American Business History

Railroads

Railroads became the first large business in America, with tracks spanning across America by 1869 with the completion of the transcontinental railroad. As companies began laying railroad tracks, they soon realized they needed to streamline services by dividing responsibilities, creating managerial roles, and understanding financial obligations. Railroads laid the foundation for other big businesses to take off and spread throughout the era.

Fig. 1 Transcontinental Railroad ceremony of the golden spike 1869.

For example, linking the east and the west by rail allowed Americans to purchase any item from a catalog or department store. Railroads also made way for the industrial boom in the Gilded Age by offering quicker transportation of products and goods across the country.

American Trade History

American business in the Gilded Era played an integral part in making the country a worldwide economic player. The federal government played an essential role in trade by embracing high protective tariffs and laissez-faire economics.

Protective Tariffs

Throughout the Gilded Age, the federal government employed high protective tariffs on international imports to protect the country's economic interests. The loyalties of Congress looked to be leaning toward big business owners and their wishes for high taxes.

The cost of living for Americans could have been lower if lower tariffs had been established. However, legislators enacted high tariffs, forcing Americans to buy domestic goods instead of high-priced international products. Controversies about economic tariffs and their impact during the Gilded Age continue today.

Fig. 2 Conditions of the Laboring Man political cartoon.

Economist Douglas A. Irwin describes both sides of the tariff argument. He writes:

The high protective tariffs during the Gilded Age contributed to the increased wealth of business owners and industrial employment and the deterioration of the working class.

American Business Culture

American business culture during the Gilded Age was not equitable across class lines. Business owners' wealth overshadowed that of the working class, who often found themselves in poverty.

Robber Barons & Captains of Industry

Wealthy business owners throughout the Gilded Era earned the moniker of Robber Baron or Captain of Industry through their questionable ethics or philanthropic endeavors. Business magnates who accumulated significant wealth through unethical practices gained the nickname of Robber Barons as they were regarded as robbing their workers to feed their own wealth. Business owners who used their wealth for philanthropic endeavors earned the nickname of Captains of Industry, as they were regarded as benefiting the public.

Regardless of the moniker, the wealthy elite of the Gilded Era ostentatiously displayed their wealth with multiple mansions/houses, expensive clothing, and parties. However, while the rich lavished themselves with niceties, the working class struggled to survive.

Laborer Culture

Opposite their wealthy counterparts, laborers dealt with long hours, poor working conditions, and low pay. The plight of laborers triggered the formation of labor unions that fought for workers' rights. If negotiation with an owner failed, unions often used strikes to wear the owners down. However, government intervention in strikes generally sided with the owner, and the unions' efforts rendered little to no results.

For example, the Pullman Strike of 1894 and the Homestead Strike of 1892 resulted in government intervention, with workers returning to similar, or the exact same, working conditions. Overall, the disparity between business owners and laborers only intensified throughout the Gilded Era as owners acquired more wealth and laborers struggled.

American Business History Timeline

The timeline below highlights major events throughout America's business history in the Gilded Age.

Major Problems in American Business History

While business fully expanded and thrived throughout the Gilded Age, problems also arose that only strengthened business owners' hold.

Laissez-Faire Economics

At the beginning of the Gilded Age, the federal government embraced a laissez-faire economic system, catapulting business owners into greater wealth and success. Proponents of laissez-faire embraced the idea that the government should limit or completely stop its interference with the economy.

Fig. 4 The King of the Combinations political cartoon, 1901.

Laissez-faire economics created a lack of competition by allowing businesses to operate with their own rules. This often meant owners had no price or trade regulations and set their workers' wages. The laissez-faire economic policy created the foundation for business owners to amass great wealth while simultaneously creating difficult working conditions for laborers.

Failure of the Sherman Anti-Trust Act

In the hopes of ending the hold monopolies held on business and the American economy, Congress passed the Sherman Anti-Trust Act in 1890. The Act authorized Congress to dissolve trusts that had the potential to impede economic competition. According to the Act, any business combination "in the form of trust or otherwise that was in restraint of trade or commerce among the several states, or with foreign nations" could not continue.

However, the language of the Act created confusion due to undefined, important terminology. The first failure of the Act occurred in 1895. The Supreme Court ruled the American Sugar Refining company did not meet monopoly requirements even though it controlled almost 100% of sugar production in the country.

Summary of American Business History

The Gilded Age saw the beginning and rise of big businesses, leading to wealthy business owners and an impoverished working class. The completion of the transcontinental railroad and favorable economic policies created a strong foundation for monopolies within the country. For example, John D. Rockefeller monopolized the oil industry and owned 90% of America's oil industry.

While wealthy business owners helped boost the country's economy, they also created poor working conditions for laborers. Workers created labor unions to combat the power of business owners and utilized strikes when negotiation tactics failed. However, the government generally stepped in and ended strikes in favor of the owners. Congress passed the Sherman Anti-Trust Act in 1890 to help curb the power of monopolies. Although the Act gave Congress the power to dissolve monopolies, the language in the legislation allowed for different interpretations. Thus, big businesses continued operating well into the twentieth century.