Throughout the late 18th
and early 19th century, the United States of America reached a
previously unmatched level of economic prosperity. Free from government
intrusion and unburdened by red-tape regulation, the economy was allowed to
proceed to new heights. New systems of production and efficiency were being
integrated into the workplace, the factory system was evolving, and many of the
world’s richest men were building their fortunes. Business, was, in short,
booming. However, this prosperity failed to reach a large portion of Americans.
Beneath the alluring veneer of the American capitalist system lay a rotting
foundation, a corruption of the values on which the nation was based. Business
concerns trumped human concerns, labor was commoditized and its organization
was vehemently opposed. In a gross distortion of the Jeffersonian ideal of
independence, workers were dependent upon the so-called “captains of industry.”
Monopolies and trusts were allowed to set prices to eliminate competition. Efforts
by the federal government to prevent such actions were rendered ineffective for
multiple reasons. Through the laissez-faire system, Supreme Court decisions, and
overly vague laws, attempts at regulation during the Gilded Age, or lack
thereof, failed, representing the failure of the federal government to uphold
the values upon which it was built.
To truly understand the actions, or lack
thereof, of government in regards to business and regulation, one must first recognize
the central dogma behind early-American governance: laissez-faire capitalism. The
United States of America was founded upon the legendary guarantee to life,
liberty, and property, and as such sought to protect the rights of all of its
constituents to such entities. Free markets, it was believed, were the products
of free men. Laissez-faire capitalism and the popular Jeffersonian view of America
necessitated that man, and by extension his property, be free from the
unnecessary burdens and subservience inherent in government action (Laissez-faire, 1). Property was the
ultimate expression of liberty. Material possessions not only offered a method
of personal expression but also served as a manifestation of one’s independence.
He who owned his property controlled his destiny. To confiscate property or to regulate
it would represent the government crushing the rights of a citizen to
self-expression and his liberty. As such, large-scale attempts to regulate
trade and rein in business were largely non-existent.
The corollary explaining the
relationship between liberty and property extended quite nicely into the world
of finance and the aggrandizement of wealth. In the Gilded Age, the market, as
mentioned above, was experiencing a period of unmatched prosperity. Government
action was therefore unnecessary. In the event of a the market would adjust
under the influence of Adam Smith’s “invisible hand” (Nederman, 1). The most prominent example this mindset can be found
in interaction between the federal government and monopolies. Built in a time
of nonexistent antitrust laws, monopolies were the preeminent product of the economic
climate. Monopolies were seen as naturally developing and to break up or hinder
the growth of such large conglomerates would be an attack on the personal
freedom and property of the owner and its constituents. However, by failing to
regulate such large corporations and unquestionably embracing the laissez-faire
mindset, the United States effectively abandoned the small local companies and
individuals that were unfortunate enough to be competing with such large entities.
Left without a viable alternative in the marketplace, American consumers were therefore
dependent upon the monopolies for the production of various widgets, most
notably oil, steel, and sugar. Regardless, regulation was avoided, leaving the
small-business owner and the consumer at the mercy of large, profit-oriented
corporations.
Another reason Gilded Age policy failed is
that Monopolies and trusts were notoriously difficult to regulate. However, in
light of the Jeffersonian ideal, their assault upon national values and the
American ethos of independence, especially regarding property and reasonable degrees
of economic freedom, was arguably more appalling. An excellent example is the
first truly “big business” in the history of the United States, the railroad
industry. Railroads, supported by government subsidy and land grants, were
notorious for price-gouging and for cooperation between companies. Furthermore,
the companies often utilized rebates and bulk-shipping discounts to cater
towards larger, more profitable ventures (Smith, 1). Because smaller lines were
often unable to afford giving such large discounts and remain solvent, larger
railroad pools obtained great fortunes exerting newfound influence upon
clients. The small farmers were left without an alternative to bring their
goods to market. However, much larger businesses, most notably John D.
Rockefeller’s Standard Oil, received discounts and more favorable shipping (Tarbell,
267–269, 274–277, 287–288, 292). Again, a dependency emerged under a government
supposedly supporting the values of independence and freedom. Despite their
natural opposition to the values of independence and self-sufficiency, as a
dependent, alternative-less consumer-base was conducive to larger profits, any
efforts to rein in big business were rebuffed and ultimately fruitless, the
railroads being a prominent example.
On a strictly legal level, the first legislative
attempts at regulating such practices were generally ineffective as trusts, by
nature, existed outside of the public eye. Through interlocking directorates
and the exploitation of legal loopholes, trusts were comprised of seemingly
independent companies though all of which were ultimately controlled by a select
group of individuals (Roosevelt, 2). However, the Sherman Antitrust Act, though
it did dramatically increase the regulatory scope and strength of the federal
government, was largely ineffective. It failed to define what constituted a
restraint in trade. Consequently, only eighteen antitrust lawsuits were filed
from 1890-1901, four of which were actually filed against labor unions. Among
the aforementioned railroads, under the Interstate Commerce Act, from 1887-1911
only sixteen were brought to trial. The federal government won only one case (Regulation,
7). Furthermore, the failure to effectively regulate big business could also
stem from corruption of the legislature, as one observer stated that
“Rockefeller did everything with the Pennsylvania legislature except refine
it.” (Lloyd, 4) Business had surpassed government as the true controller of the
nation, leaving the nation dependent and thriving in a negligent system.
Government action of the time indicated a
strong bias towards business interests rather than human concerns. A key
example can be found in the reactionary approach towards organized labor. During
the Gilded Age, workers were being hired in droves in order to increase
production. However, rather than the independent and somewhat expressive work
found throughout the previous century, labor was reduced to a series of wrote
motions; workers were little more than a cog in a machine—as satirized by actor
Charlie Chaplin in his film Modern Times.
Tasks were standardized, the production was timed and expedited, and quotas
were drafted. Humanity had no place in the factory (Manifesto of the Industrial
Workers of the World, 1). Unfortunately, the vital role workers played was not
well compensated. Workers were paid poorly because wages were brought down by
the rapid influx of desperate immigrants. They often lived in tenement housing
owned by their respective employers. Left with little spending money, as workers
were forced to pay rent to employers and shop at company stores, many members
of American society found themselves in abject poverty. As described in the
Manifesto of the Industrial Workers of the World:
His
(the worker’s) wages constantly grow less as his hours grow longer and
monopolized prices grow higher. Shifted hither and thither by the demands of
profit-takers the laborer's home no longer exists. In this helpless condition
he is forced to accept whatever humiliating conditions his master may impose. He is submitted to a physical and intellectual
examination more searching than was the chattel slave when sold from the
auction block (Manifesto of Industrial Workers of the World, 1)
This was quite clearly a corruption of the
Lowell system made famous a century before. Such depravity was best shown by
photojournalist Jacob Riis in his exposé on American urban life How the Other Half Lives. With no
minimum wage to fall back upon and given the proliferation of child labor entire
families were left dependent upon their employers. Living in urban slums
without access to clean air, water, let alone personal property, the extortion
of labor was a gross abandonment of the right to property and liberty (Byington, 1). Even Jefferson himself stated in
his inaugural address said:
A
wise and frugal Government, which shall restrain men from injuring one another,
shall leave them otherwise free to regulate their own pursuits of industry and
improvement, and shall not take from the mouth of labor the bread it has
earned. This is the sum of good government, and this is necessary to close the
circle of our felicities (Jefferson, 3).
The governmental policies of the Gilded
Age failed to uphold the Jeffersonian standards, focusing only upon one
part—the lack of regulation—of the statement, rather than the humanitarian and
demand for equality woven into the remaining portions.
With mouths to feed and bills to pay, many
individuals sought to form trade unions in order to receive better wages and
working conditions (Manifesto of the Industrial Workers of the World, 1-2).
Despite a noble cause, the federal government rarely, if ever, came to support
organized labor in strikes. At individual companies, workers were forced to
sign yellow-dog contracts to prevent unionization, and many strikes were met
with swift and merciless retribution (Homestead Strike, 1). Henry Clay Frick
was notorious for his tolerance, or lack thereof, of organized labor. At the
Homestead Steel Works plant he ran, the Amalgated Association of Iron and Steel
Workers requested a raise for its members. Despite a growing market for steel,
Frick offered neither better working conditions nor a significantly higher
salary. After weeks of tense negotiations, Frick, after being given license by
Andrew Carnegie, locked his employees out of the plant. Pinkertons armed with
rifles were sent to the strike site immediately after to break the strike. The
situation escalated and quickly turned violent, forcing Pennsylvania Governor
Robert E. Pattison to call out the state militia, which quickly broke the strike
(Homestead Strike, 1). A company that furnished Navy ships to protect American liberty
abroad had turned its back on its most disenfranchised citizens.
The situation was not unique to Homestead,
though the strike in Pennsylvania was certainly among the most violent.
However, many strikes were broken before they could even begin. The Sherman
Antitrust Act was frequently turned against the people it was trying to
protect. As conspirators in the restraint of trade, unions, particularly strike
members, were found to be in violation of the Act. The strike, the fundamental
weapon of labor, the only path to earning better wages and working conditions,
as depicted by Frederick Graetz (Image 1) had been stripped away (Lowe, 1). Labor was dependent upon the
management once again.
The first truly large-scale effort by the
federal government during the Gilded Age was the Interstate Commerce Commission
Act. Passed in 1887, it was designed to end the discriminatory practices of
railroads described in the above. The ICCA was weakened by the Supreme Court in
Wabash, St. Louis and Pacific Railway Company
v. Illinois,
which prevented states from regulating the railroads. Furthermore, the act was
hampered by pro-trust attorneys general as only sixteen lawsuits against
companies were actually filed from 1887-1911(“Federal,” 7). The regulatory commission
formed by the Act was unable to enforce rate restrictions without court
approval until 1906 and could not criminalize short-haul discrimination, which
had been crippling small farmers for decades, until 1903(“Federal,” 7). The most basic tenets of
the Act were unenforceable and inefficient. Though certainly an important step
for the United States, the ICCA was ineffective at regulating the railroads
until the Gilded Age had given way to the Progressive Era, where new laws like
the Hepburn act modified and amended the law in portions.
Another hallmark of Gilded Age policy, the
aforementioned Sherman Antitrust Act, was passed in 1890. However, it was often
used for purposes contrary to the intentions of its creator. It was vague and
unspecific—the central part states that every “contract, combination in the
form of trust or otherwise, or conspiracy, in restraint of trade or commerce
among the several States, or with foreign nations, is hereby declared to be
illegal” (Sherman Antitrust Act, 1), without actually defining a trust, conspiracy,
or restraint of trade. As stated above, labor unions were often the target of
federal prosecution for participating in the ambiguously-titled restraint of
trade, as seen in Loewe v. Lawlor (1908)
(Loewe, 1). Furthermore, the bill was
eviscerated by Supreme Court rulings. In Knight Company, E. C., UNITED STATES v. 156
U.S. 1 (1895), the Supreme
Court ruled 8-1 that the American Sugar Refining Company had not formed a trust
or restricted trade despite controlling 98% of all domestic sugar production.
The decision also declared that manufacturing was not within the regulatory
scope of the Act, thus beginning the largest consolidation movement among
manufacturing and railroad companies the nation had ever seen (Knight
Company, E.C., UNITED STATES, 1).
The subsequent loophole formed prompted political scientist Edward S. Corwin to
refer to the nation’s regulatory code as a “twilight zone.” (“Federal,” 7) Even if the Sugar Trust had been found in violation of the Act, only the property in
question, in this case four refineries, would have been seized by the United States.
The individuals involved would be faced only with a misdemeanor and no more
than a $5,000 fine—a pittance compared to potential profits (Sherman Antitrust
Act, 1). The law was hollow. The attempt at regulation had failed yet again.
The Gilded Age was an era of
unmatched economic prosperity and development. However, underneath the glamor
of big business and mechanization was a gross distortion of American values.
The Jeffersonian ideal of personal property and liberty had been distorted in
order to support a system that stole life and liberty from the workers and gave
property to the managers. America had lost its innocence. The idyllic
laissez-faire capitalist system had shown its truly gruesome features of
corruption, “gentleman’s agreements,” manipulation, and monopoly. The federal
government could not, or in some cases would not, curtail such private-sector
excesses. When efforts were made, namely
in the Sherman Antitrust Act and the Interstate Commerce Commission Act, the
laws were either too vague or too inefficient for effective regulation. The courts
stripped the rights of unions while simultaneously crippling the regulatory
power of the government. The United States of America had built its factories
and refineries upon foundations of liberty, freedom, and equality. In the
Gilded Age, however, those foundations had withered away, setting the stage for
a decade of turmoil.