Industrial Development & Gilded Age Politics

Business Corruption and Reform in the Industrial Era (1870s-1900s)

I. Industrialization

• I. Inventions & Advancements

A. Electricity:

1. portable power

2. electric motors

3. telegraph (Morse)

4. light bulbs (Edison)

I. Industrialization

• B. Communication:– 1. telephone (Bell)– 2. typewriter

I. Industrialization

• C. Industrial Production– 1. steel– 2. iron– 3. coal– 4. oil

I. Industrialization

• D. Transcontinental Railroad– 1. by 1900, railroads were largest

U.S. industry– 2. idea was for the railroad to run

from the Atlantic to the Pacific– 3. built by the Central Pacific

using Chinese workers

II. Rise of

Corporations

• A. Holding Companies: companies that did not produce anything, but bought out other companies

– 1. Carnegie Steel: established a monopoly on the steel industry through buy-outs and mergers

II. Rise of

Corporations

• B. Trust: several competing companies would sell to a corporation, which would run them as one company

– Led to 2% of businesses making 50% of the products

III. Business P

ractices

• A. Social Darwinism: idea that government should have a laissez faire (hands-off) policy toward business and let the strongest survive– 1. Horatio Alger wrote books

about achieving the American dream

III. Business P

ractices

• B. Robber Barons: business owners that took advantage of consumers by fixing costs and driving out competition– 1. John D. Rockefeller: Standard

Oil controlled 90% of oil market– Led to a lot of anti-trust feelings

IV. G

ilded Age

• A. Gilded Age: looked good on the outside but corrupt on the inside– 1. The “spoils” system: political

leaders gave government jobs and contracts to people that helped them get elected

– 2. Incidents like the Credit Mobilier scandal and the political machines in large cities led to distrust in government

IV. G

ilded Age

• Credit Mobilier Scandal:Credit Mobilier, a construction

company, built Union Pacific Railroad. Both companies were owned by the same corporation (Union Pacific), so Union Pacific paid the construction company three times the actual cost to build the railroad. Union Pacific also bribed Congress members with shares of stock to keep them from investigating. The New York Sun exposed the bribery.

IV. G

ilded Age

• B. Grange Movement (Grangers)– 1. started as an organization of farmers

to improve farming techniques

– 2. protested the rate policies of the railroads

– 3. wanted railroads to be a public utility, regulated through the government

– 4. Interstate Commerce Act: required railroad rates to be “reasonable and just”

IV. G

ilded Age

• C. Populism: movement of “the people”; wanted to shrink the gap between the wealthy and poor (especially farmers)– 1. Populist Demands:

• A. Inflation: would give farmers more money for crops

• B. Progressive tax system: would take a higher percentage of taxes from the wealthy

• C. Federal loans to farmers • D. Government control of the railroads and

other public utilities

– 1. Populist Demands, cont.• E. Secret ballot to end fraud

• F. Political Reforms:

– Initiative: allows people to introduce laws and vote on them (i.e. Propositions)

– Recall: allows people to throw out corrupt politicians (i.e. recall election of Gray Davis)

– Referendum: allows people to repeal (take away) laws

• Populists received 40 percent of the vote in the 1894 congressional elections and looked forward to winning the Presidency--and the silver standard--in 1896. That election, between Republican William McKinley and Populist - Democrat William Jennings Bryan, Congressman from Nebraska, proved a disaster for the Populists. McKinley received 271 electoral votes to Bryan's 176, almost all in the Midwest. Bryan opposed McKinley again in 1900, but by then the Populists' strength had been dissipated.