Ricky Ahlo-Pinera
Pd. 6
October 31, 2011
Chapter 18 -- Industrial Growth: An Overview
A. American Manufacturing flourished in the mid to late 1880's due to:
1.New natural resources were discovered and exploited thereby increasing opportunities
2. Increased size of the national market
3. Protective Tariffs led to the entry of foreign capital into America
4. Influx of Immigrants provided the labor to expand American industry; 2.5 million in
1870s, 5 million in 1880s.
B. What did these push and pull factors lead to?
a) Introduction of Robber Barons (Bad) and/or Captains of Industry (Good, guiding
economy).
b) Monopolies led to abuse of workers, in an attempt to control the economy
IX. Railroads: The First Big Business
A. Railroads emerged as the first big business. Rail lines began to be connected across
the country. In the process, the railroad business dominated the U.S economy and led to
the emergence of leaders in the industry. Other inventions and technologies would also
expand the American Market.
1. Effects on the economy
a) In 1890 the system took in one billion dollars worth of revenue, compared to the
Federal Government's $403 million.
b) By 1900 the nation had 193,000 miles of railroad track compared to 35,000 miles at
the climax of the Civil War.
2. Leaders of the Railroad
a) Cornelius Vanderbilt owned Rail lines throughout the upper Midwest.
b) Thomas A. Scott owned lines running in cities such as Philadelphia, Chicago, Saint
Louis, and Baltimore.
c) Jay Gould consolidated the Kansas, Union and the Missouri Pacific, controlling much
of the lines in the Midwest and the Northwest.
3. Changes in the Railroad Business
a) Time zones were developed. (growing standardization of the US)
b) Fixed rates for different types of freight.
c) New technologies and methods lead to the improvement of the rail system.
(1) Invention of the air brake by George Westinghouse (1869), and the sleeping car by
George Pullman (1864).
2. Standard railroad measurements and systems allowed for greater efficiency and
allowed the national system to function as one railroad network.
X. Steel, Oil, and Electricity
A. The Bessemer Process, the process of converting cast iron to steel opened up a new
industry gave way to a new industry, Steel.
B. Railroads and new naval technologies led to an expanded shipping of resources in the
united states.
C. Technological advances also inspired the growth of the petroleum industry as new
developments, which drove the prices of oil down, making it marketable.
D.Alexander Graham Bell's invention (the telephone) resulted in a growing use of
electricity and led to the formation of companies such as American Telephone and
Telegraph Company and Western Union.
E. Thomas Edison invented the incandescent lamp, which resulted in the emergence of
the power industry.
XI. Competition and Monopoly: The Railroads
A. Deflation caused prices to fall while production increased and led to competition not
only within industry, but also within the railroad business.
B. What was the result of competition on the railroading business?
1. Competition advanced the public interest by keeping prices low and insuring the most
proficient producer the largest profit.
2. As competition cut into railroad profits, lines attempted to undersell by:
a) Giving rebates to large shippers in order to capture their business.
b) Giving discounts to those who shipped in volume. (Terminal Rates)
3. To compensate for their losses, railroads charged enormous rates at points along the
tracks where no competition emerged. Under these conditions it occasionally cost more
money to ship goods a short distance than farther distances.
a) In the 1870's it cost 30 cents to transport a barrel of flour from Rochester to New York
City, a distance of 350 miles. At the same time it cost 20 cents a barrel to transport flour
from Minneapolis to New York, a trip of over 1000 miles.
4. Bankruptcy resulted from the stiff competition, leading to rail lines being bought out
by monopolies run by plutocrats such as J.P. Morgan.
a) By 1879, 65 railroad lines were bankrupt. These lines were forced to consolidate their
losses by selling out to the control of financiers such as J.Pierpont Morgan who regulated
rates and prices through the banks.
XII. Competition and Monopoly: Steel
A. Competition within the steel business was also stiff. The demand for steel varied from
month to month and year to year. Many industries expanded during good times only to
crumble in recessions.
B. Andrew Carnegie emerged as the leader of the steel business. Carnegie combined
ruthlessness with daring ingenuity to create a rise in the steel business by vertical
consolidation. He controlled all the major aspects of the steel industry thus creating a
monopoly.
1. Carnegie would expand his production in lean years when costs were lower and reap
the benefits in good years.
2. Carnegie had no conscious when it came to money. "Many of my friends needed
money...I bought out five or six of them. Opposed liberal interest with strong rhetoric
That is what gave me my leading interest in this steel business." The monopolization
process was strengthened by the concentration of wealth in robber barons and captains of
industry.
3. Carnegie felt that it was a disgrace to die rich so he sold out to J.P Morgan who went
on to build United States Steel, the world's first billion dollar corporation. Carnegie
dedicated the rest of his life to philanthropic work, such as Carnegie Hall the "Gospel of
Wealth".
XIII. Competition and Monopoly: Oil
A. Competition in the oil business centered around the oil refining areas of Cleveland,
Baltimore, Pittsburgh, and New York.
1. John D. Rockefeller and his Standard Oil Company (founded 1870) in Cleveland
would emerge as the dominant player in the oil business. He used horizontal
consolidation and controlled the refining business, an essential part in the process of oil
producing. Rockefeller later expanded into vertical consolidation when his horizontal
consoldiation was complete.
2. By 1879 Rockefeller controlled 90 percent of the nation's oil refining capacity.
a) Rockefeller undermined competition by offering the lowest rates, which eliminated
small independents.
b) Rockefeller exploited every technological advance and controlled much of the
country's wealth.
c) Rockefeller employed a Pennsylvania lawyer named Samuel C. T. Dodd.
(1) Dodd created the "Trust" which nearly eliminated competition, and led to
skyrocketing profits. By 1892 John D. Rockefeller was worth over $800 million.
XIV. Competition and Monopoly: Utilities and Retailing
A. When Alexander Graham Bell and Thomas Edison first announced their incandescent
lamp (electric light), capitalists, engineers, and inventors saw an opportunity to leech off
their patent. Years of bitter competition and monopolies resulted from the invention.
There were three main players in the electricity business:
a) Alexander Graham Bell and Thomas Edison
b) James Westinghouse
c) Thomas Houston
d) In 1892 Edison and Houston companies merged, forming General Electric
(1) The retailing business was led by Alexander T. Stewart, who owned an eight story
building in New York. John Wanamaker owned Marshall Field in Chicago. Each store
advertised heavily, stressing low prices and money back guarantees, which lead to huge
profits.
XV. Americans React to Big Business
A. Americans viewed big business as a "double edged sword." They were greedy for
more of the goods and services that these businesses provided, but were fearful of their
effect on the economy and the government.
1. John Boyle O'Reily, a liberal Catholic journalist, wrote in 1886: "There is something
worse that anarchy, bad as that is; and it is irresponsibly power in the hands of the
wealthy."
a) Carnegie and Rockefeller reacted by stating that the concentration of wealth in the
hands of a few is necessary for the survival of the nation and strengthened the Social
Darwinism / "survival of the fittest" attitude.
XVI. Reformers: George, Bellamy, Lloyd
A. Henry George published "Progress and Poverty," which was a book that attacked the
unequal distribution of wealth.
1. George proposed a "single tax" that would collect so much money that no other taxes
would be necessary, While the single tax was never adopted, it was the foundation for the
16th Amendment (Income Taxes).
B. Edward Bellamy wrote "Looking Backwards" in 1888. This book described a man
going under hypnosis in 1888 and waking up to a utopian society in the year 2000.
1. He suggested the ideal socialist state, in which all citizens shared equally, would arrive
without violence.
C. Henry Lloyd wrote "Wealth Against Commonwealth" in 1894. This was a book that
attacked trusts such as the Standard Oil Company trusts.
1. He also launched attacks against:
a) Herbert Spencer's concept of the survival of the fittest
b) Laissez faire Government
c) Monopolies
XVII. Reformers: The Marxists
A. By the mid 1870's socialists, led by Laurence Gronlund, were beginning to emerge in
the United States. Gronlund wrote "The Cooperative Commonwealth" in 1884 and Daniel
De Leon edited "The People," which was the party's weekly paper.
1. Both individuals stressed the ideas of Karl Marx, and the need for a worker revolution.
In 1891 De Leon would run for the presidency under the Socialist Labor Party.
XVIII. The Government "Reacts" to Big Business: Railroad Regulation
A. Political action related to big business came first at the state level.
1. National Grange of the Patrons of Husbandry was founded in 1867 by Oliver H.
Kelley. The Grange was created to provide social and cultural benefits for isolated rural
communities.
a) Munn v. Illinois (1877) A case involving a grain elevator owner who protested that
railroads were being deprived of property without due process of law , and therefore
would not comply with a state Warehouse Act. The Supreme Court upheld the act
claiming that any business that served the public interest was subject to state control.
b) The need for federal control would emerge with the Wabash Case of 1886 which
declared that only the federal government could reulate Interstate commerce, leading to
the government's creation of the ICC
(1) Interstate Commerce Commission (ICC) and state regulatory commissions proved to
be ineffective measures due to Sepreme Court biases towards big business
XIX. The Government Reacts to Big Business: The Sherman Antitrust Act 1890
A. As with the railroad legislation, the first antitrust laws originated in the states,
especially those in the South and the West. These antitrust laws were rarely enforced.
Federal action came in 1890 with the passage of the Sherman Antitrust Act.
1.The Sherman Anti-trust act was an attempt to restore competition and regulate
monopolies
a) United States v. E.C. Knight Company-The Supreme court ruled that the Sherman
Anti-trust act only regulated commerce not manufacturing, limiting the effectivness of
the act.
XX. Labor Organizes
A. In the Civil War period only a small percentage of workers were tied to a union. This
small percentage was largely skilled workers, not unskilled factory hands. This would
begin to change with the emergence of union bodies such as the National Labor Union in
1866 and the Knights of Labor in 1869.
1. Knights of Labor- led by Uriah S. Stephens; the union called for workers to pool their
resources so they could move up the economic ladder. They also pushed for an eight hour
day and the right to form a union. A strike against Jay Gould's Missouri Pacific saw
union membership sail from 42,000 members in 1882 to 700,000 members by 1886.
2. Haymarket Square- A riot occurred when union workers in Chicago gathered to protest
the killing of one of their members in a labor dispute between the workers and the
McCormick Harvesting Machine Company. Police intervened to break up the meeting
when someone tossed a bomb in their circle and killed 7 officers. Although the persons
identity was never revealed, seven union members were condemned to die. In effect the
Knight's of Labor perished as well during the demise of the labor union movement.
XXI. The American Federation of Labor
A. The AFL, founded by Samuel Gompers, (1886) picked up where the Knight's of Labor
died. The AFL pushed to gain worker improvements such as the eight hour day, and
higher wages, through non-violent striking.
XXI. Labor Militancy Rebuffed
A. Workers used strikes because they felt squeezed by different sides.
1. Threat of foreign workers taking their jobs(Scabs) increased Xenophobia
2. The growing size and power of corporate employers
3. Substitution of machines for human skills
B. Three major strikes indicated the labor unrest in the late 1800's. These strikes
illustrated the need for increased government intervention and regulation.
1. Strike of 1877---- A railroad strike emerged on the Baltimore & Ohio system in
response to a wage cut. The strike spread East and West along the lines until two thirds of
the railroad mileage of the country had been shut down. Violence broke out, rails were
touched, and President Hayes sent in federal troops to break up the strike.
2. Homestead Strike---Strikers went on strike against Andrew Carnegie's Homestead
Steel Plant in Pittsburgh in protest of Carnegie's refusal to negotiate with the union.
Henry Clay Frick, the boss of the Pittsburgh plant, sent in Pinkerton detectives (thugs) to
break up the strike. Alexander Berkman, an anarchist, broke into Frick's office and
attempted to assassinate him. As in the Haymarket Square, the action of radicals turned
the public against the workers.
3. Pullman Strike---Occurred when workers refused to handle trains that contained
Pullman cars because of a price cut issued by George Pullman's Palace Car factory
outside of Chicago. The strike tied up railroad lines and owners called for President
Cleveland to intervene. Cleveland complies with the owners request and Federal troops
break up the strike and jail American Railway Union leader, Eugene. V. Debs.
XXIII. Whither America, Whither Democracy?
A. Some Americans saw the country's progress declining
1. Uneven distribution of wealth
2. Centralization of manufacturing
3. Government protection of the wealthy (intervention of worker strikes).
B. The media supported workers in many cases by revealing the true events during the
time period
XXIV. Key Terms
ICC- (Interstate Commerce Commission) Enforced the measure and required railroads to
post their rates publicly. It also prohibited rate discrimination.
KoL- (Knights of Labor) (1869) The KoL were led by Uriah S. Stephens; the union
called for workers to pool their resources so they could move up the economic ladder.
They also pushed for an eight hour day and the right to form a union. A strike against Jay
Gould's Missouri Pacific saw union membership sail from 42,000 members in 1882 to
700,000 members by 1886.
AFL- (American Federation of Labor) (1886) The AFL picked up where the Knight's of
Labor died. The AFL stressed worker improvements such as the eight hour day, and
higher wages.
Sherman Anti-trust Act- It was a gilded act that was created to supress monopolistic
control and plutocratic influence
Vertical Consolidation- The process of monopolizing the whole business by controlling
all of te parts from the raw materials to the finished product
Horizontal Consolidation- The process of monopolizing one necessary part of the
business.
Social Darwinism-This philosophy applied evolution to social studies by stating that the
law of the survival of the fittest applied to the human race.