Gilded Age Business and Politics
"What is the chief end of man?--to get rich. In what way?--dishonestly if we can; honestly if we must."-- Mark Twain-1871
The Gilded Age: A Tale of Today • The term was coined by writers Mark Twain and Charles Dudley Warner in their book satirizing what they believed to be an era of serious social problems hidden by a thin gold gilding.
An era of widespread growth where the U.S. leaped ahead of Britain in industrialization. • A relative few became extremely wealthy and exerted enormous economic and political power • The rapid growth was punctuated by economic depressions in 1873, 1893,
Andrew Carnegie • Faced with sudden poverty in Scotland, Andrew Carnegie's family emigrated to America. • Determined to escape poverty, Carnegie went on to become the richest man in the world.
‘Vertical Integration’ • ‘vertical integration’ a system of business organization that allowed him to control every aspect of the steel business • He cut costs to boost productivity; workers had low wages, long hours, dangerous conditions • By 1900, Carnegie Steel was the best-known manufacturer in the nation
Railroad Industry led to a Steel Industry • Carnegie led the transition from iron to steel • Built the biggest steel industry in the world • Built most up to date plant (near Pittsburgh)
San Jose’s Carnegie Library • After amassing a fortune by crushing his competitors and exploiting his workers, Carnegie, in a move that underscored his inner conflicts, systematically gave away millions.
Railroads: America’s First Big Business • After Civil War, Americans built the greatest railroad network in the world • By 1900, US had 193,000 miles of track, more than all of Europe and Russia combined
Government encouraged rail growth with cash subsidies and land grants • Lack of planning led to overbuilding and increased competition • Because of competition local owners tried to “pool” areas and set rates • Stock market began to play a key role in American economy—capital could now be represented by stocks and not just tangibles such as land or machinery
Jay Gould: ‘Most Hated Man in America’ • Jay Gould, master of corporate expansion through stocks • Men like Gould refused to honor, so many railroads failed • The public disliked men like Gould for ruining competitors and emphasis on financial markets—‘most hated man in America’
John D. Rockefeller Standard Oil and the Trust • In the 1860s and 1870s, it did not take a lot of capital to build an oil refinery • Lots of competition • Rockefeller founded Standard Oil in 1870 • He demanded secret rebates from the railroads in exchange for his steady business, so he could undercut competitors
The Trust • 1882, Rockefeller pioneered a new form of corporate structure—the trust • The “trust” operates the business on behalf of trustees. • Consolidates decision-making and financial policy for large businesses
Monopoly • It allowed Standard Oil trustees to hold stock in various refinery companies ‘in trust’ and to coordinate policies between refineries • This gave Rockefeller a monopoly of the oil refining business
New kind of corporates structure • Paved the way for the establishment of trusts in other industries • When the government threatened to outlaw the trust as a violation of free trade, Standard Oil changed its tactics and reorganized as a holding company • This combined competing companies under one central administration
Standard Oil • By 1890 Standard Oil ruled more than 90% of the oil business
Ida Tarbell • Journalist Ida Tarbell exposed Rockefeller’s unsavory business practices in a series of articles in McClure’s Magazine from 1902 to 1905 contributing to the American public’s unfavorable opinion of Rockefeller