Understanding Economic Change in the Gilded AgeAuthor(s): Ballard C. CampbellSource: Magazine of History, Vol. 13, No. 4, The Gilded Age (Summer, 1999), pp. 16-20Published by: Organization of American HistoriansStable URL: http://www.jstor.org/stable/25163305Accessed: 17/04/2010 14:26

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Ballard C. Campbell

Understanding Economic Change

in the Gilded Age

An announcement that the Gilded-Age economy is on the

agenda produces pained looks around the classroom. These

.signs of distress signal that the economic history of the late

nineteenth century needs special handling. The first step in this task

is to recognize the obstacles in teaching the subject. The chief

impediments are the inherent complexities of economics, negative

stereotypes about the Gilded Age, and the dual paths of economic

change during the period. No single strategy can cut a smooth course

through these brambles, but acknowledging their existence helps to

avoid becoming entangled in them. Economics frightens many students. Some aspects of the subject

are difficult, it is true, but our contemporary culture adds to these

complications. Today's teenagers grow up in an affluent society.

Most college students and a large proportion of high school students come from middle-class backgrounds, where abundance, not scar

city, is their chief economic reference. The vast majority of young

Americans do not earn their own living. Few know anything about

budgets or accounting; still fewer have experienced the fear of

bankruptcy. It's not that kids today are out of touch. They just have

little personal basis for understanding the economic realities that

faced adults in the Gilded Age.

My strategy for coping with these challenges begins with posing some simple questions. I start by asking how people earned a living in the period. Answers to this inquiry not only describe the contours

of the workforce, but also prompt questions about the goods that

workers produced. One can follow up the answers by discussing how

these items were made. I encourage students to draw on their own

experiences and use their imagination in these exercises. A question

such as "how did a person get a pair of shoes before malls existed?"

can get the ball rolling.

Profiling the workforce leads to questions about how much

workers were paid and how they spent their earnings. At this point

I introduce the concepts of standard of living and the distribution of

wealth. Students tend to dichotomize Gilded-Age society into a few

fabulously wealthy industrialists and a mass of impoverished work ers?a distorted image probably due in part to the period's nickname.

While students have a general sense that the United States is today

among the richest nations in the world, few know that the standard

of living improved substantially for many Americans during the

Gilded Age. Nor are they usually aware that the United States out

produced all other nations on a per capita basis and in aggregate totals

by the end of the nineteenth century (1). Here I take a brief detour into an explanation of "real" per capita

Gross National Product (GNP) and the relationship between productiv ity and incomes. To interject realism into this exercise, I review the

volatility of the Gilded-Age economy, which slumped into depression in

the 1870s and 1890s. Describing the rise in bankruptcies and the travails

of unemployment during these "hard-times" dramatizes how individual

fortunes became increasingly interconnected with the overall health of

the economy in the industrial age.

The Gilded Age conjures up images of "robber barons," corrupt

politicians, and laissez-faire government, and this is the second

obstacle to learning Gilded-Age economics. The stereotypes contain

elements of truth, of course. Bold entrepreneurs did accumulate

great fortunes, and politicians did cooperate with businesspeople to

block regulations. Yet historians can no longer let Charles Beard and

Matthew Josephson monopolize the economic story of the era.

Several generations of scholars have demonstrated that the plot was

far more complex than these early "progressive" historians indicated.

Nonetheless, the "robber barons" motif remains an entrenched

stereotype about the period.

The third impediment to understanding the economic history of

the Gilded Age lies in its dual paths of development. These twin

strands of growth give instructors a lot of ground to cover. One

16 O AH Magazine of History Summer 1999

Campbell/Economic Change

trajectory of change followed the settlement of agricultural land and

the exploitation of natural resources, a story that is conventionally

discussed as the "western movement." The other path of develop

ment headed toward industrialization, which advanced rapidly between 1865 and 1900. Although the United States had not

become a mature, urban-industrial society by 1900, changes since the

Civil War had fundamentally altered the nation's economy. These dual paths of growth produced an economic expansion of

extraordinary proportions. No other major industrial society matched

the record of the United States in combining the scope of its

development in agriculture and extractive resources on the one hand

and its accelerated transition to an industrial base on the other. One

way of helping students grasp the magnitude of this duality is to

explore the growth of job opportunities. Thirteen million immigrants came to the United States between 1865 and 1899; another fourteen

and a half million arrived during the next two decades. This massive

relocation of people becomes easier to comprehend in light of the

demand for labor generated by the simultaneous expansion of

agriculture and industry. Simply put, America's dual tracks of

development spelled good paying jobs and numerous business

opportunities, including the chance to own a farm.

A second way of underscoring the duality of America's economic

growth is comparison with other countries. Britain, Germany, and

Japan?three leading industrial powers?

did not undergo extensive agricultural settle

ment at the time of their industrial

transitions. Other frontier societies, such

as Australia, Canada, Argentina, and South

Africa, opened new agricultural regions

during the late nineteenth and early twen

tieth centuries, but their industrial sectors

evolved later than that of the United

States and never matched its scale. Brit

ain, Germany, and Japan turned to for

eign colonization, in part because of the

scarcity of open spaces within their own

borders. Although the United States

joined the race for empire at the century's

end, America's colonization occurred

internally on lands already integrated into the nation.

America's dual paths of development

ranged over enormous territory. My class

room presentation of this story relies heavily

on maps, tables, and biography. The search

for resources after 1865 took Americans to

every corner of the continent. Opportun

ists flocked to the Titusville oil region of

Pennsylvania, the rich prairies of the north

ern Great Plains, the Mesabi iron range,

the northwestern forests and piney woods

of the Gulf coast, and the fertile valleys of

California, Oregon, and Washington.

Locating these places offers an opportunity to combat students'

geographic illiteracy. I use an overhead projector in class to locate

resource sites, agricultural commodity belts, and industrial cities (2).

Maps show location and spatial relations but they don't handle rates and aggregate totals very well. To convey this quantitative

material, I rely on collections of printed data, such as Table 1. Line

1 of the table gives the number of farms and the amount of land in cultivation, both of which more than doubled between 1870 and 1900. The wheat harvest grew at an even greater clip. All three

categories continued to expand between 1900 and 1920, albeit at a

slower rate. I also use some tables that extend to 1990, in order to place

the Gilded Age within the context of longer developments.

Teaching with quantitative data poses a special challenge,

because many students are loath to confront facts expressed in

numeric form. I don't give in to this aversion. Numbers are as

integral to economics as music is to ballet. My strategy is to keep the

data displays simple, to explain the construction of each indicator,

and to ask questions that emphasize the significance of each numeric

story. Line 2 in Table 1 shows the size of the workforce, which

doubled in the thirty years after 1870; manufacturing jobs grew even

faster. This growth?plus new positions created in trade, services, and

administration?proceeded at a fast pace, so that the agricultural

workforce actually shrank proportionately between 1870 and 1920

Table 1: Indicators of Economic Change, 1870*1920

1870_1500_1920 1. Farms (millions) 2.7 5,7 6.4

Land in farms (million acres) 408 841 956 Wheat grown (million bushels) 254 599 843

2. Employment (millions) 14 28.5 44.5 in manufacturing (millions) 2.5 5.9 11.2

3. Percentage in Workforce

agricultural 52 27 industry3 29 44 trade, service, administration15 20 27

4. Railroad track (thousands of miles) 53 258 407 Steel produced (thousands of tons) .8 11.2 46

5. GNP (billions of dollars) 7.4 18.7 91.5 per capita (in 1958 dollars) 531 1,011 1,315

6. Life expectancy at birth (years) 42 47 54

a. Includes manufacturing, transportation, mining, construction.

b. Includes trade, finance, public administration.

Source: U.S. Bureau oftheCensus, Historical Statistics of the UnitedStates (Washington, DQGovernment

Printing Office, 1975), seriesfor line 1:K4,5,507; line2:D11,174; line3:D 152-81, with author calculations; line 4: Q 321, 288, P 265; line 5: F 1, 4; line 6: B 107.

OAH Magazine of History Summer 1999 17

Campbell/Economic Change

(see line 3), despite its absolute (numeric) growth. Railroad track

mileage quintupled during the Gilded Age; steel production multi

plied fourteen times (line 4). These gains underlay a surging GNP

(listed on line 5). When translated into per person "constant" dollars

(based on the purchasing power of a dollar in 1958), "real" economic

growth doubled in the United States between 1870 and 1900.

Per person GNP provides a rough approximation of trends in

income during the late nineteenth

century, although these data do

not speak direcdy to its distribu

tion among groups. This macro

economic evidence suggests that

industrialization raised the stan

dard of living for the majority of

Americans. Line 6 of Table 1, which measures longevity, sup

ports this likelihood. Life expect

ancy at birth lengthened significandy between 1870 and 1900 and regis tered a greater gain over the next

twenty years, reflecting advances in

the standard of living and invest

ments in public health during the

Gilded Age. Few students quarrel

with the notion that living longer constituted progress (3).

Students invariably ask what

caused incomes to grow. Industri

alization, of course, is the primary

reason, but this explanation raises

as many questions as it answers. I

define industrialization as the pro

cess of change whereby economic

activity shifted away from local

ized harvesting and extracting ac

tivities and home manufactures,

to a diversified network of com

mercial relationships in which

integrated manufacturing pro

cesses, continuous technological

innovation, and finance capital

ism predominated. But this con

ceptualization remains a blurry

abstraction unless it is anchored to specific features of economic

change. My approach to industrialization highlights the role of six

components: technology, railroads, corporations, finance capitalism,

labor, and retailing. These attributes can be thought of as causes, but

I avoid discussion of explicit models of growth in the classroom.

Getting students to see that industrialization unfolded along several

intersecting planes is useful in itself (4).

Technology is a good place to begin this exploration. In the

automobile and television age, students intuitively grasp the signifi

cance of technical innovations. I work backwards from the artifacts

of our own time, like the computer and walkman, to nineteenth

century forerunners, such as the typewriter, phonograph, and

electrical lighting. From consumer items I shift attention to

innovations in industrial materials (e.g., steel), sources of power (coal

and steam, petroleum), and internal combustion engines. Showing

tangible artifacts of industrialism is easier than depicting innovations

in manufacturing processes, which probably explains why a picture

{

?"

John D. Rockefeller in 1884. (Courtesy of the Rockefeller

Archive Center, Sleepy Hollow, NY.)

of the Ford assembly line is a

favorite with textbook authors. Less

photogenic but no less important

were advances in education and

research (engineering schools and

industrial labs, including publicly run agricultural experiment sta

tions), and bureaucratic manage

ment (including accounting) (5). Railroads are a recognizable

symbol of industrialization. Stu

dents always volunteer that the

railroads shortened trip time and

made travel easier. They are less

likely to know, however, that rail

roads lowered the cost of shipping

freight. Carrying goods, not people,

was the railroad's principal contri

bution to economic growth. This

dichotomy in students' intuitive

understanding of railroad eco

nomics probably derives from

their personal experience driv

ing a car but not running a trans

portation business (6).

Lowering the costs of ship

ping permitted a reduction in the

prices customers paid for food and

durable items. In forging connec

tions between production and dis

tribution, railroads accelerated the

trend toward localized manufac

turing of products for sale over

wide areas. The evolution of na

tional markets stimulated new lev

els of competition. Three facts

symbolized the railroad's influence on the creation of national

markets: the completion of the first transcontinental connection in

1869, the adoption of four standard time zones for the continental

United States in 1883 (a cooperative railroad venture), and the

agreement on the standardization of track width in 1886. The enactment of the Interstate Commerce Act in 1887 fits in nicely with this chronology. Although initially weak, the act was the first

significant federal regulation of an industrial business.

Railroads were not only the nation's first big industrial business,

but they also contributed to the popularity of corporate organization

18 OAH Magazine of History Summer 1999

Campbell/Economic Change

among manufacturers. Because most large companies eventually

incorporated matters such as limited liability, capitalization, and

stock issues, hierarchical administrative organization and legal

obligations imposed on corporations by their charters warrant

explanation. The emergence of large-scale enterprises in the last

decades of the 1800s is generally associated with legendary figures in

American business history?Rockefeller, Carnegie, Edison, Swift,

Duke, and others. Their rise to fame and fortune provides material

for interesting stories, but historians should resist entrapment in the

"robber barons" stereotype. Matthew Josephson's indictment of

business ethics highlighted the weak regulations of the Gilded Age, but this critique of capitalism is one-sided and obscures other

dimensions of corporate activity during the era (7).

John D. Rockefeller, the creator of Standard Oil, offers a case in

point. The craze to profit from the oil in the Titusville region threatened to drown drillers and refiners in a sea of petroleum.

Rockefeller understood the logic of rationing this production, as well as the importance of transportation to the business of processing and

marketing a bulk commodity. Contemporary writers such as Henry

Demarest Lloyd and Ida Tarbell pilloried Rockefeller for cutting

special deals with railroads (rebates) and for pressuring competitors into selling out to his expanding enterprise. These "muckraking"

critics emphasized Rockefeller's use of cutthroat tactics and con

spiracy. Later economic historians point out how excess capacity cast

the industry into chaotic competition. Rockefeller himself argued that he bought rivals out of "self-defense" (8).

Two aspects of the Rockefeller story offer a counterpoint to the

robber baron critique. First, Rockefeller's personal life was a model

of Victorian decorum: he did not smoke, drink, or flaunt his wealth.

His life revolved around his family, the Baptist church, and

philanthropic activities. Second, Standard Oil lowered the cost of

kerosene and other products, at least until Rockefeller retired from

active management of the corporation. Keeping prices low was a

strategy to discourage the entrance of new competitors into the field.

Few Americans complained about the falling price of oil or other

products, but many hated Standard and monopolies. This

distinction between the consumer ethos of the public and its

distrust of big business is important to understanding economic

life in the Gilded Age (9). The captains of industry will continue to engender debate. But

it is beyond doubt that corporations were engines of economic

growth. Analyzing these organizations leads students to the unpre

dictable swings in the business cycle, which included two severe

depressions during the Gilded Age. In addition to idling thousands

of workers, these downturns pitted firm against firm in "merciless"

competition. As demand fell, anxious managers scrambled to

survive. One potential escape from ruin was through consolidation.

Many railroads formed cartels in the wake of the depression of the

1870s. The contraction of the 1890s, which put a third of the

railroads in bankruptcy, produced a wave of consolidations. A

merger movement swept through the manufacturing sector between

1897 and 1904, creating corporate entities such as U.S. Steel,

Goodyear, and Nabisco (10).

While many big corporations emerged during these years, small

businesses outnumbered big business many times over and domi

nated some portions of the economy. Private bankers brokered many

of the consolidations formed at the turn of the century. The

contribution of investment bankers to capitalist development derived

from the tremendous appetite of industrial businesses for funds used

for expansion. This demand stimulated the evolution of the

securities market, which dealt primarily with bonds during its

formation period. The depression of the 1890s accelerated a trend

toward greater issues of stock, a shift that paralleled the rise of large

manufacturing corporations (11). Investment bankers underwrote

the finances of many new corporate mergers, often by forming

syndicates for the distribution of securities. The appearance of the

Dow Jones average for industrial stocks in 1896 and the prominence of J. P. Morgan as the master impresario of corporate consolidations

mark the emergence of a new stage of finance capitalism.

Some manufacturing firms hired thousands of workers. This

demand for labor had an important impact on the nature of work,

which became increasingly tied to wages and controlled by managers.

Workers in the antebellum era retained considerable freedom on the

shop floor and capitalized on their skills as artisans. The rise of the

mass-production industries opened up opportunities for semiskilled

and unskilled workers. Unlike more traditional business proprietors,

who knew their employees personally and sometimes labored

beside them, managers of large, mass-production firms saw labor

as a commodity, in which costcutting and control of shop operations became dominant objectives (12).

Generalization about workers in the Gilded Age is complicated

by their heterogeneity. Criss-crossing cleavages existed in skill levels

and between small and large firms. Further fragmentation resulted

from differences among sectors of the economy and regions of the

country. Race, ethnicity, and gender stratified all groups of workers.

Still, several broad tendencies are apparent. Laboring ten to twelve

hours a day with crude machinery, industrial workers suffered high rates of accidents. Moreover, employment was uncertain, as slack

periods idled many workers even during prosperous years. Unions

remained weak in the period compared to those in Europe, a subject

that has attracted considerable scholarly discussion. Although laissez

faire attitudes constrained lawmakers from enacting much effective

legislation for labor, officials usually came to the aid of business

during labor disputes. The Cleveland administration's suppression

of the Pullman Strike in 1894 represents a low point in Washington's insensitivity to the conditions of workers (13). Despite the mismatch

in power between businesses and workers, wages doubled on average

between 1870 and 1900.

The growing output of America's farms and factories induced

producers and retailers to find new ways of marketing their goods. As

experienced mall shoppers, students already know a lot about

retailing by the time they take a history course. The hours spent in

front of the television make them savvy to many of the techniques,

if not all the functions, of advertisers, who took on new significance

during the Gilded Age. Students will likely have had contact with

modern-day incarnations of two retailing developments of the period,

OAH Magazine of History Summer 1999 19

Campbell/Economic Change

mail-order companies and department stores. Examining the rise of

Montgomery Ward and Sears, Roebuck affords an opportunity to

discuss how the railroad, post office, and systematic management

transformed shopping. The simultaneous growth of mail-order firms

and the department store illustrates how the nation's dual paths of

economic development spawned new ways of selling to customers in

rural and urban America. The Sears catalog and the grand

emporiums that rose in the downtown areas showcased the mush

rooming array of consumer goods. City shopping also opened up

new opportunities for women, who dominated department store

clientele and counter service (14). Examination of the six attributes of industrialization discussed in

this essay touches on fundamental components of economic change

during the Gilded Age and opens up links to others. Exploration of

these paths can be fun and fascinating.

Endnotes 1. David S. Landes, The Wealth and Poverty of Nations: Why Some

Are So Rich and Some Are So Poor (New York: W. W. Norton,

1998), 232, 325.

2. Fred A. Shannon, The Farmers' Last Frontier: Agriculture, 1860

1897 (New York: Farrar and Rinehart, 1945) remains a fine

overview of western and agricultural development. Also useful

is Rodman W. Paul, The Far West and the Great Plains in

Transition, 18594900 (New York: Harper and Row, 1988). Lewis E. Atherton, The Cattle Kings (Bloomington: Indiana

University Press, 1961); Allan G. Bogue, From Prairie to

Cornbelt: Farming on the Illinois and Iowa Prairies in the

Nineteenth Century (Chicago: University of Chicago Press,

1963); William Cronon, Nature's Metropolis: Chicago and the

Great West (New York: W. W. Norton, 1991); and Ralph Hidy, F. Hill, and A. Nevins, Timber and Men: The Weyerhaeuser

Story (New York: Macmillan, 1963) examine aspects of western

resource utilization. California has a special place in America's

western development; for example, see Kevin Starr, Material

Dreams: Southern California Through the 1920s (New York:

Oxford University Press, 1990). 3. For a survey of the nation's population history, see Walter T. K.

Nugent, Structures of American Social History (Bloomington: Indiana University Press, 1981).

4. A fine introduction to the topic is Walter Licht, Industrializing America: The Nineteenth Century (Baltimore: Johns Hopkins

University Press, 1995). An older but superbly descriptive resource is Edward C. Kirkland, Industry Comes of Age:

Business, Labor, and Public Policy, 1860-1897 (NzwYovh Holt, Rinehard and Winston, 1961).

5. Examples of readable surveys include Ruth Schwartz Cowan, A

Social History of American Technology (New York: Oxford

University Press, 1997); and Alan I Marcus and Howard P.

Segal, Technology in America: A Brief History (San Diego: Harcourt, Brace, Jovanovich, 1989).

6. See John F. Stover, American Railroads (Chicago: University of

Chicago Press, 1961); and Albro Martin, Railroads Trium

phant: The Growth, Rejection, and Rebirth of a Vital American

Force (New York: Oxford University Press, 1992). 7. Matthew Josephson, The Robber Barons: The Great American

Capitalists, 18614901 (New York: Harcourt, Brace, and Com

pany, 1934). The modern classic on the rise of corporations in

the United States is Alfred D. Chandler, The Visible Hand: The

Managerial Revolution in American Business (Cambridge:

Belknap Press of Harvard University, 1977). A short overview

is Glenn Porter, The Rise of Big Business, 18604920, 2nd ed.

(Arlington Heights, IL: Harlan Davidson, 1992). John Tipple,

"Big Businessmen and a New Economy," in The Gilded Age, ed. H. Wayne Morgan, rev. and enl. ed. (Syracuse: Syracuse

University Press, 1970) is an insightful discussion of dilemmas

inherent in industrial capitalism.

8. Ron Chernow, Titan: The Life of John D. Rocke feller (New York:

Random House, 1998), 143.

9. Two biographies of entrepreneurs suitable for classroom use are

Harold C. Livesay, Andrew Carnegie and the Rise of Big Business (Boston: Little, Brown, and Company, 1975); and

Martin V. Melosi, Thomas A. Edison and the Modernization of

America (New York: HarperCollins, 1990). 10. Naomi R. Lamoreaux, The Great Merger Movement in

American Business, 18954904 (Cambridge: Cambridge

University Press, 1985). 11. Vincent P. Carosso, Investment Banking in America: A History

(Cambridge: Harvard University Press, 1970). 12. For a survey of the subject and its literature, see Melvyn Dubofsky,

Industrialism and the American Worker, 1865-1920, 3rd ed.

(Wheeling, IL: Harlan Davidson, 1996). Important studies

include David Montgomery, The Fall of the House of Labor:

The Workplace, the State, and American Labor Activism, 1865

1925 (New York: Cambridge University Press, 1987); and

Alexander Keyssar, Out of Work: The First Century of Unem

ployment in Massachusetts (New York: Cambridge University Press, 1986).

13. This episode is recounted in Ballard C. Campbell, "Richard

Olney and the Pullman Strike," in The Human Tradition in the

Gilded Acre and Progressive Era, ed. Ballard C. Campbell

(Wilmington, DE: Scholarly Resources, 1999). Essays in this

volume on Carroll Wright, Mother Jones, Mary Lease, James

Blaine, and Francis Newlands examine other aspects of the

economy during the Gilded Age. 14. On retailing, see Chandler, Visible Hand, ch. 7; Cronon,

Nature's Metropolis, ch. 7; and G?nther Barth, City People: The Rise of Modern City Culture in Nineteenth Century America (New York: Oxford University Press, 1980), ch. 4.

Ballard G Campbell is a professor of history at Northeastern University in Boston. He is the author o/The Growth of American Government:

Governance from the Cleveland Era to the Present (1995) and The Human Tradition in the Gilded Age and Progressive Era (1999).

20 OAH Magazine of History Summer 1999