The Gilded Age: Economics

Transformations brought about by industrialization, urbanization, and innovation lead to a change in the standard of living of the nation.

Entrepreneurship

• Entrepreneur – – someone who organizes, manages, and assumes the risks of

a business– an agent of change– discovers new ways to combine resources

• In the late 1800s, many were considered entrepreneurs because they created value by moving resources out of less productive areas and into more productive ones.

• Other example: skilled immigrants used their trade skills to establish businesses of their own.

Industrialization: Main Ideas• Industries and “Big Business” grew in response to technological innovations

– Bessemer Steel process which enabled faster production of a strong steel product • Other breakthroughs in electricity, mass communication, and shipping allowed

factories to produce more, at a faster rate• Large numbers of immigrants provided industrialists with more workers

– 1870s-80s immigrants coming from England, Ireland, and northern Europe– Later immigrants from Southern and Eastern Europe/Mexico/Asia (until Chinese

Exclusion Act of 1882)

Nothing…..NOTHING….contributed to the settling of the West and the

realization of “Manifest Destiny” more than the RAILROAD!!!Main Idea: After the Civil War, the rapid construction of railroads accelerated the nation’s industrialization and linked the country together.

Growth of Railroads

• Industry relied on railroads for shipping• Railroads expanded westward to meet

demands of settlement and economic development of the West– Carried people– Shipped products

• Railroad shipping facilitated the growth of – Ranching– Farming– Mining

• Rapid growth of railroads enabled by– Govt subsidies and foreign investment– Railroad combinations bringing

railroads under control of a few men– Industrial and technological innovations

Transcontinental Railroad

• Pacific Railway Act (1862) provided for construction of a transcontinental railroad.• Would connect country from

east to west.• Mostly built w/ immigrant

labor (Irish & Asian)• Much of the financing of RRs

depended on federal govt land grants to RR companies.

• Companies would then sell the land to raise $$$ for construction of the RR.

• Meeting point at Promontory Point, Utah

Jay Gould

• Some big-name RR magnates were called Robber Barons for their practice of swindling investors & bribing government officials.

• Jay Gould – manipulated stock values

by practicing“insider trading.”

– He used information he received as a railroad owner to manipulate stock prices to his benefit.

Credit Mobilier Scandal - RR construction company - greatly inflated construction costs & pocketed ridiculous profits! Cheated the stockholders of theRR company. BUT…

Not all RR entrepreneurs were “Robber Barons”!Ex: James J. Hill - took no federal land grants, etc. He was honest and smart in the the way he ran his company.

James J. Hill Great Northern Railroad

Time zones were created to make RR travel saferand more reliable.

Big Business• Industrialists and business leaders used horizontal and

vertical alignment to reduce competition and expand their companies

• Reduction of competition led to the creation of monopolies and trusts

• Socioeconomic divisions widened as industries grew

Big businesses boomed because……

Favorable business climate. Ex: Corporations were easy to form:

* An organization owned by many people; stockholders own shares of stock,

each representing a percentage of the business.

* Selling stock allows a business to raise huge amounts of capital ($$ to invest

in the business).* It is run like it is owned by a single person.

4. Government helped, not hindered, business. * Morrill Tariff - tariff on foreign imports; made American goods cheaper, more attractive to buyers. * Land grants to railroad companies & businesses; this further spurred settlement of the west and boosted the economy.

Business Practices• Economies of scale - businesses

produce goods cheaply because they make & sell so many of each item.• Big corporations could squeeze out

smaller businesses and force them to close.

• Many corporations began to consolidate (merge their businesses w/ others like them).

• Pools - agreements among companies to maintain prices at a certain level.

• Trust - Allows one person to manage another person’s property. Tactic to avoid state laws which had been passed to stop horizontal integration and monopolies.

Free Enterprise• As industry grew rapidly, the US

government promoted free enterprise – Free enterprise – business that can

operate competitively for profit with little government involvement/regulation)

• GNP– Gross National Product– All of the goods and services produced

within a country in one year• Abundant raw materials were the key

to success