INDUSTRIAL AMERICA

Industrialization increased the standard of living and the opportunities of most Americans, but at what cost?

In less than 125 years, America became the leading industrial power of the world. Major reasons for this quick rise to power include:

1. RAILROADS!!!!!!!!! 2. Resources

An abundance of natural resources An abundance of human resources

unskilled & semi-skilled labor

3. Government policy towards business Willing to help at all levels to stimulate growth Market growing as U.S. population increased.

4. Entrepreneurs – talented group of businessmen & advisors with abundant capital

5. New inventions & technology

RAILROADS The factor MOST responsible for growth

of American Industry. The Railroad fueled the growing US

economy: First big business in the US. A magnet for financial investment. The key to opening the West. Aided the development of other

industries. Became a consumer of other

industries.

Railroad ConstructionRailroad Construction

“The Big Four” Railroad Magnates“The Big Four” Railroad Magnates

Charles Crocker

Mark Hopkins

Collis Huntington

Leland Stanford

Transcontinental Railroad(During Civil War – to connect CA with the Union)

RACE – Pacific Railway Act, 1862: Received 20 sq. mi. of land for every mile of

track laid $16,000 loan for every mile on flat land $48,000 loan for every mile over mountains

Union Pacific: building west from Omaha, NE Irish immigrants

Central Pacific: building east from Sacramento, CA Leland Stanford & the Big Four Chinese immigrants used Most difficult time – Sierra Nevada Mtns.

Union lays 1,086 miles & Central 689

WEDDING OF THE RAILS:

Improvements in RRs will increase their profitability: Standardization & Consolidation:

Binds all sections of country together into one market

Cornelius Vanderbilt: “The Commodore” – steamboat fleet Consolidates NY railroads into NY Central RR

Company Eventually leaves his RR empire to his son, William

H. Vanderbilt

Improvements in service: 4 track main line Standard gauge track Use of Westinghouse air brake – allows

all cars to stop simultaneously…can then carry heavier loads on longer trains

Pullman Palace Cars – luxury cars Time Zones develop due to RR:

Develop because needed for RR scheduling

Originally 4 in U.S. How many in U.S. now? Eventually spreads worldwide

How did the RRs impact:

National unity?Industry?Mining & agriculture?Growth of cities and urban areas?Immigration?The Environment?Wealth?

Corruption in the Railroad Industry: Stock Watering

Exaggerating RR assets; selling stock at higher prices than it’s worth

Bribery Of judges, legislature; free passes to politicians

The “pool” An anti-competitive combination – group of RR

companies agree to divide business in a geographic area and share the profits

Rebates and Kickbacks Reward powerful shippers for steady & assured traffic

Price Gouging Rates are low on competing lines, but jacked up on non-

competitive lines

Government Regulation of RR: State regulation – 1870s

Encourages farmers to protest & organize (the Grange) & pressure state legislatures into passing regulations to control RR monopolies

Federal regulation 1886 – Wabash v. Illinois

Sup. Ct. rules that states CANNOT regulate interstate commerce

1887 – Interstate Commerce Act Prohibits rebates, pools, requires that rates be

published, establishes ICC to enforce

Impact of the ICC Provides forum for resolution of conflicts A good first step, but not very powerful

Resources:Natural Resources:

Coal – amount mined doubles each decade between 1840 & 1890

Iron Ore – Great Lakes, PA, AL Oil – Western PA; to TX by 1900

Human Resources:Population doubles between 1860 &

1890IMMIGRATION – 14 million immigrants

to U.S. during this time (“new immigrants” from S & E Europe)

Favorable Government Policy Towards Business LAISSEZ-FAIRE!!

The ideology of the industrial age Individuals should compete freely in the

marketplace. No room for government in the market! Industry has very few government regulations

and restrictions ENTREPRENEURS

One who takes the risk of organizing and beginning a new business

Received help from the U.S. government: High protective tariffs Cheap land Liberal immigration laws – cheap labor

JOHN D. ROCKEFELLER OIL REFINING (Standard Oil

Co.) Consolidated 40 oil refining

companies – a nationwide monopoly – controlled 95% of all refineries by 1877

Believed in “economies of scale” Ruthless in business! (dubbed

“Reckafellaw”) “American Beauty” rose

analogy – pluck off the early buds…

Used rebates, drawbacks, spies & secret info from RR to learn about competitors & force them out of business

Stock or Cash Buyouts

Treated his workers well – the first to offer old-age pensions & tried to protect them in bad times

Hated waste! Personally:

Ambitious Abstemious Pious Parsimonious

Devout churchgoer and Sunday School teacher

Strong family man Only the strong survive

“GOD GAVE ME MY MONEY.”John D. Rockefeller

Standard Oil Refinery

The Octopus, 1904

Gave away dimes to children on the street

Retired at age 40 Spent rest of his life

giving away money Gave away over $520

million to charities $78 million to colleges $60 million to

medicine $18 million to African

American education Lots more to

education & research University of Chicago

Died at age 98

at Ormond Beach , FL

ROCKEFELLEREXPOSED BY JOURNALIST IDA TARBELL

A lifelong Rockefeller hater (her father took the cash buyout)

Exposed Rockefeller’s unethical business dealings with RR, etc.

ANDREW CARNEGIESTEEL (U.S. Steel

Corporation)Hired the best

technical & scientific experts

Used new process & made steel so cheaply it forced competitors into bankruptcy & then he bought them

Did not treat his workers as well as Rockefeller

Drove wages down & hours up for the common laborers & constantly fought unionization

But, made upper level management & experts partners in the business

Poor Scottish immigrant who went from “rags to riches” – a true Horatio Alger story Began work in 1848

as bobbin boy - $1.20/wk

By 1900 produces half of nation’s steel –$25 million/year take-home pay

Ambitious, energetic, a “gambler”

Deeply believed that if one worked hard, saved $ & invested wisely, anyone could become wealthy

“The first man gets the oyster,The second man gets the shell.” Andrew Carnegie

“Gospel of Wealth” – Wealthy are blessed with greater talent and wealth and have a duty to help those who would try to help themselves. Inequality is inevitable and

good. Wealthy should act as

“trustees” for their “poorer brethren.”

Retired at 66 (bought out by J.P. Morgan – becomes U.S. Steel)

Lived to be 84 Gave away over $350

million to charities Mostly to libraries Carnegie Hall & Museum, NY

“The man who dies rich, dies disgraced.”

The BrokerNew Financial BusinessmanNew Financial Businessman

Wall Street – 1867 & 1900Wall Street – 1867 & 1900

Beliefs defending class distinctions:SOCIAL DARWINISM Philosophy that applied Darwin’s biological theory

of “survival of the fittest” to human society & those who succeeded

Wealth no longer looked upon as bad; viewed as a sign of God’s approval.

Yale professor William Graham Sumner: “millionaires are a product of natural selection.” Individuals must have absolute freedom to struggle,

succeed or fail. Therefore, state intervention to reward society and the economy is futile!

Both Rockefeller and Carnegie were strong believers in this philosophy

Believed it was a method better than elections for selecting leaders

Only the strong survivors will control industry and wealth

RUGGED INDIVIDUALISM Equates to contempt for the poor Many of nouveau riche had “pulled

themselves up by their bootstraps” The poor are only poor because of

their laziness and lack of initiative Rev. Russell Conwell

Christian duty to accumulate wealth Should not help the poor. “Acres of Diamonds” speech:

“There is not a poor person in the U.S. who was not made poor by his own shortcomings.”

1/10 of people own 9/10 of all the wealth by 1900

EFFORTS TO CURB COMPETITON:

HORIZONTAL INTEGRATION:

SEVERAL FIRMS IN THE SAME KIND OF BUSINESS CONSOLIDATED, JOINED TOGETHER

Best example: ROCKEFELLER

and his Standard Oil Co.

VERTICAL INTEGRATION

BUSINESSES IN DIFFERENT BUT RELATED ACTIVITIES JOINED TOGETHER;

COMBINES ALL PHASES OF MANUFACTURING INTO ONE ORGANIZATION

Best examples: CARNEGIE Gustavus Swift,

Meat-packing

INTERLOCKING DIRECTORATES:

J.P. MORGAN “Banker’s banker” Put officers of his own

banking syndicate on Board of Directors of rival businesses

Made millions financing reorganization of RRs, banks, insurance companies

Due to huge sums required to build railroads, corporations become major business form in U.S.

A corporation is a company formed by a group of investors who get a share of ownership in proportion to the amount of money they invest

Corporate investors enjoy LIMITED LIABILITY … which means that investors risk ONLY the amount of their investment (stock cost) and can’t be held personally liable for debts of the corporation

ADVANTAGES OF CORPORATIONS OVER OTHER TYPES OF BUSINESSES:

Viewed as a legal “person” under the law – can make contracts, sue and be sued, etc.

PERMANENCE - they continue forever EASY TO RAISE LARGE SUMS OF MONEY

Small amounts of $ from many individual investors can be pooled into huge sums of $ need to start or expand a large company

LIMITED LIABILITY

Advantages of “Big Business?”

Can produce more and better goods at a lower cost

created jobs

Can afford to pay high salaries to get the best experts

increased efficiency by establishing separate departments in business

What are the disadvantages of“Big Business?”Methods they used to get “Big”

Demanded, & got, volume discounts from shippers

Underselling & forcing competitors out of business

Raising prices to the consumerBribing of public officials

Destruction of the environmentWhy would people put up with this?

U. S. Corporate MergersU. S. Corporate Mergers

The ‘Robber Barons’ of the PastThe ‘Robber Barons’ of the Past

Images of the new elite

(from left to right)John D. Rockefeller,Andrew Carnegie, Cornelius Vanderbilt, and J.P. Morgan

Jay Gould – the Archtype of the Robber Baron

Dr. Thomas C. Durant, Vice-Pres., Union-Pacific Railroad

Henry FlaglerAn American tycoon who worked with John D. Rockefeller to establish Standard Oil. He helped develop Florida as the vacation land it is today.

Moves to St. Augustine Founder of Palm Beach “Father of Miami” Founds the Florida East Coast

Railway By 1912 Florida Overseas

Railroad was completed to Key West

Flagler County, Flagler Beach, Flagler College

Flagler Resort

Flagler College

Whitehall - 1st big mansion in West Palm –--- history museum there now

Distribution of wealth in the Gilded Age

Regulating the TrustsRegulating the Trusts

1877 Munn. v. IL – okay for states to regulate RR rates

1886 Wabash, St. Louis & Pacific Railroad Company v. IL – overrules Munn;

federal gov’t controls RR interstate commerce

1890 Sherman Antitrust Act Forbids combinations in “restraint of trade” No real means of enforcement First lawsuits all decided in favor of the trusts

& against labor unions – restraining trade

1895 US v. E. C. Knight Co. – Fed. gov’t using Sherman Act to get rid of sugar monopoly but lost. Ct.

held that manufacturing industries not subject to fed. gov’ts interstate commerce control

1877 Munn. v. IL – okay for states to regulate RR rates

1886 Wabash, St. Louis & Pacific Railroad Company v. IL – overrules Munn;

federal gov’t controls RR interstate commerce

1890 Sherman Antitrust Act Forbids combinations in “restraint of trade” No real means of enforcement First lawsuits all decided in favor of the trusts

& against labor unions – restraining trade

1895 US v. E. C. Knight Co. – Fed. gov’t using Sherman Act to get rid of sugar monopoly but lost. Ct.

held that manufacturing industries not subject to fed. gov’ts interstate commerce control

NEW INVENTIONS & TECHNOLOGY: Bessemer and open hearth process

Created a lighter, stronger, rust-free metal – STEEL

U.S. producing 1/3 of world’s supply by 1890 Refrigerated RR cars Edison

light bulb phonograph motion pictures.

Thomas Alva EdisonThomas Alva Edison

“Wizard of Menlo Park” “Wizard of Menlo Park”

The Light BulbThe Light Bulb

Birth of the Night Shift!

Industrial production nowpossible 24 hrs. per day.

The Phonograph (1877)The Phonograph (1877)

The Ediphone or DictaphoneThe Ediphone or Dictaphone

The Motion Picture CameraThe Motion Picture Camera

Alexander Graham BellAlexander Graham BellTelephone (1876)Telephone (1876)

CHRISTOPHER LATHAM SHOLES

THE TYPEWRITER Along with the

telephone, leads to feminization of the work place

Women make up

5% of all office

workers in 1870;

40% by 1910

AlternateCurrent

AlternateCurrent

GeorgeWestinghouse

GeorgeWestinghouse

AirBrakeAirBrake

The AirplaneThe Airplane

Wilbur Wright Orville Wright Wilbur Wright Orville Wright

Kitty Hawk, NC – December 7, 1903 Kitty Hawk, NC – December 7, 1903

U. S. Patents GrantedU. S. Patents Granted

1790s 276 patents issued. 1790s 276 patents issued.

1990s 1,119,220 patents issued. 1990s 1,119,220 patents issued.

Problems of workers in the Industrial Age: Less value placed on skills Depersonalized relations with corporate employers Technological unemployment – machines replace

men Glutted labor market –IMMIGRANTS! Begin to look to unions for help

Corporate resistance to Labor Unions: Pressure politicians Buy out the press Import scabs, use of troops (Pinkertons) to break up

strikes File for injunctions Lockouts Yellow Dog Contracts & ironclad oaths Blacklists Company-owned towns – Pullman, IL

LABOR UNIONS

Had difficulty organizing: Extreme opposition from

Employers Courts & police favored

Employers over workers Too many immigrant laborers

Several major unions form in late 1800s: National Labor Union Knights of Labor American Federation of

Labor American Railway Union

NATIONAL LABOR UNION Formed 1866 - 600,000 workers at height General union with skilled & unskilled

workers, and farmers Sought social reform – 8 hr. day Get 8 hr. day for gov’t workers but 1870s

depression destroys union RR wage cuts in 1877 led to massive

strikes, federal troops called in & violence erodes support for unions among Americans

KNIGHTS OF LABOR,1869

Led by Terrence Powderly Originally a secret organization ALL workers welcome: unskilled

and skilled Recruited women & blacks Sought broad reforms:

Health and safety codes 8 hour day end to child labor, etc.

Used political activity first; preferred NOT to use strikes Successful strike against Gould’s

Wabash RR in 1885 Association with anarchy &

violence (Haymarket Square Riot) causes end of Knights by 1890s

AFL, 1886 Led by Samuel Gompers A CRAFT Union

ONLY skilled workers - why? (better bargaining power)

Kept out blacks and women A “federation” Sought “bread and butter” reforms:

Higher Wages Shorter Hours Better/safer working conditions

Also sought “closed shops” (union workers only)

Relied on economic pressure: walkouts, strikes and boycotts – collective bargaining

“All I want is more!”

AMERICAN RAILWAY UNIONLed by Eugene V. Debs

Later became a socialist while in jail after arrest in Pullman Strike

“INDUSTRIAL” union All workers in same

industry, regardless of their craft or skill level, in the same union

Sought less violence/confrontations but winds up in it anyway

THE MAJOR STRIKES:Great RR Strike of 1877

Baltimore & Ohio RR – cut wages during a depression

Striking & violence spread; Employers called on federal gov’t for help

Pres. Hayes sent in troops to restore order

HAYMARKET SQUARE RIOT1886 On May 1, 1886, unions called for national

strike in support of an 8 hour work day Thousands of workers demonstrated in U.S.

cities but Chicago was the center, with 40,000 demonstrators

After bomb thrown into crowd, police fired upon strikers killing an unknown number of workers – 12?

Several anarchist labor leaders arrested and tried and hanged without supporting evidence

Association between unions & violence leads to demise of Knights of Labor

Images from Haymarket Riots, May 3, 1886

Haymarket Memorial, Chicago

Homestead Strike, 1892Carnegie Steel – Homestead PlantCarnegie’s partner (Frick) cut

wages; workers strikePinkerton Detectives called in to

break strike Led to deaths of 9 strikers & 7 detectives

Anarchist tried and failed to assassinate Frick

Strike called off – managemen wins

unions’ association with violence continues

Pullman Strike, 1894

US cavalry breaks up 1894 Pullman Car workers strike

Pullman Strike, 1894 Pullman Palace Car Company Company Town Laid off workers & cut wages after Panic of

1893 BUT didn’t cut rent & food prices Refused to bargain; shut down plant First true nationwide strike! Caused interference with mail delivery Pres. Cleveland got injunction to force end

to strike and sent in troops to enforce it – sets a precedent

Debs refused, arrested, jailed … socialist