RETURN The "Gilded Age" 

As the US struggled out of the depression of the 1870s the nation entered upon one of the most remarkable periods of economic expansion in human experience. The developments of the next two decades were to provide a vivid example of how unbridled individual initiative and the massive concentration of economic power in large privately owned enterprises could generate economic growth. This was a period when many of the great American fortunes were amassed, when the westward expansion of the economy was completed, and when the country seemed to be caught up in a mood of limitless confidence and optimism. The economic, political and cultural environment of the post Civil War years appeared to provide unusually favorable conditions to economic progress throughout the country. While many were excluded from sharing the benefits of the experience, the social issues associated with inequality could be dismissed as temporary or even held to be "natural" in keeping with the views of Herbert Spenser and his followers, the Social Darwinists, who contended that those who could not keep up with the competitive economic struggle should be allowed to perish to improve the health of the society at large. 

Given the importance of this period in the economic and social history of the United States it is not surprising that many historians have tried to find out what made it happen. Particularly important is the apparent fact that in a relatively short period of time following the Civil War the United States appeared to be well on the way to becoming the most industrially developed and richest nation in the world. Could this have been due to the war itself? 

Traditional interpretations of American economic development have usually dated the industrialization of the US economy from the Civil War, a convenient, but, in light of modern work on the subject, oversimplified view of the matter. The older approach was most eloquently stated by Charles and Mary Beard in their widely-read book, The Rise of American Civilization, first published in 1927. In it they characterized the Civil War as a "second American Revolution," a struggle between the old established agricultural interests based in the South and the emerging manufacturing industrial interests of the North. During the war years, according to their analysis, the manufacturing sector was strongly stimulated by the need for armaments and other military requirements, while the reform of the financial system, the modification of protective tariff policies, and the promotion of railway and other transportation developments were all measures critical to the emergence after the war of an industrialized United States. 

More recent scholarship, however, suggest a less obvious relationship between the Civil War and subsequent American economic development. In fact there appears to have been little consensus among the business people of the North about which policies were appropriate to the successful waging of the war, a conflict which they seem to have viewed more as a clash of political rather than economic conceptions. Statistical analysis of the growth of the manufacturing sector in the US also suggests that the process of industrialization was well under way before the war, perhaps as early as the 1840s when a rapid rise in "manufacturing value added" is first detected. Thus, it is probably wrong to suggest that the extraordinary growth of industrial America after the 1860s was caused by the Civil War. New estimates of national income data suggest that the rate of growth in the American economy was actually higher in the 1840s and 1850s (averaging around 4.75 per cent as an annual average) than in the decades following the war (when it averaged less than 4 per cent). Nevertheless, the sense remains that somehow the United States had been fundamentally changed by that great crisis. It was only after the war that the vast industrial enterprises which marked America’s rise to a position of world economic leadership came into being. Before the war the industrial sector of the economy had been diversified and for the most part individual producing units were of small or modest size. After the war, giant enterprises emerged. What some historians have called the "Age of Enterprise" in the US came in the second half of the 19th century. It was after the war that the Carnegies, Morgans, Rockefellers and Vanderbuilts built business operations of such scale and with such economic and political power that they came to represent a national economy capable of outproducing any other system known in human experience. 

Another component of the traditional account of American industrialization was that it been made possible by the development of the national railway transportation network which spread over the continent in the decades following the Civil War. This too has been challenged by more recent analysis. Early practitioners of formal econometric analysis seized upon this question as a suitable subject for one of their early exercises. According to what William Fogel called the "axiom of indispensability", railroads were credited with playing a crucial role in the post-Civil War expansion of the American economy. Indeed, the conventional view appeared to assume that this expansion would have been impossible in the absence of railways, that "the economy of the nineteenth century lacked an effective alternative to the railroad and was incapable of producing one." [See William Fogel, Railroads and American Economic Growth: Essays in Econometric History, Johns Hopkins Press, Baltimore, 1964, p.10.] Fogel’s reexamination of the evidence suggests that the railroads were not indispensable and he was able to develop models of American growth in this period which yielded only somewhat lower levels of per capita output in the assumed absence of railroads, capital and other resources being diverted in his hypothetical world to more sophisticated waterways and alternative modes of transport. In fact, he suggests, the railroads may have retarded growth to the extent that their very success delayed the development of even more effective modes of transport utilizing internal combustion engines and highways of the kind that eventually did render the railways of America largely obsolete. 

Again, however, all this ongoing revisionism not withstanding, it remains the case that the railroad companies of the post-Civil War period were the source of great wealth. As John Kenneth Galbraith has put it: 

Nothing in the last century, and nothing so far in this century, so altered the fortunes of so many people so suddenly as the American or Canadian railroad. The contractors who built it, those whose real estate was in its path, those who owned it, those shipped by it and those who looted it could all get rich, some of them in a week. The only people connected with the railroads who were spared the burdens of wealth were those who laid the rails and ran the trains. Railroading in the last century was not a highly paid occupation, and it was also very dangerous. The casualty rates of those who ran the trains—the incidence of mutilation and death—approached that of a first class war. [J.K. Galbraith, The Age of Uncertainty, Houghton Mifflin, Boston, 1977, p.49.] The railroads were also important in that they were themselves among the first of the country’s very large-scale enterprises and they were intimately involved with the development of heavy industry. The coal, iron, steel, timber and petroleum industries were all linked to the big railway companies both as customers and as financial partners. The railway companies were also among the first of the big business entities to embark on programs to limit competition and to build monopolistic or oligopolistic organizations. After experimenting with crude systems of informal collusion, which won them deep public suspicion and legal challenges, they and their big business partners pursued programs of vertical and horizontal integration through the creation of trusts, holding companies and giant corporations. The first of these was the Standard Oil Trust engineered by John D. ("God gave me my money") Rockerfeller in the early 1880s, which brought more than 90 per cent of the petroleum refining capacity of the US under one management and then proceeded to acquire control of the pipelines, service stations and other components of the industry in the US and abroad until it was dissolved by legislation in 1911. [A succinct account of these developments will be found in Glenn Porter, The Rise of Big Business, 1972.] 

Other giant American enterprises of this period included the Carnegie iron and steel organization and the meat-packing empire of Gustavus Swift. Beginning as a railroader, Carnegie expanded into steelmaking, into iron ore and coal mining. When he sold out to the financier J.P. Morgan, in 1901, Morgan combined the Carnegie operations with his own steel company (Federal Steel) to create the United States Steel Corporation, believed to be the first billion-dollar corporation. [The standard work on the subject is Peter Temin, Iron and Steel in 19th Century America, 1961.] The House of Morgan and its rival Kuhn, Loeb, and Company engineered many such mergers and take-overs in the era of unbridled American financial capitalism. Only a few segments of the manufacturing sector retained a semblance of competition, as economists would use the term, through this period of consolidation. Food, clothing and furniture-making are examples. But many more underwent intense consolidation: cottonseed oil, sugar, whiskey, flour, nonferrous metals, tobacco, explosives, sewing machines, rubber goods, and electrical apparatus came to be dominated by a handful of companies. 

This concentration of economic power did not go unopposed and strong political pressures developed in support of government intervention in the interests of controlling it. In 1887, the Interstate Commerce Commission was brought into being to regulate competition among the big railway companies and to exercise some control over freight rates. In 1890, the Sherman Anti-Trust Act made trusts and other business combinations that restrained trade illegal. These measures, however, had limited success. American corporations were quick to invoke the 14th Amendment to the Constitution, which limited the government’s power to interfere with private property, to defend their positions and the US Supreme Court on this and other grounds often struck down measures by which both the federal and state governments undertook to regulate private business. 

By 1900 the United States was clearly the dominant industrial economy in the world. It by then produced as much steel as the UK and Germany, the next two largest steel producers, combined. It was also by 1900 the largest world producer and consumer of petroleum products. 

The fruits of this unparalleled economic expansion were far from evenly distributed and there was much dissatisfaction among industrial workers, who responded to the challenges of industrial capitalism by organizing themselves in unions. Many of the early American unions were modeled on European precedents, especially those based on crafts such as carpentry, stonemasonry and the like. In the late 1870s, however, a new type of union organization emerged in the form of the Knights of Labor, based in Philadelphia, which sought to bring all workers, skilled or not, under its umbrella. Unlike most North American labor organizations the Knights of Labor had an idealistic, messianic agenda broad enough to embrace widespread economic and social reforms as well as the bread and butter issues of wages and working conditions which other parts of the labor movement focused on. Although the Knights had considerable influence and succeeded in establishing locals throughout the United States and Canada, the movement eventually disintegrated and left the way clear for a more conservative type of unionism to take over. Under the leadership of Samuel Gompers, a new umbrella organization, the American Federation of Labor, came to dominate the American labor movement. The AFL was built up of local unions of skilled craftsworkers and its goals were straightforward and pragmatic—union recognition by employers, better wages, better working conditions, a shorter work week. 

The 30 years following the Civil War in the US were marked by a large rise in average per capita real incomes, perhaps something in the order of 50 per cent. For many workers life became easier. Mechanization eliminated much brutal manual labor. Education became more widely available. Leisure time was enhanced by such things as newspapers, magazines and novels directed to a mass audience. Electricity was making it possible to extend the day by providing safe and convenient lighting while improvements in transportation were making the population more mobile than could easily have been imagined a few decades earlier. This was also the era of rapid urbanization in America. Prior to the Civil War only about 15 per cent of Americans lived in centers of more than 2500 persons. By the turn of the century the figure was 40 per cent. While it is true that in 1900 more Americans still derived their living from agriculture than from manufacturing employment, the shift from rural to urban life was strongly under way. Especially in the 1880s and 1890s, as a result of both immigration from abroad and people moving from rural America into the towns, New York and other cities of the North-East, Chicago and other cities in the Mid-West burgeoned. By 1900 six cities in the US had populations in excess of a million people each. [The story is well set out in Constance Green’s, The Rise of Urban America, 1965.] 

As in other classic cases of industrialization, that of the US was marked by a relative decline in the importance of agriculture both as a source of work and as a component of total production. Nevertheless, farming and the rural life style associated with it continued to represent an important part of the American scene throughout the 19th century. Indeed, because the western agricultural frontier was still expanding up to the 1890s, the land-based sector of American life remained socially, politically, and culturally as well as economically significant. If the "gilded age" brings to mind images of the glittering urban life of affluent Americans spending the wealth derived from industrial development, it is important not to forget that it was also a time when the final settlement of the "last best west" was also taking place.