THE GILDED AGE
In which the Industrial Revolution changed America causing the growth of
cities, control of the Great Plains, and a fight for justice.
INCORPORATING AMERICA: THE RISE OF BIG
BUSINESS
WHAT LED TO THE RISE OF BIG BUSINESS?
•
2nd IR
• US/Germany  modernity in industry
• Innovation/invention in area of metals, machinery, chemicals, foodstuffs
•
Shortage of labor (post-CW)  increase in technology
• Transportation networks (RRs)
• Efficient, high-speed, labor-saving machinery
• New products
• Better productivity = more products  expansion of co. into more states
• Standardized machinery, parts,
•
Abundance of natural resources/power sources
• Coal, iron, oil, wood, water, electricity
•
Entrepreneurs & Innovators
• 440,000 patents in 1800s, 234,956 in 1890s
• Capital investments
•
Growth of labor
• Immigrants: 23 mil. By 1914
• Movement from farm to city
•  new markets for products
•
Gov. that encouraged business
• High tariffs
• Gov. $$ and land to finance RR, protective tariffs, little regulation, limited taxes on
corporate profits
•
Laissez Faire  industry control gov.
• Gospel of Wealth: Carnegie
• $ of wealthy from God . . . Must be morally responsible
• Social Darwinism: Herbert Spencer
• Wealthy deserve wealth- inherently better
• Poor are so b/c of own shortcomings- deserve it
• Shouldn’t help the “unfit” to survive  impedes progress
• Russell Cornwell, “Acres of Diamonds” speech
• William Graham Sumner, What Social Classes Owe Each Other
“DIG IN YOUR OWN BACKYARD”
•
http://historymatters.gmu.edu/d/5769
•
“I say that you ought to get rich, and it is your duty to get rich ... The men who get rich
may be the most honest men you find in the community. Let me say here clearly ... ninety eight out of one hundred of the rich men of America are honest. That is why they are rich.
That is why they are trusted with money. That is why they carry on great enterprises and
find plenty of people to work with them. It is because they are honest men. ... I
sympathize with the poor, but the number of poor who are to be sympathized with is very
small. To sympathize with a man whom God has punished for his sins ... is to do wrong. ...
Let us remember there is not a poor person in the United States who was not made poor
by his own shortcomings…”
•
-Russell Cornwell
Spencer
Sumner
FUELING INDUSTRY
•
RR connect E – W  national market for goods, services
•
•
•
•
Telegraph system, steamships, electricity (1880s)
US leader in AG by 1870
•
Fueled economy  wheat, corn to flour, meal
•
Cattle industry- from slaughter to packing saw growth of major industry
•
Stimulated industrial sector of econ
Applying science to industry
•
Scientists + engineers  kerosene/gasoline from crude oil
•
Refining steel (Bessemer process- GB)
•
Led to new products @ lower prices
Focus on maximum production, national/international marketing & distribution
•
Steel, oil, processed food, tobacco
•
http://www.youtube.com/watch?feature=player_embedded&v=kW-3wnWpoR8
RAILROADS
•
1865- 35,000 miles
•
1900- 200,000
•
Gov. grants of land to RR companies
• Built by private companies- sold bonds to raise $ for contruction
• Gov. aid through land grants, loans, tax breaks
• Haul military personnel/equipment, mail, gov. freight
• Grow economy = grow gov. revenue
• Corruption: Credit Mobilier
•
Town success dependent on RR stop
• Ghost towns = no stop
•
RR connect raw material to factories  nat’l market for goods
• Also a market themselves – steel, iron, lumber
•
Built by: civil war vets, immigrants (Irish, Chinese), African-Americans
• Harsh climate, Indian raids, water shortages
• 90% of Central Pacific workers = Chinese
• Handle explosives, operate power drills (high danger, high death)
•
Cornelius Vanderbilt- “Commodore”
• Involved in steamboats, but moves to RR bc of hazards of wartime shipping
• Consolidated rail lines into rail network- New York Central
• Death in 1877- William Henry took over & extended 13,000
Tracks owned by different companies, not
standardized
Large companies
bought small railroads,
standardized gauges and
schedules, and pooled cars
Cornelius Vanderbilt (3.47)
Eastern railroads were
connected to the West
by 4 great trunk lines
ROCKEFELLER AND OIL: RAGS TO RICHES I
•
Oil discovered in Titusville, PA  refineries in Cleveland, Pittsburgh
• Cleveland also rail/shipping connections, so service to oil fields an advantage
•
JDR moved into oil business during CW
• Organized, self-disciplined, daring, aggressive
• 1862- backed friend’s (partner) refinery business
•
1870- Standard Oil Co. of Ohio
• Led nation
•
More people enter industry  price decreasing, trade destroyed
• Led JDR to find way to end chaos and “stomp out” competition
•
1872- South Improvement Co created to handle marketing of oil shipments
• Allow JDR to control traffic and gain admiration from RRs  secret rebates on
standard rates from RRs for large shipments
• Temporarily cut prices, force others down
•
Pressure competitors to sell @ his own price
• “if we did not sell out, we should be crushed out”
• JDR could dissuade RRs from servicing other companies, create price wars
•
By 1879, Standard Oil controlled 90-95% of US refined oil
•
JDR policy- “pay nobody a profit”
•
•
Vertical integration: made own barrels, cans, pipelines, tank cars, oil-storage facilities,
etc.
Trusts formed. Legal formation allowing 1+ people to manage property of others, now used to
control businesses
•
37 stockholders convey stock to 9 “trustees” who gave direction to all S.O. cos
•
Copied by others in 1880s
•
Vulnerable to prosecution via state laws vs. monopoly/restraint of trade
Industrialization led
to a demand for oil
for lubrication and
kerosene lighting
The oil industry during the
Gilded Age was dominated
John D. Rockefeller’s
Standard Oil Company
Standard Oil lowered costs
and improved the quality
of its oil products
By 1879, Standard Oil sold
90% of the oil in America
John D. Rockefeller (2.51)
Rockefeller took
advantage of his
workers and used his
fortune to influence
the national gov’t…
…but Rockefeller gave
away $500 million
to charities, created
the Rockefeller
Foundation, and
founded the
University of Chicago
•
1892- Supreme Court of Ohio order SO Trust dissolved
•
Next phase = holding company
• Company that controls other companies by holding all/majority of stock
• Standard Oil Co. of New Jersey- holding company for all SO companies
•
The good: $500 million donated during 98-year lifetime
• Most to education, medicine
• “I have always regarded it as a religious duty to get all I could honorable and to give
all I could.”
CARNEGIE AND STEEL: RAGS TO RICHES II
•
Early on, worked way up through telegraph company, then RRs, bridge building, iron,
finally STEEL, investments
•
Travelled to GB & learned of Henry Bessemer process of steel-making  all eggs in a
steel basket
• Very competitive, desire for efficiency, most up to date machinery, expanded during
recessions
• Kept much profit when times were good, so when economy down (construction,
labor costs low) he could buy out competition and expand
•
Steel = miracle material of post-CW
• Not new, but CHEAP with Bessemer Process
• 1/3 of world’s steel procuded by Carnegie
•
Sold company to J.P. Morgan in 1901 for $400-500 million (to become 1 st billion dollar
corp)
IRON & STEEL
PRODUCTION
NEW TYPE OF BUSINESS ENTITIES
Steel led to skyscrapers, longer bridges,
stronger railroads, and heavier machinery
THE GOSPEL OF WEALTH, 1889
•
Stands out due to philosophy of big business
•
Wealthy = public benefactors
•
“Not evil, but good, has come to the race from the accumulation of wealth by those who
have the ability and energy that produces it.”
•
Inequality is inevitable and good
•
Best way to dispense fortune was during one’s lifetime for public good. Should provide
means for people to help themselves: universities, libraries, hospitals, parks, halls,
churches. $120 mil. to public libraries and higher ed.
MORGAN AND FINANCE
•
1857- work in NY firm as representative of father’s bank in London
•
1860- was agent of bank under name of J. Pierpont Morgan and Co. Channeled Euro $
into US  became financial powerhouse
•
JPM = investment banker
• Bought corporate stocks/bonds and later sold at profit
• Since want client companies to do well (so make $$), involved in operation of client’s
firms and gain seats on boards.
•
JPM saw RRs as future, so bought and reorganized companies after Panic of 1893. By
end of decade, owned 1/6 of US rail
•
1901- purchase Carnegie’s steel/iron holdings = U.S. Steel Corp.
• “Mr. Carnegie, I want to congratulate you on being the richest man in the world.”
Industrialization led to a demand for financing so
banking became a significant part of the Gilded Age
American finance was
dominated by JP Morgan
He was so influential that
he bailed out the railroad
industry when companies
were in trouble
He helped ease an
economic depression
during the Panic of 1907
JP Morgan (3.08)
Industrialists like Vanderbilt, Carnegie, Rockefeller
changed the way businesses were organized
Businesses hired professional managers to oversee
employees, improve efficiency, and manage finances
Corporations became a more
common business structure
Holding
Board of
Company
Trustees
Company
A
Company
Company
B
Manager
Company
C
Company
Company
Company Employees
Company
Employees Company
Employees
Employees
D
E
F
G
H
Corporations
used boards
of trustees
(“trusts”) to
manage the
company…
…and holding
companies to
manage other
subsidiary
companies
Companies like Standard Oil used horizontal integration
to buy similar companies to reduce competition
Companies like Carnegie Steel used vertical integration
to buy companies in order to gain materials
needed to make or deliver their products
COMPARISON
ROBBER BARONS
•
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CAPTAINS OF INDUSTRY
•
?
INNOVATIONS AND INVENTIONS
•
Telephones
•
Typewriters
•
Adding machines
•
Sewing machines
•
Cameras
•
Elevators
•
Farm machinery
THOMAS ALVA EDISON
“Wizard of Menlo Park”
THE LIGHT BULB
THE PHONOGRAPH
(1877)
THE EDIPHONE OR
DICTAPHONE
THE MOTION PICTURE
CAMERA
ALEXANDER GRAHAM BELL
Telephone (1876)
ALTERNATE CURRENT
George Westinghouse
ALTERNATE CURRENT
Westinghouse Lamp ad
THE AIRPLANE
Wilbur Wright
Orville Wright
Kitty Hawk, NC – December 7, 1903
MODEL T AUTOMOBILE
“MODEL T” PRICES
& SALES
EFFECTS ON WORKERS
•
Dehumanization of worker
•
Free enterprise/farming replaced by corporations
•
Factory controls life- whistle, subservient behavior
•
2/3 of people dependent on wages
• Does increase 1860-1890 (50%), 1890-1914 (another 37%)
• Working conditions poor, hours long
• Child labor
•
SOL rose  more physical comforts
•
Women impacted by new inventions: typewriter, telephone  new image of
independence
• Gibson Girl