Capitalism in the Gilded Age

• Adam Smith (1776)• Origins of Species (1859)• Social Darwinism• William Graham Sumner

(1880s)• Andrew Carnegie (1901)

• Gospel of Wealth (1889)• J. P. Morgan (1837-1913)• U. S. Steel (1901)• John D. Rockefeller (1881)• Standard Oil (1882)

I. Origins of Capitalist ThoughtII. The Ideology CapitalismIII. Industrial Concentration

Key Terms

I. Origins of Capitalist Thought

Adam Smith

The Wealth of Nations“Were the Americans, either by combination or by any other sort of violence, to stop the importation of European manufactures, and, by thus giving a monopoly to such of their own countrymen as could manufacture the like goods, divert any considerable part of their capital into this employment, they would retard instead of accelerating the further increase in the value of their annual produce, and would obstruct instead of promoting the progress of their country towards real wealth and greatness.”

Thomas Jefferson

Charles Darwin

Herbert Spencer

William Graham Sumner

The Concentration of Wealth: Its Justification

“What matters more than that some millionaires are idle, or silly, or vulgar. . . . The millionaires are a product of natural selection, acting on the whole body of men to pick out those who can meet the requirement of certain work to be done. . . they get high wages and live in luxury, but the bargain is a good one for society”

“Let it be understood that we cannot go outside of this alternative: liberty, ineqaulity, survival of the fittest; not-liberty, equality, survival of the unfittest. The foremost carries society forward and favors its best members; the latter carries society downwards and favors its worst members”

II. The Ideology Capitalism

Ideology of Capitalism1) A natural aristocracy controlled the American

economy for the benefit of all.2) Politicians, unlike businessmen, were not subject

to natural selection.3) If the state interfered with the economy it would

upset natural selection.4) Slums and poverty were the unfortunate but

inevitable results of the competitive struggle.5) The stewardship of wealth obliged the rich to

help the poor.

Andrew Carnegie

The Gospel of Wealth and Other Essays

“This, then, is held to be the duty of the man of wealth: To set an example of modest, unostentatious living, shunning display or extravagance; to provide moderately for the legitimate wants of those dependent upon him; and, after doing so, to consider all surplus revenues which come to him simply as trust funds, which he is called upon to administer, and strictly bound as a matter of duty administer in the manner, which, in his judgment, is best calculated to produce the most beneficial results for the community--the man of wealth thus becomes the mere trustee and agent for his poorer brethren, bringing to their service his superior wisdom, experience, and ability to administer, doing for them better than they would or could do for themselves.”

Carnegie’s House on Fifth Avenue, New York

Carnegie’s Vacation Home—Skibo Castle in Scotland

Income Comparison25,000,000

5000

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

Income in 1900

Andrew CarnegieAverage Worker

III. Industrial Concentration

Farmer in Missouri, Growing for a Local Market

New Farm Machinery

Spread of Railroads

020,00040,00060,00080,000

100,000120,000140,000160,000180,000

1860 1870 1880 1890

Miles of Track

Railroad Expansion, 1870-1890

Land Grants to Rail Roads -- Total of 224,000,000 Acres

John Pierpont Morgan

J. P. Morgan’s Private Library

U.S. Steel

Charles M. Schwab

Charles Schwab’s Home

John D. Rockerfeller (1839-1937)

“The day of combination is here to stay. Individualism has gone, never to return.”

Standard Oil• Used special rates with railroads to drive

smaller competitors out of business.

• By 1881Rockerfeller’s cartel controlled 90% of the nation’s oil refining capacity.

• Within three years the number of oil refineries were reduced from 53 to 22.

Discussion• How does the practice of capitalism in the

Gilded Age compare to the ideology?

• What is the justification of monopolies? Are they good for society?

• What does Gilded Age style capitalism mean for democracy?