The term "The Gilded Age" comes from a novel of the same name published in 1873 by Mark Twain and Charles Dudley Warner, which, though fictional, is a critical examination of politics and corruption in the United States during the nineteenth century. This lecture explores how rampant economic and political corruption colored American society and culture during the Gilded Age.
Some questions to keep in mind:
How did the federal government transform the American economy during the Gilded Age?
Why was corruption so rampant in American politics during this period? Was it worse than today? If so, why?
Was there really any difference between the Republican and Democratic parties at this time? If so, what?
The Gilded Age: A Tale of Today (1873) A novel by Mark Twain and Charles Dudley Warner, which explores political and economic corruption in the United States. The central characters, Colonel Sellers and Senator Abner Dilworthy, are tied together in a government railroad bribery scheme. Twain and Warner depict an American society that, despite its appearance of promise and prosperity, is riddled with corruption and scandal.
Samuel L. Clemens (1835-1910)
Mark Twain Samuel Clemens (1835-1910), known as Mark Twain, was one of America's greatest nineteenth-century writers. Born in Hannibal, Missouri, he observed life along the Mississippi River and later incorporated these insights into his fiction. Clemens invested in several businesses but none prospered, and later in life he became more cynical about American society as he spoke throughout the country.
Two general themes caused tension during the Gilded Age:
Laissez-faire "1: a doctrine opposing government interference in economic affairs beyond the minimum necessary for the maintenance of peace and property rights." Source: Webster's Ninth New Collegiate Dictionary (1990).
Concentration of power in the hands of the government at all levels - local, state, and federal. Government during this period assumed more authority and power, especially expanding its bureaucratic control and authority. Major areas of expansion of government power included land policy, railroad subsidies, tax/tariff policy, immigration policy, and Indian policy.
The Homestead Act The Homestead Act (May 20, 1862) set in motion a program of public land grants to small farmers. Before the Civil War, southern states had regularly voted against homestead legislation because they predicted correctly that the law would hurry the settlement of western territory, ultimately adding to the number and political influence of the free states. (If too many settlers moved to the West, the North would demand another TWO states: (one southern/one northern).
This opposition to the homestead bill, exacerbated sectional conflicts. Indeed, during the 1850s, many northern politicians championed a vision of independent yeomen establishing homesteads on the prairies as a vivid contrast to the degradation of slave labor on southern plantations. In 1860, the Republican platform included a plank advocating homestead legislation. After the southern states had seceded, homestead legislation was high on the Republican agenda. The Homestead Act of 1862 provided that any adult citizen,(or person intending to become a citizen),who headed a family could qualify for a grant of 160 acres of public land by paying a small registration fee and living on the land continuously for five years. If the settler was willing to pay $1.25 an acre, he could obtain the land after only six months' residence.
By the end of the Civil War, fifteen thousand homestead claims had been established, and more followed in the postwar years. But the law did not provide the new beginning for city dwellers that some had hoped; few such families had the resources to start farming, even on free land. The grants did give new opportunities to many impoverished farmers from the East and Midwest, but much of the land granted under the Homestead Act fell quickly into the hands of speculators. Also, over time, the growing mechanization of American agriculture led to the replacement of individual homesteads with a smaller number of much larger farms.
Source: Houghton Mifflin Co, The Reader's Companion to American History (1991).
Transportation Revolution "...Railroads could reach interior areas, including places where an inadequate water supply or rough terrain made canals impossible. Unlike canals, which froze in winter or became impassable when water was low, railroads ran year round, and they could easily ascend and descend hills and mountains. Initially financed by municipal governments and enterprising businessmen in river, lake, and ocean towns and cities, the first railroads extended short distances into the interior to tap potential markets in the surrounding countryside. Extension and connection of short lines soon provided uninterrupted transportation over long distances. By 1840, the United States had almost three thousand miles of track; by 1860, a network of thirty thousand miles linked most of the nation's major cities and towns..."
Source: George Rogers Taylor, The Transportation Revolution, 1815-1860 (1962).
Pacific Railway Acts, 1862, 1864 The federal government passed the Pacific Railway Acts of 1862 and 1864 after the South seceded from the Union. The acts enabled the United States government to make a direct grant of public land to private corporations for the construction of a trans-continental railroad system. For every mile of track laid, the government would grant to private railroad corporations 20 sections of public land (12,800 acres) which the corporation could do with as it saw fit (say what?). The federal government also guaranteed payment of $48,000 for every mile of track constructed in mountainous terrain and promised a 30 year subsidized loan at below-market interest rates. The Union Pacific Railroad, built West from the Missouri River, met the Central Pacific Railroad, which extended East from Sacramento, California. The two railroad giants met at Promontory Point, Utah, in the spring of 1869. By 1890, investors developed five more trans-continental lines. (Mostly Irish immigrants were used as laborers from the East while Chinese labors worked West).
Credit Mobilier "The Credit Mobilier scandal of 1872-1873damaged the careers of several Gilded Age politicians. Major stockholders in the Union Pacific Railroad formed a company, the Credit Mobilier of America, and gave it contracts to build the railroad. They sold or gave shares in this construction to influential congressmen. It was a lucrative deal for the congressmen, because they helped themselves by approving federal subsidies for the cost of railroad construction without paying much attention to expenses, enabling railroad builders to make huge profits. When the New York Sun broke the story on the eve of the 1872 election, Speaker of the House James G. Blaine, a Maine Republican implicated in the scandal, set up a congressional committee to investigate." The Reader's Companion to American History (1991)
James A. Garfield (1831-1881)
Copyright 1997 State Historical Society of Wisconsin
James A. Garfield (1831 - 1881) A Republican party leader during the nineteenth century who served as president in 1881. His record was marred by his unorthodox acceptance of a fee in the DeGolyer paving contract case and by suspicions of his complicity in the Credit Mobilier scandal. Garfield was assassinated after only a few months in office by Charles J. Guiteau, a disappointed office seeker, on July 2, 1881.
"The Bloody Shirt" In the years following the Civil War, both the Democratic and Republican parties were equally beholden to special interests. Furthermore, neither party could gain control of American government. On the one hand, Republicans dominated the presidency, winning every presidential election between 1868-1912, interrupted only by the Democratic administration of Grover Cleveland. Democrats, on the other hand, controlled Congress and most state legislatures. Each party thus struggled to find political issues to distinguish it from the other and to try to seize government power. From 1868 to 1880, the most common Republican campaign tactic was to wave the "Bloody Shirt" to remind voters of the South's dishonor of seceding and causing the Civil War. This tactic painted all Democrats as traitors to the Union.
Ulysses S. Grant (1822-1885)
Copyright 1997 State Historical Society of Wisconsin
Ulysses S. Grant A general and a political leader during and after the Civil War. He served as commanding general of the Union army and as president from 1869 to 1877. While Grant, a Republican, was president, economic and political corruption ran rampant. Many historians, in fact, judge Grant's presidency as perhaps the most corrupt in American History.
James Gillespie Blaine (1830-1893) One of the most powerful men in the Republican party during the 1870s and 1880s. A member of the United States House of Representatives from 1862-1876, he served as speaker from 1868 until he resigned to seek the Republican nomination for president. He failed to receive the nomination in both 1876 and 1880 but was the Republican candidate in 1886, only narrowly defeated by Grover Cleveland.
Mugwumps Mugwumps were those Republicans who, refusing to support Blaine in the presidential campaign of 1884, bolted the party and voted for Cleveland. The word, from the Algonquian "mugwomp," was used in John Eliot's translation of the Bible to render the English term "caption." It was later applied in United States political slang to any independent voter. The Oxford Companion to American History (1966)
Grover Cleveland (1837-1908)
Copyright 1997 State Historical Society of Wisconsin
Grover Cleveland Cleveland was born in Caldwell, New Jersey, on March 18, 1837. He was admitted to the bar in Buffalo, New York, in 1859, and lived there as a lawyer and became active in Democratic politics. He did not participate in the Civil War. As mayor of Buffalo in 1881, he carried through a reform program so ably that the Democrats ran him successfully for governor in 1882. In 1884 he won the Democratic nomination for President.
The campaign contrasted Cleveland's spotless public career with the uncertain record of James G. Blaine, the Republican candidate, and Cleveland received enough Mugwump (independent Republican) support to win. As president, Cleveland pushed civil service reform, opposed the pension grab and attacked the high tariff rates. While in the White House, he married Frances Folsom in 1886. Renominated in 1888, Cleveland was defeated by Benjamin Harrison, polling more popular but fewer electoral votes. In 1892, he was elected over Harrison. When the Panic of 1893 burst upon the country, Cleveland's attempts to solve it by sound-money measures alienated the free-silver wing of the party, while his tariff policy alienated the protectionists. In 1894, he sent troops to break the Pullman strike. In foreign affairs, his firmness caused Great Britain to back down in the Venezuelan border dispute. In his last years Cleveland was an active and much-respected public figure. He died in Princeton, N.J., on June 24, 1908.
The Reader's Companion to American History (1991).
Money may or may not be the root of all evil, ( it is), but it certainly played a major role in the politics of the Gilded Age. Of course, this money did not appear out of thin air. Instead, the rise of the corporation drove Gilded Age prosperity. The rise of American corporations during the second half of the nineteenth century is an incredibly fascinating subject.
Businessmen and "That Creature" the Corporation
Names like James J. Hill, Andrew Carnegie, Cornelius Vanderbilt, and John D. Rockefeller have struck terror in the hearts of many, yet these same names have inspired millions of other Americans. Between 1870 and 1900, the United States became a world industrial power, in part, because of the trailblazing business practices of these individuals. Were these early industrialists "Robber Barons" or "Captains of Industry?" What about "that creature" the corporation and its monopolistic cousin, the trust? The debate over whether the business practices of the Gilded Age were corrupt or beneficial rages on even to this day. Even in our own times, corporate mergers, mass layoffs, deregulation, and Enron remind us that the line between corruption and progress is indeed a fine one.
Some questions to keep in mind:
Who were some of the "new" businessmen of the era and how did they operate? Is it best to refer to them as "Robber Barons" or "Captains of Industry? Why or why not?
What was the corporation revolution? How did it transform the American economy?
In your opinion, did Gilded Age businessmen make the United States better or worse? Why?
The Gilded Age was a time of economic transformation in the United States. Immediately following the Civil War, America's industrial output paled in comparison to the mighty industrial powers of Western Europe, especially Great Britain. However, by 1900, only Great Britain's industrial production exceeded the total industrial production of the United States. Two major factors precipitated the rise of industry:
New Ways of Doing Business
Historians often describe nineteenth-century businessmen in two contradictory ways:
"Robber Barons"--other historians have viewed the Gilded Age industrialists as immoral, greedy, and corrupt, and have mustered ample the evidence to support such a view. Bribery, illegal business practices, and cruelty to workers were not uncommon during this period, and many of the most respected industrialists were also feared and hated.
The Erie Railroad Wars of the 1860s provide an example of the unscrupulous and often illegal business activities that transformed the nation during the Gilded Age. The "Wars" involved four men:
(1797-1879), financier. Born in Carmel, New York, Drew served briefly in the War of 1812 before beginning a livestock business, driving cattle and horses to New York City from upstate, and later from as far away as Illinois. He quickly acquired a reputation for sharp dealing and was known to feed salt to his cattle and then let them drink themselves full in order to increase their weight; this practice became known as "stock watering" and Drew was its master. In 1857, Drew became director and treasurer of the Erie Railroad line. A shrewd man, Drew used "watered stock" and other tools to try and squeeze every possible dollar out of the railroad and into his own coffers.
(1836-1892), financier. Gould grew up in relative poverty and received little formal education. Nonetheless, he possessed a quick mind and had few scruples, and searched for opportunities to make money. His earnings from three years as a surveyor, and from the publication of his History of Delaware County, and Border Wars of New York in 1856, enabled him to open a tannery in Pennsylvania. By 1860, he had begun speculating in railroad securities and became a director of the Erie Railroad in 1867. Gould, working with co-directors Jim Fisk and Daniel Drew, combined "stock watering" and bribes to New York City's "Boss" William M. Tweed as well as state legislators, profited handsomely from the Erie Railroad Wars. In 1872, Gould turned to Western railroads, where he eventually assembled an empire that consisted of half the track mileage in the Southwest. A prototype of the "robber baron" capitalist, Gould remained ruthless, unscrupulous, and friendless to the end.
(1834-1872), financier. Fisk received little schooling and in his youth held a variety of jobs from waiter to ticket agent for a circus. Fisk earned the title of "Barnum of Wall Street" for his flamboyant trading techniques. With the proceeds gained from his Wall Street endeavors, Fisk led the life of a sybarite, developing tastes for French theatricals, Broadway showgirls, expensive horses, and honorary but gaudy military posts. After becoming almost the epitome of the "robber baron," he continued his career as a voluptuary-about-town until, following a quarrel over certain business matters and a favorite mistress, the actress Josie Mansfield, he was shot by Edward S. Stokes on January 6, 1872.
(1794-1877), financier. At sixteen Vanderbilt purchased a small sailboat with money he had borrowed from his parents and began to carry passengers between Staten Island and New York City. The government authorized him to transport provisions to regiments around the city during the War of 1812 and he soon established a small fleet engaged in river and coastal trade. Vanderbilt formed his own steamboat company in 1829. To the dismay of the established shipping firms on the Hudson River, he charged lower fares than his competitors and quickly dominated the business. By 1846, "Commodore" Vanderbilt had become a millionaire.
Vanderbilt began purchasing stock in the New York and Harlem Railroad in 1862, and, by 1863, he controlled the line and used it to initiate New York streetcar service. He then battled Daniel Drew for control of the Hudson River Railroad. The two men again clashed over the New York Central Railroad, although Vanderbilt emerged victorious from the struggle and merged the New York Central with the Hudson River Railroad in 1869. Vanderbilt's acquisition of the Lake Shore and Michigan Southern Railroad completed the first New York-to-Chicago rail system. In every case, he made large capital investments in improved roads, rolling stock, and facilities. By ordering construction of Grand Central Terminal in New York City, he provided jobs to thousands of unemployed workers during the Panic of 1873. Historians estimate that Vanderbilt was worth $100 million by the time of his death on January 4, 1877.
The Erie Railroad Wars
Began when Cornelius Vanderbilt began buying shares in the Erie Railroad Co. in an attempt to drive his only competition out of business. The treasurer of the Erie Railroad Co., Daniel Drew, saw an opportunity to swindle Vanderbilt out of millions of dollars. Drew, along with Jay Gould and Jim Fisk, printed up 100,000 worthless stock certificates, which Vanderbilt promptly bought, although he soon realized the stocks had no value. Although Vanderbilt had once said, "Law, what do I care about the law? Ain't I got the power?" he appeal to government authorities to arrest Fisk, Gould, and Drew.
Fisk, Gould, and Drew, hearing of their impending arrest, took a short vacation to New Jersey where the laws of New York, fortunately for them, did not apply to their situation. Fisk made a public statement claiming that their trip to New Jersey had been prompted by a desire to do better business. Meanwhile, Gould "encouraged" some members of the New York state legislature to pass a law making the sale of watered stock to Vanderbilt legal (a half million dollars made the "encouragement" all that much the easier). The result was that Drew, Fisk, and Gould ended up $7 million richer while Vanderbilt appeared to the public as a monopolistic power-monger.
New Ways of Doing Business
Although American businessmen had always strived to make money, the Gilded Age saw the rise of new methods of capitalism that allowed individuals to limit their liability and maximize their profits.
"Before the Gilded Age, individuals had looted society. But the most characteristic economic institution of the Gilded Age no longer was the individual. Instead it was a collection of individuals together called the corporation" (Professor Schultz, videotape lecture #5).
One of the key features of corporations and the Gilded Age, in general, was an increasing concentration of power in large entities. Business and government became bigger while their respective operations became intertwined. Ever since the federal government had used its power and money to encourage businessmen to build railroads, all levels of government had become more involved in the nation's economic welfare.
What was a corporation?
A corporation was formed when a group of people requested a charter from the state legislature that provided them with a set of legal rights and (presumably) responsibilities. State law treated the corporation as an individual. Unlike a partnership, in which liability ran high for individual investors, the corporation involved limited liability. Limited liability makes individual investors legally liable only for their share of the investment. In partnerships, if a partner skips town or dies, the other partners are liable for any outstanding debts. In corporations, if an individual investor dies no other investors are affected. If the corporation goes bankrupt, the law only required investors to foot the bill for a percentage corresponding to the proportion of their investment. As corporations became more common in the mid-nineteenth century, the opportunity for wide numbers of people to invest in business greatly expanded, for individual investors could now invest without the fear of total liability. Another important result of the corporation revolution was that corporations became "immortal." Most state laws allowed corporations to buy, sell, and inherit property; thus, they took on their own identity. Individual investors may come and go, but the corporation has an indefinite lifespan.
Corporations in the past
Corporations were not a new invention of the Gilded Age. The first American colonies were the result of corporate activity. Corporations began to crop up well before the Civil War. By the 1850s, however, American businessmen began using corporations in new ways. After the Civil War, ownership of a corporation no longer meant control of the corporation. Whereas prior to the Civil War investors had retained a great deal of power over the means of production, the new concept of corporations allowed managers and directors to make money, while investors reaped only the benefits of limited dividends. This new management structure allowed a handful of corporate directors to profit enormously from other people's money with little personal risk.
Combinations of corporations
One of the most salient characteristics of the Gilded Age was the continual combination of corporations. Small corporations began to merge with one another to increase efficiency and profits. Americans soon knew these new "mega corporations" as trusts. In such trusts, a small board of trustees managed the means of production and distribution. Though trusts were certainly larger, more efficient, and more profitable than smaller corporations, they also destroyed the healthy competition that often makes capitalism a viable economic model.
Standard Oil of New Jersey
In 1879, John D. Rockefeller and a handful of associates founded Standard Oil of New Jersey, the prototypical example of corporate consolidation and efficiency. Rockefeller was so successful that at his death, his personal fortune was estimated at $815,647,796.89, not to mention the $40 million in profits that the Standard Oil trust averaged every year. However, his methods of persuading small companies to join his trust were often less admirable than we might expect of an American folk hero. Although Rockefeller often gained control by purchasing smaller companies in public, he also seized power privately or through proxy to hide the fact that his behemoth trust would soon destroy the smaller company. Moreover, if buying stock proved too arduous, Rockefeller sometimes hired armed Pinkerton Agents to "persuade" his competition to relinquish control. The Pinkerton Agents were famed for their club-wielding ability, and many a small business owner became familiar with the wrong end of those clubs.
The new businessmen and the new methods of doing business that became prominent during the Gilded Age were not always shining examples of morality and democracy. As the Gilded Age wore on, Americans began to realize the social problems that went hand-in-hand with untrammeled business growth. The federal government passed the first federal law to slow the growth of trusts in 1890. The Sherman Antitrust Act, however, remained little more than a token law, and federal officials rarely invoked it until after WWI. A more important sign of the growing disillusionment with Gilded Age political and business corruption came from the American people, themselves. Although many Americans still regarded men like John D. Rockefeller as "Captains of Industry," more and more people began to question the tactics of "Robber Barons." As trusts grew ever more powerful and wealth became concentrated in fewer hands, public animosity increased towards the businessmen.
The Social Philosophy of American Businessmen
Corporations, and the businessmen who were their recognizable heads, came under increasing attack at the end of the nineteenth century. Many Americans who had once associated "laissez-faire" with individual freedom now linked the term to unfettered corporate power, bullying trusts, and an unprecedented loss of individual freedom. American businessmen found themselves resorting to new ideologies and "scientific" terminology to defend themselves from angry Americans who felt the trusts were destroying traditional ways of life.
Some questions to keep in mind:
What was Social Darwinism and why did so many American businessmen find it appealing during the Gilded Age?
How did businessmen justify their actions between 1870 and 1900?
What did many Americans think about corporations?
"We hold these Truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the Pursuit of Happiness..." (Thomas Jefferson, "Declaration of Independence," 1776).
When Thomas Jefferson substituted "Pursuit of Happiness" for philosopher John Locke's original term, "Property," he may have foreseen the controversy over the meaning of freedom that would dominate Gilded Age politics. Two contrasting ideals of freedom clashed during this period. A intellectual contest ensued between Americans who believed that the "Pursuit of Happiness" was the driving force in American history, and others, such as Andrew Carnegie and John D. Rockefeller, who championed the "Pursuit of Property" as the source of American greatness. Both sides constructed logical arguments to justify their positions. Eventually, however, advocates of the "Pursuit of Property" applied the "scientific" lessons of Social Darwinism and laissez-faire economics to win over the public.
Pursuit of Happiness #18
Why did so many Americans view the new corporations and trusts as evil entities that destroyed the American dream of the "Pursuit of Happiness?" Though we can provide many answers to this question, there are three important points that can help us understand the logic of those who despised growing corporate power:
There was no analogy in the past
The corporation was an artificial creation
Corporations threatened free competition
There was no analogy in the past
Thomas Jefferson assumed America would become a land of independent yeoman farmers when he authored the "Declaration of Independence" in 1776. He believed that an agrarian lifestyle rooted in hard work would keep individual farmers and, ultimately, the nation, strong and vibrant. This ethos of individualism has permeated American culture since the days of the Pilgrims. One conspicuous symbol of the American attachment to romantic individualism is the "American Cowboy" and the images of the "Wild West." After the corporation revolution, many Americans struggled to adjust to a new form of economic organization that seemed to emphasize cold-hearted acquisitiveness over more compassionate business practices.
The corporation was an artificial creation
Corporations were essentially nothing more than a legal agreement between legislators and businessmen. As we can see in our own era, Americans often mistrust lawyers, legislators, and businesspeople. Thus, it is not surprising that many Americans disapproved of a legislative process that allowed a group of investors to create a money-making device that only existed on paper.
Corporations threatened to destroy competition
Perhaps the most convincing argument advanced against the corporations and trusts was that they threatened to destroy the age-old concept of free trade and healthy competition. Capitalism certainly has faults. One of its great advantages, however, is that healthy commercial competition can benefit consumers by providing more economic choices and lower prices. As trusts and corporations grew larger and became more dominant during the Gilded Age, people began to fear that corporations would destroy free competition and eliminate the benefits of capitalism.
Some Americans, of course, believed that the "Pursuit of Happiness" and the "Pursuit of Property" went hand in hand. For instance, Abram S. Hewitt, a well-respected businessman, philanthropist, public official, and political leader, maintained that corporations were merely a more efficient means of producing the age-old "American Dream:"
"It is curious that the mass of the people of this country should fail to recognize that their best friends are the corporations, because corporations have been the only barrier between the despotisms of ignorance and the invasion of the rights of property. Doubtless they abuse their privileges at times but they alone have the ability and the courage to resist attack, and they are doing the work which was done by Jefferson and Madison in the early days of the Republic."--Abram S. Hewitt
Ultimately, Hewitt was on honest man with a good public record. Even though he tried to rationalize the actions of corporations, he worked under the general assumption that the "Pursuit of Happiness"--the quest for greater social good for the greatest number--was the driving force behind the corporatization of America. Other Americans, however, believed that the "Pursuit of Property"--the search for greater material wealth--was, in fact, the only justification needed for the corporation revolution.
Pursuit of Property
Attempts to reconcile the "Pursuit of Happiness" with the "Pursuit of Property" were unpersuasive to most Americans. Though men like Hewitt could claim that corporations could mass-produce individual happiness, many Americans disagreed. For this reason, businessmen resorted to another tactic to persuade Americans that corporations offered the best way of doing business. Three main themes of late-nineteenth-century thought provided American businessmen with a set of terms and ideologies to justify their activities as "Robber Barons:"
Profit incentive as only human motive
Charles Darwin was a humble, mild-mannered Englishman whose ideas helped change the world. In 1859, Darwin published On the Origin of Species. Although theories of evolution had existed for centuries, Darwin's theory of "natural selection" was an innovative hypothesis that captured the attention of scientists and philosophers around the world. Darwin purposely avoided applying "natural selection" to human societies. Later intellectuals, however, treated his ideas as the philosophical foundation for a far-reaching theory of "Social Darwinism."
Herbert Spencer, also an Englishman, took Darwin's theories out of the realm of biology and applied them to human society. Spencer, not Darwin, was the first person to coin the phrase "survival of the fittest." He believed that government intervention in the "natural" processes of human evolution, such as welfare for the poor, public education, and government healthcare, helped weak humans survive and, in the process, undermined the health of the entire race. Spencer, of course, never defined what he meant by the "natural" process of evolution. Nevertheless, his books sold over 400,000 copies in the United States alone, and he became one of the most influential thinkers of the late-nineteenth century.
Herbert Spencer (1820-1903), English philosopher
Copyright 1997 State Historical Society of Wisconsin
William Graham Sumner
Sumner was Spencer's American counterpart. "In his economic and social outlook, Sumner was a Social Darwinist, holding that distinctions of wealth and status among men were the direct result of inherently different capacities, that this stratifying tendency worked to the good of society by eliminating weaker and encouraging stronger strains (as natural selection does among animals and plants), and that this tendency should not be interfered with by sentimental, unintelligent attempts to hedge the free play of economic forces and personal abilities. Sumner thus championed laissez-faire as the only true principle of both economics and government; in lectures and written works with such titles as "The Absurd Attempt to Make the World Over" and What Social Classes Owe Each Other (1883), he decried any and all movements that pointed to a welfare state..." (Source: Webster's American Biographies, G. &C. Merriam, 1975).
William Graham Sumner (1840-1910), Yale social scientist
Copyright 1997 State Historical Society of Wisconsin
American businessmen adopted eagerly the ideology of Social Darwinism in order to defend their business practices as "natural." James J. Hill, a leading "Robber Baron" of the railroad-building era, saw the chance to justify his actions with "scientific" terminology:
"The fortunes of railroad companies are determined by the law of the survival of the fittest." --James J. Hill
James Jerome Hill (1838-1916), financier and railroad magnate
There were, of course, influential Americans who challenged Social Darwinism. One such individual was the historian Henry Adams, who said:
"The progress of evolution from President Washington to President Grant is alone evidence enough to upset Darwin." --Henry Adams
Along with Social Darwinism, many nineteenth-century businessmen accepted the idea that the American economy was "self-adjusting." This idea traced its roots back to Adam Smith and his conception of the "invisible hand" of capitalism.
"The ideas of laissez-faire applied to economics appealed greatly to Scottish economist Adam Smith. Using these ideas, Smith began another kind of revolution during the period in which the American colonists were fighting their revolutionary war. In 1776, the year that Jefferson wrote the Declaration of Independence, Smith published one of the most important books in the history of economics. The book's full title is An Inquiry Into the Nature and Causes of Wealth of Nations. Most people simply call it The Wealth of Nations. Smith wrote the book after discussing laissez-faire beliefs with some of the physiocrats. Smith's book is an argument in favor of allowing people to engage in trade, manufacturing or other economic activity without unnecessary control or interference from government.
The main argument in The Wealth of Nations (by Adam Smith) might be stated rather simply: People are naturally selfish. When they engage in manufacturing or trade, they do so in order to gain wealth and/or power. This process should not be interfered with because, despite the self-interest of these individuals, their activity is good for all of society. The more goods they make or trade, the more goods people will have. The more people who manufacture and trade, the greater the competition. Competition among manufacturers and merchants helps all people by providing even more goods and probably lower prices. This activity creates jobs and spreads wealth."
Following Adam Smith's lead, nineteenth-century American political economists generally agreed on four principle points:
They equated the rules of political economy with the unchanging, everlasting laws Nature or God
They argued that individual self-interest was socially beneficial
They maintained that free competition was a permanent and necessary law of economics
They held that government was an inefficient agency that should not be involved in economic matters
American businessmen were grateful to hear economists and influential thinkers like William Graham Sumner justifying the existence of large corporations and trusts. With the backing of the "science" of economics, late-nineteenth-century businessmen felt that their actions, no matter how immoral or corrupt, actually benefited the entire nation.
Profit motive was the only reliable incentive for action
Andrew Carnegie (1835-1919), industrialist and philanthropist
Finally, businessmen tried to justify their actions by linking the profit motive to the public interest. During the second half of the century, many American businessmen, politicians, and economists believed that the pursuit of profits bolstered the material and spiritual health of the nation. Even as corporate capitalists acquired enormous commercial power and influence in American society, their dogged pursuit of personal profits also drove the economic growth, provided jobs to poor workers, and seemed to ensure the nation's prosperity. Andrew Carnegie, for example, one of the least selfish of the nation's early industrialists, claimed that even the most ridiculous spending habits of the wealthy were beneficial to the nation.
"Millionaires are the bees that make the most honey and contribute most to the hive even after they have gorged themselves full."--
In the end, Carnegie and other American business leaders often relied on science, economic theory, and social philosophy to try and justify their business practices and their growing profits at the end of the nineteenth-century.
At times, businessmen faced extraordinarily difficult economic problems. The "boom-and-bust" cycle of depressions and recoveries from 1873 to the turn of the century, in particular, made investing precarious and competition fierce as companies struggled to survive. For all the difficulties that company directors faced during this period, however, the common workers who labored in their factories dealt with much more fundamental economic problems. As business leaders became wealthier and more powerful, the men, women, and children who formed the nation's industrial workforce began to demand higher wages, shorter working hours, and a greater voice in corporate decision-making. The story of these common workers and their search for power is an important and fascinating aspect of American history.