Module: 10
From the 1830's to the 1930's the United States economy was in a cycle of crisis. The gap between rich and poor was growing and the expanding population was in a state of unrest, the civil war was more about the have versus the have-nots, than it was about slavery. The creation and stability of the monopolies was made possible by the Federal Government and it's policies: The Pacific Railroad Survey Act, The Morrill Tariff, The Homestead Act, and The Pacific Railroad Bill, along with a corrupt congress helped perpetuate the cycle for more than a century.
In 1853 congressed passed the Pacific Railroad Survey Act appropriating four hundred thousand dollars to find the easiest and cheapest route from the Mississippi to the Pacific Ocean. (Hine, P280) The result was that all four of the surveys they did were equally satisfactory for building the line. It wasn't until the southern states seceded from the union that President Lincoln made his decision to route the railways in the north, it is what the Beards would call "the second American Revolution."[1] This was a shift from agrarian to industrial and economic expansion.
The Morrill Tariff of 1861 passed by congress made foreign products more expensive and enabled American manufacturers to charge whatever price they wanted, and forced consumers to pay more. (Zinn, P174) With competition for selling goods low, the few had the power and the capital gains to grow and decide the profits and prices, these monopolistic enterprises would survive the chaotic system that was in place, every ten to fifteen years was another depression, which brought a new set of deaths by disease, starvation, crime, but the big business owners who held the market in check. The Rockefellers, Vanderbilts, Morgans, Astor, etc would be just fine, Cornelius Vanderbilt left his son 100 million dollars on his death in 1877, a time when the average wage was $1.75 for a twelve hour shift. With the gap between the rich and the poor so great, it is understandable why the socialist and communist movements gained so much favor in the late 19th and early 20th centuries.
The Homestead Act of 1862 was first proposed by Thomas Jefferson. This Act signed into law by Lincoln, was to revitalize the preemption act of 1841 and give western settlers 160 acres of land for free provided they lived on the land for five years and built a house and improved the land then paid a ten dollar fee; they could also opt to pay after six months $1.25 per acre to get a fast title to the land. The idea was to empower the people, the "yeoman farmers" to solidify the country of the people, for the people. The south was opposed to the Homestead Act, as it cut into plantation expansion and profits. The biggest problem with the Homestead Act was the corrupt abuse of the system, where corporate fraud hired immigrants to be a "front" for a mass land grab in non-agricultural areas where they could buy up millions of acres and control the water, minerals, and other precious resources.
The Pacific Railroad Bill will forever be a black stain on American government. The corruption throughout congress and with the Union Pacific and Central Pacific Railroads to conspire against the American people is greed at it's worst and capitalism at it's lowest. The government really wanted the transcontinental railroad to be built, and afraid that no one would risk that kind of venture, and being expansionist, they didn't want to take on the job, but rather bid it out. The government provided no risk incentives and opened the door (as well as hid the details) for greed and corruption to thrive. The railroads were given ten square miles of land (later upped to 20 square miles) for every mile of track they laid, they were given loans to build the tracks on 30 year bonds at a set 6% interest rate, and given bonuses for finishing goals on time. The railroad moguls (Huntington, Hopkins, Stanford, and Crocker..the big 4) would defraud the people by telling investors where the track was going, selling them the land, then giving someone else the same deal in a different area, collecting cash from many people who thought the rails would pass their land. The railroads also created dummy corporations like the Credit Mobilier and the Credit Finance Corporation where they could charge three times the actual amount, giving the stockholders (the big 4) huge dividends, claim loss' on their taxes for the railroads, finally declare bankruptcy on the dummy corporations and steal all the money and the land with the only expense being to pay off the congress.
The Federal Government created the monopolies and ensured a chaotic economic system for many years, not only did their policies support big business, but the laws of the nation backed them up. Eminent domain was used frequently to take away from the yeoman farmer and give to the railroad moguls, there was no support for workers safety in the industrial revolution, where machines were not only taking jobs away from people, they were injuring or killing them and no laws to protect the people. The health laws were non existent so the poor people had to drink sewage water, wade through two feet of garbage to walk down the street, and had to live in disease infested basements. Zinn tells us that "In premodern times, the maldistribution of wealth was accomplished by simple force. In modern times, exploitation is disguised-it is accomplished by law, which has the look of neutrality and fairness." (Zinn P.175)
Sources:
[1] Charles A. Beard, "An Economic Interpretation of the Constitution of the United States"(The Free Press, New York. 1913)
John Mack Faragher et al., Out of Many: A History of the American People 5th ed. (Upper Saddle River, New Jersey 2006) ch. 14
Robert V. Hine & John Mack Faragher, The American West: A new interpretive history (Yale University Press, 2000).
Howard Zinn, A People’s History of the United States: Volume one: American Beginnings to Reconstruction (New York, The New Press, 2003) P.113-124
The Concise Encyclopedia of Economics, "Monopoly" George J. Stigler 1999,2002 http://www.econlib.org/LIBRARY/Enc/Monopoly.html (accessed November 17th, 2007)
