How did the federal government respond to the economic issues of tariffs, trusts, and railroads in the late 1800s?
Tariffs, or taxes on imported goods, have been used by the government since the 1700’s to help American businesses. A tariff would make foreign made goods more expensive so people would buy American made goods. Between 1865 and 1900, a debate raged whether tariffs were good or bad for the country. Some argued they were good since they helped American businesses, while others argued that they were bad because they raised prices on goods purchased by American consumers. This debate was reflected in the fact that in the late 1800’s the tariff was continually raised and then lowered again and again.
In the late 1800’s, large corporations such as Standard Oil Company, led by John D. Rockefeller, were established and these companies began to form “trusts”. Trusts were a type of business consolidation common in the 1880’s and 1890’s where businesses came together under the direction of a board of trustees to operate as one giant corporation. This was used specifically to create monopolies to reduce competition which could hurt the American consumer. Railroads in particular began to use business practices that hurt consumers, and especially small farmers who would have to ship their produce to market by rail. Railroads gave large shippers rebates, or illegal kickbacks, and these railroads also began to form “pools” to reduce competition. In the late 1800’s, the government began to react to these types of business practices. Its first target was the railroads. The government passed the Interstate Commerce Act in 1887 to regulate railroad rates. This law also established the Interstate Commerce Commission to oversee this law. Then, in 1890, the government passed the Sherman Anti-Trust Act which banned trusts or other business organizations that restricted interstate commerce.
The period of the late 1800's was a time of progress and wealth for America. The Civil War had led to a need for more weapons and manufacturing increased. In addition the railroad industry expanded and developed. Coal, lumber, iron, and other products led to industrialization.
The government created the tariffs in order to protect the businesses in America against foreign businesses. The government was supportive of the trusts and had a heavy hand in the expansion of railroads. Railroads enabled the spread of industrialization as it offered a functional method to move resources to factories and products out of factories.