The period from 1877 to 1896, known as the Gilded Age, saw several shifts in the characteristics of the two major political parties. After the compromise of 1877, the post-civil war issues of Reconstruction and civil rights for African Americans were not as divisive as they had been before. And though the Republican party did experience some internal divisions, the two parties were both generally pro-business until the election of 1896, when the Democrats adopted the more anti-business platform of the Populist movement.
Compromise of 1877
The compromise of 1877 resulted from the disputed election of 1876. Republican Rutherford B. Hayes ran against Democrat Samuel Tilden and while Tilden received a majority of the popular vote, neither candidate received a majority in the electoral college owing to disputes with ballots in several southern states. After a lengthy negotiation, Hayes was given the disputed electoral votes and became president. In exchange the Republicans ended their policy of Reconstruction and removed federal troops from the South, and agreed to maintain a less active interest in the post-civil war rights of African Americans than they had before.
The Republicans themselves also experienced internal divisions after 1877, over the issue of the spoils system, which rewarded party loyalists with government jobs rather than giving them to the most qualified people. President Hayes was against the spoils system, but angered the pro-spoils wing of the Republican party and thus lost the nomination in 1880 to James Garfield. Yet when Garfield became president, he also opposed the spoils system. Garfield was assassinated in 1881 by a party loyalist who had been denied a job. Garfield's successor Chester A. Arthur finally settled the matter by helping pass the Civil Service Act in 1883, which once and for all, at least by law, put an end to the spoils system and ensured that from then on, both the Republicans and the Democrats would agree that government positions should be determined by merit.
Throughout this time, both the Republicans and the Democrats were closely aligned with business interests. Republicans maintained close ties with the banking and railroad industries, and throughout their terms helped provide favorable market conditions for industrialists, especially through high tariffs on imported goods that protected growing American industries, such as the McKinley Tariff of 1890, crafted by then congressman William McKinley and passed by the Republican-dominated Congress. While Democrats such as Grover Cleveland opposed such tariffs, they too were generally supportive of business interests. Cleveland, in particular, was an ardent supporter of the gold standard, which benefited banks and investors over farmers.
Election of 1896
By 1896, however, the Democrats had developed more pro-farmer and anti-business characteristics. The issue of the gold standard became the divisive issue in the election of 1896, and the Democratic party moved away from Cleveland and embraced a more radical platform under William Jennings Bryan in 1896. Bryan adopted the policies of the Populists, a movement of farmers discontented with the power of industry, and in particular sought to alter the gold standard. Though he was very popular, Bryan still lost to the business-supported McKinley.