The Gilded Age in America: Booming Business & Incessant Inequalities

From 1865 to the 1890s, the United States enjoyed the Gilded Age, an unprecedented surge in industrialization and entrepreneurship… but at a terrible cost for the working classes.

Nov 11, 2022By Owen Rust, MA Economics in progress w/ MPA
gilded age america andrew carnegie
A 1910 photo of Gilded Age steel magnate Andrew Carnegie (center, without hat), who became known for philanthropy, via the WGBH Educational Foundation (PBS)


After the US Civil War (1861-65), the victorious North had a vigorous industrial economy due to wartime spending. Government subsidies continued with the goal of settling the West, which led to a boom in railroad construction. Between the late 1860s and the 1890s, immigration from southern and eastern Europe provided cheap labor to America’s growing factories. Fueled by immigrant labor from Europe and natural resources from the West, cities in the Northeast rapidly industrialized. The Gilded Age saw great industrial and technological innovations that amassed tremendous wealth for a growing class of capitalists, but the working class suffered from urban slums, low pay, and a lack of workplace safety. Here’s a look at the fast-paced era that built the first skyscrapers.


Setting the Stage: The Industrial Revolution

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A Watt steam engine, invented in 1759 by Scottish inventor James Watt, via National Museums Scotland


The mass industrialization that swept the Northeastern United States during the Gilded Age (late 1860s-1890s) had its roots in the Industrial Revolution that began in Britain in the 1750s.  A handful of inventions allowed for revolutionary change in how things were produced and powered: iron production, the steam engine, and the use of coal instead of wood coincided to allow for the creation of railroads, canals, and factories that could be powered by steam instead of water wheels.


In the 1790s, shortly after the American Revolution, the Industrial Revolution came to the United States when Samuel Slater founded a cotton mill in Massachusetts using new technology from Britain. Due to the need for ample water, industrialization was often confined to the Northeast. By the 1830s, many towns had become known for their factories, and wage labor was replacing farm work. The industrialization of the North, as opposed to the agrarian South, resulted in the South being relatively easily overwhelmed during the US Civil War (1861-65). When hostilities erupted in 1861, the North possessed the vast majority of the nation’s factories, railroads, and armaments production.


US Civil War Boosts Northern Industry

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An image of industrial production during the US Civil War, via BCTV


The benefits of industrialized production over agrarian production were easily apparent during the US Civil War. With a far greater population and only 40 percent of it employed in agriculture, the North had industrial production many times greater than that of the South. The United States government–known as the Union–actively supported industrialization during the war, and the economy expanded. Military spending benefited many industries, especially railroads, leatherworks, and textiles. By the end of the war, these industries were extremely productive and could generate tremendous output, reducing per-unit costs.

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During the war, the Union passed multiple laws that benefited industrial production, including railroad subsidies. With the federal government entirely dominated by the Republican Party, pro-industry laws could be passed with little opposition. Industries in the North grew strong from both subsidies and protection against foreign competition. Massive federal spending created a financial market for stocks and bonds, which would soon thereafter bolster private-sector investment in industries. By 1865, the North was well on its way to being an industrial world power.


Gilded Age Begins: Transcontinental Railroad

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A photograph of the completion of the Transcontinental Railroad in 1869, via The Gilder Lehrman Institute of American History


In 1862, during the Civil War, Congress passed legislation to build a transcontinental railroad connecting the new state of California on the west coast with the industrialized North. After the war was over, government attention could be turned to this monumental engineering and nation-(re)building task. Working from both the west and the east, the railroad was completed in May 1869, and a ceremonial golden railroad spike was driven into the earth. In addition to $16,000 to $48,000 per mile of subsidy, the federal government gave the two railroad companies–Central Pacific and Union Pacific–land grants that could later be sold.


The completion of the Transcontinental Railroad brought about a boom in western settlement, which later produced a boom in agriculture and natural resources–including beef cattle–that were sent back east. Agricultural production in the United States rapidly increased after the Civil War, which was good for consumers but ended up hurting farmers as crop prices were driven down by oversupply. Life out West was tough, but its productive output helped fuel the growing cities and factories in the East.


Immigration During the Gilded Age

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A political cartoon criticizing immigration to the United States from southern and eastern Europe during the Gilded Age, via Independence Hall Association in Philadelphia


After the Civil War, immigration to the United States shifted from primarily northern Europe to southern and eastern Europe. These new immigrants were more dissimilar from native-born white Americans than previous generations of immigrants, intensifying animosity. Nativists opposed them as culturally, socially, and racially inferior, as well as stealing jobs from native-born Americans. The increased rate of immigration also provoked the ire of many native-born citizens, especially as crowded cities experienced increased problems like crime and pollution.


Despite increased nativism, immigration was not discouraged during the Gilded Age due to its provision of cheap labor. Immigrants arrived in major coastal cities and could quickly take factory jobs. Most immigrants worked under difficult conditions for low wages and had little recourse if bosses and landlords were abusive or corrupt. In Europe, many immigrants had heard that America’s rapid growth and westward expansion made it a land of tremendous economic opportunity. Upon arrival, however, many discovered that the situation was not so generous. Nevertheless, millions of immigrants quickly found (hard) work and began to build lives in a new country.


Immigration & Political Machines

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A political cartoon criticizing political machines during the Gilded Age (late 1860s-1890s), via The Congressional Research Institute


The rapid growth of cities due to Gilded Age immigration led to tremendous stresses on infrastructure and public services. Political machines took advantage of these stresses to win votes from select demographics in urban areas. During this era, the patronage system was dominant, meaning elected officials had a relatively free hand to give government jobs and contracts to whomever they wished. By controlling government jobs and government services, political machines could demand loyalty from voters. Although this system did help some struggling immigrants receive government services, it was widely corrupt and fiscally wasteful.


Voter fraud was also common during the Gilded Age and used by political machines to ensure victory in elections. Men would be disguised multiple times to vote for the desired candidate, and the counting of votes itself was hardly scrutinized. The secret ballot, now universal across the United States, was a rarity during the late 1800s, allowing local political bosses to see if voters were crossing party lines. Those caught voting against the political machine, also known as the party machine, may find themselves blocked from government jobs or even denied government services.


Laissez-Faire Economics & Child Labor

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A photograph of a child worker in a cotton mill, via the National Archives, Washington DC


Most immigrants to the United States during the Gilded Age were impoverished. Although there were public schools, compulsory attendance laws were not enforced and would not be until the 1930s. To make ends meet, many poor families had little choice but to have children work in factories, mills, or even coal mines. Child labor was common; child laborers were paid less than adults and enjoyed few or no safety regulations.


Child labor was common during the Gilded Age and was partly influenced by the tradition of children working on farms. The ability of children to operate factory machinery was seen as a credit to the simplicity of the machinery, though children were often injured in such work. However, critics of child labor became more vocal as the era went on, with some comparing child labor to slavery. Although many reformers protested child labor, the prevailing viewpoint that the government should avoid trying to regulate businesses, including employment practices, was deeply entrenched. Laissez-faire economics (French for “to leave alone”) would limit the political will to restrict child labor until the New Deal.


Laissez-Faire Economics & Monopolies

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An 1899 political cartoon criticizing monopolies, via WNYC Studios


The rapid growth of big business during the Gilded Age combined with the rise of political machines and increasingly expensive political campaigns. It is hardly surprising that the era became known for political support of big business, including monopolies that dominated entire industries. At the time, there were no anti-competition restrictions that prevented one company from controlling an entire industry and raising prices on consumers. The first mega-wealthy industrialists became known for using corrupt deals to sink competitors and gain control of commerce.


The first law restricting monopolization of commerce, the Sherman Antitrust Act of 1890, forbade any contract that restricted trade among the states. However, the law was initially used to limit the activities of labor unions rather than monopolies! This kept powerful monopolies, also known as trusts, dominant in several industries, including steel, oil, and railroads. Whenever small competitors emerged, they were often bought outright by existing monopolies due to the monopolists’ ability to buy all the shares of stock.


Rise of Reformers

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An image of Hull-House in Chicago, the first settlement house in the United States to serve immigrants, via the National Park Service


Fortunately, many individuals were sympathetic to the plight of poor immigrants, child laborers, and those stuck in urban slums. Organizations sprung up during the Gilded Age to provide aid to those in need, and many types of reformers sought to bring about positive social change. In 1889, Jane Addams began the settlement house movement with Hull-House in Chicago. It provided social services to local residents, typically immigrants, including legal aid, child care, and job training.


The expansion of newspapers helped reformers expose the social and infrastructural ills of the era. Photographers and journalists known as muckrakers showed the public what was really going on in many industries and crowded tenement houses, leading to demands for government intervention. Many in the middle and upper classes saw assisting those in poverty as a moral virtue…and also a way to reduce crime and the potential for social unrest. As the economic situation of the middle class improved during the era, it became less tolerable to know that so many lived in squalor.


From Robber Barons to Philanthropists

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An image of steel tycoon turned famous philanthropist Andrew Carnegie, via the Carnegie Medal of Philanthropy


One group of prominent reformers late in the Gilded Age was philanthropists, or wealthy donors who supported charities and nonprofits. Several of the business tycoons who had been criticized as monopolists and robber barons became generous supporters of philanthropic causes. Steel tycoon Andrew Carnegie became famous for his Gospel of Wealth, in which he stated it was the moral obligation of the wealthy to help the less fortunate. Carnegie, along with John D. Rockefeller, J.P. Morgan, and Henry Ford, was praised for his philanthropy but sometimes criticized for his business practices.


Many reformers and philanthropists had views that would be controversial today, such as belief in eugenics, Social Darwinism, and classism. They wanted to assist the poor and society in general, but not necessarily everyone. There was also a frequent assumption that wealthy philanthropists were more competent at deciding how people should live their lives, often provoking animosity between wealthy reformers and lower-class immigrants. Immigrants and those in poverty were often expected to assimilate and adopt the cultural norms and values of the upper classes.


Changing Eras: Civil Service Reform

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A political cartoon blaming the patronage system for the assassination of US president James Garfield by job-seeker Charles Guiteau in 1881, via The Ohio State University


Unlike some eras in history, there was no distinct end to the Gilded Age. Many of its elements persisted for decades into the twentieth century, such as some political machines, some super-wealthy industrialists, and many nativist and classist viewpoints. However, one spark that began the transition of the nation toward the following Progressive Era was civil service reform. In 1881, popular US president James Garfield was assassinated by a disgruntled federal job-seeker, Charles Guiteau, who had expected a post given to him under the existing patronage system.


Shocked by the assassination, a swell of support pushed through the Pendleton Act of 1883, which established the Civil Service Commission to ensure that some federal government jobs were filled using merit rather than patronage. Over time, the modern civil service system was created, with government jobs filled by employees who had to compete for positions using skills and experience rather than political connections. The creation of a professional bureaucracy for government agencies helped bring down political machines. Later laws reinforced the division between government employees and partisan politics, with the Hatch Act of 1939 preventing government employees who receive federal funds from behaving in a partisan manner.


Changing Eras: Public Wants Government Regulations

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A periodical from 1905 describing the findings of author Upton Sinclair, who investigated the meatpacking industry, via The Kansas Historical Society


Eventually, a critical mass of public support for government intervention in the laissez-faire economy emerged. The 1906 book The Jungle, written by Upton Sinclair, horrified the public with an exposé about the meatpacking industry. Although Sinclair had attempted to help the exploited workers of the industry, the public was more outraged at the unsanitary conditions of the food. Congress passed the Pure Food and Drug Act, creating the Food and Drug Administration (FDA) to ensure the cleanliness and health of America’s food industries.


In 1911, the US Supreme Court finally turned the Sherman Antitrust Act against the biggest monopoly of all: John D. Rockefeller’s Standard Oil. That same year, it also broke up American Tobacco. The era of monopolies was officially over, and reforms were passed to assist worker health, safety, and compensation. Although an era of laissez-faire conservatism returned in the 1920s, the Great Depression of the 1930s brought about permanent societal change with the New Deal reformers. Today, all citizens enjoy greater health, safety, and wage protections than was fathomable during the Gilded Age.

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By Owen RustMA Economics in progress w/ MPAOwen is a high school teacher and college adjunct in West Texas. He has an MPA degree from the University of Wyoming and is close to completing a Master’s in Finance and Economics from West Texas A&M. He has taught World History, U.S. History, and freshman and sophomore English at the high school level, and Economics, Government, and Sociology at the college level as a dual-credit instructor and adjunct. His interests include Government and Politics, Economics, and Sociology.