Chapter 24
• Industry Comes of Age, 1865–1900
II. Spanning the Continent with Rails
• 1862 Congress began the transcontinental
railroad.
– The Union Pacific started in Omaha, Nebraska.
• They received generous loans of $16,000 per mile
completed on the prairie and up to 48,000 per mile in the
mountains.
• Insiders of the Credit Mobilier construction company
were able to pocket $73 million for some $50 million
worth of work… Bribing congressmen along the way of
course.
• Many Irish “Paddies” worked the line to lay as many as
ten miles a day.
• As many as 10,000 men worked on the railroad at any
given time.
Map 24-1 p514
– The Central Pacific pushed east from Sacramento,
California.
• It needed to inch through the Sierra Nevada’s receiving
the same cash incentives as the U.P.
• The C.P. was financed by the Big Four, men such as Leland
Stanford (ex-governor w/ political connections) and Collis
P. Huntington (effective lobbyist).
– They operated two construction companies and even though
they made tens of millions, they were able to keep their hands
relatively clean.
• The C.P. was manned by 10,000 Chinese laborers
(hundreds of which lost their lives from premature
explosions.)
• The two tracks met in Utah, in 1869.
– The U.P. had built 1,086 miles and the C.P. 689
miles.
p517
p516
IV. Railroad Consolidation and
Mechanization
• Cornelius Vanderbilt – ill-educated, ruthless and
with clear vision he offered superior railway
service at lower rates.
– He was able to earn $100 million during his time.
• Two significant improvements in railroading:
– Steel rails and a standard gauge of track.
• Other refinements:
– The Westinghouse air brake contributed to
efficiency and safety.
– The Pullman Palace Cars – advertised as glorious
traveling hotels.
V. Revolution by Railways
• During the post-Civil War years the railroad tied
the country together with tracks from ocean to
ocean.
• Trains hauled raw materials to factories and
then sped back finished goods for sale all over
America.
• Until the 1880s every town in U.S. had its own
“local” time. Operators had to worry about
keeping schedules and avoiding wrecks because
there wasn’t a standard time.
• November 18, 1883, the major rail lines
decreed that the continent would be divided
into four “time zones.”
VI. Wrongdoing in Railroading
• Many made huge amounts of money through
railroad investments. One of the most adept at
playing the game was Jay Gould.
– Gould played the game for nearly 30 years. He
boomed and busted the stocks of various railroad
companies.
– “Stock watering” was a favorite tactic of railroad
moguls.
• Railroad promoters would inflate their claims about the
assets and profitability of a company and then sold stocks
and bonds far in excess of the railroad’s actual worth.
• Railroad kings manipulated a huge natural
monopoly wielding more direct power over the
people than the president.
– They stopped the cutthroat tactics they had been
using against each other and began to cooperate.
• They formed combination “pools” – an agreement to
divide business in a given area and share the profits.
• They also granted secret rebates or kickbacks to powerful
shippers in return for steady traffic.
• Small farmers usually paid the highest rates, while
corporations got the best deals.
p518
VII. Government Bridles the Iron
Horse
• The depression on the 1870s led farmers to
protest being “railroaded” into bankruptcy.
• Pressure from the Grange pushed many
midwestern legislatures into trying to regulate
the railroad monopoly.
• Wabash, St. Louis & Pacific Railroad Company
v. Illinois case decreed that no individual state
had the right to regulate interstate commerce;
only the federal government could do it.
• Congress ignored Cleveland’s distain for federal
regulation and passed the Interstate Commerce
Act in 1887.
– The Act prohibited rebates and pools and required
the railroads to publish their rates openly.
– It also forbade unfair discrimination against shippers
and outlawed charging more for short hauls.
– Finally, it set up the Interstate Commerce
Commission (ICC) to administer and enforce new
legislation.
– The country could now avoid rate wars among the
railroads.
VIII. Miracles of Mechanization
• Industrialists continued to refine the pre-Civil
War “American System” of using specialized
machinery to make interchangeable parts.
– As seen by Henry Ford’s moving assembly line for
the Model T.
• Captains of industry had a major reason for
inventing new machines… they made it
possible to replace expensive skilled labor
with unskilled workers, cheap and plentiful
due to massive immigration.
• Between 1860 and 1890, some 400,000 patents
were issued.
– Alexander Graham Bell, (1876) introduced the
telephone.
– Thomas Edison, the wizard of Menlo Park, New
Jersey.
• Phonograph, moving picture, and the electric light bulb in
1879.
p520
IX. The Trust Titan Emerges
• Andrew Carnegie, steel king; John D.
Rockefeller, the oil baron; and J. P. Morgan, the
bankers’ banker all focused on circumventing
competition.
• Vertical integration – combining into one
organization all phases of manufacturing from
mining to marketing.
– Carnegie took his ore from the ground; floated it
along on his ships; moved it on his railroads and
delivered it to his blast furnaces in Pittsburgh.
• Horizontal integration – allying with
competitors in an industry to monopolize a
given market.
• Rockefeller developed the idea of a trust to
control rivals.
– Stockholders in smaller oil companies assigned their
stock to the board of directors of Rockefeller’s
Standard Oil Company (1870). It then consolidated
and allied the operations of the previously
competing enterprises… “Let us prey,” said
Rockefeller.
• Any competitor left out of the trust, were basically forced
to go under.
• Standard Oil soon cornered the market all over the world.
p521
• Interlocking directories were J.P. Morgan’s
answer to the businesspeople wounded by
cutthroat competition.
– He would consolidate rival enterprises and ensure
future harmony by placing officers of his own
banking syndicate on their various boards of
directors.
X. The Supremacy of Steel
• When Vanderbilt began to use steel rails for his
railroad they were so rare that he had to import
them from Britain.
– Within 20 years America was producing more than
Britain and Germany combined thanks to the
Bessemer process.
• The Bessemer process – it was discovered that
blowing cold air on red-hot iron caused the
metal to become white-hot, thus eliminating
impurities.
XI. Carnegie and Other Sultans of Steel
• Andrew Carnegie started as a bobbin boy
earning $1.20 a week, but ended up giving away
$350 million before he died.
• Carnegie was a tight fisted businessman but he
disliked the monopolistic trusts.
• Carnegie, looking to sell, was approached by J.P.
Morgan.
– After 8 hours of haggling, they settled on selling for
$400 million dollars.
– J.P. Morgan would eventually bring the company to
be worth $1.4 billion.
p522
XII. Rockefeller Grows an American
Beauty Rose
• In 1859 the first oil well started pumping out
“black gold”.
– Kerosene, was the first major product of the oil
industry.
• Used in lamps, it burned much bright than whale oil.
– The industry brought in more money than all the
gold mined in the west.
– As Kerosene faded away due to the electric light
bulb, the combustion engine entered the scene.
• This gave the oil industry a new and hugely profitable
lease on life.
• John D. Rockefeller, born into a poor family,
pushed forward to become a successful
businessman.
– In 1870, he organized the Standard Oil Company.
• He sought to eliminate the middlemen and squeeze out
competitiors.
• His policy was to “sell all the oil that is sold in your
district.” By 1877 he controlled 95% of all oil refineries in
the country.
• Rockefeller looked at business as survival of the fittest. To
him it wasn’t personal, he looked at anything that could
hurt his business as an enemy that needed to be
vanquished immediately.
p523
XIII. The Gospel of Wealth
• As some believed that they were given their
wealth by God (Gospel of Wealth,) many
believed they won theirs based on their natural
talents (Social Darwinism.)
• The idea that the wealthy and powerful simply
demonstrated great ability than the poor was
the foundation of Social Darwinism.
• As William Sumner stated, “what do social
classes owe each other?... Nothing.”
XIV. Government Tackles the Trust Evil
• The masses finally tried to rise up against the
Trusts via state legislation, only to fail because
of a loop hole in the 14th amendment.
• They then appealed to Congress, and in 1890
the Sherman Anti-Trust Act was signed.
– The law proved to have no teeth however, and more
new trusts were formed in the 1890s under
McKinley than during any other like period.
– Not until 1914 did the law have any real teeth. Until
then the question was whether the government
would control the trusts or the trusts would control
the government.
XVI. The Impact of the New Industrial
Revolution on America
• Probably no single group was more affected by
the new industrial age than women.
– New inventions such as the typewriter and the
telephone switchboard.
• Millions of stenographers and “hello girls” discovered
new economic and social opportunities.
– Most women workers, however, toiled out of
economic necessity, and faced the same long hours
and deplorable working conditions as the men, yet
earned less.
p529
XVII. In Unions There Is Strength
• Massive unskilled labor pools made the
individual worker powerless to battle against
giant industries.
• They were forced to organize and fight for basic
rights.
– The corporation could lose the individual worker
much easier than the worker could lose the
corporation.
– Corporations could retain high-priced lawyers, buy
up local press, and put pressure on politicians. They
could also import strikebreakers (scabs) and get
thugs to beat labor organizers.
• Corporations might even own a “company
town,” where employees held a status that
resembled serfdom.
– High-priced grocery stores.
– High-priced rent.
– “easy” credit.
XVIII. Labor Limps Along
• By 1872 there were hundreds of thousands of
organized workers and 32 national unions.
• The National Labor Union, organized in 1866,
aimed to unify workers across trades to
challenge their powerful bosses.
– The Union lasted 6 years and boasted 600,000
members.
• Including skilled, unskilled and farmers
• Excluded Chinese, women, and blacks
• Knights of Labor – a new organization, sought to
include all workers in “one big union.”
– The Knights only barred “nonproducers” – lawyers,
bankers, stockbrokers, etc.
XIX. Unhorsing the Knights of
Labor
• Haymarket Square Riot – labor disputes had
broken out, and on May 4, 1886, the Chicago
Police department advanced to break up a
protest when a dynamite bomb was thrown
into the crowd.
– Several dozen were killed or injured, including
police.
• The Knights of Labor were linked to the
Bombing and many associated them
(mistakenly) with anarchists.
XX. The AF of L to the Fore
• American Federation of Labor was the
brainchild of Samuel Gompers in 1886.
– One of Gompers major goals was the closed
shop – or all union labor.
• His most effective weapons were the walkout and
boycott.