FINANCES OF THE GILDED AGE: DISAPPEARANCE OF THE SURPLUS
The four preceding chapters described how many of the basic financial problems of the post-Civil War period grew in intensity. It is the purpose of this chapter and the next to show how these problems were temporarily solved during the "gilded age" of the nineties to the more complete satisfaction of the group whose influence on society was greatest, namely, the industrial and financial capitalists.
In the monetary sphere, the defense of the de facto gold standard against the silver currency was carried on heroically, even though the fiscal resources of the government were badly strained. Then in the campaign of 1896, the whole issue of bimetallism vs. gold monometallism was thoroughly and dramatically aired and decided by the people in favor of gold.
In the fiscal sphere, the problem of the revenue surplus was solved, if not satisfactorily, at least thoroughly. Veterans' pensions were increased, and government revenue was reduced, partly as a result of lowering the non-protective-tariff schedules and partly as a result of a business depression.
With the appearance of deficits, a need arose for additional taxation, and the agrarians in the West and the South and the labor groups in the urban centers succeeded in reestablishing the income tax only to have it invalidated by the Supreme Court. In the meanwhile, the industrial group not only successfully resisted a downward revision of protective tariff rates but even obtained a material increase. Moreover, through the incorporation of a so-called "reciprocity clause," the tariff was employed to obtain concessions from foreign countries, thus becoming an instrument of the newly emerging American economic imperialism.
While dramatic developments took place in the monetary, fiscal, and tariff fields, only minor corrections were made in the national banking system. The inelastic, bond-secured national-bank currency was continued in spite of criticism by monetary and banking authorities, and the principal weakness in the banking structure-the lack of a central bank-could not be corrected in the existing social and political atmosphere. In fact, commercial banking became increasingly decentralized as state banks grew more rapidly than national banks and finally surpassed them in importance in 1892.