Summary
Highlights
During the Gilded Age, the federal government generally adopted a laissez-faire approach to economics, meaning it kept its hands off the national economy. This approach was a departure from earlier periods where the government was more involved, such as in the creation of a national bank or infrastructure improvements. This shift was driven by three main ideological reasons.
The first contributing idea was the growing belief that hard work necessarily led to economic prosperity. This was popularized by authors like Horatio Alger, whose 'rags to riches' stories affirmed this view. Christian leaders like Russell Conwell also preached that wealth gained honestly was aligned with the gospel, implying poverty was a sign of vice, aligning with Social Darwinism and meritocracy. This belief justified minimal government intervention, as intervention was seen as hindering merit-based success.
The second set of ideas came from Adam Smith's free market economics, as articulated in 'The Wealth of Nations.' Smith argued that national wealth increased when the 'invisible hand' of the market, guided by supply and demand, was allowed to operate without outside influences, especially government. However, Gilded Age reality diverged from Smith's vision. Business leaders had consolidated power, reducing competition—a vital component of Smith's theory. President Grover Cleveland's veto of the Texas Seed Bill in 1887, stating 'Though the people support the government, the government should not support the people,' exemplifies this hands-off approach even in times of extreme hardship.
Thirdly, laissez-faire policies were supported by the principles of Social Darwinism. This idea suggested that government intervention to support weaker individuals or businesses would ultimately harm the long-term prosperity of the economic system. These three ideologies collectively fostered an environment of minimal government economic intervention, allowing industrialists to amass significant power and wealth.
Despite their arguments against government intervention, industrialists were keen to accept it when it benefited them. Examples include lobbying for protective tariffs to favor domestic goods, receiving massive land grants for railroad construction, and utilizing federal troops to suppress labor strikes, such as the Pullman strike in 1894.
The rapid industrialization of the United States led policymakers to seek control of foreign markets and natural resources. The fear was that existing markets in Europe and Canada wouldn't be able to absorb the growing surplus of American manufactured goods. This led to expansion into three main areas: the Pacific Rim (notably Hawaii), Asia (especially China), and Alaska.
The U.S. gained control of Hawaii through American sugar companies and missionaries, culminating in annexation in 1898 after a coup against the indigenous government. In Asia, the Burlingame Treaty of 1868 with China facilitated missionary access and provided the U.S. with 'most favored nation status,' enhancing trade and Chinese immigration for cheap labor. Lastly, Secretary of State William Seward purchased Alaska from Russia in 1867. Initially criticized as 'Seward's Folly,' Alaska proved strategically valuable for accessing Asian markets and later yielded enormous natural resources like gold and oil during the Klondike Gold Rush of 1896.