Capitalism in the Gilded Age I. Origins of Capitalist Thought II. The Ideology Capitalism III. Industrial Concentration Key Terms 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 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 Capitalism 1) 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 Comparison

III. Industrial Concentration

Farmer in Missouri, Growing for a Local Market

New Farm Machinery

Spread of Railroads

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

“The day of combination is here to stay “The day of combination is here to stay. Individualism has gone, never to return.” John D. Rockerfeller (1839-1937)

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?