Name_____________________________________________________Class_________________Date_________________
I can describe the growth of industry in the United States,
& I can assess its impact on American society.
Andrew Carnegie, Bessemer Process, vertical integration,
J.P. Morgan, United States Steel Corporation, interlocking directorate, John D. Rockefeller, Standard Oil Company, trust, Cornelius Vanderbilt, Gustavus F. Swift, Philip
Armour, Montgomery Ward, Sears, Roebuck and
Company, nouveau riche, William Graham Sumner ,
Herbert Spencer, Social Darwinism, Wabash case,
Interstate Commerce Act, Interstate Commerce
Commission, Sherman Anti-Trust Act, wage slaves,
Commonwealth v. Hunt , National Labor Union, Contract
Labor Law, Knights of Labor, Terence V. Powderly,
Haymarket Square Riot, American Federation of Labor,
Samuel Gompers, strike fund, Molly Maguires, Pinkerton
Detective Agency, Great Railroad Strike of 1877,
Homestead Strike, Henry C. Frick, Pullman Strike, Eugene
V. Debs
The small businesses that supported the pre-Civil War economy could not satisfy the rapidly growing national markets. Entrepreneurs quickly developed systems of mass production and distribution to meet growing national needs. The resulting expansion in industry went hand-inhand with industrial combination and concentration, enabling a few business leaders to dominate the largest markets of the time.
One of the greatest of these “Captains of Industry” stands out for his achievements and his contributions
—
Andrew
Carnegie . In 1848, as a young boy, Carnegie migrated with his family from Scotland to Allegheny, Pennsylvania.
Carnegie eventually worked his way to the top through a number of jobs in various industries. During a trip to
Europe in 1872 he met Sir Henry Bessemer, who in 1856 had invented a new process of turning iron into steel. To this point, steel was a scarce commodity in America, but with the Bessemer Process steel could be inexpensively and easily produced for locomotives, rails, and the girders used in building construction. This inspired Carnegie to focus his business efforts on steel, and in 1875 he launched J. Edgar Thompson Steel Works, which was named after the president of his biggest customer,
Pennsylvania Railroad.
America was one of the few places where all of the components needed to make steel were available in fairly close proximity. Recognizing this, Carnegie employed a tactic known as “ vertical integration
,” where he integrated every phase of the steel-making business. He acquired coal properties, iron ore from Lake Superior, a fleet of steamships to transport materials across the Great
Lakes, and railroads that delivered the materials to the furnaces in Pittsburgh. His goals were to improve efficiency, increase quality, and decrease costs by controlling all of the variables in the production process.
Carnegie was a skilled businessman and salesman, and he had a talent for hiring men with the greatest expertise.
Contrary to most, he used times of recession to expand his business, slowly buying out all of his competitors.
However, he disliked monopolistic trusts, and so built his organization into a partnership that included about 40
Pittsburgh millionaires. By 1900, Carnegie’s company was producing one quarter of the nation’s Bessemer steel.
By 1900, Carnegie was ready to sell his steel holdings.
J.P. Morgan , an investment banker, bought Carnegie out for over $400 million. Though often criticized for paying low wages to his workers, Carnegie believed that he and other industrial giants had a social responsibility and should consider themselves public benefactors. At the age of 65, Carnegie devoted the rest of his life to philanthropic endeavors that promoted social welfare and world peace.
In all, he gave approximately $350 million to public libraries, universities, hospitals, parks, meeting and concert halls, swimming pools, church buildings, and other charitable causes.
Once he bought out Carnegie, J. Pierpont Morgan moved rapidly to expand his holdings, adding other steel and finished product com panies, and “watering” the stock, or selling stock to buyers at a price greater than its current value. This enabled him to launch The United States
Steel Corporation in 1901, which was America’s first billion-dollar corporation.
Morgan was born into a rich family and worked to increase his wealth throughout his life. He was an investment banker and owned a Wall Street banking house that financed the reorganization of railroads, insurance companies, and banks. Once Morgan got into the steel business, he began to eliminate all competition to create his steel monopoly.
During the depression of the 1890s, Morgan bought out his competition and placed officers from his own banking house on their boards of directors. This duplicated board was called an interlocking directorate , and it ensured future harmony among the rival enterprises. This concentration of financial power could be abused if the intent of the directors was to build two companies, transfer all the benefits to one company, and bankrupt the other at the expense of the stock and bondholders. However, an effective board could increase efficiency, enhance economic growth, pave the way for large-scale mass production, and stimulate new markets. Morgan, along with most big business leaders, did not believe the consolidation of money was anything but advantageous to the nation, and the rapid rise of the U.S. economy made
Morgan’s position hard to refute. Social critics and
Progressive-Era politicians would soon propose limits to
“unbridled” capitalism.

Another important business leader of the time was John
D. Rockefeller .
He was born to a modest family in New
York State, and as a youth moved to Cleveland, which was strategically located near the oil fields of
Pennsylvania. Rockefeller, already a successful businessman as a teenager, recognized the potential profits in refining oil. In 1859, the first oil well was struck in
Titusville, Pennsylvania, called “Drake’s Folly.” In 1870,
Rockefeller formed the Standard Oil Company of Ohio, worth $1 million.
Although Rockefeller was the largest oil refiner, he felt his competition was flooding the market by producing too much oil, which led to reduced profits, so he weeded them out. Rockefeller was ruthless in his business tactics, and he perfected what came to be k nown as the “ trust .” He forced his competition to join with him and assign their stock to the board of directors of his Standard Oil
Company, who would then consolidate the two operations.
If his competitors did not agree to this, he would temporarily lower the price of his oil and drive them out of business. By 1877, Rockefeller controlled 95 percent of the oil refineries in United States and monopolized virtually the entire world petroleum market.
John D. Rockefeller justified his wealth with statements like, “The good Lord gave me my money.” Yet, in spite of his often ruthless business practices, Rockefeller donated more than $500 million to philanthropic endeavors throughout his lifetime.
Following Rockefeller’s lead, trusts rapidly developed in other industries, such as lead, rubber, sugar, tobacco, and leather. In the 1860s, Cornelius Vanderbilt consolidated
13 separate railroads creating the New York Central
Railroad System, and Gustavus F. Swift and Philip
Armour consolidated the meat packing industry.
Aggressive businessmen rapidly consolidated much of the transportation and communication industries. In retailing, huge urban department stores grew up in the big cities, and Montgomery Ward and Sears, Roebuck and
Company dominated the mail-order industry, making it difficult for smaller businesses to compete. Over time, public opposition toward trusts increased and they swiftly became a hotly debated political issue. However, for most businesses at the end of the century, monopoly was not the goal of a trust, but rather increased efficiency through centralization of the management of increasingly complex business operations.
The rapid expansion of industry and the concentration of ownership by fewer and fewer people changed the way many Americans felt about the role of government in economic affairs. With the growing number of trusts in
America, reformers in the late nineteenth century began to voice their concerns about the expanding gulf between the rich and the poor. Although the new class of millionaires brought economic and material progress, they also created deepening class divisions. Reformers feared that businessmen held an increasing amount of power that would eventually succeed in destroying republican institutions and placing captains of industry in direct control of the government.
Along with the reformers, the “old blood” American aristocracy was highly resentful of the " nouveau riche ."
Long-established merchants and professionals did not like the change in the order of society and felt that this arrogant class of "new rich" should be held in check. Small business owners and farmers resented both classes, and a new “civil war” was brewing.
In contrast, some theorists and wealthy business leaders used Charles Darwin’s The Origin of Species (1859) to champion the extreme success of such a small percentage of Americans. Although Darwin’s argument that existing species had all evolved through a long process of “natural selection,” described as a basic process of biology, many theorists drew broader economic inferences from his writings. William Graham Sumner applied Darwin’s “survival of the fittest” theory to the social world, touting in What Social Classes Owe to Each Other that “the millionaires are a product of natural selection.”
Herbert Spencer , one of the first major prophets of Social
Darwinism, used Darwin’s theory as a foundation for promoting the virtues of free-market capitalism. He felt that
Social Darwinism was the logical explanation for small businesses being crowded out by trusts and monopolies, and that the government should not interfere in this natural process. Spencer warned that “fostering the good-fornothing at the expense of the good is an extreme cruelty.”
Andrew Carnegie did not advocate Social Darwinism, but instead felt the wealthy had to prove that they were morally responsible. Carnegie’s The Gospel of Wealth, published in 1889, stated that the concentration of wealth was necessary for society to progress. Carnegie felt that that the contrast between a millionaire and a laborer was an indication of how far humanity had come and that in the long run extreme disparities of wealth were good for the
"race."
Political action against big business came first at the state level with legislation aimed at regulating railroads. This approach failed, in part due to the Wabash case , which confirmed the federal role in regulating interstate commerce. Congress stepped in and passed the
Interstate Commerce Act in 1887 as a response to the plight of farmers as well as to the widespread practice among the railroads of giving kickbacks and preferential treatment to certain customers. The act was aimed at stopping discrimination against small business customers by requiring that all charges made by railroads must be reasonable. The railroads were also required to publish their rates and were not allowed to charge a different rate without giving public notice.
The Interstate Commerce Act spawned the first federal regulatory board, the Interstate Commerce Commission
(ICC). The ICC supervised the affairs of the railroads, investigated any complaints, and issued orders when they determined the railroads had acted illegally. The most important outcome of the Interstate Commerce Act was that it established a precedent for Congress to regulate businesses engaged in interstate trade.
In 1890, President Benjamin Harrison signed the
Sherman Anti-Trust Act , which declared that any combination “in the form of trust or otherwise” in restraint

of trade or commerce was illegal. Unfortunately, the act turned out to be largely symbolic since succeeding administrations did little to enforce it, and when it was enforced it contained legal loopholes. The actions of the
Federal government seemed to reflect the general public’s perception that the laissez-faire approach, a philosophy that the government leaves business alone, was best for the burgeoning capitalistic nation.
The new industrial age and the resulting growth of the
U.S. economy in the late nineteenth and early twentieth centuries affected nearly everyone in America. Industrial combination and concentration became the norm, with huge trusts appearing in almost every industry. The workplace was changing as machines became common and the demand for unskilled workers brought new groups into the workforce, including immigrants, women, and children. By 1920, nearly 20 percent of all manufacturing workers were women, and 13 percent of all textile workers were younger than 16 years old.
The abundance of laborers available for these unskilled factory jobs made individual workers expendable and led to decreased wages. Most industrial laborers worked at least a ten-hour day, yet earned 20 to 40 percent less than the minimum wage necessary for a decent life. Many
Americans feared that the great industrialists were reducing "freemen" to " wage slaves ." Class division between the corporate giants and laborers became increasingly apparent throughout America. Little of the fortune that the industrial growth of the nation had generated went to the workers. In 1900, it was estimated that ten percent of Americans owned over three-fourths of the nation’s wealth. Many feared that the United States was on the brink of a disastrous class war.
Health and safety conditions in the workplace were poor and workers had limited recourse. Federal laws offered little protection, and the Sherman Anti-Trust Act was often used to stop the organization of laborers. It was not until the 1930s that the federal government would become actively involved in regulating labor. State and local authorities were usually more responsive to the interests of wealthy industrialists than the needs of laborers.
The social transformation brought on by the new industrial age affected every aspect of life in America. With women toiling alongside men, marriages were often delayed, resulting in smaller families. It was not uncommon for a single company to own an entire town. The company could increase prices at the local grocery store and give laborers easy credit, keeping workers in debt and stuck working at the same low-paying job. The crowded, dirty tenements in these towns led to high disease and death rates.
The workplace became regimented and impersonal. Any time workers would protest the working conditions, corporations would blacklist the uncooperative workers and replace them with workers who would often work for lower pay and without any benefits. Individual workers were not able to battle against the corporate monster. The process of industrialization t ransformed the nation’s economy and social structure, but in doing so it provoked the emergence of an organized labor movement.
In the 1842 case Commonwealth v. Hunt , the
Massachusetts Supreme Court held that it was not illegal for workers to organize a union or try to compel recognition of that union with a strike. This was certainly an important step for labor, but the idea of permanent unions was slow to catch on. Since many laborers were immigrants, they often spoke different languages and harbored racial and cultural biases. Many only planned to stay in America long enough to earn sufficient money to return to their homelands and live comfortably, and therefore saw no point in joining a union. For nearly 20 years after the Commonwealth v. Hunt ruling, labor unions tended to be small and limited to skilled trades.
Eventually, the increase in cost of living after the Civil War, coupled with the rising number of large corporations that decreased wages, lead industrial laborers to organize into unions. In 1866, the first national coalition of these unions was founded —The National Labor Union .
The struggle for the right to unionize was a remarkable event in the history of the United States labor movement.
It not only involved overcoming resistance from the corporations, but also cultural divisions within the working class itself. The National Labor Union consisted of delegates from labor and reform groups who supported an eight-hour workday, arbitration of industrial disputes, and inflationary greenbacks
—the printing of paper money to expand the supply of currency and relieve debtors.
The National Labor Union lasted approximately six years and attracted nearly 600,000 members. It included skilled and unskilled laborers, farmers, and some women and blacks, but excluded the Chinese. The depression of the
1870s, along with the sudden death of its leader, put an end to the union. During its existence, the union persuaded Congress to enact an eight-hour workday for federal employees and to repeal the Contract Labor Law
(a law that was passed during the Civil War to encourage importation of labor). Many industrialists had employed the
Contract Labor Law to recruit immigrants who were willing to work for lower wages than Americans.
Another national union group emerged in 1869 called the
Noble and Holy Order of the Knights of Labor . The organization was founded by Uriah S. Stephens and a group of Philadelphia garment workers. Stephens made the Knights a secret organization with an elaborate initiation ritual, which kept membership to a minimum until his successor, Terence V. Powderly , discarded secrecy.
At that time membership increased greatly.
In a step that resembles modern industrial unionism, the
Knights of Labor welcomed both skilled and unskilled laborers, blacks (though mostly in segregated locals), women, and immigrants (excluding Chinese). The Knights upheld reform measures that had been endorsed by previous unions (eight-hour workday, greenbacks, producers’ cooperatives, codes for safety and health, etc.), and were ahead of their time when they called for equal pay for equal work by men and women. The group rejected the suggestion that laborers would forever remain wage earners, and instead encouraged the idea that by

joining together working people could advance up the corporate ladder.
In 1885, the Knights of Labor staged a successful strike over Jay Gould’s Wabash Railroad. Gould had cut workers’ wages and a strike on his railroad lines led to
Gould restoring the wage cuts. This victory helped to increase membership, and by 1886 the Knights of Labor surpassed 700,000 members. The Knights had reached their peak, and closely after they went into rapid decline.
One historical interpretation is that the Knights of Labor failed in part because they tried to be all things to all working-class people.
In 1886, there was a great upheaval of labor and the
Knights became involved in several May Day strikes, which included several hundred thousand workers across the country. In Chicago about 80,000 workers were involved in a strike for the eight-hour workday. Tension built between the strikers and the police, and during a clash at McCormick Harvester Company one striker was killed.
Coincidentally, Chicago was home to an active group of anarchists who tried to take advantage of the excitement to win support for their cause. On May 4, 1886, the day after the McCormick incident, anarchists gathered at
Haymarket Square to protest the killing and other brutalities by the authorities during the May Day strikes.
Chicago police arrived to break up the meeting. A bomb was thrown into the crowd and gunfire ensued, killing several policemen and civilians and wounding approximately 100. Panic seized the city and several anarchists were arrested, although there was never any evidence linking them to the bomb-throwing.
One of the anarchists held a membership card in the
Knights of Labor, which provoked widespread antipathy against the Knights and labor groups in general. No direct tie could be proven between the Knights and the anarchists or between the Knights and the bombing, but the public tended to associate the Knights with violence and radicalism from then on. Subsequent strikes by the
Knights were unsuccessful. By the 1890s, the Knights of
Labor had only 100,000 members who ultimately left to join other protest groups, so that by 1893 the union had dissolved. One of the lasting achievements of the Knights was their drafting a bill that resulted in the creation of the
Federal Bureau of Labor Statistics in 1884.
The labor movement in general was still gaining strength, and various craft unions began to organize. An association of national craft unions called the American Federation of Labor (AFL) was established in 1886. The AFL was an alliance that unified the strategy for various independent self-governing national unions. Samuel Gompers , a cigar maker who came to America as a teenager, served as president of the AFL every year except for one until he died in 1924.
Gompers did not become involved with politics or champion utopian ideas like other union leaders; instead he focused on concrete economic gains for AFL members.
The AFL generally believed that most workers would remain laborers their whole lives, and so tried to create a sense of pride in their skills and jobs. Rather than open its membership to all, the AFL allowed only skilled workers to enter the union. The federation worked for things like employers’ liability, mine-safety laws, favorable trade agreements, closed shops (shops that could only hire union members), increased wages, and above all, a standard eight-hour workday. Since the AFL focused on a select number of basic goals, it was sometimes called a
“bread and butter” union.
Gompers and the AFL members used walkouts, boycotts, and negotiations to achieve their goals. A strike fund collected from workers’ dues enabled the AFL members to strike for extended periods of time and still get paid. This put more pressure on management to negotiate fair deals with workers. Gompers’ approach to labor problems resulted in solid growth for the AFL. By 1900, unions with a total of about 500,000 members formed the federation, and by 1920 it reached a peak of four million members.
Over the years, the public tired of the frequent union strikes and was often unsympathetic to the workers’ plight since strikes disrupted their daily lives. However, in the early 1900s, attitudes toward labor slowly changed as people began to understand the wo rkers’ need to organize, bargain, and strike.
The end of the nineteenth century saw the most contentious and violent labor conflicts in the history of the nation. Between 1881 and 1900, approximately 23,000 strikes occurred, involving over six million workers.
Unfortunately, in about half of the strikes the laborers gained nothing, and in the other half they were only able to elicit meager or modest gains. Bloody confrontations wracked the railroad, steel, and mining industries, often requiring intervention with federal troops or local militia.
One of the first great labor conflicts occurred in the early
1870s in the anthracite coal region of Pennsylvania.
Conditions in the coal mines were dangerous, with inadequate safety provisions and ventilation. A group of primarily Irish miners in Pennsylvania organized into a union. The members of this union were called the Molly
Maguires .
The miners grew increasingly frustrated with the horrendous conditions, while the mine owners ignored the problem. The situation continued to deteriorate with both sides eventually resorting to violence. The Molly Maguires often used intimidation, beatings, arson, and killings to fight for better working conditions and protest the mine owners’ denial of their right to unionize. Mine owners intimidated miners into submission by maiming and killing those suspected of union participation. The struggle reached its peak in 1874-75, and the mine owners hired the Pinkerton Detective Agency to stifle the miners’ struggle.
The Pinkerton detectives gathered enough evidence concerning the criminal activities of the Molly Maguires to indict the leaders. Approximately 20 members went to trial in 1876 and were convicted, and some of them were hanged. The Molly Maguires became martyrs for labor, inspiring other labor groups to form.

A more widespread labor struggle was the Great Railroad
Strike of 1877.
In America’s first nationwide strike, rail workers ceased working in response to a 10 percent pay cut by the four largest railroads. Workers walked off the job and blockaded freight trains near Baltimore and in
West Virginia, allowing only passenger traffic to get through.
Attempts to break the strike only led to rioting and sympathy walkouts. Nearly 100,000 workers were idled and approximately two-thirds of the railroad mileage across the Unites States was shut down with over 14 states and ten railroads involved. Violent strikes quickly broke out from Maryland to California, killing over 100 people and destroying millions of dollars in property.
Eventually President Hayes sent federal troops to restore order in the cities with the worst uprisings. The workers, never able to fully organize themselves, slowly went back to work. The strike inspired support for the Greenback-
Labor Party in 1878 and Workingmen’s Parties in the
1880s. It had been one of the most violent and destructive strikes in America’s history, yet few gains were realized by the workers.
Two other violent incidents stalled the emerging industrial union movement in the 1890s. During contract talks at
Andrew Carnegie’s Homestead steel plant in 1892, plant manager Henry C. Frick proposed a wage cut.
Negotiations broke down and the Amalgamated
Association of Iron and Steel Workers went on strike. Frick proceeded to lock them out and hired 300 Pinkerton detectives to guard the plant. Workers and townspeople confronted the detectives and a battle broke out, leaving a handful of detectives and workers dead and over 60 wounded.
The Pennsylvania governor called in the state militia to establish peace, and non-union scabs replaced the workers. Scores of workers were indicted on 167 counts of murder, rioting, and conspiracy, but eventually a jury found the union leaders innocent. Unions were not allowed back in the Homestead plant until 1937. The outcome of the
Homestead strike demonstrated that a strong employer could break a union if it hired a mercenary police force and gained government and court protection.
In 1894, one of the most notable walkouts in history occurred in Pullman, Illinois, where the Pullman Palace
Car Company housed its employees. George Pullman was hit hard by the depression and decided to cut wages 25-40 percent, but he maintained rent prices for company housing.
Many Pullman workers joined the American Railway
Union, founded by Eugene V. Debs . The workers, backed by Debs, tried to negotiate with Pullman to no avail. The workers went on strike refusing to handle Pullman cars, which shut down most of the railroads in the Midwest. The
U.S. Attorney General, Richard Olney, stepped in and urged President Cleveland to dispatch federal troops to break the strike. Olney’s rationale was that the strikers were interfering with transit of U.S. mail, since Pullman cars were connected to mail cars.
President Cleveland ordered troops to Illinois, and the federal courts issued an injunction forbidding any interference with the mail, citing the Sherman Anti-Trust
Act to support the injunction.
Involvement of federal troops resulted in a spread of violence to several states and rioting ensued. The Pullman strike was crushed, but the fighting left 34 dead. Eugene
Debs and his aides were arrested and spent six months in jail for ignoring the injunction. During his time in jail, Debs made a political conversion to socialism. The Pullman strike represented the first time the government used an injunction to break a strike, which left many workers wary that an alliance between big business and the courts had become official.