The Rise of Industrial
America, ’65-00
Chapter 18 outline
5 Major themes
• Innovative tech. & bus. Practice changed
production
• Monopoly of industries by bus. Leaders
• Why was industrialization in the S. differ
from the N. & Midwest
• Workers’ response to work & growth of
corporations
• The tactics used by corporate executives
to undercut labor’s bargaining power
Character of Industrial Change
1.
Coal deposits as cheap energy
•
•
2.
Innovative transportation, communication, & factory
systems
Need for enormous numbers of workers
3.
•
4.
Tech. enables cost cutting & hiring cheap unskilled &
semiskilled
Intense competition led to cutting costs & prices and to
monopolies
•
•
5.
6.
PA, WV, KT
Fueled railroad, factories, & urban growth
Cost cutting led to ruthless elimination of competition
Colossal fortune at the top but suffering of working class
Relentless drop in prices
Failure of the money supply to keep pace w/
productivity, which drove up interest rates & restricted
the availability of credit
Railroad innovation
• Most intense competition among railroads
• By 1900, US had more miles (193,000)
than all of Europe’s, including Russia’s
• Railroads changed corporate enterprise
culture by….
• Issued stock & bonds for huge capital needs
– Borrowed heavily & had to appeal for generous land &
loan subsidies fr. fed., state, & local gov’t
– Interest repayments cut heavily into earnings
– Collis P. Huntington = Central Pacific Railroad
– Jay Gould = Union Pacific
– James Hill = Northern Pacific
• Separation of ownership from management’
• Nat’l distribution & marketing:
– relied on magnetic telegraphs
• New organizational & managerial structures
– Hierarchical, separate geographic units
– Elaborate accounting & reports: set rates & predict
profits
Consolidating the Railroad Industry
• Huntington, Gould, & others killed hodgepodge
of smaller railroad companies: financed by
eastern & British banks
• Created integrated track (4’81/2” gauge)
networks; standardized basic
equipments/facilities
• Corrected delay problems by divided country
into 4 time zones
• Uniform rates nationwide
• Railroad leaders depicted as robber barons &
villains
(Chapter 18) Abusive Monopoly Power:
Cartoon from Puck Magazine
Jay Gould (1836-92) was one of the
wiliest financial entrepreneurs on Wall Street. In
1868 he bribed the New York legislature to defeat
Cornelius (Comodore) Vanderbilt and gain control
of the Erie Railroad. In 1869, with the flamboyant
Jay Fisk, he had tried to corner the gold supply
and control the currency. In the next decade,
despite his public image, in the words of Maury
Klein, his recent biographer, as a “deadly and
elusive predator,” Gould took advantage of the
cutthroat railroad competition to take control of the
Union Pacific, the Kansas Pacific, the Wabash,
the Michigan Central, and the Canadian Southern
railroads. He eventually even controlled the
elevated railway system in New York City.
At the same time, recognizing the value in
emerging telegraphic communications industry,
Gould gained control of Western Union, undersea
cable connections, the Associated Press, and
several leading newspapers. Western Union and
its competitor, the Atlantic and Pacific Telegraph
Company, which Gould also controlled, dominated
telegraph transmission of the news nationwide.
Rival newspapers lambasted him as an evil wizard
out to control society itself.
1.
Why is the image of Uncle Sam tied to a
telegraph pole so powerful? What other
images does it bring to mind? Why are the
ropes around him labeled N.Y. World, N.Y.
Tribune, and [N.Y.] Evening Express?
2.
Why are the telegraph lines depicted as
snakes? What is the decoration on them?
(Chapter 18)
1.
Why is the image of Uncle Sam tied
Cartoon
from
to a telegraph
pole so powerful?
What other images does it bring to
Puck
mind? Magazine
Why are the ropes around him
labeled N.Y. World, N.Y. Tribune, and
[N.Y.] Evening Express?
2.
Why are the telegraph lines depicted
as snakes? What is the decoration
on them?
Bad side of consolidation
Debt, overextended systems, crooked bus. Practices led to
reckless cost cutting for traffic
• Favored kickbacks & rebates to special clients
• Free passes for politians
• Special rates for larger shippers
• Hurt small farmers & businesses: turned to state gov’t for help
– Supreme Court in 80s ruled that states could not regulate interstate
commerce
– But passed Interstate Commerce Act in ’87 & 5-member ICC (Interstate
Commerce Commission) was est.
• Banned monopolies among other laws
• Railroads challenged ICC in 16 cases before ’05 & won all, but
one, but then Hepburn Act in ’06 empowered ICC to set rates
• Competition abated when depression hit in 1893
– Railroads in the hands of JP Morgan & other investment bankers
– JP reorganized their systems & refinanced their debts
Applying lessons of Railroad to Steel
Andrew Carnagie fr. Scottland, came to US in ’48
•
"I don't believe in God. My god is patriotism. Teach a man to be a good citizen and
you have solved the problem of life." ~ Andrew Carnegie
• Worked as bobbin boy $1.20/wk (60hrs)
• Messenger boy to telegraph operator
–
–
–
–
–
Hired then by Tom Scott of PA Railroad
Became of head of company’s western division at age 24
Used complex cost analysis to cut cost & increase traffic
Earned $56,000 yr fr. Investment in the railroads
Built his own steel mill in 70’s & used Henry Bessemer
method; knew actual production cost of each ton of steel due
to his cost analysis.
Figure
18.1: Iron
and Steel
Production,
1875–1915
Figure 18.2:
Mergers in
Mining and
Manufacturing,
1895–1910
Figure 18.2:
Mergers in
Mining and
Manufacturing,
1895–1910
(cont’d)
Railroad to Steel: Carnegie
• Lower production cost by limiting wage
increases
• Discovered vertical integration: fr. Mining &
smelting of ore to selling the steel
• Philanthropic activities: gave more than $300 M
to libraries, uni., & int’l peace causes
• Carnegie Steel = world’s largest industrial
corporation by 1900
• Consolidation of Carnegie w/ Federal Steel = 1st
business capitalized at more than $1b
•
The Trust: Creating New Forms of
Corporate
Organization
Industries like oil, salt, sugar, tobacco, meapacking followed
cost cutting method
• Philip Armour & Gustavus Swift (Chicago) raised efficiency of
using every part of cattle
• Edwin Drake drilled 1st crude oil in ’59 in PA: distilled into
kerosene…oil in rivers
• John D. Rockefeller fr. Cleveland also into cost cutting &
efficiency
–
–
–
–
Head of Standard Oil Company in ’73; also used vertical integration
Also aggressively forced out competitors
By’79 he seized 90% of US ‘s oil-refinering capacity
Est. the Standard Oil Trust to eliminate competition
• Verbal agreement among groups of companies to controll prices & markets
– Oligopoly
– By merging competing companies into a giant, he also used horizontal
integration
The Trust: denounced by gov’t
• Sen. John Sherman (OH): passed
Sherman Anti-Trust Act in ’90
– Outlawed trusts & other monopolies: fines up
to $5000 & 1 yr. in jail
– Failed to define “trust” or “restraint of trade”
– Corporate lawyers simply organized trusts
into holding company, which owns a share of
stock of more or more firms, which makes
money as well
– Supreme Court sympathized win big bus:
hamstrung Congress
• US v. EC Knight Company …favored company
by ruling that manufacturing was not interstate
commerce
Economic Growth: Tech
• New inventions stimulated consumer
demand
• Example: Safe electricity led to electrical
motors, appliances, & lightning systems
• Bonsack machine rolled 120TH cigarettes
a day, replaced 60 skilled handworkers
• Success of Singer sewing machine ’60s
– Innovative use of interch. Parts + advertising
campaigns
– Mass produced cloth= expanded wardrobe
• Phone: Alex. Graham Bell ’76
• Light bulb: Thomas Edison ‘79
Economic Growth: Edison
• Edison had little edu, like A. Carnegie
•
He studied Thomas Paine's Age of Reason before he was 12, and “recognized no
power greater than Nature”
• Earlier work: telegraph, stock quotation printer,
phonograph or “sound writer”
• Light bulb:
– had to be easy to repair/install
– More convenient than gas or kerosene lighting
• Merged w/ competitor to form GE ’92
• Westinghouse & GE exchanged patents:
– Patent-pooling as mechanism for market domination
• Later inventions: mimeograph, microphone, motionpicture camera & film, storage battery
• Died in 1931: had patented 1,093 inventions
Economic Growth: Custom-made
• Philadel.’s Baldwin Locomotive Works
– Employed 2TH workers; made 900 engines/yr
– Each machine was custome designed; no standardization
• Women’s apparel: most was custom produced until
1900
– Dressmakers & milliners (fancy goods vendors) paid high
wages to skilled seamstresses
– Shift styles quickly to follow fashion
Economic Growth: Ad. & Marketing
• Flour industry shows mass production & marketing
concepts
• Output exceeds market demands
– Excess led mills to create new products: cake flours,
breakfast cereals (Quaker Oats)
• Marketing for consumer loyalty: brand names,
trademarks, guarantees, slogans, endorsements, &
other gimmicks
– Ivory soap (Proctor & Gamble) ’79: “99 and 44/100 pure”
– Cigarettes: James “Buck” Duke used trading cards, circulars,
box-top premiums, prizes, testimonials, & scientific
endorsements
– Campbell soup ad ’90: as good as gourmet food
• Kodak camera “you push the button, we do the rest”
– Market: customers return film & camera, factory developed,
printed, reload & shipped back …all for $10
– Revolutionized industry & democratize a visual medium
Economic Growth: Costs & Benefits
• Industrial competition led to many bankrupted co.
• Also high costs for US workers: immigrants & natives
– Subsistence wages & could be fired on moment’s notice
• Devastated the environment: chemical waste,
garbage, pollution
• Benefits: labor-saving products, lower prices,
advances in communication & transportation
• Benefits & liability sometimes interconnected:
– Ex: sewing machine
•
•
•
•
created thousands of new jobs
Wider variety of clothes
Eased the lives of millions of housewives
Young women toiled long hours in sweatshops for pitifully low wages
The New South: economically weak
•
•
•
•
•
•
•
war’s physical devastation
few towns/cities
lack of capital
Illiteracy
northern control of financial markets & patents
low rate of tech. innovations
nostalgia for pre-war era… perpetuated image
of the South as traditional & unchanging
The New South: lack capital as
Obstacles to Progress
• By ’65 had only 2% of nation’s banks
– Fed policies made banking difficult: $50Th required to
start a bank
– Merchants/storekeepers lend supplies in lieu of cash in
return for crops; farmers in debt & grew only cash crops
(tobacco & cotton) to repay; short labor for industry
– Cash crops: farmers vulnerable to fluctuations of
commercial agriculture
• Cotton 11c/lb in ’75 to 5c/lb in ’94
• High tariffs made imported machines expensive to
farmers
• Demonetization of silver limited capital availability
• Discriminatory freight rates hiked expense of
shipping
The New South: lack education
•
•
•
•
Limited resources reduced education
Operated segregated schools
Refused to tax property to fund schools until ’89
School attendance remained low; limited
educated work force
• Built white patronage system by modest funds
to veterans
– Reinforce “old south’ idea: Lost Cause
– 1911 veterans’ pensions ate 22% of GA’s state
budget
– Leaves little for educational & economic developm.
The New South Creed &
Industrialization
• The New South creed: doctrine created by newspaper
(Henry Grady & Henry Watterson) that the South is
the El Dorado for the next half century
• Industrialization gained momentum in 80s
– Offered tax exemptions, leased prison convicts to serve as
cheap labor, gave huge tracts of lands to railroads
• Southern iron & steel mills as large scale recruiters if
black workers
– 1900, black population in urban = 20%
– 60% work force = black; but no chance of advancement
– Southern blacks in iron/steel earned more than whites in
textile
• Segregation: black women cleaned tobacco leaves,
white women ran machines that made cigarettes
The Southern Mill Economy
• Textile mills as catalyst for new towns (like NE in
1820’s)
– Largely in Piedmond: central VA to GA to AL
– Towns increased due to railroad
– 1920 the South was leading nation in textile-mill
• Poor black & white tenant farmers still vulnerable
to exploitations by merchants, lawyers, doctors, &
bankers
– Commercial agriculture
– Paid workers 30-50% less than in NE
– Built & owned workers’ housing, company store,
supported church, financed elem. School
– Prevent movement of workers: paid once/mo in script
• Certificate redeemable only in goods from company store
– Families in debt cycles like tenants & sharecroppers
– Whole family worked: bring babies along
The Southern industrial lag
• Southern industrialization compared to the N.
– Smaller scale & slower rate
– Depended far more in outside financing, tech., &
expertise
• Ex: steel was more expensive for southerners
to buy
– US Steel executives priced steel based in Pittsburg:
Factories & the Work Force: Fr.
Workshop to factory
• Transition to factory economy evident by
boot/shoe industry
• Shoes still custom made in 1840s; shoemakers
had high status
• Ready-made shoe market eroded status
– Skilled shoe artisans now work as team of 4, reach
w/ one function
– Lost freedom to drink on the job or take time off for
special occasion
– Working class culture now viewed as
wasteful/inefficeint
• Large factories grew; traditional skills vanished
– Replaced by lower paid, less skilled
Factories & the Work Force:
hardships of industrial labor
• Factory system increased = unprecedented
demand for unskilled labor
• Contract system: subcontractor responsible for
managing gangs of laborers
– Seasonal & transient, laid off when not needed
– Unskilled; pushed hard by foreman/boss “pushers”
• ’70s skilled ones earned $3/day; unskilled $1.30
• Industrial accidents:
– Dangerous working conditions
– Inexperience
– rapid pace of production process
• Child labor: starts at age 8 or 9
– Coal mine = black lung disease leads to
tuberculosis & emphysema
Factories & the Work Force: immigrant labor
• Unskilled immigrant labor for heavy construction
industries, mills, railroads…
• Philadelphia:
– skilled dominated by native born & German immigrants
– Unskilled by Irish until ’90s when replaced by eastern &
southern Europeans (“new immigrants”)
• Northeast: poor French-Canadians in textile mill
• West Coast: Chinese in mining, canning, railroad
• Immigrants must adjust from farm pace to
production pace
– Factory owners’ tactic: temperance societies, Sunday
schools to teach punctuality & sobriety
– Gain leverage by offering low cost housing; strike=
evicted
– Used “race” concept on darker Europeans: Irish, Greek,
Italian, Jewish, & others
• Non-white; didn’t deserve same compensation as white
Factories & the Work Force: Women & work
Women’s work experiences
• White married women of all classes accepted “separate
spheres” & remained at home
• Working class: needed extra income & earned wages at
home
– Sewing, button-making, taking in boarders, & doing laundry
– Exploited by entrepreneurs: lease tenements in return for
long work hours in apartments
• Cigar manufacturers
• Single women preferred working in textile rather than
domestic work to avoid being a “servant”
– Except black women due to discrimination
– Low pay: $5/70hours
• 1900 female comprise 17% of nation’s work force
• Typewriter & telephone led to new job opportunity
– Typist paid $6-8/wk; steadier & more prestige
Factories & the Work Force: hard work & gospel of
success
• Horatio Alger: Unitarian minister turned dime novelist
– ’67 Ragged Dick: praised poor, honest lads rose through
ambition & self-discipline
– Andrew Carnegie inspired “rags to riches”
• Mark Twain chided public for naiveté
– Essay in ’71: business success likely on lies & cheats
– His ideas reflected by Thomas McGuire’s testimony of
destitution & tenement life
• Facts: 95% of industrial leaders came fr. Middle- &
upper-class backgrounds
• Advancements were limited due to discrimination;
exception = Donahue brothers wealthy fr. Union Iron
Works
• Native born whites advantage: higher education & family
financial backing
• Positives: real wages rose 31% for unskilled & 74% for
skilled; middle class enlarged
• Neg: purchasing power undercut by injuries & lay off;
gap between the poor & well-offs
Mark Twain: ordered his uncensored book not to publish
until 100 years after his death
• A God who could make good children as easily a bad, yet preferred
to make bad ones; who could have made every one of them happy,
yet never made a single happy one; who made them prize their
bitter life, yet stingily cut it short; who gave his angels eternal
happiness unearned, yet required his other children to earn it; who
gave is angels painless lives, yet cursed his other children with
biting miseries and maladies of mind and body; who mouths justice,
and invented hell -- mouths mercy, and invented hell -- mouths
Golden Rules and foregiveness multiplied by seventy times seven,
and invented hell; who mouths morals to other people, and has none
himself; who frowns upon crimes, yet commits them all; who created
man without invitation, then tries to shuffle the responsibility for
man's acts upon man, instead of honorably placing it where it
belongs, upon himself; and finally, with altogether divine
obtuseness, invites his poor abused slave to worship him!
4/13/2015
AP Planning
34
Labor Union & Industrial Conflict
• Labor leaders sought to organize national to protect
workers & resist corporate power
Labor movement challenge:
• Ethnic & racial divisions
• Skilled & unskilled division
• Different trades; lack unity
Nat’l Labor Union & Knights of Labor
• Tried to unite workers regardless of specialties
• Efforts collapsed
American Federation of Labor (AFL):
• More success; represented amalgamation of powerful
craft unions
• But small portion of nation’s total labor force
Crisis that shaped US’s legal environment, state laws, &
progressive reform
•
strike & violence out of intolerable conditions
Organizing the Workers
• William Sylvis organized Iron Molders’ Int’l
Union & renamed it Nat’l Labor Union (NLU)
– Name change to include all workers’
– 8 hr/day
– End convict labor
– Est. federal department of labor
– Currency & banking reforms
– Endorsed restriction of immigrants; particularly
Chinese (blamed for undercut wage level)
– Supported cause of working women; elected a
woman as nat’l officers
– Urged blacks to organized; although segregated
racial unions
• Sylvis died in ’69, NLU vanished
Organizing the Workers: Knights of
Labor
Founded by Uriah Stephens & other taylors in ’69
•
in Phila
• Named the Noble and Holy Order of the Knights
of Labor
• Secret society like the Masonic order
• Included all wage earners; excluded bankers,
doctors, lawyers, gamblers, liquor dealers
• Called to end convict & child labor
• Equal pay for women
• Graduated income tax (no fed. Income yet)
• Cooperative employer/employee ownership of
factories, mines, & other business
Organizing the Workers: Knights of Labor
Membership skyrocketed after Terence Powderly
replaced Stephens in ’80s
• Apposed strikes & urged temperence
• Welcomed women (10% membership) & blacks
(allowed segregated unions in South)
– Mary Jones = Mother Jones
• Total ban on Chinese immigration
• Riots against Chinese in CA: workers destroyed
Chinese-run laundries & terrorized Chinese population
• 1900 gov’t passed Chinese Exclusion Act & made
permanent in 1902
• Struck against Wabash railroad (Jay Gould) &
succeeded & membership soared by ’86
• Unauthorized strikes failed in ’86
– Haymarket riot contributed to decline of union
Organizing the Workers: AFL
• Union crafts broke off fr. Knights of Labor to form AFL
• American Federation of Labor, AFL, led by Samuel
Gompers
Gompers led from ’86 to 1924
•
immigrant cigar maker
• Raising wages & reducing work hours
• Liabilities for injuries & mine safety laws
• Federation by allowing various trade unions to be
independent by tied to nat’l organization
• Believed women belonged in the home
• Grew 1.6 million members by 1904
Yet labor organization remained weak; only 5% of
workforce joined union
Organizing the Workers: strikes & Violence
• 37TH strikes erupted fr. 1873-1905
• 1877 deadly strike sparked by wage reduction
– Strike exploded along rail line spreading to NY, Pittsburgh, St. Louis, Kansas
City, Chicago, & San Francisco
– New Pres. Rutherford Hayess called troops to quell it
– 100 people died; 2/3 nations’ railroads stood idle
• Middle class terrified of mob violence & employers capitalized on
hysteria
– Forced workers to sign yellow dog contracts
• Promise not to strike
– Hired Pinkerton agents as their own private police force
– Turned to fed. Army & US army to suppress labor unrest
• ’86 Haymarket: a bomb thrown killing 7 policemen & police fired into
crowd killing 4 protestors
– 8 men arrested; 4 of these executed although no evidence
– Animosity towards unions intensified
• Pullman Palace Car Co. ’94 strike: George Pullman slashed wage
w/out reducing rent (nice planned community)
– Eugene Debs led union to strike & paralyzed Chicago, the hub
– Debs was arrested & fed troops poured in
• 700 rail cars burned, 13 died, 53 wounded
• Corporate leaders played unions as anarchist & violent
• Fed. & state gov’t sided with employers & hamstrung labor’s efforts
• Ended up weak w/ negative image up to 1930s
Organizing the Workers:
Alternatives
• Walt Whitman observed the spread of the poor
• Laissey Faire advocates cited Adam Smith’s the Wealth of
Nations (’1776)
– Andrew Carnegie justified laissez faire by citing Charles Darwin’s
evolutionary theories “survival of the fittest” by ignoring the
practice of monopoly earlier by praising unregulated environment
as beneficial
– William G. Sumner, professor, also shared disapproval of gov’t
interference
– Conservative social brand = Social Darwinism
• Lest F. Ward claimed that gov’t could regulate bus.,
protect society’s weaker members, & prevent exploitation
of natural resources
• Henry George proposed single tax & state controlled
ecnomy to distribute wealth evenly
• Edward Bellamy wrote utopian novel ’88: state-run;
equal,conflict free society
• These 3 sought to humanize industrialization
• Karl Marx in Das Kapital envisioned a class struggle to
form a classless society: Bourgeosie v. proletariat
(Chapter 18) World’s Fair Poster
This poster for the 1893 Chicago World’s Fair
makes specific reference to Chicago Day, October
9th, the anniversary of the Fire. The reference harks
back to the great fire of 1871. Chicago at the time
had 330,000 inhabitants and was the fourth largest
city in the nation. The fire had swept over nearly
2,000 acres of the city, destroying 18,000 buildings,
or nearly one-third of the city. 100,000 people lost
their homes. Thus, the reference to the Chicago fire
contrasts the marvelous white city of the Fair to the
ruins that had existed a scant thirty-two years earlier.
Built on a swamp, with interior lagoons, electric lights,
and even its own heating plant, the White City was
testimony to the regeneration of Chicago and the
power of planning and technological innovation.
The poster shows the massive Manufactures
and Liberal Arts building in the upper half and the
stately Court of Honor in the lower section. The
uniform building height and the classical revival
architecture in the Court of Honor created a sense of
monumentality and grandeur. It also implicitly
announced that Chicago and the United States had
become a world power, much as Rome had been in
the ancient world. The pageantry, evening parades,
and “the Grand Reunion of the States by Youths and
Maidens” announced to all that the U.S. had
overcome its internal divisions and stood poised for
international greatness.
1.
Why is it significant that manufacturing and
the liberal arts were grouped together in the
largest building at the fair?
2.
Why would the city of Chicago want to
celebrate the anniversary of the fire?
3.
What purpose do the parades play? Why
does the poster boast that these events will
be “the most Significant and grandest
special of Modern Times?”
1.
Why is it significant that manufacturing and
the liberal arts were grouped together in the
largest building at the fair?
2.
Why would the city of Chicago want to
(Chapter
18)
celebrate the anniversary of the fire?
What purpose do the parades play? Why
World’s
Fair
Poster
does the poster boast
that these
events will
3.
be “the most Significant and grandest
special of Modern Times?”