Industry Comes of Age, 1865

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Chapter 24

• Industry Comes of Age, 18651900

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II. Spanning the Continent with Rails

• 1862 Congress began the transcontinental
  railroad.
• The Union Pacific started in Omaha, Nebraska.
• They received generous loans of 16,000 per mile
  completed on the prairie and up to 48,000 per
  mile in the mountains.
• Insiders of the Credit Mobilier construction
  company were able to pocket 73 million for some
  50 million worth of work Bribing congressmen
  along the way of course.
• Many Irish Paddies worked the line to lay as
  many as ten miles a day.
• As many as 10,000 men worked on the railroad at
  any given time.

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• The Central Pacific pushed east from Sacramento,
  California.
• It needed to inch through the Sierra Nevadas
  receiving the same cash incentives as the U.P.
• The C.P. was financed by the Big Four, men such
  as Leland Stanford (ex-governor w/ political
  connections) and Collis P. Huntington (effective
  lobbyist).
• They operated two construction companies and even
  though they made tens of millions, they were able
  to keep their hands relatively clean.
• The C.P. was manned by 10,000 Chinese laborers
  (hundreds of which lost their lives from
  premature explosions.)
• The two tracks met in Utah, in 1869.
• The U.P. had built 1,086 miles and the C.P. 689
  miles.

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IV. Railroad Consolidation and Mechanization

• Cornelius Vanderbilt ill-educated, ruthless and
  with clear vision he offered superior railway
  service at lower rates.
• He was able to earn 100 million during his time.
• Two significant improvements in railroading
• Steel rails and a standard gauge of track.
• Other refinements
• The Westinghouse air brake contributed to
  efficiency and safety.
• The Pullman Palace Cars advertised as glorious
  traveling hotels.

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V. Revolution by Railways

• During the post-Civil War years the railroad tied
  the country together with tracks from ocean to
  ocean.
• Trains hauled raw materials to factories and then
  sped back finished goods for sale all over
  America.
• Until the 1880s every town in U.S. had its own
  local time. Operators had to worry about
  keeping schedules and avoiding wrecks because
  there wasnt a standard time.

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• November 18, 1883, the major rail lines decreed
  that the continent would be divided into four
  time zones.

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VI. Wrongdoing in Railroading

• Many made huge amounts of money through railroad
  investments. One of the most adept at playing
  the game was Jay Gould.
• Gould played the game for nearly 30 years. He
  boomed and busted the stocks of various railroad
  companies.
• Stock watering was a favorite tactic of
  railroad moguls.
• Railroad promoters would inflate their claims
  about the assets and profitability of a company
  and then sold stocks and bonds far in excess of
  the railroads actual worth.

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• Railroad kings manipulated a huge natural
  monopoly wielding more direct power over the
  people than the president.
• They stopped the cutthroat tactics they had been
  using against each other and began to cooperate.
• They formed combination pools an agreement to
  divide business in a given area and share the
  profits.
• They also granted secret rebates or kickbacks to
  powerful shippers in return for steady traffic.
• Small farmers usually paid the highest rates,
  while corporations got the best deals.

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VII. Government Bridles the Iron Horse

• The depression on the 1870s led farmers to
  protest being railroaded into bankruptcy.
• Pressure from the Grange pushed many midwestern
  legislatures into trying to regulate the railroad
  monopoly.
• Wabash, St. Louis Pacific Railroad Company v.
  Illinois case decreed that no individual state
  had the right to regulate interstate commerce
  only the federal government could do it.

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• Congress ignored Clevelands distain for federal
  regulation and passed the Interstate Commerce Act
  in 1887.
• The Act prohibited rebates and pools and
  required the railroads to publish their rates
  openly.
• It also forbade unfair discrimination against
  shippers and outlawed charging more for short
  hauls.
• Finally, it set up the Interstate Commerce
  Commission (ICC) to administer and enforce new
  legislation.
• The country could now avoid rate wars among the
  railroads.

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VIII. Miracles of Mechanization

• Industrialists continued to refine the pre-Civil
  War American System of using specialized
  machinery to make interchangeable parts.
• As seen by Henry Fords moving assembly line for
  the Model T.
• Captains of industry had a major reason for
  inventing new machines they made it possible to
  replace expensive skilled labor with unskilled
  workers, cheap and plentiful due to massive
  immigration.

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• Between 1860 and 1890, some 400,000 patents were
  issued.
• Alexander Graham Bell, (1876) introduced the
  telephone.
• Thomas Edison, the wizard of Menlo Park, New
  Jersey.
• Phonograph, moving picture, and the electric
  light bulb in 1879.

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IX. The Trust Titan Emerges

• Andrew Carnegie, steel king John D. Rockefeller,
  the oil baron and J. P. Morgan, the bankers
  banker all focused on circumventing competition.
• Vertical integration combining into one
  organization all phases of manufacturing from
  mining to marketing.
• Carnegie took his ore from the ground floated it
  along on his ships moved it on his railroads and
  delivered it to his blast furnaces in Pittsburgh.
  

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• Horizontal integration allying with competitors
  in an industry to monopolize a given market.
• Rockefeller developed the idea of a trust to
  control rivals.
• Stockholders in smaller oil companies assigned
  their stock to the board of directors of
  Rockefellers Standard Oil Company (1870). It
  then consolidated and allied the operations of
  the previously competing enterprises Let us
  prey, said Rockefeller.
• Any competitor left out of the trust, were
  basically forced to go under.
• Standard Oil soon cornered the market all over
  the world.

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• Interlocking directories were J.P. Morgans
  answer to the businesspeople wounded by cutthroat
  competition.
• He would consolidate rival enterprises and ensure
  future harmony by placing officers of his own
  banking syndicate on their various boards of
  directors.

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X. The Supremacy of Steel

• When Vanderbilt began to use steel rails for his
  railroad they were so rare that he had to import
  them from Britain.
• Within 20 years America was producing more than
  Britain and Germany combined thanks to the
  Bessemer process.
• The Bessemer process it was discovered that
  blowing cold air on red-hot iron caused the metal
  to become white-hot, thus eliminating impurities.

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XI. Carnegie and Other Sultans of Steel

• Andrew Carnegie started as a bobbin boy earning
  1.20 a week, but ended up giving away 350
  million before he died.
• Carnegie was a tight fisted businessman but he
  disliked the monopolistic trusts.
• Carnegie, looking to sell, was approached by J.P.
  Morgan.
• After 8 hours of haggling, they settled on
  selling for 400 million dollars.
• J.P. Morgan would eventually bring the company to
  be worth 1.4 billion.

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XII. Rockefeller Grows an American Beauty Rose

• In 1859 the first oil well started pumping out
  black gold.
• Kerosene, was the first major product of the oil
  industry.
• Used in lamps, it burned much bright than whale
  oil.
• The industry brought in more money than all the
  gold mined in the west.
• As Kerosene faded away due to the electric light
  bulb, the combustion engine entered the scene.
• This gave the oil industry a new and hugely
  profitable lease on life.

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• John D. Rockefeller, born into a poor family,
  pushed forward to become a successful
  businessman.
• In 1870, he organized the Standard Oil Company.
• He sought to eliminate the middlemen and squeeze
  out competitiors.
• His policy was to sell all the oil that is sold
  in your district. By 1877 he controlled 95 of
  all oil refineries in the country.
• Rockefeller looked at business as survival of the
  fittest. To him it wasnt personal, he looked at
  anything that could hurt his business as an enemy
  that needed to be vanquished immediately.

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XIII. The Gospel of Wealth

• As some believed that they were given their
  wealth by God (Gospel of Wealth,) many believed
  they won theirs based on their natural talents
  (Social Darwinism.)
• The idea that the wealthy and powerful simply
  demonstrated great ability than the poor was the
  foundation of Social Darwinism.
• As William Sumner stated, what do social classes
  owe each other?... Nothing.

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XIV. Government Tackles the Trust Evil

• The masses finally tried to rise up against the
  Trusts via state legislation, only to fail
  because of a loop hole in the 14th amendment.
• They then appealed to Congress, and in 1890 the
  Sherman Anti-Trust Act was signed.
• The law proved to have no teeth however, and more
  new trusts were formed in the 1890s under
  McKinley than during any other like period.
• Not until 1914 did the law have any real teeth.
  Until then the question was whether the
  government would control the trusts or the trusts
  would control the government.

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XVI. The Impact of the New Industrial Revolution
on America

• Probably no single group was more affected by the
  new industrial age than women.
• New inventions such as the typewriter and the
  telephone switchboard.
• Millions of stenographers and hello girls
  discovered new economic and social opportunities.
• Most women workers, however, toiled out of
  economic necessity, and faced the same long hours
  and deplorable working conditions as the men, yet
  earned less.

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XVII. In Unions There Is Strength

• Massive unskilled labor pools made the individual
  worker powerless to battle against giant
  industries.
• They were forced to organize and fight for basic
  rights.
• The corporation could lose the individual worker
  much easier than the worker could lose the
  corporation.
• Corporations could retain high-priced lawyers,
  buy up local press, and put pressure on
  politicians. They could also import
  strikebreakers (scabs) and get thugs to beat
  labor organizers.

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• Corporations might even own a company town,
  where employees held a status that resembled
  serfdom.
• High-priced grocery stores.
• High-priced rent.
• easy credit.

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XVIII. Labor Limps Along

• By 1872 there were hundreds of thousands of
  organized workers and 32 national unions.
• The National Labor Union, organized in 1866,
  aimed to unify workers across trades to challenge
  their powerful bosses.
• The Union lasted 6 years and boasted 600,000
  members.
• Including skilled, unskilled and farmers
• Excluded Chinese, women, and blacks

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• Knights of Labor a new organization, sought to
  include all workers in one big union.
• The Knights only barred nonproducers lawyers,
  bankers, stockbrokers, etc.

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XIX. Unhorsing the Knights of Labor

• Haymarket Square Riot labor disputes had broken
  out, and on May 4, 1886, the Chicago Police
  department advanced to break up a protest when a
  dynamite bomb was thrown into the crowd.
• Several dozen were killed or injured, including
  police.
• The Knights of Labor were linked to the Bombing
  and many associated them (mistakenly) with
  anarchists.

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XX. The AF of L to the Fore

• American Federation of Labor was the brainchild
  of Samuel Gompers in 1886.
• One of Gompers major goals was the closed shop
  or all union labor.
• His most effective weapons were the walkout and
  boycott.