AN INDUSTRIAL GIANT

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AN INDUSTRIAL GIANT

• Essentials of Industrial Growth
• American manufacturing flourished in the last
  quarter of the nineteenth century
• new natural resources were discovered and
  exploited, creating opportunities that attracted
  the brightest and most energetic Americans
• the national market grew, protected from foreign
  competition by tariffs, and foreign capital
  entered the market freely

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• European immigrants provided the additional labor
  needed for industrial expansion
• advances in science and technology created new
  machines and power sources, which increased
  productivity

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• Railroads The First Big Business
• in the last quarter of the nineteenth century,
  railroads were probably the most significant
  element in American economic development
• important as an industry themselves, railroads
  also contributed to the growth and development of
  other industries
• railroads developed into larger and more
  integrated systems, and their executives,
  including Cornelius Vanderbilt and Jay Gould,
  became some of the most powerful and wealthiest
  people in the country

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• railroad equipment became standardized, as did
  time zones
• land grant railroads helped to settle the West by
  selling their lands cheaply and on easy terms to
  settlers
• new railroad technology, including the air brake
  and more powerful locomotives, made it possible
  for larger trains to travel at faster speeds

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• Iron, Oil, and Electricity
• the transformation of iron manufacturing affected
  the United States almost as much as the
  development of railroads
• new techniques, including the Bessemer process,
  made possible mass production of steel
• huge supply of iron ore and coal in U.S. allowed
  for rapid growth of steel production
• the Mesabi range yielded enormous quantities of
  easily mined iron
• Pittsburgh, surrounded by vast coal deposits,
  became the iron and steel center of the country

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• the petroleum industry expanded even more
  spectacularly than iron and steel
• new refining techniques enabled refiners to
  increase the production of kerosene, which, until
  the development of the gasoline engine, was the
  most important petroleum product
• technological advances and the growth of an urban
  society led to the creation of new industries,
  such as the telephone and electric light
  businesses

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• Alexander Graham Bell invented the telephone in
  1876, and his invention quickly proved its
  practical value
• of all Edisons many inventions, the most
  significant was the incandescent light bulb
• the Edison Illuminating Company opened a power
  station in New York, and power stations began to
  appear everywhere
• the substitution of electric for steam power in
  factories had an impact comparable to the
  substitution of steam for water power before the
  Civil War

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• Competition and Monopoly The Railroads
• growing importance of expensive machinery and
  economies of scale led to economic concentration
• deflationary pressures after 1873 led to falling
  prices and increased competition, which cut
  deeply into railroad profits
• railroads attempted to increase the volume of
  shipping by giving rebates, drawbacks, and other
  discounts to selected customers

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• sometimes these discounts were far beyond what
  the economies of bulk shipment justified in
  order to make up these losses, railroads charged
  higher rates in areas where no competition
  existed
• combination of lost revenue from rate cutting and
  inflated debts forced several railroads into
  receivership in the 1870s
• in the 1880s, major railroads responded to those
  pressures by creating interregional systems
• these became the first giant corporations

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• Competition and Monopoly Steel
• the iron and steel industry was also intensely
  competitive production continued to increase,
  but demand varied erratically
• Andrew Carnegie used his talents as a salesman
  and administrator, along with his belief in
  technological improvements, to create Carnegie
  Steel Company, which dominated the industry
• alarmed by Carnegies control of the industry,
  makers of finished steel products began to
  combine and considered entering primary production

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• in response, Carnegie threatened to turn out
  finished products
• J. P. Morgan averted a steel war by buying out
  Carnegie, his main competitor, and the main
  fabricators of finished products
• the new combination, United States Steel, was the
  first billion-dollar corporation
• Carnegie retired to devote his life to
  philanthropy

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• Competition and Monopoly Oil
• competition among refiners led to combination and
  monopoly in the petroleum industry
• John D. Rockefeller founded the Standard Oil
  Company in 1870
• he used technological advances and employed both
  fair and unfair means to destroy his competition
  or to persuade them to join forces
• by 1879, Rockefeller controlled 90 of nations
  oil refining capacity
• to maintain monopoly, Rockefeller developed a new
  type of business organization, the trust

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• Competition and Monopoly Utilities and
  Retailing
• utilities, such as the telephone and electric
  lighting industries, also formed monopolies in
  order to prevent costly duplication of equipment
  and to protect patents
• Bell and Edison fought lengthy and expensive
  court battles to defend their inventions from
  imitators and competitors
• competition between General Electric Company and
  Westinghouse dominated the electric lighting
  industry

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• the life insurance business expanded after the
  Civil War, and it, too, became dominated by a few
  large companies
• in retailing, this period saw the emergence of
  urban department stores, including Wanamakers
  and Marshall Field
• the department stores advertised heavily and
  stressed low prices, efficient service, and
  guaranteed products

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• Americans Ambivalence to Big Business
• the expansion of industry and its concentration
  in fewer hands changed the way many people felt
  about the role of government in economic and
  social affairs
• although Americans disliked powerful government
  and strict regulation of the economy, they did
  not object to all government involvement in the
  economic sphere
• the growth of huge industrial and financial
  organizations frightened many people

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• at the same time, people wanted the goods and
  services big business produced
• the public worried that monopolists would raise
  prices still more significant was the fear that
  monopolies would destroy economic opportunity and
  threaten democratic institutions

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• Reformers George, Bellamy, Lloyd
• the popularity of several reformers reflected the
  growing concern over the maldistribution of
  wealth and the power of corporations
• in Progress and Poverty (1879), Henry George
  argued that labor was only true source of capital
• he proposed a single tax on wealth produced by
  appreciation of land values
• Edward Bellamys utopian novel, Looking Backward
  (1888), described a future in which America was
  completely socialized and carefully planned

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• Bellamys ideal socialist state arrived without
  revolution or violence
• Henry Demarest Lloyds Wealth Against
  Commonwealth (1894) denounced the Standard Oil
  Company
• his forceful but uncomplicated arguments made
  Lloyds book convincing to thousands
• despite their criticisms, these writers did not
  question the underlying values of the middle
  class majority, and they insisted that reform
  could be accomplished without serious
  inconvenience to any individual or class

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• Reformers The Marxists
• by the 1870s, the ideas of the Marxian socialists
  began to penetrate the United States Marxist
  Socialist Labor party was founded in 1877
• Laurence Gronlunds The Cooperative Commonwealth
  (1884) attempted to explain Marxism to Americans
• leading voice of Socialist Labor party, Daniel De
  Leon, was a doctrinaire revolutionary who
  insisted that workers could improve their lot
  only by adopting socialism and joining Socialist
  Labor party
• he paid scant attention to the opinions or to the
  practical needs of common working people

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• The Government Reacts to Big Business Railroad
  Regulation
• political reaction to the growth of big business
  came first at the state level and dealt chiefly
  with the regulation of railroads
• strict railroad regulation resulted largely from
  agitation by the National Grange and focused on
  establishing reasonable maximum rates and
  outlawing unjust price discrimination
• in Munn v. Illinois (1877), the Supreme Court
  ruled that such regulations by states were
  constitutional when applied to businesses that
  served a public interest

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• however, the Supreme Court declared invalid an
  Illinois law prohibiting discriminatory rates
  between long and short hauls in the Wabash case
  (1886) on the ground that a state could not
  regulate interstate commerce
• the following year, Congress passed the
  Interstate Commerce Act, which required that
  railroad charges be reasonable and just
• it also outlawed rebates, drawbacks, and other
  competitive practices
• in addition, the act created the Interstate
  Commerce Commission, the first federal regulatory
  board, to supervise railroad regulation

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• The Government Reacts to Big Business The
  Sherman Antitrust Act
• first antitrust legislation originated in the
  states
• federal action came with the passage of the
  Sherman Antitrust Act (1890), which declared
  illegal trusts or other combinations in restraint
  of trade or commerce
• the Interstate Commerce Act sought to outlaw the
  excesses of competition the Sherman Act intended
  to restore competition

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• the Supreme Court undermined the Sherman Act when
  it ruled that the American Sugar Refining
  Company, which controlled 98 percent of sugar
  refining, was engaged in manufacturing and
  therefore its dominance did not restrict trade
• in later cases, however, the Court ruled that
  agreements to fix prices did violate the Sherman
  Act

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• The Labor Union Movement
• at the time of the Civil War, only a small
  percentage of American workers were organized,
  and most union members were skilled artisans, not
  factory workers
• the growth of national craft unions quickened
  after 1865
• the National Labor Union was founded in 1866, but
  its leaders were out of touch with the practical
  needs and aspirations of workers
• they opposed the wage system, strikes, and
  anything that increased laborers sense of
  membership in the working class

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• their major objective was the formation of
  worker-owned cooperatives
• founded in 1869, the Knights of Labor supported
  political objectives that had little to do with
  working conditions and rejected the idea that
  workers must resign themselves to remaining wage
  earners
• the Knights also rejected the grouping of workers
  by crafts and accepted blacks, women, and
  immigrants
• membership in the Knights grew in the 1880s,
  encouraged by successful strikes against railroads

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• in 1886, agitation for an eight-hour day gained
  wide support
• clashes between workers and police in Chicago led
  to a protest meeting at Haymarket Square
• a bomb tossed into the crowd killed seven
  policemen and injured many others

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• The American Federation of Labor
• the violence in Chicago damaged organized labor,
  especially the Knights of Labor, which the public
  associated with anarchy and violence
• membership in the Knights declined
• a combination of national craft unions, the
  American Federation of Labor, replaced the
  Knights of Labor as the leading labor union
• led by Adolph Strasser and Samuel Gompers, the
  AFL concentrated on organizing skilled workers

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• it fought for higher wages and shorter hours
• the AFL accepted the fact that most workers would
  remain wage earners and used its organization to
  develop a sense of common purpose and pride among
  its members
• the AFL avoided direct involvement in politics
  and used the strike as its primary tool to
  improve working conditions

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• Labor Militancy Rebuffed
• threatened by the growing size and power of their
  corporate employers, the substitution of machines
  for human skills, and the influx of foreign
  workers willing to accept low wages, labor grew
  increasingly militant
• in 1877, a railroad strike shut down two-thirds
  of the nations railroad mileage
• violence broke out, federal troops restored
  order, and the strike collapsed
• in 1892, violence marked the strike against
  Carnegies Homestead Steel plant

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• the defeat of the Amalgamated Association of Iron
  and Steel Workers eliminated unionism as an
  effective force in the steel industry
• the most important strike of the period took
  place in 1894, when Eugene Debss American
  Railway Union struck the Pullman company
• President Cleveland broke the strike when he sent
  federal troops to ensure the movement of the mail
• when Debs defied a federal injunction to end the
  strike, he was jailed for contempt

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• Whither America, Whither Democracy?
• each year more of Americas wealth and power
  seemed to fall into fewer hands
• bankers dominated major industries
• centralization increased efficiency but raised
  questions about the ultimate effects of big
  business on democracy
• the defeat of the Pullman strike demonstrated the
  power of courts to break strikes

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• the federal government obtained an injunction in
  that case by asserting that the American Railway
  Union was engaged in a combination in restraint
  of trade prohibited by the Sherman Act
• after the failure of the Pullman strike, Debs
  became a socialist