INTRODUCTION
1.) What brought about prodigious industrial growth and the rise of
giant corporations in the period of 1865-1900?
2.) How did some business leaders, such as Andrew Carnegie and
John D. Rockefeller, overwhelm competitors and dominate their
industries?
3.) How and why did southern industrialization patterns differ from
northern ones?
4.) How did workers respond to the changes resulting form rapid
industrialization and the growth of big business?
5.) In the labor-management clashes of the period, why did
management almost always win?
THE RISE OF CORPORATE AMERICA
The Character of Industrial Change
 Rapid industrial expansion was made possible by:
 using America’s vast coal deposits for cheap energy
 Adopting new technology
 Enabled manufacturers to cut production costs
 Employ low-paid unskilled and semiskilled workers
 Ruthless competition among businesses
 Lowered commodity prices
 Ruined weaker companies
 Left fewer huge corporations in control of each industry
THE CHARACTER OF INDUSTRIAL CHANGE
The unrelenting competition also drove business
to brutally exploit labor and pollute the
environment
Though prices fell:
 interest rates remained high
 credit tight
 because of the failure of the money supply to keep up
with the expansion of the economy
RAILROAD INNOVATIONS
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By 1900, the United States had more rail miles tying the
country together than did all of Europe
Building this extensive railroad system opened a vast internal
market to American industry
The railroad companies also led the way in developing
accounting, financial, and managerial practices that made
large-scale corporate enterprise possible
 Sale of stocks and bonds to raise needed capital
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Railroad management innovations became the model for
other businesses trying to sell products in a national market
CONSOLIDATING THE RAILROAD INDUSTRY
A group of innovative railroad entrepreneurs bought out
their smaller competitors one by one
 Collis P. Huntington
 Central Pacific Railroad
 Jay Gould
 Financier, developer, speculator
 James J. Hill
 Great Northern Railway
These integrated lines carried goods all over the country
efficiently
 Standardized equipment and track gauge
CONSOLIDATING THE RAILROAD INDUSTRY
However, the railroad companies abused their powers
 Bribed politicians
 Free passes and other favors
 Gave rebates and kickbacks to big shippers
 Overcharged small businesses and farmers
Small shippers demanded legislation to stop the unfair practices
In the 1870’s, many Midwestern states outlawed rate discrimination
 These laws were ruled unconstitutional when the Supreme Court said
states could not regulate interstate commerce
CONSOLIDATING THE RAILROAD INDUSTRY
Interstate Commerce Act
 Passed Congress in 1887
 Forbade pools, rebated, and other monopolistic practices
 Established the Interstate Commerce Commission (ICC)
 Investigate complaints and unreasonable rates
 Interstate Commerce Act short summary
The Interstate Commerce Act was ineffective for several reasons:
 Federal courts decisions almost always sided with the railroads
 ICC’s lack of power to set railroad rates
 Presidents appointing pro-railroad commissioners
CONSOLIDATING THE RAILROAD INDUSTRY
In the early 20th century, under the
guidance of investment bankers
railroad consolidation proceeded still
further
 J.P. Morgan
By 1906, 7 giant corporations
controlled 2/3’s of all the track
APPLYING THE LESSONS OF THE RAILROADS TO STEEL
Andrew Carnegie’s career illustrates
the close connection between
railroad expansion and the growth of
heavy industry
APPLYING THE LESSONS OF THE RAILROADS TO STEEL
• Carnegie’s best customers were the railroad companies
• From his early experiences working in the railroad industry, he learned
the organizational, accounting, and managerial innovations that he
later applied to his steel business
• He also copied the railroad practice of consolidating small enterprises
into fewer and fewer huge companies
• Carnegie integrated his business both vertically and horizontally
APPLYING THE LESSONS OF THE RAILROADS TO STEEL
U.S. Steel
 1901
 Carnegie Steel and J.P. Morgan’s Federal Steel combined
 The world’s first corporation capitalized over $1 billion
 Contained 200 member companies
 By 1900, the consolidation process that had placed the railroad and
steel businesses in the hands of a few corporate giants had also taken
place in oil, sugar, meatpacking, and many other industries
THE TRUST: CREATING NEW FORMS OF CORPORATE
ORGANIZATION
Standard Oil Company
 John D. Rockefeller
 Oil-refining
 Adopted the latest technology
 Made deals with the railroads to get
special shipping discounts
 Engaged in deception and aggression to
ruin competitors
 Created the 1st trust and later holding
company to extinguish all competition in
oil refining
THE TRUST: CREATING NEW FORMS OF
CORPORATE ORGANIZATION
The growth of trusts, oligopolies, and monopolies
in one industry after another led to public
pressure for govt. intervention
In 1890, Congress passed the Sherman AntiTrust Act
 Outlawed all contracts and combinations that were in
restraint of trade in interstate commerce
 Sherman Anti-Trust Act
THE TRUST: CREATING NEW FORMS OF CORPORATE
ORGANIZATION
The Sherman Anti-Trust Act was ineffective in
stopping the growth of trusts:
 Vaguely worded
 Presidents rarely brought suits against companies under it
Supreme Court in the E.C. Knight case (1895) interpreted
the meaning of interstate commerce so narrowly as to
prevent the law’s use against manufacturing corporations
 PBS summary
 E. C. Knight case short summary
 Large-scale consolidations in industry accelerated after the E.C. Knight
case
STIMULATING ECONOMIC GROWTH
The Triumph of Technology
 The invention and patenting of new
machines in the period 1860-1900 also
brought about the growth of huge
corporations
 Alexander Graham Bell’s invention of the
telephone in 1876 gave rise to Bell Telephone
 By 1900 had installed some 800,000 phones
THE TRIUMPH OF TECHNOLOGY
Thomas Edison
 Menlo Park
 Perfected the light bulb (Edison Electric)
 Invented the phonograph, microphone,
motion-picture camera and over thousands of
other items
Bell and Edison proved that new
inventions could be the foundation of
profitable big business
SPECIALIZED PRODUCTION
Manufactures of specialized products also
greatly expanded their output between 1865
and 1900
Locomotives
Furniture
Women’s clothing
Not necessarily done in huge factories though
ADVERTISING AND MARKETING
Aggressive advertising and marketing were
effective in expanding sales and beating out
competitors in the late 19th century
Procter and Gamble
American Tobacco
Eastman-Kodak
ECONOMIC GROWTH: COST AND BENEFITS
By 1900 the chaos of thousands of small
companies competing for the national market
had been replaced by an economy dominated
by a small number of enormous corporations
offering a large array of new products
The price of these accomplishments was the
crushing of thousands of small-and mediumsized business, the exploitation of millions of
workers, and the polluting of the environment
THE NEW SOUTH
The South industrialized more slowly than the North
 Until 1900 lagged far behind North
Reasons why:
 The destruction of the South’s credit system by the Civil
War
 Shortage of capital
 Federal govt. policies that hurt the South economically
 High protective tariffs
 South’s poor educational facilities
 High rate of illiteracy
THE NEW SOUTH CREED AND SOUTHERN INDUSTRIALIZATION
In the 1870’s, southern newspaper editors, planters, and
businessmen began to preach the “New South Creed”
 The region must industrialize
Eager to attract northern capital:
 southern states offered tax exemptions for new businesses that located there
 Held industrial fairs
 Leased convicts from state prisons as cheap labor
 Practically gave away land, forests, and mineral rights to northern corporations
Iron and steel production expanded dramatically
 Birmingham and Chattanooga
 The iron and steel mills hired many unskilled African Americans
THE SOUTHERN MILL ECONOMY
• Unlike the iron and steel industry, where factories were usually in
or near urban areas, southern textile mills opened in the
countryside
 Towns and villages were created around the mills
• Most of the textile mills were located in the Piedmont region of VA,
the Carolinas, GA, and AL
• The southern mills combined northern technical expertise with
southern rural paternalism
• They recruited workers from the poor white farm population
• Hired many women and children, and even whole families
• The owners paid the laborers 30-50% less than New England mills
THE SOUTHERN MILL ECONOMY
•The textile companies dominated life in the mill towns they
started
•They provided their employees with housing, stores, schools,
and churches
•The mills underpaid their workers and overcharged for rent
and supplies
the employees often fell into debt to companies
 Just as sharecroppers were indebted to their landlords and creditormerchants
SOUTHERN INDUSTRIAL LAG
Despite impressive advances, southern
industrialization occurred on a small scale and
at a slower pace then in the North
The southern economy remained essentially in a
colonial status
Industry was owned largely by northern firms
 Example=U.S. Steel controlled the foundries in
Birmingham
FACTORIES AND THE WORK FORCE
From Workshop to Factory
 The number of industrial workers in the United States climbed from 885,000
to 3.2 million by 1900
 The trend toward large-scale, increasingly mechanized production accelerated
 the nature of work changed markedly
 Fewer artisans
 Remaining skilled workers had less control over their work and derived less
satisfaction from it
 Factories hired more low-skilled, low-paid women and children
 Jobs became simple, machine-paced, repetitive, and boring
THE HARDSHIPS OF INDUSTRIAL LABOR
• Already by the 1880’s, almost 1/3 of the labor force in steel and railroad
industries were unskilled workers
• Common laborers drifted from city to city and from industry to industry
• Worked for wages that were 1/3 of those paid to skilled artisans
• In the expanding factories and on railroads, workers were exposed to a variety
of industrially induced diseases
• Black lung (exposure to coal dust)
• Brown lung (inhaling cotton dust)
• They also had horrible accidents
• Employers rarely paid compensation to injured workers and opposed passage
of state health and safety codes
IMMIGRANT LABOR
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More and more, immigrants filled the least skilled, lowest-paid,
dirtiest, and most dangerous jobs in the expanding mines,
factories, and railroads
Impoverished French Canadians crossed the border to work in the
New England textile mills
Chinese constructed railroads and mined ore in the West
If immigrant workers stayed healthy, they often lived better than
they had in their homelands
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Most of the immigrants worked very hard
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Most did not adjust easily to the fast pace and monotony of factory
work or to the rigid discipline management tried to impose on
them
WOMEN AND WORK IN INDUSTRIAL AMERICA
Since women could be paid even less than men
and could do unskilled industrial jobs just as
well, management hired more and more women
Married, working-class women and their children
often spent hours finishing garments, rolling
cigars, and performing other labor for
manufacturers in their tenement apartments
WOMEN AND WORK IN INDUSTRIAL AMERICA
• Young, single women readily took jobs in factories
because they preferred them to domestic service
• Almost the only alternative for uneducated
females
• Immigrant parents regularly sent their daughters
into the mills and factories to supplement
inadequate family incomes
• By 1900, women made up 17% of the labor force
WOMEN AND WORK IN INDUSTRIAL AMERICA
In the late 19th and early 20th centuries, women
also began to obtain clerical positions
Office work paid better and offered more prestige
than factory jobs
But women clerical workers had almost no chance of
moving up to managerial positions
Despite the increase in female wage earners,
women’s work outside the home was viewed as
temporary
A women’s career was that of housewife and mother
HARD WORK AND THE GOSPEL OF SUCCESS
 Newspapers and magazines preached the gospel that, for male workers,
America was the land of opportunity and hard work led to success
 The papers were filled with rags-to-riches stories
 Poor immigrant boys who rose to become heads of major corporations
(Andrew Carnegie)
 In fact, Carnegie was the exception
 95% of executives of big corporations came from middle-and upper-class
families
 There was some opportunity for skilled workers to move into ownership and
management of small businesses
 For unskilled immigrant workers there was less mobility
 At best they moved from unskilled to semiskilled or skilled industrial jobs;
they remained in the working class
HARD WORK AND THE GOSPEL OF SUCCESS
• A huge gulf existed between the rich and poor
• By 1890, America’s richest families (top
10%) owned 73% of the country’s wealth
• At the other extreme, more than 50% of all
industrial laborers earned incomes that
placed them below the poverty line
LABOR UNIONS AND INDUSTRIAL CONFLICT
Organizing the Workers
In response to the unfavorable changes that
rapid industrialization was forcing on them,
workers turned to labor unions
National Labor Union
1866
Formed by William H. Sylvis
Several trades
Declined in membership in 1870’s
ORGANIZING THE WORKERS
Knights of Labor
Terrence V. Powderly 1870’s
Advance social and economic reforms:
 Equal pay for men and women
 Abolition of child labor
 Inclusion of black workers in unions
 A graduated income tax
 Cooperative ownership of factories, mines, and other
businesses
ORGANIZING THE WORKERS
• Despite their egalitarian ideals, the Knights and other
labor groups favored immigration restriction
• Labor opposition to the Chinese, whom they accused
of working so cheaply that they undercut native-born
workers, was especially strong
• The federal govt. responded to anti-Chinese
sentiment by passing the Chinese Exclusion Act in
1882
 Chinese Exclusion Act of 1882
ORGANIZING THE WORKERS (CONT.)
• When the Knights won a series of strikes in the
1880’s, workers rushed to join, swelling its
membership to 700,000
• In the late 1880’s, the Knights suffered
setbacks:
 It lost several big strikes
 Its craft unions broke away to form the American
Federation of Labor (AFL)
 Its membership declined
ORGANIZING THE WORKERS
American Federation of Labor
• Led by Samuel Gompers
• Did not attempt to organize
unskilled workers
• Dropped the far-reaching socialreform goals of the National Labor
Union and the Knights
ORGANIZING THE WORKERS
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AFL concentrated on winning short-term improvements in
wages and hours for its skilled members
The AFL grew, but by 1900 less than 5% of America’s workers
belonged to any union
The development of unions was seriously impeded by:
 splits in the labor force between skilled artisans and
common laborers
 religious and ethnic divisions
 differences among labor leaders concerning goals and
tactics
STRIKES AND LABOR VIOLENCE
• Between 1881 and 1905 almost 37,000 strikes took
place
• Nearly 7 million workers
• Violence erupted as strikers attacked employers’
property and the scab laborers
STRIKES AND LABOR VIOLENCE
Some of the biggest and most violent confrontations were:
 The railroad strikes of 1877
 The eight-hour strikes of 1886
 8 hour strike
 The Haymarket Square bombing (for which 4 anarchists were unjustly
convicted and executed)
 Chicago History
 The Homestead steel strike
 PBS Homestead Strike
 The Pullman strike
 Chicago History
STRIKES AND LABOR VIOLENCE
 To combat labor unrest, employers forced workers to sign
yellow-dog contracts and hired their own private police forces
 Because of the violence, the public regarded strikers as
dangerous radicals
 The federal govt. intervened repeatedly on the side of
management
Used the army to quell disturbances
Used injunctions to order union members back to work
STRIKES AND LABOR VIOLENCE
•When injunctions were disobeyed, union
officers like Eugene Debs (the leader of the
Pullman strike) were thrown in jail
•As a result of employer, public, and govt.
hostility, strikes almost always failed and
unions weakened
SOCIAL THINKERS PROBE FOR ALTERNATIVES
 The growing extremes of poverty and wealth and the violent clashes
between labor and management troubled middle-class Americans
 A number of social commentators tried to explain these developments
and put forward their own solutions
 Social Darwinists
 Believed that labor’s misery was an inevitable product of the
constant struggle for survival that weeded out all but the fittest
 They opposed any govt. interference with the workings of these
natural laws
 Andrew Carnegie
 William Graham Sumner
SOCIAL THINKERS PROBE FOR ALTERNATIVES
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Others attributed the social problems to a human-made
economic system that placed private property and
unrestricted profit seeking above all else
They called for govt. regulation, tax reform and a cooperative
commonwealth
• Lester F. Ward
• Henry George
• Edward Bellamy
Tiny socialist and anarchist groups preached that only the
overthrow of the capitalist and the govt. that protected them
would make possible a just and humane society
CONCLUSION
Industrialization had brought great benefits to America:
 International power status
 Lower-cost goods
 More jobs
 A tremendous array of new consumer products
But the price had been high:
 Shoddy business practices
 Polluted factory sites
 Urban slums
 Poverty for the workers
Exploited laborers periodically vented their rage and frustrations in violent outbursts and strikes
Middle-class Americans were ambivalent about the new industrial order
 They wanted to keep the benefits but somehow alleviate the accompanying social evils