MR. LIPMAN’S APUS
POWERPOINT CHAPTER 24
Industry Comes of Age
1865-1900
Keys to the Chapter
•
•
•
•
Growth of Railroads
The Grange Movement
Massive Immigration
Rise of the “Robber Barons” { Industry Giants}
• Shift to wage dependence from land dependence
• Unions struggle for a foot hold
Railroads
• 1865 – 1900
Government gave railroad subsides in land to
help offset the risk (both state and federal
governments did this) & land used as collateral
for loans to build the railroads
• Railroads used land as collateral for loans or
sold it for money (average of $3 per acre)
• Justifying the giveaway of the land
– Government got lower rates for postal
services and military traffic
– Cheap way to subsidize railroads, without
passing new taxes or cash
– R.R. increased value of government’s land
– Railroads brought civilization to the West
• Two Major R.R. build transcontinental R.R.
– Union Pacific starts in Nebraska with mostly Irish
immigrants doing the work & goes West
– Central Pacific starts in California and used mostly
Chinese immigrants to do the work
– They meet on 5/10/1869 at Promontory Point,
Utah and the Golden Spike is put in the ground
Promontory Point, Utah
May 10, 1869
• Organizing the railroad lines
– Vanderbilt organized and expanded the New York
Central line which is very profitable
– Distance between the 2 tracks (gauge) standardized
– Westinghouse air brake and Pullman Palace cars
– Safety devices:
• Telegraph for communication
• Double-tracking (so railroads weren’t going
opposite directions on same tracks)
• Block signal ( prevent 2 trains going opposite
directions from being on same track at same time)
• Standardized time zones (1883- 4 zones)
• Railroads bring the following:
– Unity between the states
– Industrialization and huge demand for steel
– Boom in mining and agriculture
– Increased population in West
– Increased immigration from Europe and Asia
– ---------------------------------------------------------– But also bring destruction to land and Indian way
of life and the end of the “open range”
– Also bring stock speculation, “rip off artists”, and
land speculators
• Stock watering: Jay Gould
– Selling stock far beyond what it was worth
– R.R. forced to charge high rates and fight
competitive battles with rival railroads to make
railroad worth high stock price
– Fierce Competition would require lower prices
thus preventing actual profit from occurring
– Bribery of politicians and journalists
• Railroads began working together rather than
competing to reward investors at the expense of
railroad users
– Pools
• Agreement to divide the business of a
certain area and share the profits
– Rebates or kickbacks
• Given to large shippers to gain steady traffic
• Lower profit made up by charging higher
prices for short hauls or on small shippers
History Repeats Itself – Middle Ages and Today
• Farmers in Midwest hurt by railroad abuses
– Depression in 1870s finally moved farmers to
protest railroad abuses
– Farmers (led by organized farmers’ groups like
the Grange) worked at state level to regulate
railroads
– BUT most Americans believed in Lazzie-Faire
which requires government to stay out of
business issues
• Farmers use state legislatures to pass laws
regulating railroad abuses.
• Railroads turn to FED court for help
• 1886 – Wabash v. Illinois
– Supreme Court ruled that states could not
regulate interstate (between states) commerce
– Only federal government could regulate
interstate commerce so pressure put on Feds
• 1887 – Interstate Commerce Act (ICC) passed
– Prohibited rebates and pools
– Stopped unfair discrimination against shippers
– Require same for short hauls & long hauls
– (ICC) set up to enforce the law
This helped RR’s because now avoid costly wars
and instead begin to control regulatory process
First large-scale attempt by federal government
to regulate business in interests of society
Post Civil War Industrialization
• Liquid Capital ($) becomes available (Europe)
• Natural Resources are plentiful (coal, oil, iron)
• Immigration provides supply of cheap labor
• Inventions enable mass production
• Urbanization speeded by refrigerator car, electricity
and electric railway
• The telephone
– Invented by Alexander Graham Bell in 1876
– Brought nationwide communication to U.S.
– Brought women to work on switchboard
Electricity developed by Thomas Edison
– Invented many things like phonograph, moving
picture, and (most famously) the light bulb
• Vertical integration
–Combining into 1 organization all
phases of manufacturing and
production thus being able to
control quality, quantity and costs
–Best exemplified by Andrew
Carnegie’s steel corporation, in
which every part of making steel
was integrated into 1 company
Vertical
Integration
as developed by
Andrew Carnegie
in steel
manufacturing
• Horizontal integration
– Uniting with competitors to monopolize
– Rockefeller trusts are an example of this
• Stockholders in smaller oil companies gave
control of their stock to the board of
Standard Oil Company
• The board then controlled all “competing”
companies in the industry
• Smaller companies left out of the trust
eliminated with ruthless competition
– Businesses in other industries begin to copy
this approach
Horizontal Integration made famous
by Rockefeller and oil trusts
• Interlocking directorate
– Devised by J.P. Morgan during depression in
1890s to control financial institutions
– Hurting companies were bought out by
Morgan’s banks who then put officers from his
banks on boards of various “competing”
companies to eliminate “wasteful” competition
– He will use his vast sums of $ to buyout
Andrew Carnegie and create US Steel
Steel
Production
1880–1914
Reduces
importance
of Europe
– Bessemer process
• Cold air on very hot iron ignited carbon in
the ore and burned out the impurities
• Made cheap production of high-quality steel
– America had important natural resources close
together
• Coal (for fuel), iron ore, other important
ingredients
Andrew
Carnegie
was king of
steel:
Scottish
immigrant
who rose
from poverty
to wealth
and then
gave almost
all away
• 1900 Morgan buys out Carnegie and
Carnegie believes he will die “disgraced” if
he dies with all his wealth
–Spends rest of his life giving away
$350 million ($50m left)
• Money given to libraries and
universities to help people
improve themselves
• The leader of the “Gospel of
Wealth” theory
• Emergence of the oil industry
– 1859 – first oil well in Pennsylvania drilled
– Kerosene became first important derivative of
oil ; better than whale oil
– Late 1800s – invention of light bulb by Edison
made burning kerosene obsolete
• Mid 1890s – automobile invented, burning
gasoline for power
– Internal combustion engine gave oil industry a
huge, profitable boost
John D.
Rockefeller
Organizes
Standard
Oil
Company to
dominate
the oil
industry
• Positives of Rockefeller’s Standard Oil
– Produced superior product at lower price
– Achieved economies of scale because his
business was so big
• Producing a lot of oil by 1 company much
more efficient than using many smaller
companies (think Microsoft)
Negatives of Rockefeller’s approach
was that business became more
powerful than the government
What a Puny Little Government
• Domination of trusts begins:
– sugar, tobacco, leather, harvester, meat
– New rich eclipsing old rich who had
inherited their money
– Old rich were the leaders of the groups
who attacked the new industrialists out
of fear of being replaced
The Gospel of Wealth argues Darwinism...Survival of
the fittest
• Blame the poor justification
– New rich had become rich through hard work
– Poor are lazy and can only blame themselves
– Law also used (Constitutional arguments) to
prevent break-up of Corporations because
would be unlawful “taking of property”
without compensation {14th protects corps)
Who is
“strong”
and who
is
“weak”?
• Public starts to oppose trusts and
newspapers rally against trusts
–Federal regulation then passed to
regulate and control trusts
–Sherman Anti-Trust Act of 1890
• Sherman Anti-Trust Act of 1890
– Forbade combinations in restraint of trade
– No distinction made between “good” and
“bad” trusts
– At first was ineffective
• Little power given to government
• Most cases decided in favor of corporations
• Used to control unions (labor combinations)
• Eventually strengthened in 1914 to stop
trusts
• South lacks growth of industry:
– Sharecropping and tenant system controlled by
absentee landlords
• 1880s – rise of pre-rolled cigarettes and in 1890
American Tobacco Company formed
– 1880s – North put more cotton mills in South
• Lower taxes and cheap labor in South
• Mills located in poorest regions because
labor was cheapest (same today for car
companies)
• Women Join Workforce
– Worked as secretaries, telephone operators,
and in factories with men
– Middle class women put off marriage and had
smaller families
– Poor women worked out of economic necessity
– Women’s wages stayed lower than men’s
• Foreign trade is expanded
– US manufacturers trade with foreign countries
when US could not absorb enough of their
products
– US military used to protect US business abroad,
and to build a US empire
– Wage earners did not share profits
proportionately with business owners
– 1900 – 1/10 of the people owned 9/10 of the
wealth in the US
• Workers begin to organize together to fight
for basic rights :
– Found many obstacles to a successful fight
against employers
• Oversupply of labor drives down wages
• New Machines increase productivity which means
less workers needed
• Employment is no longer personal (small shops) but
instead is large and impersonal
• Corporations import strike-breakers
(“scabs”) and pay thugs to beat up
strike organizers
• Corporations get conservative judges
to issue injunctions against strikes
(forcing them to stop)
–If workers did not end strike, state or
federal troops could be called out to
forcibly put down the strike
• Corporations use “lockouts” (lock factory
doors against workers) to starve them into
submission
• Corporations force workers to sign
“ironclad oaths” or “yellow-dog contracts”
which were agreements not to join a union
• Corporations put agitators’ names on
“black list”, & give lists to other employers
so that these people could not find work
• Some corporations used “company town”
where company owned housing, stores and
provided credit to workers, putting them in
continuous debt
• Middle class had little sympathy for workers
– Low wages were still highest in the world
– Believed poor could work hard to improve their
condition, as others had done before
– Strike seen as socialistic, un-American import
from Europe
– God would take care of poor and weak with
charities
• National Labor Union
– Organized in 1866; lasted 6 years
– Represented 600,000 workers at peak (skilled,
unskilled, farmers)
– Did not accept Chinese, women, or blacks
– Destroyed by depression in early 1870s
• Knights of Labor
–
–
–
–
Organized in 1869
Began as a secret society to prevent retaliation
Represented 750,000 workers at peak
Called for organizing all workers
• Skilled, unskilled, women, blacks,
– Called for producers’ cooperatives, codes for safety
and health of workers, 8-hour day
Haymarket Square:
– May 4, 1886 – police attacked a peaceful
meeting protesting police brutalities
• Dynamite bomb thrown, killing several dozen
people (including some police)
• 8 people (the Chicago 8) rounded up
– No proof they had anything to do with the bombing
– Judge ruled that since they had made speeches that
incited violence, they were responsible for the bomb
– 5 sentenced to death, 3 given long prison terms
– Later those still alive are pardoned by Governor
• Haymarket Square destroyed the Knights
– Became associated with anarchists and
violence
• Knights’ other fatal weakness was bringing
together unskilled and skilled workers
– Unskilled workers easily replaced,
nullifying effectiveness of strikes
– Skilled workers got tired of being held
back by unskilled workers so left Knights
• American Federation of Labor (AFL) formed 1886
• Led by Samuel Gompers, skilled cigar maker
– Association of self-governing national unions
– Each union kept its independence, while AFL
made overall strategy
• Gained 500,000 skilled members
• In reality, only represented skilled workers
• Used walkouts and boycotts to combat
business abuses
• Gompers:
– Hated socialism, rejected politics in favor of concrete
economic goals for workers
• Better wages, fewer hours, better conditions
• Unlike Knights of Labor, concerned with more
practical (and realistic) goals
– “trade agreement” authorizing the “closed shop”
• Gompers got some businesses to only hire union
members
– AFL was non-political except for supporting friends of
the union and voting against enemies
• Public attitudes toward workers began to change
in the late 1880s and 1890s:
– Public acknowledged workers right to join
unions and strike
– Businesses work with unions to avoid strikes
– Most businesses were still opposed to unions
• 30 years of strikes and violence would be
needed before labor finally gained
recognition and power to stand up to
business in the 1930s