Federal Promotion of Economic Enterprise

With the secession of the South, northern Republicans gained control of the Congress, and they embraced a view of the Constitution that enhanced the traditional distributive economic role of the legislative branch. Republicans blended the abolitionists' stress on the positive responsibility of the federal government to advance individual rights with economic nationalism. In theory, at least, the bounty of government activity was to fall broadly over the nation; in practice, early Republican policies laid the foundations for big business.

The riches that Congress bestowed were varied and generous. Congress, for example, was directly responsible for stimulating the growth of the railroads, the nation's single most important, and most feared, business during the Gilded Age. Congress extended massive subsidies to transcontinental railroad developers through land grants. The Pacific Railroad Bill of 1862 granted enormous amounts of federal land to the Union Pacific--Central Pacific Railroad, the first of the transcontinentals. Two years later Congress made an even more generous land grant to the Northern Pacific. In all, Congress handed over 131 million acres of federal land to private railroad promoters, and the states chipped in an additional 49 million acres. By 1900 the amount of land given for the purpose of subsidizing railroads was as large as the state of Texas.

Congress was active in other ways as well. In 1862, for example, it created the Department of Agriculture, a subcabinet agency that brought national attention to agricultural issues, and passed the Morrill Land-Grant Act, a law that donated thirty thousand acres of federal land to every state for each of its senators and representatives. The land supported at least one agricultural college, furthering scientific agriculture while encouraging the production of general knowledge vital to the economy as a whole. A quarter-century later, Congress passed the Hatch Act, which set aside funds on an annual basis for agricultural experiment stations.

The promotional role of Congress also included tariff and banking legislation. The former protected emerging industries, such as steel, by placing a duty on imported goods. The Republican-backed McKinley tariff of 1890 far surpassed the revenue tariffs (tariffs passed to raise money to pay for government operations) of the years before the Civil War. Even the Underwood Tariff, passed in 1913 at the beginning of the Democratic administration of Woodrow Wilson, while dropping rates considerably on many industries, maintained the general concept of protecting emerging businesses. National banking legislation facilitated credit arrangements and therefore the availability of capital necessary to the expansion of manufacturing. The National Banking Act of 1863 created so-called national banks, whose circulating notes provided business with a sound and uniform medium of exchange. By the Progressive era, however, promotional legislation often had a strong (and sometimes overriding) regulatory component. The Federal Reserve Banking System, created in 1913, was typical. It further strengthened credit markets, thereby stimulating business activity, but significantly enhanced federal oversight of the economy through a central bank and twelve regional banks.

Congress also passed homestead legislation that was intended to encourage permanent settlement of the national domain by clearing the West of native Americans with

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the army and by authorizing extensive work on rivers and harbors to facilitate water- borne commerce. These and other promotional activities were dramatic evidence of federal intervention in the economy. Congress promoted the release of individual creative economic energy by placing the nation's natural wealth at the people's disposal, but with often uneven results. The railroad, for example, meant new towns, new jobs, and new businesses; it also brought enormous personal wealth to private entrepreneurs who bet and won.

Date: 2015-01-29; view: 662