History 202

Chapters 19 and 20
 Industrial America
 The
“Gilded Age
 Railroads
 Big
Business
 Workers/Labor
Introduction
 At
the hear of the new order reshaping
American society was not just industry
but a system of industry—
transportation, communication,
corporations, finance, labor and
conditions.
 At
the heart was something referred to
as “The Gilded Age.” Also a sardonic
euphemism called “Robber Barons.”
The Gilded Age
 Term
derives from a novel written by
Mark Twain and Charles Dudley
Warner.
 It
is a critical examination of big
business and political corruption during
the late 19th century—
 Questions:
 1) How did the federal government
transform the American economy during
this “Gilded Age?”
Gilded Age
 2)
Why was corruption so rampant in
American politics during this period? Was it
worse than today? If so, why?
 3)
Was there really any difference between
the republican and Democratic parties at
this time? If so, what?
 We
will answer these questions then move
into Corporations and labor.
Gilded Age
 Two
general themes caused tension during
the Gilded Age:
 Laissez-faire—a doctrine opposing
government interference in economic
affairs;
 Concentration of
Power—power in the
hands of the government at all levels of
state and local government—Gov’t assumes
authority and power and bureaucratic
control over all major areas of government
policy—whether federal or local.
Homestead Act
 Begins
here; this act set in motion a
program of public land grants to small
farmers—Gave the federal government
control over public lands and underlined
the supremacy of Federalism over states
rights.
 South
had always rejected to federal
control wishing to reserve the right of each
state and territory to decide how best to
distribute and tax land grants
Homestead Act
 Unfortunately
the government never
made any money off the land grants—it
became corrupt and fell into the hands
of shady land speculators;
 It
did help lead to an agriculture and
transportation revolution and it did
assist in the rise of Land grant
Agriculture and mechanical Colleges.
Railroads

First real big business;

Could reach interior
areas where canals
were not feasible;

Did not have to worry
about physical
breakdowns as with
animals and Wagon
trains—ran year round
 Mostly reliable
Railroads

1840 there was about
3000 miles of track in the
US; by 1860, 30,000
miles of track.

Pacific railway Acts of
1862 and 1864.

Gov’t made direct grants
to private corporations—
for every mile of track, the
private corporation
received 12800 acres of
land and was guaranteed
$48000 for every mile of
track laid.
Railroads

Guaranteed 30 yr
subsidized loans
below market value.
 The Union Pacific
railroad, the central
Pacific began an
odyssey culminating
in the famous
connection at
Promontory Point
Utah in the spring of
1869.
Credit Mobilier

Major Stock holders of the Union Pacific
formed a stock company—they sold or gave
shares in the company to influential
congressmen who could enact favorable laws
and approving federal subsidies—huge
profits were made. i.e., steel stock that cost
5million dollars was credited with 10 million—
of course the tax payer was paying this.

It ruined some congressmen’s reputations
and added to the scandals already rocking
the Grant administration.
Political Corruption

It forced awareness by the media and the
public—both parties were implicated in many
shady dealings.

Opened a can of worms concerning political
parties—Republicans repeatedly warned the
public that to vote for a Democrat was to vote
for the part of secession—the Democrats
warned that a vote for Republicans was vote
for the amalgamation of society. This was the
notion of “Waving the Bloody Shirt” meaning
dishonor to Lincoln or to White society.
Mugwump



Name calling and
corruption became
somewhat comical.
“Bloody Shirt” rebels.
Mugwumps was a
derogatory term for
Republicans who refused
to vote for Blaine and
voted for Cleveland—
jumping parties—Reagan
democrats good example
or independent voters
Businessmen and Corporations
 James
J. Hill, Andrew Carnegie, John D
Rockefeller and Cornelius Vanderbilt
struck terror in the hearts of many—yet
they have inspired many others.
 These
were the “Captains of Industry”
or “The Robber Barons” however you
choose to interpret them.
 They created this creature called
corporation
Captains of Industry
 Who
were some of these captains of
industry, how did they operate and why
were they referred to as “Robber Barons?”
 What
was the corporation revolution? How
did it transform America?
 Did
these guys make America better or
worse?
Captains of Industry
 Two
major factors precipitated the rise of
industry:
 New Businessmen and New ways of doing
business.
 New
Businessmen
 Historians describe the new businessmen
in two contradictory ways.
Contradiction in Terms
 Captains
of Industry—described as
ingenious and industrious capitalists who
transformed America—embodied the
“American Dream” from ‘rags to riches.’
 Robber
Barons—described as immoral,
greedy, and corrupt—Ii.e, bribery,
kickbacks, illegal business practices and
insensitivity to workers and workers
families (J.D. Rockefeller the exception)
Daniel Drew

(1797-1879),
financier. Born in
Carmel, New York
 a reputation for sharp
dealing
 "stock watering“ give
his cattle salt—allow
them to fill up on
water to increase
market weight.
 director and treasurer
of the Erie Railroad
Jay Gould





(1836-1892), financier. Gould
grew up in relative poverty and
received little formal education.
quick mind and had few
scruples
1860, speculating in railroad
securities
director of the Erie Railroad in
1867
combined "stock watering" and
bribes to New York City's
"Boss" Tweed as well as state
legislators; eventually
assembled an empire;
remained ruthless,
unscrupulous, and friendless
to the end.
Jim Fisk

1834-1872), financier.
little schooling; title of
"Barnum of Wall Street"
 life of a sybarite
 Broadway showgirls,
expensive horses, and
honorary but gaudy
military posts
 quarrel over certain
business matters and a
favorite mistress, the
actress Josie Mansfield,
he was shot by Edward
S. Stokes on January 6,
1872.
Cornelius Vanderbilt




1794-1877), financier.
16, he purchased a small
sail and began a
passengers service
between Staten Island
and New York; formed his
own steamboat company
in 1829.
By 1846, "Commodore"
Vanderbilt had become a
millionaire
He soon became
immersed in the railroad
trade; most famously the
Erie and New York
Erie Railroad Wars

Vanderbilt began buying up Erie shares to drive out
competition; Erie treasurer Daniel Drew, saw an
opportunity to swindle Vanderbilt out of millions of
dollars.

He, Gould, and Fisk, printed up 100,000 worthless
stock certificates, which Vanderbilt promptly bought.

Realized the stocks had no value. Although Vanderbilt
had once said, "Law, what do I care about the law? Ain't
I got the power?" he appeal to government authorities
to arrest Fisk, Gould, and Drew. They went on the
Lam—convinced legislators to make it legal to buy the
“Watered stock” from Vanderbilt—they made Millions
and Vanderbilt appeared a “Robber Baron” to the public
and media—did recoup some of his losses.
Corporation Revolution

Although American businessmen had always
strived to make money, the Gilded Age saw the
rise of new methods of capitalism that allowed
individuals to limit their liability and maximize
their profits.

Before the Gilded Age, individuals had looted
society;

no longer the individual; now it was the
corporation
Corporation Revolution
 1)
Key features of the Corporation
 2)
What was a corporation?
 3)
Corporations in the past
 4)
Combinations of corporations
Corporation Revolution

Key features--increasing concentration of
power in large entities
 Business and government became bigger;
while operations became intertwined
 government had used its power and money to
encourage businessmen to build railroads;
encouraged corporations;
 Government more involved in the welfare of
the nation.
What was a Corporation?
 A corporation
was formed when a group
of people requested a charter from the
state legislature that provided them with
a set of legal rights and (presumably)
responsibilities. State law treated the
corporation as an individual. Unlike a
partnership, in which liability ran high for
individual investors, the corporation
involved limited liability. Limited liability
makes individual investors legally liable
only for their share of the investment.
What was a Corporation?
 Partnership,
if one party dies etc …
other partners are responsible;
however, in corporation law, one is only
responsible for their percentage.
 “Immortal”
Corporations can buy, sell,
and inherit property; thus, they took on
their own identity. Individual investors
may come and go, but the corporation
has an indefinite lifespan.
Past Corporations

Corporations began before the Civil War.
1850s, American businessmen began using
corporations differently; ownership no longer
meant control of the corporation.
 Pre-Civil War investors had a great deal of
power over production.
 Post-War corporations allowed managers and
directors absolute control, while investors
reaped the benefits of limited dividends. This
allowed a handful of corporate directors to
profit enormously with little personal risk.
Combinations of Corporations
 A salient
characteristic was the continual
combination and merging of corporations.
 These new "mega corporations" were
known as trusts.
 Though trusts were certainly larger, more
efficient, and more profitable than smaller
corporations, they also destroyed the
healthy competition that often makes
capitalism a viable economic model.
Standard Oil of New Jersey
 1879,
JD Rockefeller founded Standard
Oil—prototype of Corporation efficiency
and consolidation.
 At Rockefeller’s death: $815,647,796.89.
 Not counting 40Million per yr in dividends.
 Purchased
small companies in public, he
also seized power privately through takeover techniques—not beyond hiring
Pinkerton agents to persuade owners to
sell. (hostile takeovers—mergers and acquisitions)
Trust Busters
 Americans
began to realize the social
problems that went hand-in-hand with
untrammeled business growth
 Began to pass federal laws to slow the
growth and power of trusts
 The Sherman anti-trust act was mere
token legislation until after WWI.
 As wealth became concentrated in fewer
hands, public animosity increased towards
the businessmen.
Labor Unions and Workers
 While Andrew
Carnegie and Rockefeller
took advantage of lax corporation laws,
mass production and mechanization
threatened the independence of the
American worker—things were quickly
moving from skilled crafts to unskilled
assembly line boredom.
 Originally
workers organized in
“Workingmen’s Parties” to control local
politics.(mostly middle and upper class
leaders—not actual workers themselves).
Labor Unions and Workers
 Originally
began in Philadelphia, New
York, and Chicago—believed they could
reform society.
 Vast
majority were skilled laborers;
believed they were important to society—
performed a vital function; were not
alienated socially or economically;
 Class
consciousness would not emerge
until after the Civil War.
Labor Unions and Workers
 Industrialization
undermined skilled
workers; needed more unskilled workers
than skilled.
 Two factors created this phenomenon:
 1) Industrialization created mechanization
not need for skilled artisans or guilds;
 2)
Urbanization created larger work force.
People came to the city for bright lights
and opportunity—many were unskilled.
Sources of Labor
 Many
displaced agriculture workers and
Immigrants filled the cities; women and
children became a significant part of the
work force;
 Demographics—Single, between 18-24
and strangely many women also came to
the cities.
 By
1910, 25% of American children were
employed in factories.
Demographics

Worked 16 to 18 hr
days in 1865—1870
11 to 12 hr days.

1880s demanded
shorter hrs—got 10.

The issue was
owners believed that
workers benefited
from long hours—kept
them from gambling,
drinking, and
prostitution
Wage Theory

Why should wages be so low?
 1) High wages hurt profit; needed profits to
open more factories and hire more workers.
 2) Moral reasons. Subsistence wages
prevented workers from wasting their money on
alcohol, gambling, and other vices.
 Many as a result lived below the subsistence
levels.
 Average Family of 4 in 1890 was 380$. That
same year the Census Bureau estimated that a
subsistence income needed to be $530—
morality, no Greed!!
Samuel Gompers

Anglo-Jew from
working class
parents;
 13, joined the Cigars
Makers’ Union;
 Became its president
(1874-81); Organized
the American
federation of Labor.

President until his
death in 1924
(exception is 1895)
Knights of Labor

Founded 1869; secret order of tailor’s in
Philadelphia; Uriah S. Stephens.

Most Important leader was Terence V.
Powderly—national persona with a central office;
open to all workers.
 1) first significant labor organization; local
chapters; centralized agenda and directives;

2) Open to all workers except lawyers, bankers,
gamblers, and liquor merchants; even
management could join;
Knights of Labor

Open to AfricanAmericans (10%);

Sought work place
and wage reforms
and in society atlarge;

“tried to be all things
to all people…” But
were too inclusive
and too broad
principled—failed.
A F of L-CIO

Largest of unions until it
merged in 1955 with CIO
(congress of industrial
organization); It used
strikes and boycotts to
force collective
bargaining.

Conservative—only
accepted skilled workers;
better pay, better hours,
safety insurance,
workplace safety (OSHA)
and family social
conditions.