Control of Railraods & Overseas Markets (College Board AP® US History)

Summary

During the final years of the Gilded Age, it became apparent to some that the policy of laissez-faire protected the wealthy at the expense of the poor. While large businesses profited, the financial instability of the economy highlighted the need for reform. There were key events and policies that affected the role of the government during this period.

Economic crises, regulation & trade policies

Panic of 1893

• The Panic of 1893 was a severe financial crisis that led to widespread economic hardship

• The US monetary system was based on a gold reserve 

  • A decrease in US gold reserves caused panic 

• This panic severely impacted the economy due to:

  • a rise in interest rates

  • increased costs of consumer goods 

• This crisis triggered widespread bankruptcies of banks, railroad companies, and businesses

• High unemployment rates left families with no or reduced incomes, causing:

  • financial instability for working-class families

  • widespread poverty

• President Grover Cleveland held firm to the gold standard and was unable to bring relief to the struggling economy

  • He refused to expand the money supply and made it harder for businesses and farmers to recover

Gold Standard

• The Gold Standard meant that the US currency was backed by gold

  • Gold was seen as a stable asset that held its value during times of inflation

• The Gold Standard was restrictive for farmers and some business owners who were struggling with debt

  • The Gold Standard restricted the economy’s growth by limiting the amount of money in circulation

• Farmers and businessmen wanted to expand the money supply by backing currency with silver or paper money as well

  • This would lower interest rates

  • This would also allow for more money to pay off debts

Wabash v Illinois (1896)

• A Supreme Court case ruled that only the federal government could regulate interstate commerce rates, including railroad rates

• Before this, many states had tried to regulate railroad prices within their borders, 

  • The Court determined that states did not have the authority to do this when commerce crossed state lines

• This ruling weakened state power and led to the creation of the Interstate Commerce Commission (ICC)

  • The ICC regulated the railroad companies and their rates to ensure fair competition

• The ICC’s creation marked the beginning of federal regulation in business, especially in industries that had a national impact, like railroads

Overseas Markets

• As American businesses grew, especially in the industrial sector, they began to look for new markets for their products

• The expansion of American trade abroad became a key focus, particularly because supply often exceeded domestic demand

• Annexation of Hawaii (1898)

  • The annexation of Hawaii was driven by the desire to expand trade

    • The United States wanted to access Hawaii’s resources, such as sugar

  • Hawaii was in a strategic location in the Pacific for trade routes

  • The overthrow of Queen Liliuokalani in 1893, largely organized by American business interests, led to the annexation in 1898

  • This annexation allowed American businesses to expand their markets, particularly for sugar, and helped the United States extend its influence in the Pacific

Open Door Policy (1899)

• The Open Door Policy aimed to ensure that the United States could trade freely with China

• The policy was introduced by Secretary of State John Hay and aimed to allow equal trading rights with China

• It protected American traders so that they would not be shut out of the lucrative Chinese market

• The Open Door Policy also created opportunities for trade in other Asian markets, boosting the global presence of American goods and services