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Laissez-faire is a French term, translated roughly as "let them be," and refers to a belief that natural market forces, rather than the government, should regulate the marketplace.

Although part of American economic policy since the country's birth, laissez-faire began to show its weakness in the late 1800s, as consolidation reduced natural competition, prompting the first government regulations of business and the economy. 


land grant

A land grant is a gift of real estate. After the Civil War, land grants by the federal government were used to finance the building of railways in the western United States. Congress granted land to more than 80 railroads, which the railroads then sold to settlers, applying the proceeds to finance construction.

Land grants were used in other ways as well; for instance, several states created "land grant universities."


Who was Cornelius Vanderbilt?

Cornelius Vanderbilt was the President of the New York Central Railroad during the 1860s and 1870s. The New York Central dominated rail traffic between Chicago and New York City, and was the result of the merger of several smaller railway lines in 1867. 


Between the Civil War and 1900, railway track miles in the U.S. increased from 35,000 to 193,000. What negative effects did this massive growth have?

Many of the new railways were of shoddy construction and the land grant system by which Congress funded their growth was fraught with corruption, including scandals such as the Crédit Mobilier. Some 80 different railroad companies built railway lines, and many were in precarious financial shape from the outset. 

In both 1873 and 1893, railroad overbuilding and speculation in railroad stocks led to the collapse of the stock market and major economic depressions.


How did railroads affect consumerism during the late 1800s?

Both food and durable goods were shipped throughout the country via railway.

The development of the refrigerated railroad car meant that meat could be shipped long distances, and the increased number of canned goods meant that vegetables grown in Illinois could be eaten in Boston without spoilage.

Companies such as Sears & Roebuck and Montgomery Ward pioneered the idea of shopping by catalog, allowing distant farm families to purchase goods, which were then shipped to them via railroad.


What were some of the positive effects of the growth of railroads in the years following the Civil War?

The massive growth of railroads resulted in a rise of mass consumption, spurring economic growth as manufactured goods were shipped throughout the country, and farmers and ranchers moved their products into urban areas. Related economic sectors, such as coal and steel, also experienced exponential growth during the period.

The complex nature of railway construction and finance also led to the creation of more complex forms of corporate structuring, such as trusts, and an increased use of the corporation.

In addition, the growth in railroads also spurred the standardization of time, resulting in the four time zones that exist today.


As a result of railway overbuilding, the United States suffered a stock market crash and long depression in 1893, during which several railway companies went bankrupt. How did J.P. Morgan react?

J.P. Morgan, with the assistance of other bankers, organized the consolidation of various small railway lines into seven regional lines, which dominated railway traffic. While Morgan's system was more efficient, it also led to monopolization and reduction in competition.



A merger is where two companies are joined into one, e.g. Company A and Company B are consolidated to form Company C.

Mergers were first used during the railway boom after the Civil War, as companies were consolidated to increase efficiency and to reduce duplication of railway lines.


interlocking directorates

An interlocking directorate takes place when a member of the board of directors of one company also serves on the board of directors of a competitor. By serving on both boards, the director is able to coordinate policy between the two, harming competition.

Often used by corporations during the late nineteenth century, interlocking directorates became illegal with the Clayton Act (1914). 


In 1868, a revolution broke out in Cuba against Spain. How did President Grant react?

When Congress attempted to recognize the Cuban rebels, Grant sent a message to Congress reasserting his administration's position of neutrality. Grant did attempt to negotiate the purchase of Cuba from Spain, but was rebuffed. Spain eventually put down the Cuban insurrection.


Which country did Ulysses S. Grant propose annexing in 1870?

Grant proposed annexing the Caribbean nation of Santo Domingo, now known as the Dominican Republic. Both Grant and the government of Santo Domingo supported annexation, but Congress refused to authorize it.


In 1868, Congress ratified the Burlingame Treaty with China. What did this treaty establish?

The Burlingame Treaty allowed unrestricted Chinese immigration, and large numbers of Chinese immigrants arrived on the West Coast. Many of the new immigrants found work in mines or building the western half of the Transcontinental Railroad.


How did the state of California react to the high numbers of Chinese immigrants arriving as a result of the Burlingame Treaty of 1868?

In response to the influx, California included articles in its 1878 state constitution which disenfranchised the Chinese, blocked their work on public projects, and disallowed their employment with any corporation licensed by the state.

The federal courts struck down these measures as unconstitutional, but they signaled a growing hostility towards Chinese immigrants.


The process of pumping air through molten iron is known as the _____ _____.

Bessemer Process

By removing impurities, the Bessemer Process converts iron into steel, a stronger building material than iron alone. The Process revolutionized the making of steel by significantly lowering the cost of its production.


Who was Andrew Carnegie?

Carnegie was the owner of the Carnegie Steel Company, which by the late 1880s supplied half of all steel used worldwide. A poor Scottish immigrant, Carnegie became one of the nation's wealthiest men by using a business technique known as vertical integration.


What is vertical integration?

Under vertical integration, all the aspects of production for a manufactured good are owned by a single person or trust. For instance, Andrew Carnegie's steel company owned the iron mines where steel originated, the distribution network where steel was sold, and everything in between.


What is horizontal integration?

Horizontal integration is where a single person or trust owns virtually all of one aspect in the production process. Horizontal integration is usually brought about by consolidating several smaller companies in the same field into one cooperating enterprise.

John D. Rockefeller's Standard Oil Company controlled virtually all the oil refining capability in the United States in the late 1800s by using horizontal integration. The control of this crucial phase in the production of oil gave him power over the entire market for oil.


What was the Standard Oil Company?

The Standard Oil Company, under the control of John D. Rockefeller, was the largest oil producer in the United States in the late 1800s, with ownership of 95% of the market. 

Rockefeller grew Standard Oil through the use of horizontal integration; stockholders of competitors sold their stock to Rockefeller, giving him control of their company. Using this tactic, Rockefeller then drove the price of oil down, forcing other competitors out of business. 


How were corporate trusts used in the late 1800s to eliminate business competition?

Trusts were used to combine several smaller competitors into large business concerns, the resulting company being known as a "trust." The tactic eliminated competition between the firms. Trusts existed in a number of industries, including sugar, whiskey, meat, leather, and tobacco.


How did Congress attempt to regulate the growth of trusts in 1890?

In 1890, Congress passed the Sherman Antitrust Act, which prohibited all restraints of trade and unfair methods of competition. The new act was ambiguously written and rarely enforced.

In United States v. E.C. Knight Co. (1895), the Supreme Court further weakened the Sherman Act by stating that it applied only to commerce, not manufacturing.


What did Social Darwinists such as Herbert Spencer and William Graham Sumner argue?

Social Darwinists extended the evolutionary theory of "survival of the fittest" to the world of business, and justified the concentration of large amounts of wealth into the hands of a small few by contending that it benefited the country and humanity as a whole. Essentially, Social Darwinists believed that wealth belonged in the hands of those best suited to control it.


What did Andrew Carnegie argue in his essay Gospel of Wealth?

Carnegie argued that the wealthy had a duty to better society by aiding the poor. Carnegie did not, however, advocate merely providing the poor with money. Rather, Carnegie believed that it was the duty of the wealthy to provide means by which the poor could achieve success, such as by endowing free libraries, schools, and universities.


Who invented the telephone in 1876?

Alexander Graham Bell

Bell's studies in deaf education gave him many of his ideas for the telephone, which mimicked the human ear to transmit sound. The Bell Telephone Company later became one of the world's largest companies.


Who was known as "The Wizard of Menlo Park"?

Thomas Alva Edison

Working in his laboratory in Menlo Park, NJ, Edison was the most prolific inventor of the late 1800s, inventing the light bulb, phonograph, and movie camera, as well as hundreds of other items.


Who was George Westinghouse?

Westinghouse was Thomas Edison's main competitor in the field of electricity products during the late 1800s, and successfully manufactured machinery for alternating current (AC) transformers. Westinghouse's transformer made it possible to bring electricity to cities in large quantities.

Edison advocated for direct current (DC) electricity, and in an effort to convince the public of the dangers of AC electricity, publicly electrocuted a number of animals, including an elephant. Although he failed to convince the public to adopt DC, Edison's displays were a prime motivating factor in the establishment of the electric chair.


Author _____ _____'s books such as Ragged Dick, which told "rags to riches" stories, were best-sellers during the late 1800s.

Horatio Alger

Alger's hugely popular books generally featured a hero who rises from poor surroundings to the middle class, via a bit of luck, clean living, and a large amount of hard work. In Alger's Ragged Dick for instancea young bootblack rises to become a respectable middle-class businessman. 


How did the rise in industrialism affect the upper class in the late nineteenth century?

As a whole, the amount of wealth in the hands of the upper class grew, as industrialists such as John D. Rockefeller and Andrew Carnegie amassed vast sums of wealth. Many of the wealthy were self-made men, having achieved great wealth in manufacturing or mining.


After the Civil War, there was an exponential increase in manufacturing in the United States. How did this increase affect the middle class?

The middle class grew, as the companies in new industries needed white-collar workers, such as clerks, bookkeepers and salesmen.

There was also an increase due to the need for professional men who worked with the new industries, such as lawyers and accountants. 


What type of working conditions prevailed in the new factories during the late nineteenth century?

By modern standards, working conditions were atrocious in the new factories. Workers toiled for ten hours per day, six days a week, often in dangerous conditions. Deaths at the workplace were common in the absence of worker safety laws.

Low pay and an increase in prices of basic goods during and after the Civil War led women into the workforce to supplement familial income. Most working women found employment in textile mills or garment factories.


What are company towns?

Company towns are towns in which most, if not all, the real estate and buildings are owned by a company that employs the populace of the town. 

During the late nineteenth century, industrialists such as George Pullman (railroad cars) and William Steinway (pianos) built company towns that provided workers with indoor plumbing, sewers, and gas heating.