How Corruption and Scams Affect Politics and Business in the Gilded Age

In a world where corruption is now in the spotlight, it is worth remembering that the bribery and trading of influence can make political systems incapable of addressing social problems whose resolution would threaten vested interests. This is a well-documented phenomenon in the history of democracy.

This issue explores new approaches to the relations between businessmen and politicians, a theme that has enjoyed a recent comeback in historical studies.

Credit Mobilier Scandal

In the nineteenth century railroads were inseparable from politics, as state governments issued corporate charters and determined where the lines would run. Consequently, railroad builders sought to influence political leaders and use government power to their advantage.

In 1872 the House of Representatives started investigating allegations of bribery related to the construction of the Union Pacific Railroad and its associated company, Credit Mobilier (not to be confused with the French bank, Credit Mobilier). The scandal involved the illegal manipulation of contracts by a construction and management firm for the railroad.

The conspiracy involved a sham construction company, called Credit Mobilier of America, that was designed to shield the real owners of the Union Pacific, George Francis Train and Thomas Durant, from accusations that they were using the construction phase of the railroad to extort the government with inflated costs. Congressman Oakes Ames gave stock shares of Credit Mobilier to several members of Congress in an attempt to allay suspicions of his interest in the scheme and encourage legislation favorable to the company.

Whiskey Ring Scandal

The Whiskey Ring was an example of how political machines, private companies and governmental neglect contributed to corruption in the United States in this time referred to by Mark Twain as the Gilded Age. The scandal helped to instill a distrust in many Americans of their government and fed the belief that a federal commission was corrupt.

The scandal was uncovered in 1875 when the Treasury Department broke up a criminal conspiracy involving whiskey distillers and corrupt Treasury officials who evaded taxes by sharing government revenues with each other. President Grant appointed Benjamin Bristow to investigate the case, and he quickly began to uncover evidence against those involved in the ring.

One of the more disturbing aspects of this scandal was that a number of Grant’s advisers were implicated in the ring, including his private secretary Orville Babcock. To avoid a conflict of interest, Grant appointed John B. Henderson as special prosecutor, but he was soon fired when it was revealed that he had also been a part of the St. Louis ring, and had received government contracts in return for his service.

Gould & Fiske Scandal

A gang of robber barons led by Jay Gould and James Fisk hatched a plan to corner the nation’s gold market. At the time, the Treasury sold gold every week in exchange for greenbacks—the unbacked currency the Union used to fund the Civil War. Gould and Fisk schemed to convince President Ulysses S. Grant, whom they knew socially through his brother-in-law, to halt those sales.

To accomplish their goal, they recruited Abel Corbin—a former Washington bureaucrat and friend of Grant’s sister Jennie. Gould hoped that corbin’s relationship with the president would give him inside information about government actions in the market. He also deposited $1.5 million in gold in an account opened under Corbin’s name as a quid pro quo for his help. The ploy failed on September 24, 1869—a day known as Black Friday. Both Gould and Fisk lost large sums of money, but they died wealthy men. Their scandal undermined public confidence in the federal government.

Indian Reservation Scandal

When people think of the problems on Native American reservations, they usually point to alcoholism or corruption. But they don’t often talk about how a lack of property rights contributes to the poverty.

Reservation residents can’t get mortgages or loans to improve their homes because they don’t have clear title to the land. That’s because the 1887 Dawes Act allotted land to individuals instead of communal tribal property.

That led to a checkerboard of private ownership where, on one reservation, hundreds of people share one piece of privatized trust land. On another, the Crow Reservation’s 1 million acres are divided among as many as 20 family members.

The government has a plan to fix the problem, but it will cost $1.9 billion over the next decade to buy back fractional interests in land. Getting the tribes to agree to it could be tough. In addition to a history of mismanagement and incompetence, the NHA’s board includes some who’ve benefited from shady deals with Abramoff and Scanlon.

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