“yankee ingenuity” were they “captains of industry” or
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Chapter 18
Industrial America
The U.S. had been steadily building a manufacturing economy since early in the 19th
century in the Northeast manufacturing was well established before the Civil War
But the accomplishments of the 1870s, 1880s and 1890s overshadow this earlier
progress
Factors contributing to the dramatic industrial growth
1. abundance of basic raw materials and energy sources –
coal
petroleum
water power
timber
iron, etc.
2. large and growing supply of labor
this labor a result of two migrations:
the movement of American farmers into the cities
the movement of European peasants to US cities
3. “Yankee ingenuity”
remarkable technological inventiveness
4. A talented, energetic, and ambitious group of Entrepreneurs
Were they “captains of industry” or “robber barons” (as this is your paper
topic for the next 2 weeks we’ll discuss this further at a later time)
they developed new financial and administrative structures to run large-
scale production and distribution systems
5. The Federal government
did not interfere with the prerogatives of capitalists
made public resources available for private exploitation on generous terms
Erected protective tariff barriers against foreign competition
Established new banking and currency systems
Provided subsidies of land and money
Industrial Technology
By 1860 there had been 36,000 patents granted
o From 1860 and 1890 there were 440,000 granted
Communications and Business aids
1866 – Cyrus Field – transatlantic telegraph cable
1870s – Alexander G. Bell – first telephone
o by the 1900, AT&T had installed 800,000 in American cities
1868 – Christopher Sholes – the first typewriter
1879 – James Ritty – the first cash register
1891 – William Burroughs – the first calculating/adding machine
Electricity – had the most revolutionary effect on industry and lives of urban Americans
Charles F. Brush – devised the arc lamp for street lighting
Thomas Edison – the incandescent lamp (light bulb) for street and home lighting
o He and others also designed improved generators and built large power plants to
furnish electricity
o By 1900 there were 2,774 power stations and some 2 million electric lights in the
US
o But remember that there were places in the US that did not get electricity until the
1950s or still don’t have it today
Steel – 1850s – Englishman Henry Bessemer and American William Kelly came up with
the Bessemer process
Blowing air through molten Iron to burn out the impurities
1868 – the open-hearth process introduced in the US by Abram Hewitt
Petroleum industry – late 19th century
Why: steel industry’s need for lubrication for its machines
1855 – Pennsylvania businessman George H. Bissell sent a sample of oil to Professor
Benjamin Silliman of Yale for analysis
Results: could be used for lighting purposes and also yield such products as: paraffin,
naphtha(a solvent), and lubricating oil
So Bissel raised the money for drilling—
In 1859 Edwin Drake drilled the first well near Titusville, PA
It yielded 500 barrels a month
By 1870 nearly 40 million barrels of petroleum had been produced and annual
production was approaching 20 million barrels coming from PA, Ohio, and W. VA
Food –
a. Refrigerated freight cars – expanded the meat packing industry
b. New ways to mill flour – came large milling companies (General Mills)
c. Canning foods and condensing milk helped establish the prepared-food industry with
Borden leading the way
Transportation – Late 19th century new ideas come forth
1. Development of the airplane
1st flight in 1903 by the Wright brothers at Kitty Hawk, NC
2. Cars – first designers in France, Germany and Austria
Only moderate success with an “internal combustion engine” (used expanding
power of gasoline to drive the pistons)
First in US – built by Charles and Frank Duryea in 1903 – powered by gasoline
1906 – Henry Ford
Earlier cars using fuel other than gasoline had appeared earlier but weren’t as
successful as Duryea’s and Ford’s cars
Nevertheless by 1900 companies were building about 4000 cars a year
By 1910 the automobile industry was a major US industry
o In 1895 there had been only 4 cars in America
o By 1917 there were nearly 5 million
Production
In order for industries to advance many thought they needed to turn to “Scientific
Management”
o Leader in this movement was Frederick Winslow Taylor so Scientific
Management is often called “Taylorism”
Idea – reorganize production by subdividing tasks
o Train workers how to operate machinery efficiently and effectively
In 1914 Henry Ford embraced these ideas and incorporated them into his Assembly
Line
o It made it possible to assemble a chassis in 1 ½ hours versus the 12 ½ hour it took
before the assembly line
Didn’t really catch on until the 1920s but many companies began to make small
change in production
Railroads – the catalyst for industrial development in the late 19th century
Big name in railroads is C. Vanderbilt
From 30,000 miles of track in 1860 it grew to 193,000 miles in 1900
Gave us:
1. Principal method of transportation
2. made possible the expansion of the national commerce – quick and inexpensive
access to markets and raw materials
3. gave us the corporation (bit later in the lecture)
4. Simulated economic growth through their construction and new equipment needs
5. helped improve technology – steel rails (popularized by Cornelius Vanderbilt)
when he replaced the old iron tracks of the New York Central
Heavier locomotives and cars
Uniform track gauges – 4”8 ½” – 1886
New braking system – 1870s (George Westinghouse)
6. New businessmen (the maker of millionaires) and many of them unscrupulous
“The railroads are not run for the benefit of the dear public. That cry is all nonsense.
They are built for men who invest their money and expect to get a fair percentage on the
same.” – William H. Vanderbilt, 1882
They also often manipulated stock (boomed it and busted it)
o Waged stock and traffic wars at the expense of their stockholders
Didn’t care about anything but themselves
EX: Cornelius Vanderbilt: when told the law stood in this way said, “Law! What do I
care about the law? Hain’s I got the power?”]
His son, William, when in 1883 was asked about the discontinuation of a mail
train said, “the public be damned!”
Corporations –
Had existed in colonial times but were given charters by the gov’t to run public
facilities
o Such as: bridges, roads and banks
After Civil War there was the realization that one person or even a small group could
not finance the railroads and other large businesses
Four things helped bring this realization:
1. rapid spread of technological innovations and the factory system
until 1870 a factory having 100 workers was a large business
But by 1905 the Singer Sewing Machines Co. had a working capital of $20
million had 8 factories and employed 90,000 people
2. A constant pressure on companies to compete by cutting costs and prices
This gave way to an impulse to eliminate competition and create monopolies
3. A relentless drop in prices
In the end though all benefited from this as consumers “gobbled up” goods
4. the failure of money supply to keep pace with productivity
This drove up interest rates and restricted credit
This was especially burdensome to farmers and small businessmen
So incorporate – raise money by selling stock to the public
o Why did people buy stock:
Limited liability – risked only the amount of their investment
Not liable for company debts
Spread quickly to other industries –
o Steal (Carnegie)
o Meat packing (Swift)
o Oil (Rockefeller)
Not only did companies sell/issue stock but began new business practices
1. separating ownership from management
formed new organizational and management structures
2. diversifying production facilities
3. Creating nation distribution and marketing systems (advertising)
4. set up accounting systems to document cost of every operation of each division
from coal consumption to repair of tracks and cars
this helped to set rates and predict profits
Advantages to US of corporate railroads
1. national market for goods and raw materials
2. Could virtually travel from any large city to another by rail
Disadvantages to US of corporate railroads
1. Debt (by 1900 the debt of all US railroads was $5.1 billion – the national debt was
only about $1 billion)
2. Railroads undercut each other
Jay Gould was the master of this!
Cut rates for large shippers
Made special arrangements for bulk goods
Gave free passes to politicians who supported them
Gave free passes to the press for favorable coverage
Gave rebates and kickbacks to favored clients
3. The practices above severely hurt farmers and small business who were forced to
pay higher rates and cut into their profits
4. “Stock watering” – issued stock for a price far in excess of its actual value just to
raise capital
investors would then lose money or take a long time to make it
Farmers need help!!!
Farmers and small businessmen turned to their state legislatures for help against the
Railroads
1. most passed rate discrimination laws (forbid it)
2. Finally federal government got involved after courts ruled in favor of railroads
a. 1887 – Illinois Senator Shelby M. Cullom proposed and got passed the
Interstate Commerce Act
1. It established the Interstate Commerce Commission
A 5 member board
a. To oversee the practices of railroads passing through more than 1
state
b. Banned the practices of rebates and short-distance rates
The Supreme Court weakened the Act by supporting the Railroads
o Before 1905 there was only 1 case out of many where they did not side with the
railroads
Finally – 1906 – Hepburn Act
o Gave the Interstate Commerce Commission the power to set rates
Andrew Carnegie Bio:
Born in Scotland
At 12 years old:
Immigrated to U.S. at age of 12 (1848) – Pittsburgh
Took a job for $1.20/week (equal to $30.64 today) as a bobbin boy
Worked 60 hours per week
Enrolled in a night course to learn bookkeeping
At 13 years old:
Took a job as Western Union delivery boy
Took over for operators who wanted a break
Soon became the city’s fastest telegraph operator
Because he decoded messages for every major business in Pittsburgh he gained an inside
knowledge of their operations
At 16 years old:
Tom Scott – Superintendent of PA’s railroads Western Division hired Carnegie as his
personal secretary and telegrapher
At 23 years old:
Carnegie becomes Superintendent of PA RR Western Division
As Division Superintendent of PA RR: 1. Cost analysis to maximize profits. Analyze techniques to double mileage and quadruple
traffic
2. Set up first night train dispatchers and ran trains 24 hours a day
3. When wrecks occurred he burned the cars or laid new track around the wreck to get service
going
4. Slashed commuter fares to keep trains full
At 32 years old (1868):
By investing his earnings in telegraph, sleeping car, and bridge construction companies he
was earning $56,000/year. Equal to $1.4 million today.
Early 1890’s:
Decided to build his own steel mill
Panic of 1893 led to depression so costs were low
Used the new Bessemer process which made steel purer and stronger by burning off carbon.
Andrew Carnegie's Steel Industry
Used special scales to measure materials in all parts of mill
Became 1st steel maker to establish actual product cost per ton of steel
o So cut expenses was the basis for deciding on new tools, machines etc.
Production
o 1875 – 1,000,000 tons produced
o 1890 – 5,000,000
o 1902 – 15,000,000
o 1915 – 35,000,000
Philosophy – “Watch the costs & profits will take care of themselves”
Beginning priced his rails at $65/ton ($5 less than competition)
Got price down to $50 /ton & asked railroad friends for favors & gave commissions
to railroad purchasing agents
1. Hired a chemist so only purchased best iron ore
2. Reprocessed scrap that broke off steel as went over rollers – most threw away
3. Got newest machines (one after 3 months)
4. Got into vertical integration – 1880
Explain vertical & horizontal integration
a. 1892 – bought an ore company in Minnesota
1890s annual profits rose to $40 million in1900
Producing rails 1900 for $11.50 a ton
Employed 20,000 people
Carnegie pursues philanthropic activities
Felt great fortunes corrupted
So resolved to donate $ to charity (to make him popular)
Set up foundations – eventually $300 million for libraries, universities & int’l
peace causes
Industrial Consolidation
Competition to consolidation also went into other fields, need capital to compete
Philip Armour & Gustavus Swift
o Made meat packing efficient (what else?)
o Refrigerated shipping
o Most of East’s meat
Oil –
1st well – 1859 Titusville (NW, PA) by Edwin Drake
Easy to get into to –
o Sank wells
o Erected small refineries
o Turned petroleum into oil (lubricant) & Kerosene (fuel for lights)
o Few ultimately survived
Survivor
John D Rockefeller
o Cleveland merchant
o Devout baptist
Passion for cost cutting & efficiency
1870 started Standard Oil Company
o daily went over books, etc.
o so picky – reduced from 40 to 39 the # of drops of solder used to seal kerosene
cans
o but save $1000s of dollars. (@ $1,000 = $24,000 today)
Stressed reliable product (got consumer loyalty)
o Built bulk depots & tank wagons for local kerosene distribution
o Insisted all equipment clean
Advertised to boost sales
o Used a Red 5 gal can
Vertical and horizontal integration
o 1872 – purchased own railroad tanker cars to keep costs down
o then went to pipelines
o when competition refused buyout
o strangled them out on business
o by 1879 controlled 90% of oil-refining business
Tried to eliminate competition (wasted resources)
o By 1882 established Standard Oil Trust
o Trusts legal – centralized control over a # of companies – board of trustees run
To do Rockefeller & associates persuaded stockholders of 40 companies to exchange
stock for trust certificates
Within 3 years had consolidated crude-oil buying & slashed # of refineries in half
Now Rockefeller reaped profits
1. enlarged refinery capacity
2. pipeline capacity - decreased his need to use Vanderbuilt railroads
3. expanded distribution network from North America to Asia, Africa,
and South America
By mid-1890s personal fortune of more than $1.2 billion. ($232 billion today)
He was the world's first billionaire
Rockefellers ideas spread to copper, sugar, whiskey, lead etc. industry
But all their tactics, monopolistic control
o Sky-high earning provoked public outcry (average worker earned less than
$1000/year)
1890 – Sherman Anti-Trust Act Passed
1. Outlawed trusts & any other contracts or combinations in restraint of trade
2. Fines of up to $5000 & 1 year in jail
1890-1904 – gov’t only prosecuted 18 suits & sympathetic to big business
By 1900 – 2/5 of capital was held by a few giant monopolies
Myth of Self-made man (1860- few millionaires by 1892 4000+)
o Rags to riches – however need to get there Vanderbilt
o Horatio Alger books
Society – few haves, lots of have nots
1. Capitalists – definite laissez-faire
Used Adam Smith’s The Wealth of Nations.
Self-interest is an “invisible hand” in the marketplace, automatically
regulating supply of and demand for goods + services
Social Darwinism –
o 1st to use Eng. Philosopher Herbert Spencer
1. struggle normal
weak fail, strong prevail
2. Society benefits because unfit are eliminated, talent survives
3. ideal man would eventually result
In US – Yale professor WM. Graham Sumner agreed
1883 what Social classes owe to each other & essays
Natural laws control social order
o “A drunkard in the gutter is just where he ought to be”
Social theorists, sentimental humanitarians and “labor fakers” (intent on uplifting the
poor & need were actually harming the forgotten man) (fm = hardworking individual
whose taxes were going to be used to do-good work
State only owed, -- law, order & basic political rights
Gospel of Wealth – A. Carnegie’s influential essay of 1889
Published right after Jonestown, PA flood which killed 2,200 townspeople.
Wealthy people had built a lake with a dam up river from Jonestown.
Dam gave away - Carnegie needed to go on damage control
Justified laissez-faire by using Social Darwinism
Said unregulated competition gives positive long-term social benefits
But rich need to help poor thru philanthropic work
Excess funds (personal go into trust funds that are administered for the good of the
community
Person of wealth “a mere trustee and agent for his poorer brethren.”
No direct aid – encourages dependency
Attacks on Social Darwinism and Gospel of wealth
Lester Frank War, Dynamic Sociology, (1883) geologist
“Laws of nature could be circumvented by human will”
State can regulate business, protect society’s weaker members & prevent the headless
exploitation of natural resources
Henry George, -- self-taught S.F. newspaper editor & economic theorist
Proposed to settle uneven distribution of wealth thru a single tax
Progress & Poverty (1879)
o Speculators reaped huge profits from rising prices of land that wasn’t dev. or
improved
o Tax profits
o Would bring benefits of socialism without stifling individual initiative
Labor Leaders – said yes
Wanted to humanize the industrial order
Everyone worked together
Also Marxist socialists got into picture
o Marx said as competition among capitalists increased, wages would decline to
starvation levels & even some capitalists would find selves out of business
New Technology
After 1870 corporations stepped up efforts to introduce lots of new consumer goods
1. Bessemer Process
2. New glassmaking techniques
3. Canning(mass)
4. Match production
5. Refrigerated Railcars
6. Cigarette rolling-machine (Bonsack machine)
o Could roll 120,000 cigs/day – machine replaced 60 workers
Products for the masses
1. sewing machine – mass produced
2. Telephone (1876) (by 1900 800,000 in US)
Thomas Edison
"Genius is one percent inspiration and ninety-nine percent perspiration"
3. Light bulbs – 1879 perfected
o Edison premier inventor – (Had 1093 inventions by the time of his death)
Mimeograph
Microphone
Motion picture camera & film
Storage battery
Phonograph – 1877
4. Electric streetcars (1st Richmond)
5. Flour mills could mass produce – Quaker Oats Pillsbury
6. Ivory Soap – 1879 (Proctor & Gamble)
7. George Eastman – 1880s dev. paper-based photo film – US glass plates
8. Kodak camera – “You press the button, we do the rest”
o Customer sent 100 picture film and camera to his Rochester factory – film
developed, camera reloaded shipped back ($10 charge)
Workers – Problems
1860-1900 number of industrial workers went from 885,000 – 3.2 mil.
Transition to factories vs. workshops profound
Ex – shoe & boot industry
o In 1840s every shoe still made by hand by 1 man
o Usually 1 shop had 4-5 shoemakers
Agreed to work certain hours, etc.
1850’s – ready-made shoes introduced
o 1851 – Cincinnati’s Filey & Chapin Co.
o moved into a large warehouse
o broke down the Man. Into a series of repetitive, easily master tasks
o Worked in teams of 4 – each one only did 1-2 parts
Workers lost freedom to come & go
o Drink on job
o Take off for “special” days
Workers would no longer help each other in sickness etc.
1880s – shoe factories larger & more mechanize & traditional skills vanished
replaced skilled workers w/ machines & lower-paid women & children
By 1890 35% of shoe industry workers were women
Problems
1. Bad pay –
1870s – unskilled labor = $1.30/day
o Bricklayer/blacksmith = $3.00/day
2. Worked 10-12 hour/day, 6 days a week
3. Lots of accidents
Why—
o Dangerous conditions
o Workers’ inexperience with complicated machines
o Rapid pace of production process
o Employers’ unconcern for safety – always more workers available
For adults most dangerous industry = railroads
o 1889 – 2000 workers killed on job & 20,000 injured
Little or no aid for injury/death on job
o Until 1890s courts considered it a normal risk
Co. owners fought adopting state safety & & health standards (too expensive)
For sickness/accidents benefits, workers joined & paid dues to fraternal
organizations & ethnic clubs – most cases too little to really help
Immigrant labor – many people came to US
o 1870-1900
o Hard to adjust to factories – most had done agricultural work in Europe
Women – 1870 13% women worked outside of home – 60% of them in domestic work
Most women hated the awfully long hours, had (low) pay, & social stigma of being a
servant
So when jobs in factories opened up in textile, food processing & garments industry
1870-1900 -- # of women working tripled
1890’s – women with HS education moved into clerical & secretarial work
Clean, safe working conditions & relatively good pay
1st rate typists could earn $6-7/week
Unions
why – low wages
dangerous & degrading conditions
Obstacles to –
1. immigrants were willing to work for low wages & work as strike breakers
2. ethnic & racial divisions in workplace
3. Skilled craftsmen little empathy for common laborers
4. Skilled craftsmen saw little reason to cooperate from 1 area to another. Job &
conditions to different
Knights of Labor – attempt with national labor Union to build a mass movement
Secret society based on free Masons
Welcomed all wage earners
Excluded only – doctors, lawyers, stockbrokers, professional gamblers & liquor
dealers
Demanded—
1. pay for women
2. End for child labor
3. End of convict labor
4. Graduated income tax
5. Cooperative employer – employed ownership of facotires, mines, etc
Why did union membership grow increase in the early 1800's?
Grew slowly at 1st partly because Catholic Church forbade Catholics to join
Early 1880s membership rocketed (1886 – 700,000 members)
1. ban on Catholics joining was lifted
2. leader - Terrance V. Powderly
Eloquent speaker
Successfully led labor clashes
Powderly –
a. opposed strikes (relic of barbarism)
b. gradual end to wages reorganize society or cooperative principles
c. Waged war against temperance
d. Advocated admission of blacks (could have segregated units in South)
e. Admitted women (by 1886 10% of members were women)
f. Restrictions on immigration & total ban on Chinese immigration
1877 – SF workers were demonstrating for 8 – hour day
destroyed 25 Chinese laundries
1882 – Congress 10 year moratorium on Chinese Exclusion Act (will discuss
later)
Decline in late 1880s –
1. Membership doesn’t listen to leadership
2. Failed series of unauthorized strikes
3. Jay Gould & others vendettas
4. Public mistrust of Unions
American Federation of Labor – May 1886 craft unions left Knights of Labor to form
AFL
Samuel Gompers – led AFL 1886-1924
1904 – 1.6 million members
Wanted & stressed bread & butter issues
1. Better wages
2. 8 hour workday
3. employer’s liability
4. Mine—safety laws
Still all in all 5% workers in unions
Strikes – 1881-1905
37,000 strikes (involving & 7mil workers)
In some cases became like mobs – property damage, looting, etc.
May 1 1886 – 340,000 worked off jobs to show support for 8-hours workday in
Cincinnati. Shut down city for 1 month
Haymarket Square
May 3 1886 – Chicago police shot & killed 4 strikers at McCormick harvester plant
May 4 1886 – protest rally (P.M.) at Haymarket Square – bomb thrown – 7 police
wounded or killed
Other famous strikes:
1892 – Homestead strike – cut wages, locked out workers
o Homestead Steel works in Homestead, PA
o Skilled union members were being replaced with unskilled labor as the plant
became more unionized
o Pinkertons and later the state militia was called in and broke up the strike
1894 – Pullman Strike – slashed wages, left rent same
o Pullman, Illinois
o Orders for rail cars plummeted during the Panic of 1893
o Workers wages were slashed but not rent at their company housing
o Strikers led by Eugene Debs
o President Cleveland sent in the military to keep the mail moving on trains
o Debs was arrested for interfering with the mail and found guilty of "defying a
court injunction against the strike".
o Spent 6 months in jail where he read "The Communist Manifesto" by Karl Marx
o
Reaction –
1. Virtual class war in U.S.
2. “yellow dog” contracts promised not to strike or join a union in order to get or keep
jobs
3. Some companies hired Pinkerton agents to serve as private police force
4. Some CO’s turned to US army to suppress
5. After Haymarket –
Arrested 8 men
No evidence linked them – all convicted
4 hanged
1 committed suicide in prison
6. Americans saw labor problems as “deadly foreign conspiracy”
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