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
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