Gilded Age - Economic Growth

Economic Growth

During the 1870s and 1880s, the U.S. economy rose at the fastest rate in its history, with real wages, wealth, GDP, and capital formation all increasing rapidly. For example, between 1865 and 1898, the output of wheat increased by 256%, corn by 222%, coal by 800% and miles of railway track by 567%. Thick national networks for transportation and communication were created. The corporation became the dominant form of business organization, and a managerial revolution transformed business operations. By the beginning of the 20th century, per capita income and industrial production in the United States led the world, with per capita incomes double that of Germany or France, and 50% higher than Britain. The businessmen of the Second Industrial Revolution created industrial towns and cities in the Northeast with new factories, and hired an ethnically diverse industrial working class, many of them new immigrants from Europe. The super-rich industrialists and financiers such as John D. Rockefeller, Andrew W. Mellon, Andrew Carnegie, Henry Flagler, Henry H. Rogers, J. P. Morgan, Cornelius Vanderbilt of the Vanderbilt family, and the prominent Astor family would sometimes be labeled "robber barons" in reference to the perceived underhanded manner in which they attained their vast wealth. Many of these captains of industry, in addition to building the still fledgeling American economy, participated in immense acts of philanthropy (referred to by Andrew Carnegie as the "Gospel of Wealth") and used private money to endow thousands of colleges, hospitals, museums, academies, schools, opera houses, public libraries, symphony orchestras, and charities. John D. Rockefeller, for example, donated over $500 million to various charities, slightly over half his entire net worth.

This emerging industrial economy quickly expanded to meet the new market demands. From 1869 to 1879, the US economy grew at a rate of 6.8% for NNP (GDP minus capital depreciation) and 4.5% for NNP per capita. The economy repeated this period of growth in the 1880s, in which the wealth of the nation grew at an annual rate of 3.8%, while the GDP was also doubled. Real wages also increased greatly during the 1880s. Economist Milton Friedman states that for the 1880s, "The highest decadal rate for periods of about ten years was apparently reached in the eighties with approximately 3.8 percent."