6.12 - Controversies over the Role of Government in the Gilded Age

Government Actions

• Federal Land Grants

  • The federal government subsidized railroads with loans and land grants, giving 80 railroad companies more than 170 million acres of public land.

  • These grants promoted hasty construction and corruption, exemplified by the Crédit Mobilier scandal, where insiders bribed officials and pocketed profits.

• Interstate Commerce Act (1887)

  • In response to state regulations being nullified by the Supreme Court in Wabash v. Illinois (1886), Congress passed the Interstate Commerce Act.

  • This act required railroad rates to be "reasonable and just" and established the Interstate Commerce Commission (ICC) to investigate and prosecute discriminatory practices.

  • Initially, the ICC helped railroads more than farmers, as it lost most cases in federal courts and only stabilized rates without effectively aiding shippers.

Antitrust Movement

• Growing concern over corporate trusts like Standard Oil led to the Sherman Antitrust Act of 1890, the first federal legislation aimed at curbing monopolistic practices.

• The Sherman Antitrust Act was crucial because it was the first significant attempt by the U.S. government to regulate and maintain fair competition in the marketplace.

• It prohibited any "contract, combination, in the form of trust or otherwise, or conspiracy in restraint of trade or commerce," targeting monopolies and other forms of anti-competitive behavior.

• Despite its groundbreaking nature, the act was initially ineffective due to vague wording and enforcement challenges.

• The Supreme Court ruling in U.S. v. E.C. Knight Co. (1895) further weakened the act by ruling it could only be applied to commerce, not manufacturing, limiting its scope.

• During the Progressive Era, the act was strengthened through additional legislation and more rigorous enforcement.

Political Issues: Civil Service, Currency, and Tariffs

• Civil Service Reform

  • The Pendleton Act of 1881 established the Civil Service Commission, requiring competitive exams for government jobs and prohibiting political contributions from civil servants.

  • This reform reduced patronage and shifted politicians' reliance to wealthy donors for campaign funding.

• Money Question

  • The debate over expanding the money supply reflected tensions between debtors and creditors. Debtors favored "easy" money to pay off loans, while creditors supported "hard" money backed by gold to prevent inflation.

  • The Panic of 1873 heightened the debate, leading to the formation of the Greenback Party, which advocated for paper money but faded after economic recovery.

• Greenback Party

  • Formed by supporters of paper money not backed by gold or silver, the party gained significant support in the 1878 congressional elections but declined as economic conditions improved.

  • The demand for increasing the money supply continued, influencing later monetary policies.

• Demands for Silver Money

  • The Bland-Allison Act allowed limited coinage of silver, a compromise that did not satisfy those advocating for unlimited silver coinage to expand the money supply.

• Tariff Issue

  • High tariffs enacted during the Civil War were opposed by Democrats who argued they raised consumer prices and harmed farmers by reducing overseas sales of agricultural products.

  • Protective tariffs benefited industrialists but contributed to agricultural surpluses and lower farm prices, fueling rural discontent.