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,

Homes of the Gilded Age

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’ 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

‘Vertical Integration’

Carnegie led the transition from

iron to steel Built the biggest steel industry in

the world Built most up to date plant (near

Pittsburgh)

Railroad Industry led to a Steel Industry

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.

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

Railroads: America’s First Big Business

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’

Rockefeller and Standard Oil

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

John D. Rockefeller Standard Oil and 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

The Trust

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

Monopoly

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

New kind of corporates structure

By 1890 Standard Oil ruled more than 90% of

the oil business

Standard Oil

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