Bad Big Business Tactics
Legislation/Regulation & Unionization
Andrew Carnegie, 1835-1919
“When fate hands us a
lemon, let’s try to make
lemonade.”
Scottish Immigrant
Came to United States
1848, age 12
First jobs
- At 18 - a clerk for the Superintendent the
Pennsylvania Railroad
* Impressed his boss - offered chance to
purchase stock
* Carnegie impressed by ability to earn from
capital - builds investments
At 24 - he was Superintendent of the Railroad
Opens a New Steel Business
- 1873: opens a steel mill
- 1899: producing more steel than all of Britain
- 1901: Sells out to U.S. Steel
Carnegie’s Business Strategy
1. Worked to make products better and cheaper
2. Attracted good people with stock options
3. Control steel industry
a. Vertical Integration
“As I grow older, I
pay less attention to
what men say, I just
watch what they do”
Vertical Integration:
See graphic on pg. 242
• control production bottom to top
(your own company provides all “parts”)
Horizontal Integration:
• buy out competing producers
(you are the only company offering a specific type of
service)
Social Darwinism
Expanded upon Charles Darwin’s
theory of the evolution where
“survival of the fittest” was a
natural law
• Herbert Spencer suggested evolution in human society – the
fittest rise to the top
• Used to justify “laissez-faire” (hands-off) economics: econ.
should not be regulated or interfered with - it followed natural
laws
Consistent with
“Protestant work ethic”
Material success =
Sign of God’s grace
John D. Rockefeller
(July 8, 1839 – May 23, 1937)
• American born
“I believe in the dignity of
labor, whether with head or
hand; that the world owes no
man a living but that it owes
every man an opportunity to
make a living.”
Rockefeller and the Standard Oil Trust (Monopoly)
Tactics
1. Paid very low wages
2. Drove competition out of business by
a. selling at a loss
b. buying out competitors’ supplies
c. refusing to lease oil tankers to compet.
d. arranging cheaper shipping with the railroad
By 1879 Standard Oil was refining 90% of American oil, used
its own tank car fleet, ships, docking facilities, barrel-making
plants, depots, and warehouses.
That’s what I call Vertical Integration!
Robber Barons: businessmen and bankers who dominated
their industries and became very wealthy, typically as a direct
result of pursuing anti-competitive or unfair business practices
Carnegie- steel
Morgan- banker
Rockefeller- oil
Stanford- RR
Vanderbilt- RR
Gould- RR
or Philanthropists?
“Gospel of Wealth” - essay by Andrew Carnegie
“…the duty of the man of wealth: first, to set an example of modest,
unostentatious living, shunning display or extravagance; to provide
moderately for the legitimate wants of those dependent upon him;
and after doing so to consider all surplus revenues which come to
him simply as trust funds which he is called upon to administer, and
strictly bound as a matter of duty to administer in the manner which,
in his judgment, is best calculated to produce the most beneficial
results for the community—the man of wealth thus becoming the
mere agent and trustee for his poorer brethren, bringing to their
service his superior wisdom, experience, and ability to administer,
doing for them better than they would or could do for themselves....
The man who dies rich… dies disgraced.”
Government Reaction to “robber baron” Tactics
Wanted to protect free market: fear big business stifling
competition
Passed Sherman Anti-trust Act, 1890 - made it illegal
to form a trust that interfered with free trade between
states or other countries
- proved difficult to enforce, courts
rejected majority of cases
Problems in the workplace
Terms of employment poor:
6-7 day weeks, 12+ hour days, no vacation, no
sick leave
Physical conditions poor:
polluted and often dangerous
Wages low:
so low that millions of women and children
forced to work
Worker Reaction - Unions
Name of Union
Knights of Labor
(Craft Unions)
AFL (American Federation
of Labor)
(Industrial Unions)
Example: ARU
American Railway Union
IWW
International Workers of
the World
Date and
Organizer
Membership
Goals/
Beliefs
Tactics
1869,
Uriah
Stephens
men, women,
black, white,
skilled,
unskilled
8 hour day,
equal pay for
equal work
arbitration,
strike last
resort
1886,
Samuel
Gompers
1893,
Eugene V.
Debs
1905,
Eugene V.
Debs
skilled workers
(male, white)
wages, work
hours, work
conditions
strikes
major
tactic
male, skilled
and unskilled
workers
wages, work
hours, work
conditions
strikes
major
tactic
male, skilled,
unskilled,
white, black
Usual +
international
worker unity
(socialist)
strikes
major
tactic
In 1905 radical unionists and socialists formed the Industrial Workers of
the World (IWW) to organize unskilled labor and semi-skilled workers
such as western miners, migrant farm workers, lumbermen, and some eastern textile
workers. IWW members, known as Wobblies, pasted small posters like this one on fence
posts or in RR boxcars to call attention to their cause.
1. What message do the images in this
poster convey to you?
2. What do you find the most persuasive
about this poster? Why?
3. Why do you think IWW posters were
often called “silent agitators”?
Strikes become violent (Great- Hay- Home- Pull)
Government and business respond with force
- strikes undermine the economic system (slows production)
- fear communism and/or anarchy
Sherman Anti-trust Act works in favor of business
- businesses claimed strikes interfered with interstate
commerce and gov’t would send in troops to break up strike
Great Strike of 1877
- 80,000 railroad workers
strike
- Shut down most RR
traffic for week
President Hayes
authorizes use of federal
troops to stop the violence
Haymarket Riot, May 4, 1886
- 3,000 gather to protest police
killing of striker
- police sent in to disperse
rioters
someone throws bomb into
police line - 7 police killed
Public opinion begins to turn against unions and
strikes, connecting them to violence
Homestead Strike, 1892
- At Carnegie Steel Plant in
Homestead, PA
Supervisor announces wage cuts, calls in
Pinkerton detectives to protect strike
breakers (“scabs”)
Pinkerton detectives battle
strikers and townspeople12 die
Union
loses
support
Pullman’s Model
Town…
George M. Pullman’s “Model Town”
Pullman’s factory builds high quality
RR cars
Pullman provided…
Apartments
And expected…
Doctors
Sports fields
Shops
Rent
No Alcohol
Letters from the citizens of Pullman
“One fine morning a number of men...will
knock at your door and tell you that they have
come to whitewash your house. They will not
bother you with questions...but they just go in
and do it...all charges for repairs....will be
DEDUCTED FROM YOUR WAGES next
pay day. You would have liked to wait another
week...because you wanted to buy a pair of
shoes for your boy. The company can't care
about that!”
“Pullman was all very well as an employer, but to live
and breathe and have one's being in Pullman was a bit
too much. Residents paid rent to the Pullman Company,
they bought gas of the Pullman Company, they walked
on streets owned in fee simple by the Pullman Company,
they paid water-tax to the Pullman Company...They sent
their children to Pullman's school, attended Pullman's
church, looked at but dared not enter Pullman's hotel
with its private bar, for that was the limit. Pullman did
not sell them their grog [liquor]...The lives of the
working men were bounded on all sides by the Pullman
Company; Pullman was the horizon in every direction.”
Pullman Strike, 1893
Pullman lays off half of workers, cuts wages of rest
- refuses to reduce rent
ARU, with Eugene Debs as spokesman,
wants arbitration
- Pullman refuses
Pullman hires strikebreakers
“scabs”
President Cleveland orders in
federal troops
Women and Unions
Leading figure: Mary Harris Jones
-supported strikes, help start unions
- showed horrors of child laborers
-lead to restrictions in child labor
Women’s Unions form
ILGWU (Internat’l Ladies
Garment Workers Union)
Triangle Shirtwaist Factory
Factory located on 8th, 9th, and 10th
floors of Asch Building in New York
City
March 25, 1911 about 4:45 PM fire
breaks out on 8th floor
Most doors were locked and elevator
soon failed
Unable to escape, young women burned to death,
died of smoke inhalation, or jumped to their death
It took only about
half an hour to
bring the fire
under control
This is what they found
inside…
The final count: 146 young teenage women dead
Aftermath
Rose Schneiderman, a young union organizer, spoke for
many workers when she said:
“I would be a traitor to those poor burned bodies, if I
were to come here to talk good fellowship. We have tried
you good people of the public—and we have found you
wanting.”
Public fury over the deaths and the acquittal of the
building’s owners led to thirty-six new laws
reforming the state’s labor code.
Please answer the questions in your
notebook
1. Do you think the tycoons we’ve talked about
(Carnegie and Rockefeller) are ruthless robber
barons or just good business men (captains of
industry)?
2. If the government had supported unions instead
of management (factory owners) in the late 19th
century, how might the lives of workers have
been different?
3. Do you think more gov’t involvement could’ve
slowed down the industrialization of America?
How or why?