The Rise of Industrial America, 1865-1900

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The Rise of Industrial America, 1865-1900

• The Gilded Age

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President Grover Cleveland, 1888

• As we view the achievements of aggregated
  capital, we discover the existence of trusts,
  combination and monopolies, while the citizen is
  struggling far in the rear or is trampled to
  death beneath an iron heel. Corporations, which
  should be the carefully restrained creatures of
  the law and servants of the people, are fast
  becoming the peoples masters.

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1900 U.S. led the world in industry

• Natural resources coal, iron ore, copper, lead,
  timber, and oil
• Labor supply hundreds of thousands of immigrants
  between 1860 and 1900
• Growing population
• Advanced transportation network
• Capital was plentiful even Europeans invested in
  the U.S.
• Development of laborsaving technologies
• Over 440,000 new patents between 1860 and 1900
• Laws protected private property
• Subsidized RRs with land grants and loans
• Protective tariffs
• Little regulation on business
• Few taxes on corporate profits
• Entrepreneurship

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The Railroads

• RR mileage increased more than 5x from 1865 to
  1900
• Nationwide RR network created a market for goods
• Encouraged mass production, mass consumption, and
  economic specialization
• Promoted growth of coal and steel industries
• Divided into 4 time zones in 1883
• Modern stockholder corporation
• Development of structures in finance, business
  management, and regulation of competition

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Eastern Trunk Lines

• Major route between large cities
• Cornelius Vanderbilt used steamboat profits to
  merge local RRs into the New York Central
  Railroad in 1867 (NY to Chicago)
• Baltimore and Ohio RR
• Pennsylvania RR

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Western Railroads

• Coincided with settlement of the last frontier
• Promoted settlement on the Great Plains
• Linked the West with the East

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Federal Land Grants

• 80 RR companies received more than 170 million
  acres of public land
• Govt expected them to sell land around RR routes
  in order to finance construction
• Negative Consequences
• Quick and poor construction
• Corruption in government
• Credit Mobilier Scandal
• RRs controlled half of the land in some western
  states

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Transcontinental Railroads

• Congress authorized The Union Pacific and the
  Central Pacific to build during the Civil War
• Union Pacific
• Across Great Plains, starting in Omaha, NE
• War veterans and Irish immigrants
• Central Pacific
• Through Sierras from Sacramento
• 6,000 Chinese immigrants
• Came together May 10, 1869 at Promontory Point,
  UT (Golden Spike)
• By 1900, 4 more transcontinental RRs existed
• James Hills Great Northern was the only one
  built without subsidies

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Competition and Consolidation

• RRs were overbuilt and some were unprofitable
• Mismanagement and fraud
• Speculators (Jay Gould) made quick profits by
  selling off assets and watering stock inflating
  value of assets and profits before selling to
  public
• Offered rebates and kickbacks to favored shippers
• Farmers often had to pay higher prices
• Pools competing companies agreed secretly to fix
  prices and share business

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Panic of 1893

• Forced ¼ of RRs into bankruptcy
• J. Pierpont Morgan and other bankers took control
  and consolidated RRs
• Stabilized rates and reduced debts
• By 1900, 7 giant systems controlled 2/3 of the
  RRs
• Interlocking directorates same directors ran
  competing companies creating regional RR
  monopolies
• William Vanderbilt The public be damned.
• Granger Laws overturned by courts

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Industrial Empires

• Shift in industrial production in the late 19th
  century
• Early factories had produced textiles, clothing,
  and leather products
• Second Industrial Revolution after the Civil
  War
• Heavy industry steel, petroleum, electric power,
  and industrial machinery

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The Steel Industry

• Henry Bessemer in England and William Kelly of
  the U.S. discovered an new process of making
  large quantities of steel The Bessemer Process
• Great Lakes Region became leading steel producer

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Andrew Carnegie

• Poor Scottish immigrant who became the
  superintendent of a PA RR.
• 1870s started manufacturing steel in Pittsburgh
• Vertical integration company controls every
  stage of the industrial process
• Mining raw materials to transporting the finished
  product
• Carnegie Steel was at top by 1900

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U.S. Steel Corporation

• Carnegie wished to retire and devote himself to
  philanthropy
• Sold company to J.P. Morgan for over 400 million
• First billion-dollar company
• Largest enterprise in the world
• 168,000 employees
• Controlled over 3/5 of the nations steel business

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The Oil Industry

• 1st U.S. oil well drilled by Edwin Drake in 1859
  in PA

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Rockefeller and Standard Oil

• Applied latest technologies and more efficient
  practices
• Rebates from RR companies and temporarily cut
  prices to eliminate competition (one-two punch)
• Controlled 90 of the oil refinery business by
  1881
• Formed a trust horizontal integration
• Other industries copied and organized trusts

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Antitrust Movement

• Sherman Antitrust Act (1890) prohibited any
  contract, combination, in the form of trust or
  otherwise, or conspiracy in restrain of trade or
  commerce.
• Too vague to be enforced
• United States v. E.C. Knight Co. (1895) ruled
  that the law could only be applied to commerce,
  not manufacturing
• Few convictions until the Progressive Era

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Laissez-Faire Capitalism

• The government should stay out of the economy
• The government should not regulate businesses

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Conservative Economic Theories

• The Wealth of Nations (1776) economist Adam
  Smith argued that business should not be
  regulated, but supply and demand should be the
  determining economic forces
• American industrialists used laissez-faire
  economics to justify their business practices

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Social Darwinism

• Theory of natural selection
• English social philosopher Herbert Spencer
  believed that the theory should be applied to the
  marketplace
• The concentration of wealth should be held by the
  fit.
• Professor William Graham Sumner of Yale argued
  that help for the poor would interfere with the
  laws of nature

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Gospel of Wealth

• Used religion to justify wealth
• J.D. Rockefeller applied the Protestant work
  ethic hard work and success are signs of Gods
  favor
• Carnegies article wealth argued that the
  wealthy had a God-given responsibility to carry
  out acts of civic philanthropy

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Technology and Innovations

• Inventions
• Telegraph by Samuel Morse
• Improved transatlantic cable (1866)
• Telephone by Alexander Graham Bell (1876)
• Typewriter (1867)
• Cash register (1879)
• Calculating machine (1887)
• Adding machine (1888)
• Kodak camera by George Eastman
• Fountain pen
• Gillettes safety razor

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Edison and Westinghouse

• Thomas Edison
• Invention Factory
• More than 1000 patents
• Phonograph
• Incandescent lamp
• Mimeograph
• Motion picture machine
• George Westinghouse
• More than 400 patents
• Air brake for the railroads
• Transformer for electrical current
• Made possible lighting for cities and operation
  of streetcars, subways, and appliances

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Marketing Consumer Goods

• R.H. Macy in NYC
• Marshall Field in Chicago
• Frank Woolworths Five and Ten Cent Stores
• Sears Roebuck and Montgomery Ward provided for
  catalog orders
• Packaged foods Kellogg and Post
• Refrigerated railroad cars and canning changed
  the war Americans ate
• Created a consumer culture

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Impact of Industrialization

• Raised the standard of living for most people
• Created sharper economic and class divisions
  among the rich, middle class, and the poor

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Concentration of Wealth

• By the 1890s, the richest 10 controlled 9/10 of
  the nations wealth.
• New class of wealth
• Newport, RI cottages

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Horatio Alger myth

• Authors novels sold more than a million copies
• Portrayed a young man who became rich and
  successful through honesty, hard work, and a
  little luck
• In reality, few experienced this rags-to-riches
  story
• Typical wealthy business person was a white,
  Anglo-Saxon, Protestant male who came from an
  upper or middle-class background

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Expanding Middle Class

• Growth of corporations provided a need for
  white-collar workers
• Middle management was needed
• Expanded middle class through creating jobs for
  accountants, clerical workers, and salespersons

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Wage Earners

• By 1900, 2/3 worked for wages that required them
  to work ten hours a day, six days a week
• Determined by supply and demand
• Factory wages were barely above subsistence
• Real wages rose steadily, but most families still
  could not support a family on one income
• Women and children were working to make up the
  difference
• 1890 11 million of the 12.45 million families
  averaged less than 380 a year

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Working Women

• 1 out of every 5 women were working in 1900
• Most were young and single
• Women usually worked in textile, garment, and
  food-processing industries
• Secretaries, bookkeepers, typists, and telephone
  operators

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Labor Discontent

• Assigned one step in the production monotonous
• Exposed to chemicals and pollutants
• Changed jobs on average every 3 years
• Many joined unions

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Struggle of Organized Labor

• Industrial Warfare
• Businesses held most of power because of the
  surplus of cheap labor
• Lockout
• Blacklists
• Yellow-dog contracts
• Private guards and state militia
• Court injunctions
• Great railroad strike of 1877
• Hayes used federal troops to end labor violence

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Attempts to Organize National Unions

• National Labor Union
• Attempt to organize all workers skilled and
  unskilled
• Knights of Labor
• Began secretly by Terrence Powderly
• Opened membership to all, including women and
  African-Americans
• Worker cooperatives
• Abolition of child labor
• Abolition of trusts and monopolies
• Wanted to arbitrate rather than strike
• Haymarket bombing
• American Federation of Labor
• Samuel Gompers
• Higher wages and improved working conditions

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Strikebreaking

• Homestead Strike
• Failure set back the union movement in the steel
  industry until the New Deal
• Pullman Strike
• Federal court issued an injunction forbidding
  interference and ordering workers to abandon the
  strike
• Eugene Debs (American Railway Union) and other
  union leaders were arrested and jailed.