BIG BUSINESS & LABOR
Carnegie, Social Darwinism, and Unions
CARNEGIE’S INNOVATIONS
Andrew Carnegie was a self-made millionaire who was
originally from Scotland.
Carnegie Steel Company became the leading steel
producer in the world by 1899.
Carnegie’s business strategies led to his rise in fortune.
He found cheaper ways to produce goods with new
technology, and he brought in talented workers with
stock as incentive.
Carnegie also took control of all the markets connected
with steel. Vertical integration bought out the raw
materials and distribution processes, while he also
bought out the competition with horizontal integration.
VERTICAL & HORIZONTAL
INTEGRATION
Vertical
• Resources
• Farms, Fields, Mines, and Forests
Equals
• Manufacturing
• Production & Processing
Ownership
Of 3
• Distribution
• Shipping & Transport
Horizontal
Equals Merging
Industry
SOCIAL DARWINISM & BUSINESS
The theory of Social Darwinism was the idea that the business
world was based on “survival of the fittest”
This led many to argue against regulation of big business by the
government, since success and failure were governed by natural
law and none should intervene.
This notion supported individual responsibility and blame,
therefore it was inferred that being rich meant God had blessed
while being poor was the fault of the poor.
Do you believe this to be a fair, or true statement? Why or
why not?
REACTIONS FROM THE
“LITTLE MAN”
GROWTH & CONSOLIDATION
Many smaller companies began to merge in order to remain
in competition. Firms would buy out the stock of
competing industries, and once all were owned, you had a
monopoly.
Holding companies were a way of gaining a monopoly, and
there sole job was to buy stock. One such company was
headed by J.P. Morgan– US Steel, which became the world’s
largest business in 1901 after buying Carnegie Steel.
Another way to establish a monopoly was through trusts.
Standard Oil Company, established by John D. Rockefeller,
was a trust in which companies pool their stock to create
one large company.
Companies earned dividends on the profit made through
trusts, but these were not legal mergers.
ROCKEFELLER &
THE “ROBBER BARONS”
Rockefeller’s Standard Oil jumped from producing 2-3% of the nations crude oil in 1870, to
producing 90% by 1880. He made huge profit by underpaying employees, having lower prices
then the competition, and hiking up the prices once the competition was gone.
These tactics labeled these captains of industry as the “Robber Barons,” but this was not entirely
true. Both Rockefeller and Carnegie were avid philanthropists. Rockefeller gave away $500
million and Carnegie gave away 90% of his wealth.
SHERMAN ANTI-TRUST ACT
The government became alarmed by the formation of trusts and
monopolies, and felt that free competition was becoming extinct.
In 1890, the Sherman Anti-Trust Act made it illegal to form a
trust that interfered with free competition and trade.
This was ineffective … why?
“Trusts” were not clearly defined in this act, which made it
difficult to prosecute companies. Also, companies like Standard
Oil could reorganize themselves into one company to evade
governmental interference.
STANDARD OIL POLITICAL
CARTOON
MORE POLITICAL CARTOONS:
MONOPOLIES
BUSINESS BOOM BYPASSES THE
SOUTH
The South was still recovering from the Civil War.
They were without capital, and no one wanted to invest in their industries.
The North owned 90% of stock in their most profitable enterprises.
Farmers were at the mercy of railroads and entrepreneurs paid high tariffs on
raw materials and imports.
The South was stuck in a position of poverty.
LABOR UNIONS EMERGE
Laborers of the late 19th century did not enjoy the benefits of today. Some worked 7 day weeks
or 14 hour days, and there were no sick days, workers compensation, unemployment pay, or even
vacation time.
Injury rates were very high (i.e. 675 deaths/week in 1882) and everyone in the household needed
to work. Some children at the age of 5 had full time jobs in sweatshops where pay could be as
low as $0.27 for a 14hr day.
Early labor unions included the National Labor Union (NLU)
which successfully persuaded Congress to legalize an 8hr day
for government workers in 1868.
The Noble Order of the Knights of Labor was another group
that formed, and like the NLU they sought to get better rights
for laborers. They did not see strikes as the primary way to get
their demands, but rather through negotiation.
UNION MOVEMENTS DIVERGE
Two major types of unions emerged in the late 19th century: Craft and Industrial Unionism
Craft unionism was the combining of several skilled trades, as seen with Samuel Gompers and
the American Federation of Labor (AFL)
The AFL used strikes as its major tactic and with success. Pay rose from $17.50 to $24.00 while
the work week hours fell form 54.5 to 49hrs between 1890 and 1915.
Eugene V. Debs targeted both skilled and unskilled
laborers to form the American Railway Union (ARU) as
an industrial union.
Through strikes the ARU won higher wages in 1894,
but declined after a strike went badly.
Chinese, Japanese, and Mexican farmers and miners also
joined these efforts in the west with some success.
SOCIALISM & THE IWW
Eugene V. Debs and other activists began to look at
socialism as a way to combat abusive labor systems. They
felt that government control over business and wealth
would end capitalism. Most were not extreme though, and
sought only to make reforms in industries.
The Industrial Workers of the World (IWW) was a group
of radical unionists and socialists in Chicago, also known
as Wobblies.
Although the IWW saw little success, it displayed solidarity
among the lower class workers, and added to the reform
fervor of the era.
STRIKES TURN VIOLENT
Unfortunately, industry and the government responded forcefully to union activity and this gave
rise to violence and unrest in the late 1800’s.
The Great Strike of 1877 (pictured right) took place when
B&O Railroad workers struck in protest of wage cuts.
Railroads stopped for a week before Pres. Hayes intervened
with federal troops.
THE HAYMARKET AFFAIR
The Haymarket Affair
turned the public against
unions due to the violence
it produced when a bomb
was thrown into a crowd
leading to violence and the
death of 7 police, several
workers and those hanged
for inciting treason.
THE HOMESTEAD STRIKE
At Carnegies Steel
Plant in Homestead,
PA workers struck and
were attacked by
Pinkerton detectives
hired by Henry Frick.
3 detectives and 9
strikers were killed,
leading to the National
Guard being called in
to end the strike.
THE PULLMAN COMPANY STRIKE
After laying off 3,000 workers and
cutting wages by 25-50% and not
lowering rent, the Pullman strike
began and were helped by the
ARU. The arrival of scabs led to
violence which needed Pres.
Cleveland’s aid to put down with
troops.
WOMEN ORGANIZE
Many unions barred women from joining, but they still organized
for better working conditions, equal pay, and ending child labor.
Mary Harris Jones was the most prominent voice and was
nicknamed Mother Jones by coal miners she supported in their
strike.
She led 80 mill working children to Pres. Roosevelt’s home on a
march in an effort to expose the cruelties of child labor.
The Triangle Shirtwaist Factory in NYC exposed the conditions
women had to work in for the garment industry when a fire broke
out and women were trapped inside due to locked doors.
146 women perished in the blaze and the factory owners were
acquitted, but this led to a task force to investigate conditions
afterwards.
TRIANGLE SHIRTWAIST FACTORY
MANAGEMENT & GOVERNMENT
PRESSURE UNIONS
As unions gained power, employers feared them more. Employers responded by forbidding
union meetings, firing union members, and forcing new employees to sign “yellow-dog”
contracts.
Businesses also used the Sherman Anti-trust Acts against unions by arguing that their activities
interfered with interstate trade.
Even with these limitations, unions still flourished
into the 20th century.
The AFL had 1.7 million members by 1904, and 2
million by 1919.
REMINDERS
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