7 Labor in the Gilded Age
6.8 Immigration and Migration
6.9 Responses to Immigration
6.10 Development of the Middle Class
6.11 Reform in the Gilded Age
6.12 Controversies over the Role of Government
6.13 Politics in the Gilded Age
6.14 Continuity and Change in Period 6

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6.12 Controversies over the Role of Government

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During the Gilded Age (1870s-1890s), Americans argued about how much the government should be involved in the economy. As factories and big businesses grew rapidly, some people wanted government to stay out of business affairs, while others wanted more rules to control powerful corporations. These debates shaped real policies that affected everyday Americans and set patterns that would influence American politics for decades.

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Political commentary on big business, image courtesy of Bryan-College Station Chronicle

Economic Philosophies and Approaches

The Gilded Age saw a big fight between different ideas about how the economy should work. Business leaders usually wanted less government involvement, while farmers, workers, and reformers often wanted more rules to protect people against powerful corporations.

Laissez-faire supporters believed government should stay out of the economy:

  • "Laissez-faire" means "let them do as they please" in French
  • They thought businesses should operate without government rules
  • They believed free markets would naturally fix economic problems
  • They saw economic competition as natural and good
  • They opposed government help during hard economic times

Government intervention supporters argued:

  • Unregulated businesses created harmful monopolies
  • Government needed to protect the public against powerful corporations
  • Economic downturns required government action to help suffering people
  • Government should make sure competition was fair
Laissez-faire BeliefsGovernment Intervention Beliefs
Free markets solve problems naturallyMarkets need rules to be fair
Competition creates the best resultsMonopolies hurt consumers and workers
Government should stay out of businessGovernment should protect the public
Economic hardship weeds out weak businessesEconomic hardship causes needless suffering
Success comes from individual effortSuccess depends partly on fair rules

Social Darwinism gave laissez-faire ideas a scientific-sounding excuse. It wrongly applied Darwin's ideas about natural selection to human society, suggesting that rich people were naturally superior and government help for poor people would weaken society. These ideas were popular among wealthy business owners who benefited from limited rules.

Federal Economic Policies

Despite the popularity of laissez-faire thinking, the government actually did quite a bit to help businesses grow during this period. At the same time, growing problems with monopolies and corruption eventually led to the first significant business regulations.

How government helped business growth:

  • Gave railroad companies huge amounts of free land
  • Put high taxes on imported goods to protect American industries
  • Kept immigration open to ensure cheap labor
  • Sent troops to break up worker strikes
  • Limited legal responsibility for corporations

Early business regulations:

  • Interstate Commerce Act (1887) – controlled railroad rates
  • Sherman Antitrust Act (1890) – made monopolies illegal
  • Pendleton Civil Service Act (1883) – reduced government corruption

The Interstate Commerce Act created America's first federal regulatory agency to oversee railroad rates and practices. The Sherman Antitrust Act declared monopolies illegal, though it wasn't strongly enforced until the early 1900s. Both laws represented important steps toward greater government involvement in the economy, even if they didn't change things overnight.

Monetary Policy Debates

One of the biggest economic debates of the Gilded Age was about money – specifically, whether American currency should be backed by gold alone or by both gold and silver. This affected millions of Americans, particularly farmers and people in debt who were suffering under the gold standard's effects.

"Hard Money" supporters (mostly bankers and lenders) wanted:

  • Gold standard where paper money was backed by gold
  • Stable currency to make businesses feel confident
  • Limited inflation to protect their investments
  • Policies that generally helped northeastern banks and businesses

"Easy Money" supporters (mostly farmers and borrowers) wanted:

  • More money in circulation through silver coinage or paper currency
  • Rising prices to help farmers and make debts easier to repay
  • Policies that would help western and southern regions

The "Crime of 1873" happened when Congress stopped making silver coins, effectively putting the US on the gold standard. This decision made things harder for farmers and debtors, while helping banks and creditors. The fight over gold versus silver became a major political issue, leading to the rise of the Populist Party and playing a central role in the 1896 presidential election.

Regional Economic Conflicts

Government economic policies created tensions between different regions of the country. Policies that helped one region often hurt another, leading to political conflicts between North and South, East and West.

Northern industrial interests wanted:

  • High taxes on imported goods to protect their factories
  • Gold standard money policies
  • Government support for industrial growth

Southern agricultural interests wanted:

  • Lower taxes on imports to reduce prices and help exports
  • More money in circulation to raise crop prices
  • Limited government economic regulation

Eastern financial centers wanted:

  • Gold standard and conservative money policy
  • National banking system controlled by Eastern banks
  • Limited inflation to protect lenders

Western farmers and miners wanted:

  • "Free silver" to create more money
  • Government control of railroad rates
  • Federal programs to help farmers

These regional tensions shaped political parties, elections, and government policies throughout the Gilded Age. The debate wasn't just about abstract economic theories – it was about whose interests would be served by government policy.

Foreign Economic Policy

As American production grew beyond what Americans could consume, the government increasingly looked to foreign markets. This led to more active government involvement in international affairs to protect American economic interests.

The government promoted economic expansion abroad by:

  • Seeking new markets for American products
  • Building influence in Latin America
  • Opening Asian markets, especially China and Japan
  • Acquiring territories like Hawaii, Philippines, and Puerto Rico
  • Establishing naval bases to support trade

Business leaders pushed for an "Open Door" policy in China to ensure American companies could compete with European powers there. The government also organized the first Pan-American Conference in 1889 to build stronger trade relationships with Latin American nations. These economic interests played a major role in America's growing global influence at the end of the 19th century.

Legacy of Gilded Age Economic Debates

The debates over government's role in the economy during the Gilded Age set important patterns for the future. While laissez-faire ideas dominated much of this period, growing problems with monopolies, worker unrest, and economic inequality gradually built support for increased regulation.

These controversies laid the groundwork for the Progressive Era reforms that would follow in the early 20th century, when the federal government would take a more active role in regulating business and addressing social problems. Many economic issues that first emerged during the Gilded Age – like monopoly power, worker rights, and government's role in managing the economy – continue to be debated in American politics today.

Key Terms to Review (22)

Antitrust Movement: The Antitrust Movement was a campaign in the late 19th and early 20th centuries aimed at breaking up monopolies and promoting competition in the American economy. It sought to address the growing power of large corporations, known as trusts, which were seen as harmful to consumers and small businesses. This movement was a significant part of broader debates over the role of government in regulating the economy and protecting public interests.
Bland-Allison Act of 1878: The Bland-Allison Act of 1878 was a U.S. federal law that mandated the government to purchase and coin silver, specifically aiming to increase the money supply and stabilize the economy during a period of deflation. This act was a response to the growing demands from silver miners and agrarian interests who believed that increasing the money supply through silver would alleviate economic hardships and enhance inflation, thereby supporting farmers and debtors. The act highlighted the ongoing controversies over the role of government in regulating the economy and addressing monetary policy.
Civil Service Commission: The Civil Service Commission was established in the United States in 1883 to oversee the implementation of merit-based hiring for government jobs, aiming to eliminate the corrupt practices associated with the patronage system. By instituting a standardized method for hiring and promoting federal employees, the commission sought to ensure that government positions were filled based on qualifications rather than political connections, thus enhancing the efficiency and integrity of the federal workforce.
Crime of 1873: The Crime of 1873 refers to the U.S. Congress's decision to eliminate the silver dollar as a standard unit of currency and move toward a gold standard, effectively demonetizing silver. This legislative action sparked significant controversy regarding the role of government in regulating currency and its impact on the economy, particularly among farmers and laborers who favored inflationary policies to alleviate debt burdens.
"Easy" Money: 'Easy' money refers to a monetary policy that allows for low-interest rates and easy access to credit, which encourages borrowing and spending. This approach is often used by governments or central banks to stimulate economic growth during periods of recession or economic downturn. The concept is intertwined with debates about the appropriate level of government intervention in the economy and the potential long-term consequences of such policies.
Federal Land Grants: Federal land grants are parcels of land provided by the federal government to individuals, companies, or institutions, often used to encourage settlement, economic development, and infrastructure projects. These grants reflect the government's role in shaping land use policies and fostering economic growth while sparking debates over land ownership, rights, and responsibilities.
Gilded Age: The Gilded Age refers to the period in American history from the 1870s to about 1900, characterized by rapid economic growth, industrialization, and significant social changes, all cloaked in a superficial layer of prosperity that masked underlying issues such as political corruption, economic inequality, and social strife. This era saw the emergence of a wealthy elite and a growing middle class, while also witnessing major conflicts over labor rights, immigration policies, and government roles.
Greenback Party: The Greenback Party was a political party formed in the United States in the 1870s that advocated for the issuance of paper money, known as greenbacks, to help farmers and working-class citizens cope with economic hardships. This party emerged during a time of significant economic turmoil and focused on monetary reform, emphasizing the need for government intervention in the economy, which resonated with many who felt disenfranchised by existing political parties.
Hard Money: Hard money refers to currency that is backed by a tangible asset, such as gold or silver, and is often considered more stable compared to paper currency. In the context of economic debates, hard money emphasizes the need for a strict monetary policy with limited government intervention, often arguing against inflationary practices. This debate touches on broader controversies regarding the role of government in regulating the economy and managing currency supply.
Hepburn Act of 1906: The Hepburn Act of 1906 was a landmark piece of legislation that aimed to regulate the railroad industry by granting the Interstate Commerce Commission (ICC) the authority to set maximum railroad rates and oversee railroad practices. This act represented a significant shift in government intervention in the economy, particularly in addressing public concerns over unfair practices by powerful railroad companies and aligning with the Progressive movement's goals for increased government regulation to protect consumers and promote fair competition.
Interstate Commerce Act of 1887: The Interstate Commerce Act of 1887 was a significant piece of legislation aimed at regulating the railroad industry and its monopolistic practices. It established the Interstate Commerce Commission (ICC) to oversee railroad rates and ensure they were just and reasonable, reflecting growing concerns over the impact of industrialization on economic fairness and competition.
Interstate Commerce Commission (ICC): The Interstate Commerce Commission (ICC) was a regulatory agency established in 1887 to oversee and regulate the railroad industry and later other forms of transportation. It aimed to ensure fair rates, eliminate discrimination, and regulate monopolistic practices within the interstate transportation of goods and passengers, reflecting the growing belief in the need for government intervention in the economy during a time of rapid industrialization.
Laissez-faire: Laissez-faire is an economic philosophy that advocates for minimal government intervention in the marketplace, allowing supply and demand to dictate prices and production. This principle promotes individual entrepreneurial freedom, suggesting that when businesses operate without excessive regulation, it leads to economic growth and prosperity. It is a foundational concept in capitalist economies, especially during periods of rapid industrialization and economic expansion.
Panic of 1873: The Panic of 1873 was a financial crisis that triggered a severe economic depression in the United States and Europe, beginning with the collapse of Jay Cooke & Company, a major bank heavily invested in railroads. This crisis exposed the fragility of the post-Civil War economy and led to widespread bank failures, unemployment, and social unrest. The fallout from this panic highlighted debates about the role of government in regulating the economy and the impact of westward expansion, as it coincided with the completion of the Transcontinental Railroad and increased speculation in the railroad industry.
Pendleton Act of 1881: The Pendleton Act of 1881 was a landmark piece of legislation that established a merit-based system for federal employment, aiming to reduce corruption and the influence of patronage in government jobs. This act marked a significant shift in how government positions were filled, moving away from the 'spoils system' where jobs were awarded based on political connections rather than qualifications. The Pendleton Act laid the groundwork for modern civil service reform and highlighted ongoing debates about the appropriate role of government in hiring practices.
Sherman Antitrust Act of 1890: The Sherman Antitrust Act of 1890 was a landmark federal statute in the United States aimed at curbing monopolistic practices and promoting fair competition in the marketplace. This act made it illegal to restrain trade or commerce through monopolies or anti-competitive agreements, marking a significant shift in how the government intervened in economic affairs. Its passage reflected growing public concern over the power of large corporations and their influence on the economy and society.
Social Darwinism: Social Darwinism is a social theory that applies the concept of 'survival of the fittest' from Charles Darwin's theory of evolution to human societies. It argues that social and economic inequalities are natural and justified, promoting the idea that certain races and classes are superior to others, which influences various aspects of society including economics, politics, and imperialism.
Specie Resumption Act of 1875: The Specie Resumption Act of 1875 was legislation that aimed to return the United States to the gold standard by mandating the redemption of greenbacks (paper currency) in gold starting in 1879. This act reflects the broader debates about the role of government in managing the economy and the monetary system, especially during a period marked by economic instability and inflation following the Civil War.
Standard Oil Co. of New Jersey v. United States: Standard Oil Co. of New Jersey v. United States was a landmark Supreme Court case in 1911 that ruled against the Standard Oil Company for violating the Sherman Antitrust Act by engaging in monopolistic practices. This case underscored the government's role in regulating large corporations and preventing anti-competitive behavior, highlighting ongoing debates about the balance between free enterprise and government intervention in the economy.
Tariff Issue: The Tariff Issue refers to the debates and conflicts surrounding the imposition of tariffs, which are taxes on imported goods, primarily in the early 19th century United States. These tariffs were a significant point of contention between different regions, as industrialized Northern states generally supported high tariffs to protect their emerging industries, while agrarian Southern states opposed them, arguing they raised the cost of imported goods and hindered their trade. This disagreement highlighted broader controversies over the role of government in economic regulation and regional interests.
United States v E. C. Knight Co.: United States v E. C. Knight Co. was a landmark Supreme Court case in 1895 that addressed the scope of Congress's power to regulate interstate commerce and the Sherman Antitrust Act. The Court ruled that the federal government could not regulate sugar manufacturing because it was considered a local activity, illustrating a narrow interpretation of the federal government's role in regulating businesses and setting a precedent for limiting antitrust enforcement.
Wabash v Illinois: Wabash v Illinois was a landmark Supreme Court case decided in 1886 that limited the rights of states to regulate interstate commerce, particularly regarding railroad rates. The ruling emphasized that states could not regulate interstate commerce because it was under the jurisdiction of the federal government, which raised significant questions about the balance of power between state and federal authorities.
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6.13 Politics in the Gilded Age