Reconstruction, Expansion, and the Triumph of Industrial Capitalism 21degree. But, as noted, the government [the public sector] still played a huge
role in developing Industrial Capitalism. Railroad grants continued, and the
Republican Party, which held political power, was friendly toward Big Business
more than to farmers or wage workers, and passed laws that provided subsi-
dies and tax breaks to iron manufacturers, textile mills, coalmines, and other
industries. Perhaps most importantly, the government created a policy that
protected manufacturers. Tariffs are taxes paid on goods imported into the
United States. Since Britain and other European countries had industrialized
prior to the United States, they could produce goods more efficiently, in
higher quantity and at a lower price. So the government would enact large
and burdensome taxes on foreign imports to make them more expensive than
the American goods, and thus guarantee a market for the home producers.
This combination of private capital and government handouts, as well as
America’s abundant natural resources, led to an economic explosion. By 1880,
as well as having more railroad miles than any other country, American man-
ufacturers had developed a strong steel industry [about 90 percent of which
went to the Railways]; steel output was increasing 700 percent between 1877-
1892; copper production also rose 700 percent; and crude oil 400 percent.
There were, however, prices to pay for this massive spurt of industrializa-
tion. Inflation caused by wartime borrowing and government-issued paper
money–“greenbacks”–meant that manufacturers were paying off merchants
for their old debts with seriously devalued money. Moreover, investments may
have surged, but financial markets were unregulated [as in current times]
which meant that money was being loaned out and borrowed without enough
attention to the likelihood that such capital would be used productively or
ever paid back. In fact, in 1873, the financial house of Jay Cooke and
Company collapsed, leading to a run on banks across the country and causing
the entire stock market to close for a week. Hence the country was on an
economic roller-coaster in the decades after the Civil War.
Business Expansion and Corporations
Business in the late 19th century was marked by control and expansion.
Especially in large-scale industries such as railroads, steel, and oil, businesses
extended control and expanded firms ever more; eliminated competition;
gained access to raw materials; and more effectively marketed goods; while