Lecture # 1
The Rise of American Business, Industry, and Labor: 1865-1920
THE BIG IDEA:
The US developed a prosperous new economy based on the mass production of goods. During this period:
1) economic development expanded in the North, but weakened in the South 2) entrepreneurs became
wealthy and powerful 3) government began to regulate business and 4) labor unions formed to improve
working conditions.
OVERVIEW:
From Reconstruction through WWI, the US developed a prosperous industrial economy that
revolutionized American society. New machines made possible the mass production of goods. Industrial
growth led to a new type of business, the corporation, headed by a rising class of enterprising
industrialists such as Henry Ford. With little government interference, these corporate giants created new
business structures, some legal and some not, that brought them tremendous wealth. They used their
riches both to benefit society and to increase their power. Industries attracted a new type of laborer (from
rural areas and afar), the factory worker, who often worked long hours in hazardous conditions. These
conditions spurred the growth of labor unions, which gradually gained the right to collectively bargain
with employers.
THEMES:
1. Science and Technology: How did technological developments lead to the growth of
industrialization?
2. Government: How did the government respond to the growth of powerful industries and to
complaints about business practices (schemes)?
3. Factors of Production: What factors led to the growth of the labor movement, and what
strategies did unions pursue?
KEY PEOPLE:
Andrew Carnegie, JD Rockefeller, JP Morgan, Henry Ford, Charles Darwin, Samuel Gompers
I. BUSINESS DEVELOPMENTS (Reconstruction to Gilded Age to WWI to today(?))
-Before the Civil War, sole proprietors, or single owners, and partnerships had controlled most
American businesses. The mills and factories that came with industrialization, however, required
greater capital, or money for investment, than one person or a few partners could raise.
A. The Growth of Corporations
B. Other Forms of Business Organization
1. Monopoly
2. Conglomerate
3. Pool
4. Trust
5. Holding Company
C. Innovation
-While these new forms of business organization helped young industries to get stared
and to maximize profits, other innovations enabled businesses to market their products
more effectively. In urban areas, new department stories offered customers a wide variety
of goods under one roof. For rural areas, retailers developed mail-order catalogs that
saved customers a trip to faraway stores. The items offered in these stores and catalogs
expanded as well, thanks to new inventions such as the vacuum cleaner, the telephone,
the electric light bulb, the electric iron, and the safety razor.
D. Entrepreneurs
-These new forms of business organization and innovative ideas from inventors helped
American industry grow in the late 1800s and early 1900s. Yet without the business
knowledge and daring of certain individuals, that growth would have been much slower.
These individuals were entrepreneurs; people how take responsibility for the organization
and operation of the new business venture. Entrepreneurs often risk large sums of venture
capital in hopes of making enormous profits. The business decision made by the turn of
the century entrepreneurs had great impact on the lives of most Americans. Some of the
key entrepreneurs are:
1. Andrew Carnegie
2. JD Rockefeller
3. JP Morgan
4. Henry Ford
E. Attitudes Toward Business
-Industrialization and the changes associated with it caused American attitudes toward
business to alter in the late 1800s. Traditional attitudes, of course, existed. They could be
found in books by the popular writer Horatio Alger. Alger’s novels describe poor boys
who become rich through hard work and luck. Alger’s novels illustrate what is known as
the Puritan work ethic. This is the belief, brought with the Puritans to colonial New
England and embodied in the preaching of Puritan minister Cotton Mather, that hard
work builds character and is its own reward. The tremendous wealth some of
entrepreneurs gained during ht elate 1800s, as well as the cut-throat business methods
they used, led some Americans to rethink their ideas on the meaning of business success.
New philosophies tried to explain and justify both the accumulation of wealth and the
practices used to achieve it.
1. Laissez-Faire
2. Social Darwinism
3. Robber Barons or Philanthropists?
II. GOVERNMENT POLICIES TOWARD BUSINESS (protections and regulations)
-The federal government generally held a laissez-faire attitude toward business for much of this
period. Expanding industries and growing foreign trade seemed to justify such an attitude. In
addition, many business leaders made financial contributions, legal and illegal, to the politicians
who set federal policies. A number of government policies were designed to aid the growth of
business. These included loans and land grants to large railroad companies, high tariffs that
discouraged competition from foreign manufactures, tight limits on the amount of money in?
circulation, and few limits on immigration.
A. Steps Toward Government Regulation
-Several factors led the government to take the first steps in the late 1800s toward
regulating business: 1) periodic downturns in the national economy 2) growing criticism
of practices that saw big business profit as the expense of the poor and working class 3)
increasing grassroots political pressure for change. Although government intervention at
the is time had limited impact, it did set the course for more federal action in the years to
come (i.e., the Progressive Era)
1. Supreme Court Decisions
2. Interstate Commerce Commission
3. Sherman Antitrust Act
III. LABOR ORGANIZATIONS (“We gave you weekends!”)
-Business growth in the late 1800s brought generally higher wages to American workers. Yet
periodic unemployment and poor working conditions remained a fact of life for workers. In
addition, employers held enormous power over the lives of their workers and could lower wages
and fire employees at will.
A. The Growth of Unions
-To improve conditions, increasing numbers of American workers formed labor unions
beginning in the 1820s. As working conditions changed with industrialization, many
more workers became interested in unions. Americans had long understood the value of
cooperation and association, and labor unions provide a means to put these values into
action. In collective bargaining, union members representing workers negotiated labor
issues with management/ownership. Instead of each worker trying to achieve individual
aims, a united group would put pressure on management.
1. Knights of Labor (1869)
2. American Federation of Labor (1886)
3. International Ladies’ Garment Workers Union (1900)
B. Labor Conflict (Labor vs managers/owners/capitalists)
- If collective bargaining failed, labor unions often used strikes, or work stoppages, to
achieve their aims. Strikes sometimes ended in union victories; often, however, they led
to violence as business owners sought state and even federal support to end walkouts.
The strikes and labor-associate violence described below sometimes advanced the cause
of labor and sometimes set it back.
1. Great Railway Strike of 1877
2. Haymarket Riot of 1886
3. Homestead Strike of 1892
C. Pullman Strike of 1894
D. Lawrence Textile Strike of 1912 (IWW)
*Adapted from and courtesy of Prentice Hall’s Brief Review of USHG