agenda industrialization & the rise of business unit objective: how and why did the us emerge as...

AgendaIndustrialization & the Rise of Business• Unit Objective: HOW and WHY did the US

emerge as the world’s largest industrial power after the Civil War?

• What social, economic, and political changes occurred, and to what extent were these changes beneficial?

• Take out your notebooks, outlines/HW, and a sheet of paper.

• Take the reading quiz.• When you are done, write a thesis to

respond to (one of) the prompts above.

• What social changes occurred as a result of America’s industrialization and corporatization?– Widening wealth gap– Decline in working conditions

• Dangerous, long hrs., low pay, cheap labor, child labor

– Decline in urban/environmental quality• Pollution/sanitation problems, overcrowding,

slums, etc.

Changing Society

Gilded Age: Second Industrial

Revolution

1865-1900

What were the “seeds” of the 2nd

Industrial Revolution?Mineral Wealth

Technological Innovations

Abundant Skilled and Unskilled Labor Supply

Railroads

Abundance of Land

Growing Market

Foundations

• The Mining Frontier– Precious metals (gold, silver)– Mining syndicates– Copper, lead, talc, iron, zinc, and quartz– Coal mining

• Bessemer Process - Steel

• Petroleum– “Drake’s Folly” (1859)

Foundations of the 2nd Industrial Revolution

• Technological Change– Philadelphia Centennial Exposition, 1876



U.S. Patents Granted, 1850-1899

• Technological Change– Mechanization of the office (typewriter, practical

adding machine)– Clerical work became women’s work (lower pay)– Mechanization of transportation – electric

streetcars – impact on cities?


• Technological Change– Innovations in communication– Transatlantic telegraph cable, 1866– Mass printing and mass advertising– George Eastman’s Kodak camera, 1888– Alexander Graham Bell’s telephone, 1876


• Technological Change– Innovations in electricity– Thomas Alva Edison– General Electric Company, 1888– George Westinghouse and AC system– Nikola Tesla’s electric motor, 1888


• Expanding Railroad Network– Early railroads were local; different gauges, short tracks

– By 1900, 5 transcontinental railroads (land grants, govt support)

– Intense competition domination by a few

– Standardized gauges, efficiencies, time zones

– Railroads: 1st big business in the US; attracted investors

– Key to opening the West, developed other industries


What was the “good soil” of the

2nd Industrial Revolution?

Horatio Alger “Rags to Riches”

Social Darwinism

Ideologies about Wealth

“Gospel of Wealth”

Protestant Work Ethic

• Social Darwinism – “survival of the fittest” in the economy and society, “natural law”

• Government should not try to improve the conditions of the poor

• Herbert Spencer and William Graham Sumner

Ideology of the 2nd Industrial Revolution

• “If we do not like the survival of the fittest, we have only one possible alternative, and that is survival of the unfittest.”

William Graham Sumner

• “The growth of large business is merely the survival of the fittest. It is merely the working out of a law of nature and a law of God.”

John D. Rockefeller


• Gospel of wealth – God sanctioned the wealthy– “God gave me my riches.” Rockefeller– “Not evil, but good, has come to the race from the

accumulation of wealth by those who have the ability and energy that produces it.”

– “Wealth, passing through the hands of a few can be a much more potent force for the elevation of our race than if it had been distributed in small sums to the people themselves.”

Andrew Carnegie


• Religious apologists– “Godliness is in league with riches.” – Bishop

William Lawrence– “Acres of Diamonds” sermon – Pastor Russell

Conwell– “no man suffers from poverty unless it be more

than his fault—unless it be his sin.” – Henry Ward Beecher


• Popular culture supported these ideas about the distribution of wealth – McGuffey’s Readers

– Horatio Alger, Jr. novels and “Protestant Work Ethic”


• What arguments emerged in support of the new social paradigm?– Gospel of Success (Bootstrap Theory)

• Anyone can rise to the top through hard work• “God helps those who help themselves”• Carnegie – Gospel of Wealth

– Laissez-faire • gov’t keeps hands off economy• Interference messes up system

– Social Darwinism– Herbert Spencer• Survival of the fittest• Smartest, hardest-working rise to top• Helping the unintelligent, lazy weakens society

– Philanthropy• The wealthy give their $$$ to good causes• Education, arts, etc.

New Philosophies

• What arguments emerged to criticize the new social order?– Darwinism – can’t be applied to human society– Social mobility – possible, but limited

• Specific theories or works?– Henry George – Progress & Poverty

• Supports capitalism, but w/ regulations• Gov’t could tax profits earned thru inflation, not innovation

– Edward Bellamy – Looking Backward • Supports socialist utopia• “Nationalist” clubs emerge to oppose corporate power

– Thorstein Veblen – The Theory of the Leisure Class• Scathing critique of upper class lifestyle• “Conspicuous consumption” – spending to impress others

– Karl Marx & Friedrich Engels – Communist Manifesto & Das Kapital• Communism – state run by proletariat• result of working class overthrow of state & capitalist ruling class• Somewhat popular in US

– Scientific Anarchism – total overthrow of gov’t• Stateless society, Never really caught on in US

New Philosophies

What created the “favorable climate” of

the 2nd Industrial Revolution?Laissez-Faire Policies

• Laissez-Faire in Theory– Adam Smith’s Wealth of Nations (1776)– The “invisible hand”: natural laws of supply

and demand & competition regulate the market– Government should not meddle

• Laissez-Faire in Practice– Business leaders rejected govt regulation…but– Happily took aid & subsidies– Business practices subverted natural competition

Politics of the 2nd Industrial Revolution

Laissez-faire in practice•No protections for consumers

– “Let the buyer beware”

• food and medicines• fraud and unfair

business practices


• Laissez-faire in practice– Government aid for business (industry and

agriculture)– High tariffs (no competition from overseas)– Subsidies -- land grants to railroad owners– Favorable legislation

• labor laws

• financial legislation

• low-interest loans


What was the “fertilizer” of the


Foreign investment

Capital formation

Supreme Court protection

Corporations

Liberal corporation laws

Legal and Financial Developments

• Evolution of corporations– Limited liability and risk – Sale of stock to raise capital– Santa Clara County v. The Southern Pacific

Railroad (1886)– Corps became “privileged persons” with

• Rights (to reasonable profits)• Protections (from state regulations)

– Sherman Anti-Trust Act (1890) undercut by U.S. vs E.C. Knight Co (1895)

• Only applied to “commerce,” not manufacturing

Corporations and Capital Formation

• Capital formation– Takes $$ to make $$– Rising GNP (growing economy) provided some– Growth of middle class with $$– New technology increased productivity

extra income investments– Investment bankers (J.P. Morgan) marketed

corporate stocks and bonds– Foreign investment

Corporations and Capital Formation

Who were the “gardeners” of the


Mass Marketing and

Production

J. Pierpont MorganJohn D.

Rockefeller

Andrew Carnegie

Cornelius Vanderbilt

New Managerial

Styles

Captains of Industry or Robber Barons?

• Competition =– Chaos, waste, duplication & clutter

• Railroads tackled this problem 1st – lower rates for bulk shipments and long hauls, rebates,

kickbacks, rate wars

• Railroad managers tried collusion (cooperation) in pools, but hard to maintain, not legally binding

• Consolidation was the answer• Cornelius Vanderbilt “organized”

railroads

The Rise of Big Business

• John D. Rockefeller “organized” the oil industry

• Standard Oil Company, 1870– Horizontal integration– Controlled 90% of oil industry

by 1890– Colluded with railroads

• Standard Oil Trust, 1882– Trusts control competition by

separating ownership (stockholders) from management (trustees)


• Andrew Carnegie “organized” the steel industry– Vertical integration: owned all

aspects of the steel industry– Cut wages and increased hours– Lower costs and prices– Invested in new technology and

experts– Exploited downturns in business

cycles– Horizontal integration


The Rise of Big Business:Horizontal and Vertical Integration

• J.P. Morgan “organized” the economy– Bought Carnegie Steel for $350 million

in 1901; formed U.S. Steel (capitalized at $1.4 billion!) - a supercorporation

– Created holding companies and interlocking directorates; modern finance

• Increased production and growth, but…..

• Centralization of vast economic power into the hands of a few


Wall Street in 1867 & 1900

• Railroads created modern mgmt techniques• Spread to other businesses• Creates “middle management” (white collar workers –

sales, mgmt, accountants)• Growth of the middle class: by 1900, 1/3 of urban

families owned their homes

• More loyal to upper mgmt or to workers???

New Managerial Styles

• Urban population boom + transportation = new markets.

• Rise of mass production and advertising/ marketing

• “Fast food” and brand loyalty – consumer choices

Mass Production and Marketing

• Relationships between tech advances: Meatpacking industry

• Gustavus Swift = refrig car (1877) + assembly-line mass prod in meat-packing

• Rail + refrigerated railcars centralized slaughterhouses (Chicago) used all (waste) products higher profits

Mass Production and Marketing

The Power of Bigness

“Robber Barons”

• In 1890, 11 million of 12.5 million families earned less than $380 a year

• 0.03 percent of the population controlled 20 percent of the wealth.

• In 1883, Railroad owners established four time zones without consulting any branch of government

• “What do I care about the law? Hain’t I got the power?”

• “The public be damned!”William

Vanderbilt

The Power of Bigness

Railroad Time Zones

Did the 2nd Industrial Revolution affect all

aspects of society evenly?

• Workers faced major changes from industrialization

• Economy grew…but wages lagged behind • Workers battled poverty -- prosperity depended

on the family economy -- how many members of the family worked.

• “A family of workers can always live well, but the man with a family of small children to support, unless his wife works also, has a small chance of living properly.”

Carroll D. Wright, 1882

Working in Industrial America

• Family economy; debate on whether it destroyed families or strengthened them


• Women earned half as much as men:• “I didn’t live, I simply existed. I couldn’t live that [which]

you could call living…It took me months and months to save up money to buy a dress or a pair of shoes….I had the hardest struggle I ever had in my life.”

• Conditions for African Americans, Asians, and Mexicans were even worse.

• Clear divisions among workers based on national origin and skills.

• Hours of work varied (avg 50-80); new concept of time


I hear the whistle. I must hurry. I hear the five minute whistle. It is time to go into the shop. I take my check from the gate board and hang it on the

department board. I change my clothes get ready to work. The starting whistle blows. I work until the whistle blows for lunch. I eat my lunch. It is forbidden to eat until then. The whistle blows at five minutes for starting time. I get ready to go to work. I work until the whistle blows to quit. I leave my place nice and clean. I put all my clothes in the locker. I must go home.


• Eight Hour Work-day movement– “Eight Hours for Work, Eight Hours for Rest, Eight Hours for

What We Will.”

We mean to make things over;

We’re tired of toil for naught;

We may have enough to live on,

But never an hour for thought.

We want to feel the sunshine,

We want to smell the flowers;

We are sure that God has willed it,

And we mean to have eight hours.

• 8-hour and 10-hour days were just a dream until the 1930s


• New ideals of industrial America created more work for women

• Women devoted more time to cleaning, dusting, and scrubbing.

• New washable cotton fabrics increased the amount of laundering

• More varied diets increased time for food preparation

• By 1900, the typical housewife worked six hours a day on just two chores: meal preparation and cleaning.


• Long hours, low wages, impersonal work• Mechanization of labor decline of skilled labor• Factory work was inhumane, monotonous, and

dangerous – workplace injuries/deaths • High turnover & absenteeism – frequent strikes• Factory owners more concerned with prod &

efficiency than worker welfare• “I regard my people as I regard my machinery. So long as

they can do my work for what I choose to pay them, I keep them, getting out of them all I can. What they do or how they fare outside my walls I don’t know, nor do I consider it my business to know. They must look out for themselves as I do myself.”

Worker Discontent

Worker Discontent

Early Labor Violence

Management vs. Labor

“Tools” of Management

“Tools” of Labor

“scabs”

P. R. campaign

Pinkertons

lockout

blacklisting

yellow-dog contracts (promise not to join union)

court injunctions (force workers back on job)

open shop – no union/optional

boycotts

sympathy demonstrations

informational picketing

closed shops – only union

organized strikes

“wildcat” strikes (unauthorized by union)

Unions• National Labor Union (died after Panic of

1873)• Knights of Labor (Powderly)

• Inclusive union, broad social agenda• 8-hr day, better wages/conditions, equal

pay/rights• No child or prison labor, Yes for govt

regulation• Too idealistic -- couldn’t organize• Lost support after Haymarket Strike

“An injury to one is an injury

to all.”

Unions• American Fed. of Labor (Sam Gompers, 1886) • Skilled labor, practical “bread-and-butter”

goals (wages, conditions, hours)• Believed in negotiation, organization

Unions• American Railway Union – largest of its time• Union president: Eugene V. Debs. arrested after the

Pullman strike• Ran for Pres of US… as a Socialist….from prison

Early Labor Violence

Strikes• Great Railroad Strike of 1877 – Hayes sends in

federal troops – 100+ killed• Haymarket Riots 1886 – Strikers in Chicago

against International Harvester - A bomb was thrown into police line - Police fired back - Many died - violence turned the public against the strikers – blamed anarchists

Great Railroad Strike of 1877

Haymarket Square Riot, 1886

Strikes• 1892 Homestead Strike – Steelworkers at a Carnegie mill• Management decided to hire scabs and use private

“security” – Pinkertons• Violence btwn workers and scabs/Pinkertons, Govt

brought in National Guard to protect scabs• Violence caused Steelworkers to lose support & power

Strikes• 1894 Pullman Strike – Railroad workers led by Eugene

V. Deb's American Railroad Union to boycott and strike against the Pullman company - turned violent when strikebreakers went in

• Debs put in jail and railroad workers lost their jobs• Strikes generally hurt unions as the middle class felt the

unions were violent & out of touch - Gov't. almost always sided w/ owners

Molly Maguires, 1877

agenda industrialization & the rise of business unit objective: how and why did the us emerge as...

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