The Rise of Industrial
America, 1865-1900
“The Gilded Age”
President Grover Cleveland, 1888
As we view the achievements
of aggregated capital, we
discover the existence of
trusts, combination and
monopolies, while the citizen is
struggling far in the rear or is
trampled to death beneath an
iron heel. Corporations, which
should be the carefully
restrained creatures of the law
and servants of the people, are
fast becoming the people’s
masters.
1900: U.S. led the world in industry
Natural resources: coal, iron ore, copper, lead, timber, and oil
Labor supply: hundreds of thousands of immigrants between 1860
and 1900
Growing population
Advanced transportation network
Capital was plentiful: even Europeans invested in the U.S.
Development of laborsaving technologies
Over 440,000 new patents between 1860 and 1900
Laws protected private property
Subsidized RRs with land grants and loans
Protective tariffs
Little regulation on business
Few taxes on corporate profits
Entrepreneurship
The Railroads
RR mileage increased more
than 5x from 1865 to 1900
Nationwide RR network
created a market for goods
Encouraged mass production,
mass consumption, and
economic specialization
Promoted growth of coal and
steel industries
Divided into 4 time zones in
1883
Modern stockholder
corporation
Development of structures in
finance, business
management, and regulation of
competition
Eastern Trunk Lines
Major route between
large cities
Cornelius Vanderbilt used
steamboat profits to
merge local RRs into the
New York Central
Railroad in 1867 (NY to
Chicago)
Baltimore and Ohio RR
Pennsylvania RR
Western Railroads
Coincided with settlement of the last
frontier
Promoted settlement on the Great Plains
Linked the West with the East
Federal Land Grants
80 RR companies received more than 170
million acres of public land
Gov’t expected them to sell land around RR
routes in order to finance construction
Negative Consequences
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Quick and poor construction
Corruption in government
Credit Mobilier Scandal
RRs controlled half of the land in some western states
Transcontinental Railroads
Congress authorized The Union
Pacific and the Central Pacific to
build during the Civil War
Union Pacific
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Across Great Plains, starting in
Omaha, NE
War veterans and Irish immigrants
Central Pacific
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Through Sierras from Sacramento
6,000 Chinese immigrants
Came together May 10, 1869 at
Promontory Point, UT (Golden
Spike)
By 1900, 4 more transcontinental
RRs existed
James Hill’s Great Northern was
the only one built without subsidies
Competition and Consolidation
RRs were overbuilt and some
were unprofitable
Mismanagement and fraud
Speculators (Jay Gould) made
quick profits by selling off
assets and watering stock:
inflating value of assets and
profits before selling to public
Offered rebates and kickbacks
to favored shippers
Farmers often had to pay
higher prices
Pools: competing companies
agreed secretly to fix prices
and share business
Panic of 1893
Forced ¼ of RRs into
bankruptcy
J. Pierpont Morgan and other
bankers took control and
consolidated RRs
Stabilized rates and reduced
debts
By 1900, 7 giant systems
controlled 2/3 of the RRs
Interlocking directorates: same
directors ran competing
companies creating regional
RR monopolies
William Vanderbilt: “The public
be damned.”
Granger Laws overturned by
courts
Industrial Empires
Shift in industrial production in the late 19th
century
Early factories had produced textiles,
clothing, and leather products
“Second Industrial Revolution” after the
Civil War
Heavy industry: steel, petroleum, electric
power, and industrial machinery
The Steel Industry
Henry Bessemer in
England and William
Kelly of the U.S.
discovered an new
process of making
large quantities of
steel: “The Bessemer
Process”
Great Lakes Region
became leading steel
producer
Andrew Carnegie
Poor Scottish immigrant who
became the superintendent
of a PA RR.
1870s: started manufacturing
steel in Pittsburgh
Vertical integration: company
controls every stage of the
industrial process
Mining raw materials to
transporting the finished
product
Carnegie Steel was at top by
1900
U.S. Steel Corporation
Carnegie wished to retire
and devote himself to
philanthropy
Sold company to J.P.
Morgan for over $400
million
First billion-dollar
company
Largest enterprise in the
world
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168,000 employees
Controlled over 3/5 of the
nation’s steel business
The Oil Industry
1st U.S. oil well drilled
by Edwin Drake in
1859 in PA
Rockefeller and Standard Oil
Applied latest
technologies and more
efficient practices
Rebates from RR
companies and
temporarily cut prices to
eliminate competition
(“one-two punch”)
Controlled 90% of the oil
refinery business by 1881
Formed a “trust”:
horizontal integration
Other industries copied
and organized trusts
Antitrust Movement
Sherman Antitrust Act (1890): prohibited
any “contract, combination, in the form of
trust or otherwise, or conspiracy in restrain
of trade or commerce.”
Too vague to be enforced
United States v. E.C. Knight Co. (1895)
ruled that the law could only be applied to
commerce, not manufacturing
Few convictions until the Progressive Era
Laissez-Faire Capitalism
The government should stay out of the economy
The government should not regulate businesses
Conservative Economic Theories
The Wealth of Nations
(1776): economist Adam
Smith argued that
business should not be
regulated, but supply and
demand should be the
determining economic
forces
American industrialists
used laissez-faire
economics to justify their
business practices
Social Darwinism
Theory of natural selection
English social philosopher Herbert
Spencer believed that the theory should
be applied to the marketplace
The concentration of wealth should be
held by the “fit.”
Professor William Graham Sumner of Yale
argued that help for the poor would
interfere with the laws of nature
Gospel of Wealth
Used religion to justify wealth
J.D. Rockefeller applied the Protestant
work ethic: hard work and success are
signs of God’s favor
Carnegie’s article “wealth” argued that the
wealthy had a God-given responsibility to
carry out acts of civic philanthropy
Technology and Innovations
Inventions
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Telegraph by Samuel Morse
Improved transatlantic cable (1866)
Telephone by Alexander Graham Bell (1876)
Typewriter (1867)
Cash register (1879)
Calculating machine (1887)
Adding machine (1888)
Kodak camera by George Eastman
Fountain pen
Gillette’s safety razor
Edison and Westinghouse
Thomas Edison
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“Invention Factory”
More than 1000 patents
Phonograph
Incandescent lamp
Mimeograph
Motion picture machine
George Westinghouse
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More than 400 patents
Air brake for the railroads
Transformer for electrical current
Made possible lighting for cities and operation of streetcars,
subways, and appliances
Marketing Consumer Goods
R.H. Macy in NYC
Marshall Field in Chicago
Frank Woolworth’s Five and Ten Cent Stores
Sears Roebuck and Montgomery Ward provided
for catalog orders
Packaged foods: Kellogg and Post
Refrigerated railroad cars and canning changed
the war Americans ate
Created a consumer culture
Impact of Industrialization
Raised the standard of living for most
people
Created sharper economic and class
divisions among the rich, middle class,
and the poor
Concentration of Wealth
By the 1890s, the richest 10% controlled
9/10 of the nation’s wealth.
New class of wealth
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Newport, RI “cottages”
Horatio Alger myth
Author’s novels sold more than a million copies
Portrayed a young man who became rich and
successful through honesty, hard work, and a
little luck
In reality, few experienced this rags-to-riches
story
Typical wealthy business person was a white,
Anglo-Saxon, Protestant male who came from
an upper or middle-class background
Expanding Middle Class
Growth of corporations provided a need
for white-collar workers
Middle management was needed
Expanded middle class through creating
jobs for accountants, clerical workers, and
salespersons
Wage Earners
By 1900, 2/3 worked for wages that required
them to work ten hours a day, six days a week
Determined by supply and demand
Factory wages were barely above subsistence
Real wages rose steadily, but most families still
could not support a family on one income
Women and children were working to make up
the difference
1890: 11 million of the 12.45 million families
averaged less than $380 a year
Working Women
1 out of every 5 women were working in
1900
Most were young and single
Women usually worked in textile, garment,
and food-processing industries
Secretaries, bookkeepers, typists, and
telephone operators
Labor Discontent
Assigned one step in the production;
monotonous
Exposed to chemicals and pollutants
Changed jobs on average every 3 years
Many joined unions
Struggle of Organized Labor
Industrial Warfare
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Businesses held most of power because of the
surplus of cheap labor
Lockout
Blacklists
Yellow-dog contracts
Private guards and state militia
Court injunctions
Great railroad strike of 1877
Hayes used federal troops to end labor violence
Attempts to Organize National
Unions
National Labor Union
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Attempt to organize all workers skilled and unskilled
Knights of Labor
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Began secretly by Terrence Powderly
Opened membership to all, including women and AfricanAmericans
Worker cooperatives
Abolition of child labor
Abolition of trusts and monopolies
Wanted to arbitrate rather than strike
Haymarket bombing
American Federation of Labor
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Samuel Gompers
Higher wages and improved working conditions
Strikebreaking
Homestead Strike
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Failure set back the union movement in the
steel industry until the New Deal
Pullman Strike
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Federal court issued an injunction forbidding
interference and ordering workers to abandon
the strike
Eugene Debs (American Railway Union) and
other union leaders were arrested and jailed.