What would you choose between a job with poor working conditions and terrible pay or the opportunity to be a millionaire? Surely we would all like the chance to be a millionaire. However, in the Gilded Age, business opportunities were not equitably distributed. Only a select few amassed great wealth as big businesses flourished throughout the era. While companies and the economy boomed, an income gap continued to deepen between the wealthy and the working class. Continue reading to see how big business started in America and how it impacted the nation, the wealthy, and the working class!
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Jetzt kostenlos anmeldenWhat would you choose between a job with poor working conditions and terrible pay or the opportunity to be a millionaire? Surely we would all like the chance to be a millionaire. However, in the Gilded Age, business opportunities were not equitably distributed. Only a select few amassed great wealth as big businesses flourished throughout the era. While companies and the economy boomed, an income gap continued to deepen between the wealthy and the working class. Continue reading to see how big business started in America and how it impacted the nation, the wealthy, and the working class!
"Big business" is often used to refer to businesses during the Gilded Age. Big businesses comprise specific management structures such as vertical and horizontal integration. These business structures allowed owners to maximize production output and profits throughout the Gilded Age ushering in the era of monopolies. However, while owners thrived with significant profits, workers bore the brunt of poor working conditions, low pay, and long hours.
Vertical Integration
The combining of several stages of production; an example is Carnegie purchasing all businesses that produce steel.
Horizontal Integration
The acquisition of other similar or identical businesses; an example would be Rockefeller absorbing oil companies into his own.
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.
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.
Did you know?
The Gilded Age inspired a TV show of the same name in January 2022! HBO embraced the show, and it has since become very successful.
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.
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.
Economist Douglas A. Irwin describes both sides of the tariff argument. He writes:
Tariff advocates claimed that high import duties helped American workers by expanding industrial employment and keeping wages high while also giving farmers a steady demand in the home market for the food and raw materials that they produced. Tariff critics charged that those import duties raised the cost of living for consumers and harmed agricultural producers by effectively taxing their exports, thus redistributing income from consumers and farmers to benefit big businesses and capital-owners in the North.1
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 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.
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.
Well known for his oil monopoly, John D. Rockefeller earned both monikers of Robber Baron and Captain of Industry. Due to incredibly favorable economic conditions, Rockefeller incorporated his Standard Oil Company, which came to own over 90% of oil production in the country by 1880. With his newfound wealth, Rockefeller implemented harsh and sometimes unethical business practices. For example, Rockefeller took out the competition through any means necessary, often driving up prices exorbitantly to push competitors out.
While Rockefeller used his influence and wealth to maintain his hold over the competition, he also gave millions to philanthropic endeavors. For example, he donated over $500 million to educational and scientific foundations, giving away most of his money. He also helped establish Rockefeller University and another college in Chicago. Though Rockefeller shows characteristics of both monikers, the argument continues today over whether he was a Captain of Industry or a Robber Baron.
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.
Did you know?
John D. Rockefeller donated over $500 million to philanthropic causes and charities!
The timeline below highlights major events throughout America's business history in the Gilded Age.
Date | Event |
1859 | Large Amounts of Oil were discovered in Pennsylvania. |
1863 - 1865 | John D. Rockefeller established his first oil refinery in Ohio. |
1869 | The Union Pacific and the Central Pacific completed the first Transcontinental Railroad. |
1870 - 1872 | Rockefeller incorporated Standard Oil. |
1872 | Andrew Carnegie visited England and brought back the plans for the Bessemer steel-making process. |
1877 | President Hayes pulled troops out of the South, officially ending Reconstruction. |
1881 - 1882 | Rockefeller and associates officially created the first US trust. |
1885 | Financier JP Morgan reorganized railroad companies. |
1889 | Carnegie published his Gospel of Wealth essay, outlining the wealthy's responsibility for philanthropic endeavors. |
1890 | The Sherman Anti-Trust Act was passed to help fight large monopolies. |
1892 | Homestead Strike at Carnegie's Steel Mill. |
1893 | JP Morgan created a banking group that bailed the US government out of debt. |
1900 | Carnegie's Steel profit hit $40 million. |
1901 | President William McKinley was assassinated, officially ending the Gilded Age. |
1902 | Journalist Ida Tarbell published an article on the questionable ethics within the Standard Oil Company. |
While business fully expanded and thrived throughout the Gilded Age, problems also arose that only strengthened business owners' hold.
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.
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.
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.
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.
The first American business began with the railroads in 1869 with the completion of the transcontinental railroad.
America started big business with the adoption of laissez-faire economics, which created the foundation for monopolies.
American business culture is comprised of two separate groups: wealthy business owners and laborers. Wealthy business owners used ruthless and unethical business practices to maximize their profits. Laborers bore the brunt of these unethical practices with poor working conditions, low pay, and long hours.
Big business changed America by bringing great wealth into the country's economy, launching her onto the worldwide stage.
The most important role of big businesses was the economic success the country enjoyed as a result of monopolists.
Who were the four main Robber Barons of the Gilded Era?
Andrew Carnegie, Cornelius Vanderbilt, JP Morgan, and John D. Rockefeller
What Robber Baron controlled 90% of the US oil?
John D. Rockefeller
Why were industrialists called Robber Barons?
They utilized ruthless and unfair business practices to increase their profit margins.
What were Captains of Industry?
Men who were generous with their wealth and practiced philanthropy
Though viewed as unfavorable, Robber Barons ushered in industrial advancements during this time. Name two examples of this.
Andrew Carnegie successfully adopting the Bessemer Process in his steel company.
Name the piece of legislation that wished to end unregulated business practices.
Sherman Anti-Trust Act of 1890
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