As the United States grew into the world’s leading industrial power during the late 19th century, those atop the economic ladder in America’s Gilded Age accumulated spectacular fortunes. By 1890, the country’s 4,000 millionaires held 20 percent of the country’s wealth, and with that enormous affluence came colossal political corruption.
Corporate titans could buy anything they wanted—including politicians. Richard White, professor emeritus of history at Stanford University and author of The Republic for Which It Stands: The United States During Reconstruction and the Gilded Age, 1865-1896, says the Gilded Age was among the most corrupt eras in American history primarily because of “the rise of corporations and the growth of modern means of communication that intensified the way corruption can work.”
“This is a government of the people, by the people and for the people no longer,” former president Rutherford B. Hayes wrote in his diary in 1886. “It is a government by the corporations, of the corporations and for the corporations.” Politicians took spectacularly handsome bribes from corporations and demanded kickbacks as the helping hand they extended often came with an open palm.
Railroads Were at the Forefront of Political Corruption
Railroads propelled the expansion of the American economy as tracks expanded nearly fourfold between 1871 and 1900. The federal government helped finance these huge infrastructure projects by granting more than 150 million acres of land to railroad companies, which sold them to raise revenue. “Railroads need monopoly franchises and subsidies, and to get them, they are more than willing to bribe public officials,” White says. The Central Pacific Railroad, for example, spent $500,000 annually in thinly disguised bribes between 1875 and 1885.
In the most notorious instance of corruption connected to the railroads, Union Pacific Railroad executives formed a sham construction company, Crédit Mobilier, that submitted bills for nearly double the construction cost of the eastern portion of the Transcontinental Railroad and pocketed the overcharges. To avert any investigation and ensure votes to benefit the company, railroad officials bribed approximately one dozen influential congressmen with Crédit Mobilier shares at below-market prices. Swept up in the Crédit Mobilier scandal was not just Ulysses S. Grant’s first vice president, but his second one as well.
The graft grew even closer to Grant. The Whiskey Ring scandal in which federal agents and whiskey distillers underreported sales to cheat the government out of excise tax revenue and pocket the cash ensnared Grant’s personal secretary, Orville Babcock. In an attempt to corner the gold market, Wall Street financier and railroad magnate Jay Gould bribed Abel Rathbone Corbin, who had married Grant’s sister, to use his influence to steer the president toward policies that would favor the robber baron’s plan. “Grant is not a corrupt man as far as I can tell,” White says, “but he combines an incredible lack of attention to detail—astonishing given his army record—and a blind loyalty to friends.”
Pay Structure Made Public Officials Vulnerable to Graft
Public officials were susceptible to corruption because many did not rely on salaries for income but on a cut of fees or taxes they collected, similar to sales commissions. “Taxes are kept down, but these offices are profit-garnering enterprises,” White says of the Gilded Age’s fee-based governance.
Most postmasters, for instance, earned a percentage of stamps they sold, and public prosecutors received fees for each case they brought. White says this payment system easily morphed into bribery and fraud. For example, custom officials could collect half of the penalties paid on goods they said were undervalued for import—or be paid off to not report malfeasance.
Urban political machines such as New York City’s Tammany Hall gained great power—and kickbacks—in doling out these highly lucrative public offices as political plums. They also fixed elections, committed widespread voter fraud and took lavish bribes when awarding contracts. Tammany Hall leader William “Boss” Tweed and his cronies stole between $45 million and $200 million in city funds (a figure in the billions of dollars today), and Tweed accumulated enough graft to become the third-largest landowner in New York City until his conviction on 204 counts of fraud.
A more subtle form of corruption, what Tammany Hall politician George W. Plunkitt defended as “honest graft,” also plagued the Gilded Age. As opposed to robbing public coffers or blackmailing business owners, politicians such as Plunkitt used their inside knowledge of where public works would be built to engage in highly profitable land speculation. “Much of the corruption of the Gilded Age is the ability to gain privileged information and use it for private purposes,” White says.
Bureaucracy Brings End to Gilded Age Corruption
The turn of the 20th century brought the dawn of the Progressive Era that ended the corruption of the Gilded Age. Muckraking reporters who exposed political corruption paved the way for the enactment of reforms by President Theodore Roosevelt that included tax and election reform as well as limitations on corporate power.
White says the development of a government bureaucracy played a major role in ending the Gilded Age’s political corruption. “A series of laws providing oversight and a move away from fee-based governance to a salary structure caused instances of corruption to decline dramatically,” he says. “If the Gilded Age is America’s most corrupt period, the time between the Progressive Era and the 1960s and 1970s is among the least corrupt.”