History, U.S. Honors - CH 8-1 Lecture | Economies | Economics

Lecture Honors U.S. History Mr.

Irwin Week 15

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CHAPTER 8 – POLITICS, IMMIGRATION, AND URBAN LIFE Chapter 8-1 Politics in the Gilded Age Question: What is meant by the term Gilded Age? Answer: The Gilded Age is a term that was coined by the author, Mark Twain. The word gilded means “covered with a thin layer of gold.” The term Gilded Age is meant to convey a period in our country’s history in which there was a “thin layer of posterity” covering, or masking an era of poverty and corruption of much of society. The period of the Gilded Age is the period directly after Reconstruction. This was a “golden” period for the large industrialists, but not for the majority of America. As the U.S. emerged from Reconstruction, industrial expansion raised the output of the nation’s factories and farms. Speculators in land and stock were able to quickly rise from rags to riches. During this post-Reconstruction period, the U.S. went into an economic depression. As the result, wages for the common industrial worker remained quite low. In another segment of employment, farmers began to realize that as market prices for farm goods fell, they would experience diminishing returns on their labor, which in turn would put a financial stress upon them, as they struggled to stay in business and pay their debts. Today, we have farm subsidies. Farm subsidies did not exist during the late 1800s. In the late 1880s, businesses operated largely without government regulation. This hands-off approach to economic matters is known by the French phrase “laissez-faire”. Laissez-faire – roughly translates into “free market.” In a truly “free market” economy, government is absent from the market. It is believed that the market regulates itself as the result of the transactions which occur between buyers and sellers. Under a free market economy, prices are determined by the actions of the buyers and sellers. People who believe in laissez-faire believe the result of this practice will be that the strongest and most capable businesses will survive and thrive, while the weaker ones will fade, and ultimately disappear. The idea behind laissez-faire is that strong companies will survive, which in turn will translate into a strong overall U.S. economy.

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During the Gilded Age some American businesses wanted the benefits of laissez-faire when it suited them, but at other times wanted help from government. One such example is the subsidy. A subsidy is a payment made by the government to encourage the development of certain key industries, such as railroads (sometimes a subsidy can be a government payment to an industry to not produce something). Some businessmen realized that by striking up friendships with key government officials, they could exert influence upon these officials in order to bring about subsidies for their type of business. In some cases, bribes were paid to government officials. The officials receiving the bribes were then expected to bring about certain government action that would be favorable to business. According to your textbook, between 1875 – 1885, the Central Pacific Railway budgeted $500,000 per year for bribes to government officials. One railroad official explained this practice by saying: “If you have to pay money to have the right thing done, it is only just and fair to do it.” The Credit Mobilier Scandal: Our government’s desire to connect the country via railroads ended up inviting corruption. One of the most notorious scandals to come out of this period was the Credit Mobilier Scandal. Congress awarded the Union Pacific Railroad Company loans, as well as western land, as incentives to complete the first Continental Railroad. The Union Pacific hired an outside company, Credit Mobilier, to build the actual tracks that the Union Pacific Railroad trains would run on. Credit Mobilier charged the Union Pacific far beyond the value of the work done (overcharging). As the result, money flowed from the United States government, through the Union Pacific Railroad company, and to the shareholders of Credit Mobilier. To keep the money coming in, Credit Mobilier’s managers needed Congress to continue funding the Union Pacific. They accomplished this objective by bribing government officials, by giving them cheap shares of valuable Credit Mobilier stock. If government officials would back the continued funding of the transcontinental railroad, they would receive valuable shares of stock as their bribe. In 1872, three years after the transcontinental railroad had been completed, Congress investigated Credit Mobilier. The investigation uncovered that Credit Mobilier had given stock to representatives of both the Republican, and the Democratic parties. Several cousins of President Grant had also been in on this scam, which caused some to wonder if Grant, himself, had been involved.

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