The period from 1865 to 1890 witnessed rapid economic transformation as the United States emerged as a leading industrial power driven by innovation and expansion.
Industrial Growth
The Role of Railways
Railways were the backbone of American industrial expansion during this era:
Transcontinental Railroads: The completion of the First Transcontinental Railroad in 1869 connected the East and West, promoting the national market.
Investment and Land Grants: The federal government granted over 180 million acres of public land to railway companies to incentivise expansion.
Railway Tycoons: Figures such as Cornelius Vanderbilt and James J. Hill amassed vast fortunes, reflecting the growing power of railway magnates.
Economic Linkage: Railways stimulated coal, iron, and steel industries and facilitated the movement of raw materials and finished goods.
Growth of Steel, Oil, and Banking
Industrial growth was driven by the rise of key sectors:
Steel Industry:
Enabled by the Bessemer process, steel became cheaper and more widely available.
Andrew Carnegie's Carnegie Steel dominated the market by the 1890s, producing more steel than all of Britain combined.
Oil Industry:
Discoveries in Pennsylvania (e.g. the Drake Well, 1859) led to a boom in oil production.
John D. Rockefeller's Standard Oil established near-total control of refining through vertical and horizontal integration.
Banking Sector:
Growth was supported by investment banks like J.P. Morgan & Co., which financed infrastructure and corporate mergers.
Banks helped channel European capital into American industries, fuelling further expansion.
Agricultural Changes
Mechanisation and Overproduction
Agriculture saw profound changes, though not all were beneficial for farmers:
New Machinery:
The mechanical reaper, steel plough, and thresher increased productivity.
Farmers in the Midwest and Great Plains could cultivate more land than ever before.
Increased Yields:
Output surged due to mechanisation and newly settled lands, but prices dropped as supply outpaced demand.
Transport Costs:
Despite better access to markets via railways, freight rates remained high, reducing farmers' profits.
Farmer Hardship
Although production expanded, many farmers suffered:
Falling Prices: Wheat and corn prices collapsed, leading to rural poverty and debt.
Loan Dependency: Farmers often relied on credit to buy equipment and seeds, leading to cycles of debt.
Railroad Monopolies: Rail companies charged exorbitant rates, especially where competition was absent.
Climate Vulnerability: Droughts in the 1880s severely impacted farming regions, particularly in the West.
Urbanisation
Internal Migration and Urban Growth
The economic boom contributed to massive urbanisation:
Rural to Urban Shift:
Many Americans left farms for factory jobs in cities such as Chicago, Pittsburgh, and New York.
Immigration Surge:
Between 1865 and 1890, millions of immigrants—mainly from Europe—settled in urban areas, providing cheap labour.
Labour Supply:
The growing workforce supported industrial growth but led to overcrowding and poor living conditions.
Infrastructure Development
Urban expansion brought both innovation and strain:
Skyscrapers and Streetcars: New construction methods and transport improved mobility and density.
Water and Sewage Systems: Some cities began to invest in sanitation to combat disease outbreaks.
Urban Planning Lags: However, many cities lacked coordinated planning, leading to slums, fire hazards, and pollution.
Corporations, Monopolies, and Trusts
Corporate Expansion
The late 19th century saw the rise of the modern corporation:
Limited Liability Companies allowed firms to raise large capital while reducing investor risk.
Joint-stock corporations expanded, often merging to form large conglomerates.
Monopolies and Trusts
Big business concentrated power through monopolistic practices:
Horizontal Integration: Companies like Standard Oil absorbed competitors to dominate entire sectors.
Vertical Integration: Carnegie Steel owned all steps in production—from raw materials to finished goods.
Trusts: Legal structures were created to manage multiple companies under one board, avoiding competition laws.
Consequences:
Market Control: Prices and output could be manipulated by a few large entities.
Barriers to Entry: Small businesses found it difficult to compete.
Public Backlash: Anti-monopoly sentiment began to grow, especially among farmers and small producers.
Laissez-Faire Ideology
Principles of Laissez-Faire
The dominant political philosophy during this era was laissez-faire, meaning minimal government interference in business:
Belief in the Free Market: Entrepreneurs should operate without state control.
Classical Liberalism: Rooted in ideas of private property, individualism, and competition.
‘Survival of the Fittest’: Influenced by Social Darwinism, it justified vast inequalities of wealth.
Limited Regulation
Government policy aligned with laissez-faire beliefs:
Weak Regulation: Few laws governed working conditions, wages, or business conduct.
Courts Favoured Business: Legal decisions often sided with companies, citing ‘freedom of contract’.
Minimal Taxation: Low corporate and personal taxes supported capital accumulation.
Impact on Workers and Consumers
While industries flourished, the effects on the broader population were mixed:
Poor Working Conditions:
Long hours, unsafe environments, and low pay were widespread.
Child labour was common in factories and mines.
Labour Unrest:
Strikes such as the Great Railroad Strike of 1877 highlighted growing tensions.
Workers began to unionise despite employer resistance.
Consumer Exploitation:
Monopolies could charge higher prices and limit choices.
The End of the Frontier
Closing the Frontier
By 1890, the U.S. Census Bureau declared the frontier ‘closed’, marking the end of a historical era:
Homestead Act (1862): Encouraged settlement by granting 160 acres to citizens willing to farm for five years.
Railroad Expansion: Enabled access to remote regions, hastening the settlement of the West.
Population Growth: Vast numbers moved westward, reducing the availability of unsettled land.
National Significance
The symbolic closure of the frontier had far-reaching implications:
Cultural Identity:
The frontier had represented freedom, opportunity, and individualism—central themes in American identity.
Economic Impact:
With land exhausted, attention shifted towards industrial development and foreign markets.
Frederick Jackson Turner:
In 1893, his Frontier Thesis argued that the frontier shaped American democracy and character, and its loss might bring social stagnation.
FAQ
Immigration played a crucial role in fuelling industrial growth by providing a vast, inexpensive, and flexible labour force that was essential to the expanding economy. Between 1865 and 1890, millions of immigrants—primarily from Germany, Ireland, Scandinavia, and later Southern and Eastern Europe—settled in urban centres where factories and industrial operations were based. These immigrants took on low-paying, often dangerous jobs in industries such as textiles, steel, coal mining, and construction, tasks that native-born Americans increasingly rejected. Industrialists welcomed this influx, as it helped keep wages low and productivity high. Immigrants also brought with them a range of skills and cultural attitudes that contributed to the growth of ethnic neighbourhoods and urban culture. Many lived in overcrowded tenements and worked in poor conditions, but their labour underpinned much of the economic expansion. Their presence also led to increased demand for goods and services, further stimulating industrial and urban growth.
Technological innovation during 1865–1890 significantly enhanced productivity across various sectors, transforming the American economy into an industrial powerhouse. In manufacturing, innovations such as the Bessemer steel process allowed mass production of stronger and cheaper steel, vital for construction and railways. Mechanised looms, sewing machines, and typewriters boosted productivity in the textile and clerical industries. The adoption of standardised parts and assembly line techniques laid the groundwork for future mass production. In agriculture, the introduction of mechanical reapers, seed drills, and combine harvesters increased output per worker and reduced the need for manual labour. The telegraph and expanding use of the telephone revolutionised business communication and coordination across distances. These innovations not only made production faster and cheaper but also reduced costs for businesses and allowed for expansion into new markets. As productivity rose, so too did profits and output, though often without corresponding increases in workers' wages or improvements in working conditions.
Corporate leaders in the late 19th century often justified their immense wealth and industrial dominance through a mix of ideological, religious, and economic reasoning. A key justification was Social Darwinism, which applied Charles Darwin’s theory of natural selection to society and economics. It argued that in the competitive world of business, only the most capable would succeed, thus legitimising the success of men like Rockefeller and Carnegie. These magnates also promoted the Gospel of Wealth, especially Carnegie, who believed that the wealthy had a moral obligation to use their fortunes to benefit society, such as funding libraries, schools, and universities. Additionally, many capitalists portrayed themselves as self-made men, embodying the ‘American Dream’—their success was seen as a result of hard work, ingenuity, and perseverance. They argued that their dominance brought efficiency, innovation, and economic progress, and that government interference would hinder growth. This ideology reinforced laissez-faire capitalism and discouraged regulatory reform.
Industrialisation between 1865 and 1890 deeply affected family life and gender roles, especially in urban areas. Traditional family structures began to shift as economic survival required contributions from all family members. In working-class families, women and children often joined the labour force, particularly in textiles, garment production, and food processing industries. This led to long hours and limited time for domestic responsibilities, challenging the 19th-century ideal of the woman as a homemaker. However, middle-class families increasingly embraced the concept of ‘separate spheres’, where men were breadwinners and women focused on domestic life and moral upbringing. The rise of clerical and teaching jobs provided some middle-class women with new, albeit limited, professional opportunities. Family sizes began to shrink in urban areas, partly due to the high cost of living and greater access to birth control. Urban housing shortages also meant that extended families were often split, leading to more nuclear family arrangements in cramped living quarters.
The economic struggles faced by farmers in the post-Civil War period led to a surge in political activism, particularly through grassroots movements such as the Grangers and later the Farmers’ Alliances. Mechanisation and overproduction led to falling crop prices, while high interest rates and debts made it difficult for farmers to maintain financial stability. Railroads and grain storage companies often operated monopolies in rural areas, charging exorbitant prices that further squeezed profits. Many farmers felt ignored by the federal government, which prioritised industrial and banking interests. As a result, they began to organise to demand change. These groups lobbied for regulation of railway rates, coinage of silver to increase the money supply, and protective tariffs. Their activism laid the foundation for the Populist Party, which emerged in the 1890s and pushed for more radical reforms. Farmers’ political engagement reflected their desire to address the inequalities of the Gilded Age and regain control over their economic futures.
Practice Questions
‘The most significant cause of industrial growth in the USA, 1865–1890, was the development of the railways.’ Assess the validity of this view.
While the railways were vital to industrial growth, connecting markets and stimulating sectors like steel and coal, other factors were equally significant. The growth of banking and finance allowed mass investment, while technological innovations such as the Bessemer process revolutionised steel production. The rise of entrepreneurs like Carnegie and Rockefeller, and a laissez-faire government encouraging enterprise, also played major roles. Although railways were central, the overall growth was a product of multiple interconnected forces that reinforced one another.
To what extent did laissez-faire policies benefit the American economy between 1865 and 1890?
Laissez-faire policies greatly benefited the American economy by fostering rapid industrial growth, encouraging entrepreneurship, and attracting foreign investment. Minimal government interference allowed corporations to expand, and monopolies like Standard Oil flourished. However, these benefits came at the cost of widespread exploitation of workers, poor urban conditions, and rising inequality. While the economy grew, the lack of regulation exacerbated social tensions and labour unrest. Therefore, laissez-faire policies boosted the economy's expansion but also created significant social and economic drawbacks, limiting their overall benefit.
