ch.6 – the expansion of american industry
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Ch.6 – The Expansion of American Industry
Changes in Daily Life• Life in 1865 -
– No indoor lighting– Used ice blocks to keep food cool
(expensive)– Long-Distance Communication
• Took up to a month to deliver a letter from East to West Coast
• By 1900 - – Standard of living was one of the highest in
the world– Why?
• Increased productivity• Patents: 1790-1860: 36,000; 1860-1890: 500,000
– Lots of NEW inventions!
New Forms of Energy• Oil– In 1858, Edwin Drake struck oil in Titusville,
Pennsylvania (boomtown)– Oil business grew rapidly
• Oil Refineries transformed crude oil into kerosene
• Byproduct – gasoline was seen as a waste product and simply thrown away
What were the effects of petroleum on the development of the US?
Invention Inventor Impact on Society
Light Bulb Thomas Edison
Affordable in-house lighting, extended the working day
TransformerGeorge Westinghouse
Allowed electricity to be sent over long distances
Sewing Machine Isaac Singer
Clothing production was cheaper and faster, created more jobs,
Refrigerator Carl von Linde
Decreased food spoilage and the need to use other means of preservation
How did the growth of electric power impact the development of the U.S.?
Technology gap arises between rural and urban areas
Communication Breakthrough• TELEGRAPHTELEGRAPH• Sending messages over a Sending messages over a
wirewire• Early 1700sEarly 1700s• Samuel Morse (his Samuel Morse (his
patent & code)patent & code)• Companies form early & Companies form early &
merge after CWmerge after CW– Western Union– 100k miles in 1870– 900k miles in 1900
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Communication Breakthrough• TELEPHONETELEPHONE
• Alexander Graham Alexander Graham Bell- 1871, Scottish Bell- 1871, Scottish immigrant working on immigrant working on “talking telegraph”“talking telegraph”
• 1876, has a patent1876, has a patent
• Set up telephone Set up telephone businessbusiness– Expansion through
central switchboards– 1.5M lines by 1900
Railroads Create a National Network
• Transcontinental Railroad: railway extending from coast to coast– Congress believed it would help economic
infrastructure– Central Pacific Union Pacific– Project began in 1862 and finished on May 10,
1869 at Promontory Summit (Utah)– Most workers were immigrants from Ireland and
China
Railroad Developments
• Problems– Noisy, dirty, and
uncomfortable for travelers
• Improvements– Steel rails replaced iron rails; track
gauges and signals were standardized
– Safety: Air brakes; telegraph system for moving trains to communicate w/each other (reduced the risk of collisions)
– Introduction of time zones (scheduling)
Railroads & Industry• Faster and more practical means of transporting goods• Lower costs of production: shipping costs dropped
thus, more goods could be sent at lower prices• Creation of national markets: businesses could market
products nationally and locally• Model for big business• Stimulation of other industries (ex. Steel)
The Bessemer Process
• In 1856, Henry Bessemer received the patent on the process
• Process made it much easier and cheaper to remove the impurities from iron– Process: Melt iron, add carbon, and
remove impurities• Steel is lighter, stronger, and more
flexible• Steel was now mass produced
– Led to innovations in architecture (skyscrapers, bridges)
Chicago Reliance Building
Brooklyn Bridge
The railroads showed the US just how massive business could get and how much money could be had by just a few individuals.
There is a group of these guys, industrialists from this era, that amassed huge fortunes through various means.
They are known by 2 different names:• Robber Barons• Captains of Industry
(*Note that these 2 names refer to the same group of people.)
Big Business
http://www.icsd.k12.ny.us/legacy/acs/library/ushistory/laborwebquest/images/robber_barons.jpg
Term #1:Term #1: Robber Baron Robber Baron• Background… German nobles in 1200s that
controlled the Rhine River who used strategic positioning to take advantage of passersby– Demanded tolls from everyone– Ships must pay or they can’t pass– Got RICH simply because of their strategic location
• In the Gilded Age, this was a negative term for rich industrialists.– Built their fortunes by stealing from the public (strategic
locations in business world)– Drained natural resources– Drove competitors out of business– Paid workers minimally– Forced employees to work in dangerous & unhealthy
conditions
Term #2:Term #2: Captain of Industry Captain of Industry
• This was a positive term for rich industrialists.– Captains
• Leading us into a new era of commerce• Increasing the supply of goods by building factories• Raising productivity• Expanding markets• Creating jobs (raising standard of living for many)
– Philanthropists• Billions $ in donations–museums, libraries, colleges
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Social DarwinismSocial Darwinism
• Applied Darwin’s theory of natural selection to the business & social sectors– “Survival of the fittest”
• JUST DON’T INTERFERE WITH COMPETITION!
• The government would largely stay out of business’s way during this time.
BIG Business
• Why is called BIG business?–Large pools of capital: – invest your own money or borrow $$$
–Wider geographic span–Broader range of operations:
combined multiple operations in one place
Business on a Larger ScaleBusiness on a Larger Scale
• Therefore, business grew.– No longer cottage industries (mom/pop shops)– Start-up costs were high, therefore, only a few
companies could compete– Difficult to enter
BIG Business• Revised role of ownership:
– owners had less connection of operations
• New methods of management: – Not knowing all employees or aspects of
operation
– “Professional manager”
John D. Rockefeller
Andrew Carnegie
New BIG Industries• OilOil
– John D. Rockefeller
• SteelSteel– Andrew Carnegie
• RailroadsRailroads– Jay Gould
• We’ll get to him in later Chapters…
John D. RockefellerJohn D. Rockefeller• Formed Standard Oil Company
– Controlled up to 91% of oil industry
• Richest man ever $323.4 billion
• Numerous enormous donations– Over $500 million http://www.ohiohistorycentral.org/images/John_D._Rockefeller.jpg
Andrew Carnegie’s “Gospel”Andrew Carnegie’s “Gospel”• Made money in
steel industry
• “Gospel of Wealth”– Businessmen should
accumulate as much wealth as they can & redistribute to society
• 80% of wealth to education
– Flip side: Keep money away from ill-equipped people & organizations
• To benefit society as a whole
Gaining a Competitive Edge
• Monopoly: companies that gain complete control of a product or service–Drove small competitors out of
business–Free to raise its prices when there are
no competitors
Gaining a Competitive Edge• Oligopoly: a market dominated by only a few
large, profitable firms– Examples: Breakfast cereals, cars, and household appliances– Nationwide businesses because of
transportation & communication advances• Cartel: loose association of businesses that
make the same product– Limit supply of product & can keep prices high– Example: Diamond Industry, OPEC
• Economies of Scale: as production increases, the cost of each item produced is lower– This put small companies at a disadvantage
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Horizontal consolidationJohn Rockefeller acquired all but 10% of the oil industry;
if you wanted oil, you had to go thru him.
Independent Oil Refineries
Purchased by Rockefeller
StandardOil
Company
Coke fields Ships
Iron ore deposits
Steel mills Railroads
ALL purchased by Carnegie
CarnegieSteel
Company
2 distinct ways to create monopolies…Vertical consolidation
Andrew Carnegie’s steel company controlled every aspect of the supply chain (production to delivery).
• More on Rockefeller...
– He often dropped prices to below cost to drive out competitors.
– When the government cracked down on monopolies, they formed trusts instead.
• Merging companies under a board of trustees that acts as 1 accord but are technically not 1.
Gov’t response = Sherman Antitrust Act 1890• Outlawed any combination of companies that restrained
interstate trade or commerce• Poorly enforced; vague wording made it ineffective• Pro-business courts ruled in favor of business• Helped businesses against trade unions
• Ruled by the clock– Work week= 12 hours a
day, six days a week• Strict rules
– no tardiness, no talking• Dangerous
– Very loud, dark, dirty, hot, poorly ventilated, w/ frequent fires & accidents
• No workers’ comp or insurance– Many young children had
to work• No help provided
– Against “Social Darwinism”
– Would only encourage idleness
http://www.dwd.state.wi.us/dwd/DWDHistory/images/women_in_factory_big.jpg
I’d rather own the company…
• Piecework: those who worked the fastest and produced the most pieces earned the most money
• Sweatshop: a shop where employees worked long hours at low wages and in poor working conditions
http://faculty.citadel.edu/hutchisson/Images/sweatshop.jpg
What was work like?What was work like?
Increasing Efficiency• Frederick Winslow Taylor’s
Time & Motion Studies: – Goal to increase worker
productivity and thereby increase profits
• Broke down each task into a number or steps and determined how long each step should take.
• Some employers simply increased the speed of machines and gave employees more work http://imagecache2.allposters.com/images/adc/10098908A.jpg
Division of Labor
• Artisans• Make product from
start to finish• Performed a variety of
tasks
• Factory Workers• Perform one small task
repeatedly• Division of Labor
• More efficient• Boring
http://www.rootsweb.ancestry.com/~nytigs/LinenCollarFactoryWorkers.jpg
Child Labor & Working Families• By the late 1800’s nearly 1 in 5 children
between the ages of 10 and 16 were employed• Everyone had to work to survive
• Kids dropped out of school to help the family• Children’s wages meant the difference between going
hungry or having food on the table• Social Darwinism taught against government aid
http://historyplace.com
Gulf Between Rich & Poor
• In 1890, the richest 9% of Americans held nearly 75% of the national wealth!
• Example: On average, 3 out of a class of 30 students would have 75% of the national wealth.
“You have endured the pangs of want and hunger; your children you have sacrificed to
the factory-lords.
In short, you have been miserable and obedient slaves all these years. Why?
To satisfy the insatiable greed, to fill the coffers of your lazy thieving master!”
- August Spies, Newspaper Editor
•Anarchist- radicals who oppose all government
What this quote tell you about the relationship between workers and business owners?
SocialismSocialism
• Some workers became politically active. A few were drawn to the idea of socialismsocialism- an economic and political philosophy that favors public instead of private control of property and income– Society at large, not just private individuals,
should control a nation’s wealth.
– Wealth should be distributed equally to everyone.
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Early UnionsEarly Unions
• Became strong after the Civil War
• Provided help to members in bad times
• Soon became the means for expressing workers’ demands to employers– Shorter workdays
– Higher wages
– Better working conditions
• Scab- negative term for a strike breaker
https://wiki.brown.edu/confluence/download/attachments/16612/200px-Debs.jpg
National UnionsNational Unions• Knights of Labor– Recruited skilled and unskilled workers,
women, and African Americans– Emphasized education and social
reform• Equal pay for equal work• 8-hour work day• End to child labor
– Strikes were largely unsuccessful (one successful strike forced Jay Gould to give up wage cut)
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National UnionsNational Unions
• American Federation of Labor (AFL)– Created by Samuel Gompers– Craft union- organize skilled workers– Collective Bargaining- workers negotiate as a group with employers
• Industrial Workers of the World (IWW, Wobblies)– Unskilled workers– Many Socialists, with violent strikes
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ReactionReaction
• Many employers disliked and feared unions.– They forbade union meetings.
– They fired union organizers.
– They forced yellow dogyellow dog contracts (workers contracts (workers promised never to join a union or strike)promised never to join a union or strike).
– They refused to bargain collectively.
– They refused to recognize unions.
STRIKE!STRIKE!• Great Railroad Strike of 1877
– 10% wage cut during a depression– Clashes between federal troops/militia and workers– Led to creation of the American Railway Union under Eugene Debs – Industrial Union- workers from all crafts in a given industry– Began violent era of labor relations
• About 24,000 strikes occurred across the nation from 1881-1900– Haymarket (1886)- 8hr work day, ended violently– Homestead (1892)- Carnegie Steel-tried to cut wages, brought in
Pinkertons, anarchist not connected with union failed in attempt to assassinate Henry Frick, but public associated his act with strike violence.
– Pullman (1894)- Factory town- cut wages but kept rent and food prices the same. Union went on strike, and Pullman closed the factory. American Railway Union boycotted Pullman cars, and impeded mail distribution. Govt. ruled against ARU citing the Sherman Anti-Trust act.
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ConclusionConclusionLabor unions had only limited success at this time. They brought many of labor’s
pressing issues to light, but they were often met with violence and government
opposition during strikes.
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