Closer to home, Republicans focused on transportation infrastructure. Railroad development in the United States began well before the Civil War, with the first locomotives arriving from Britain in the early 1830s. Unlike canals or roads, railroads offered the promise of year-round, all-weather service. Locomotives could run in the dark and never needed to rest, except to take on coal and water. Steam engines crossed high mountains and rocky gorges where pack animals could find no fodder and canals could never reach. West of the Mississippi, railroads opened vast regions for farming, trade, and tourism. A transcontinental railroad executive was only half-joking when he said, “The West is purely a railroad enterprise.”

Governments could choose to build and operate railroads themselves or promote construction by private companies. Unlike most European countries, the United States chose the private approach. The federal government, however, provided essential loans, subsidies, and grants of public land. States and localities also lured railroads with offers of financial aid, mainly by buying railroad bonds. Without this aid, rail networks would have grown much more slowly and would probably have concentrated in urban regions. With it, railroads enjoyed an enormous — and reckless — boom. By 1900, virtually no corner of the country lacked rail service (Map 16.1). At the same time, U.S. railroads built across the border into Mexico (America Compared).

Railroad companies transformed American capitalism. They adopted a legal form of organization, the corporation, that enabled them to raise private capital in prodigious amounts. In earlier decades, state legislatures had chartered corporations for specific public purposes, binding these creations to government goals and oversight. But over the course of the nineteenth century, legislatures gradually began to allow any business to become a corporation by simply applying for a state charter. Among the first corporations to become large interstate enterprises, private railroads were much freer than earlier companies to do as they pleased. After the Civil War, they received lavish public aid with few strings attached. Their position was like that of American banks in late 2008 after the big federal bailout: even critics acknowledged that public aid to these giant companies was good for the economy, but they observed that it also lent government support to fabulous accumulations of private wealth.

Tariffs and Economic Growth Along with the transformative power of railroads, Republicans’ protective tariffs helped build other U.S. industries, including textiles and steel in the Northeast and Midwest and, through tariffs on imported sugar and wool, sugar beet farming and sheep ranching in the West. Tariffs also funded government itself. In an era when the United States did not levy income taxes, tariffs provided the bulk of treasury revenue. The Civil War had left the Union with a staggering debt of $2.8 billion. Tariff income erased that debt and by the 1880s generated huge budget surpluses — a circumstance hard to imagine today.

As Reconstruction faltered, tariffs came under political fire. Democrats argued that tariffs taxed American consumers by denying them access to low-cost imported goods and forcing them to pay subsidies to U.S. manufacturers. Republicans claimed, conversely, that tariffs benefitted workers because they created jobs, blocked low-wage foreign competition, and safeguarded America from the kind of industrial poverty that had arisen in Europe. According to this argument, tariffs helped American men earn enough to support their families; wives could devote themselves to homemaking, and children could go to school, not the factory. For protectionist Republicans, high tariffs were akin to the abolition of slavery: they protected and uplifted the most vulnerable workers.

In these fierce debates, both sides were partly right. Protective tariffs did play a powerful role in economic growth. They helped transform the United States into a global industrial power. Eventually, though, even protectionist Republicans had to admit that Democrats had a point: tariffs had not prevented industrial poverty in the United States. Corporations accumulated massive benefits from tariffs but failed to pass them along to workers, who often toiled long hours for low wages. Furthermore, tariffs helped foster trusts, corporations that dominated whole sectors of the economy and wielded near-monopoly power. The rise of large private corporations and trusts generated enduring political problems.

The Role of Courts While fostering growth, most historians agree, Republicans did not give government enough regulatory power over the new corporations. State legislatures did pass hundreds of regulatory laws after the Civil War, but interstate companies challenged them in federal courts. In Munn v. Illinois (1877), the Supreme Court affirmed that states could regulate key businesses, such as railroads and grain elevators, that were “clothed in the public interest.” However, the justices feared that too many state and local regulations would impede business and fragment the national marketplace. Starting in the 1870s, they interpreted the “due process” clause of the new Fourteenth Amendment — which dictated that no state could “deprive any person of life, liberty, or property, without due process of law” — as shielding corporations from excessive regulation. Ironically, the Court refused to use the same amendment to protect the rights of African Americans.

In the Southwest as well, federal courts promoted economic development at the expense of racial justice. Though the United States had taken control of New Mexico and Arizona after the Mexican War, much land remained afterward in the hands of Mexican farmers and ranchers. Many lived as peónes, under longstanding agreements with landowners who held large tracts originally granted by the Spanish crown. The post–Civil War years brought railroads and an influx of land-hungry Anglos. New Mexico’s governor reported indignantly that Mexican shepherds were often “asked” to leave their ranges “by a cowboy or cattle herder with a brace of pistols at his belt and a Winchester in his hands.”

Existing land claims were so complex that Congress eventually set up a special court to rule on land titles. Between 1891 and 1904, the court invalidated most traditional claims, including those of many New Mexico ejidos, or villages owned collectively by their communities. Mexican Americans lost about 64 percent of the contested lands. In addition, much land was sold or appropriated through legal machinations like those of a notorious cabal of politicians and lawyers known as the Santa Fe Ring. The result was displacement of thousands of Mexican American villagers and farmers. Some found work as railroad builders or mine workers; others, moving into the sparse high country of the Sierras and Rockies where cattle could not survive, developed sheep raising into a major enterprise.

Silver and Gold In an era of nation building, U.S. and European policymakers sought new ways to rationalize markets. Industrializing nations, for example, tried to develop an international system of standard measurements and even a unified currency. Though these proposals failed as each nation succumbed to self-interest, governments did increasingly agree that, for “scientific” reasons, money should be based on gold, which was thought to have an intrinsic worth above other metals. Great Britain had long held to the gold standard, meaning that paper notes from the Bank of England could be backed by gold held in the bank’s vaults. During the 1870s and 1880s, the United States, Germany, France, and other countries also converted to gold.

Beforehand, these nations had been on a bimetallic standard: they issued both gold and silver coins, with respective weights fixed at a relative value. The United States switched to the gold standard in part because treasury officials and financiers were watching developments out west. Geologists accurately predicted the discovery of immense silver deposits, such as Nevada’s Comstock Lode, without comparable new gold strikes. A massive influx of silver would clearly upset the long-standing ratio. Thus, with a law that became infamous to later critics as the “Crime of 1873,” Congress chose gold. It directed the U.S. Treasury to cease minting silver dollars and, over a six-year period, retire Civil War-era greenbacks (paper dollars) and replace them with notes from an expanded system of national banks. After this process was complete in 1879, the treasury exchanged these notes for gold on request. (Advocates of bimetallism did achieve one small victory: the Bland-Allison Act of 1878 required the U.S. Mint to coin a modest amount of silver.)

By adopting the gold standard, Republican policymakers sharply limited the nation’s money supply, to the level of available gold. The amount of money circulating in the United States had been $30.35 per person in 1865; by 1880, it fell to only $19.36 per person. Today, few economists would sanction such a plan, especially for an economy growing at breakneck speed. They would recommend, instead, increasing money supplies to keep pace with development. But at the time, policymakers remembered rampant antebellum speculation and the hardships of inflation during the Civil War. The United States, as a developing country, also needed to attract investment capital from Britain, Belgium, and other European nations that were on the gold standard. Making it easy to exchange U.S. bonds and currency for gold encouraged European investors to send their money to the United States.

Republican policies fostered exuberant growth and a breathtakingly rapid integration of the economy. Railroads and telegraphs tied the nation together. U.S. manufacturers amassed staggering amounts of capital and built corporations of national and even global scope. With its immense, integrated marketplace of workers, consumers, raw materials, and finished products, the United States was poised to become a mighty industrial power.