The history of Michigan railroads is not complete without mention of the massive wealth and power gained during the Gilded Age.
The development of railroads heralded many changes to the state of Michigan, bringing about new waves of industry, social factors and political intrigue. Railroads for Michigan (Michigan State University Press, 2013) casts a light on these exciting times. Graydon M. Meints, a trustee of the Historical Society of Michigan, shows how the railroad would play an important role in many critical events in Michigan’s history, from the Civil War to the Gilded Age, and beyond through the Great Depression. In this passage from “The Explosive Years, 1975-1897," Michigan railroads boom in prosperity as the nation sees the beginning of the Gilded Age.
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The booming prosperity that followed the end of the Civil War was brought to an abrupt stop by the financial panic of 1873. If one event has to be named as triggering the depression that followed, it was the collapse of the Philadelphia banking house of Jay Cooke on 18 September 1873. The effects rippled quickly through the country and soon grew into the most severe depression in the nation’s history. The Civil War furnished new stimuli to the Industrial Revolution so that by the war’s end the nation’s industrialists, now wealthy from the war effort, were plowing money back into the economy. Old and new industries benefited, and the railroads were no exception. Domestic capital was matched by foreign inflows, especially from the Dutch, English, French, and Germans. The first transcontinental railroad, built by the Union Pacific and Central Pacific, was completed in 1869. By 1873 the nation’s total rail mileage more than doubled from the 35,000 miles in 1865. Michigan’s railroads grew from 931 to 3,253 miles in the same period.
The panic of 1873 rolled through the economy by severely restricting business expansion, with railroad construction particularly hard hit. Money for new businesses dried up. It took nearly all of the following four years to work the excesses out of the economy. During this period many companies reduced employee wages, causing a series of strikes and a never-before-witnessed level of industrial violence. The “Molly Maguires” in the Pennsylvania coalfields only hinted at the militancy labor was adopting. One result was a substantial growth in labor union membership. Corporate bankruptcies resulted in reorganizations that lightened the debt burden of many companies to such an extent they were made profitable. By the end of the decade confidence was reappearing, and once again money began to tiptoe into new ventures.
What followed was more spectacular than anything that had come before. There seemed to be no limit on the amount of money that poured into businesses old and new. It came from the United States and from Europe. The European funds were accompanied by immigrant workers to man the growing economy. They poured through the ports into the terrible slums of all the large cities to find ready employment. Their work paid enough to allow the immigrant families to survive, but not much more. Only the pressure from a stream of still newer arrivals looking for work kept the labor force compliant to their bosses’ demands.
Any sort of business conduct seemed legitimate, and most were legal. The 1880s brought out the full talents of such men as Andrew Carnegie, John D. Rockefeller, Jay Gould, William Henry Vanderbilt, James J. Hill, Cyrus McCormick, Philip D. Armour, Henry Clay Frick, and dozens more. These men, “robber barons” to some, used any device that might increase their profits. One newly favored tool was the “trust,” a cartel of one or more owners of companies in a specific industry that created a monopoly. Oil, steel, tobacco, and other smaller fields came under the control of the trusts. The trusts may have improved the efficiency of businesses, provided employment, and improved distribution of the product. Every trust was created to achieve but one goal, and that goal was increased profits for the owners. It succeeded in this to a amount never before seen in human history. Money flooded in faster than it could be spent, and the wealthy eventually had to resort to giving it away for charitable ends. The noblest of Europe’s kings and queens did not live as well as these American plutocrats.
The public thought they were largely excluded from these profits and yet were very much at the mercy of both the manufacturers and the railroads. There were close financial ties between the two groups and with the banks that provided capital to both. Interlocking directorates emphasized the close interreliance between them. The public also thought that businesses had such control of the state legislatures and judiciaries and of the Congress that the citizenry was excluded. Farmers formed the Patrons of Husbandry (the Grange) to correct their grievances against railroads and grain dealers. Labor unions grew still more aggressive in trying to alleviate the oppressive conditions of factory workers. All these efforts were met and challenged by corporate managements who marshaled the courts, police, and even the general government on their behalf. This suppression did nothing to mitigate the feelings of the public, and, in fact, our society continues to live to this day with the abrasions of a division between management and labor. Still, a not small segment of society did benefit from the increased production and profitability and moved into improved status, what today would be called the “upper middle class.” These benefits included discretionary disposable income, leisure time, mobility, and an improved level of education. FC
Reprinted with permission from Railroads for Michigan by Graydon Meints and published by Michigan State University Press, 2013. Buy this book from our store: Railroads for Michigan.