Industry Comes of Age in the 'Gilded Age' 1865-1900

advertisement
Industry Comes of Age
in the ‘Gilded Age’
1865-1900
Part I (cont.) & II
A.P. US History
Mr. Houze
II.
Old Industries Transformed, New Industries Born
A. Miracles of Mechanization (cont.)
“Genius is one percent
inspiration and ninety-nine
percent perspiration.”
-- Thomas Alva Edison
2
II.
Old Industries Transformed, New Industries Born
A. Miracles of Mechanization (cont.)
• Edison pioneered the use of
electricity as an energy
source to power his inventions
– among his major inventions
were the ‘phonograph’,
‘motion picture camera’,
‘mimeograph’, and the
‘incandescent light bulb’
• By the late 19th century,
electricity had become part of
American urban life – powering
trolley’s, subways, factories,
and lighting homes, office
buildings, apartments and
other structures
3
II.
Old Industries Transformed, New Industries Born
A. Miracles of Mechanization (cont.)
• George W. Westinghouse, a lesser competitor and
contemporary of Edison, invented the Westinghouse air
brake – a braking system utilized in railroading that
greatly increased the efficiency and safety of rail
transportation.
• By the early 1890s, the freewheeling era of ‘robber
barons’ and inventors was closing and the heyday
of corporate consolidation opened – among the first
was General Electric [formerly Edison General Electric]
4
II. Old Industries Transformed, New Industries Born
B. The Supremacy of Steel & Andrew Carnegie
• In 1848, Andrew Carnegie
came to America from
Scotland – his first job was
as a ‘bobbin boy’ in a textile
mill, earning $1.20 a week.
• By 1900, Carnegie was
producing one-fourth of
the nation’s ‘Bessemer
Steel’!
• By then, Carnegie Steel
Corp. was earning $40
million a year, which he
divided with his partners [his
take, a cool $25 million a
year]
5
II.
Old Industries Transformed, New Industries Born
B. The Supremacy of Steel & Andrew Carnegie
(cont.)
• Carnegie sold his company in 1900 to J. Pierpont Morgan
for $450 million dollars!
• By the time of his death in 1919, Carnegie had given away
more than $300 million dollars to charitable causes!
• Andrew Carnegie became the nation’s leader in the
transition from the age of iron to that of steel – avoiding the
corrupt speculation exhibited by many of his contemporaries
to make steel production the nation’s first ‘manufacturing’ big
business.
• He reshaped the iron and steel industries by building the most
up-to-date steel plant on 100 acres just outside of Pittsburgh,
Pennsylvania – a site with access to the Monongahela River
and two railroad lines.
6
II.
Old Industries Transformed, New Industries Born
B. The Supremacy of Steel & Andrew Carnegie
(cont.)
• The river and rail lines provided his plant with a natural
highway to Pittsburgh, the Ohio River, and Pennsylvania’s
coal fields
• To ensure access to iron ore, coal, and rail service,
Carnegie pioneered ‘vertical integration’ – a system of
business organization that maximized output while
minimizing costs by allowing him to control every aspect
of the steel business.
• Using ‘vertical integration’, Carnegie combined all phases
of manufacturing from mining to marketing into one
organization – Carnegie Steel
(1) owned iron ore mines in the Mesabi Range,
(2) Carnegie ships carried the ore across the Great Lakes,
(3) Carnegie railroads carried the ore from the Great Lakes to his
blast furnaces in Pittsburgh, and carried the finished products
to distant markets.
7
8
II.
Old Industries Transformed, New Industries Born
B. The Supremacy of Steel & Andrew Carnegie
(cont.)
• Through ‘vertical integration’, Carnegie eliminated all
middlemen and their costs while improving efficiency and
the quality of his steel products.
• By 1900, Carnegie’s business model enabled his mills to
produce 10,000 tons of steel a week – enough to meet
America’s growing need for bridges, skyscrapers,
railroads, elevated trains, etc.
• Carnegie’s pioneering use of ‘vertical integration’ came
at a cost to workers!
– long hours,
– low wages,
– dangerous working conditions.
9
10
Part II:
• Describe how the economy
came to be dominated by
giant ‘trusts’, such as those
headed by Carnegie and
Rockefeller in the steel and
oil industries (cont. from Part
I)
• Explain why the South was
generally excluded from
industrial development and
fell into a ‘third world’
economic dependency
• Analyze the social changes
brought by industrialization,
particularly the altered
position of working men and
women
11
II.
Old Industries Transformed, New Industries Born
C. Rockefeller Grows an American Beauty
Rose
• ‘Captains of Industry’ like
Andrew Carnegie, John D.
Rockefeller, and J. Pierpont
Morgan used their genius
and business skills devising
ways to cut costs, increase
efficiency, and eliminate
competition.
• The ‘horizontal integration’
business model was based
less on efficiency and more
on the idea of allying with
competitors, forming an
oligarchy, to monopolize a
‘market’.
12
II.
Old Industries Transformed, New Industries Born
C. Rockefeller Grows an American Beauty Rose
• John D. Rockefeller was a master of this business stratagem –
pioneering a variant of ‘horizontal integration’ called the
‘trust’
• In 1859, Edwin Drake discovered oil in Pennsylvania –
beginning an oil boom to meet America’s growing need for
refined machine lubricants and kerosene for lighting 19th century
houses.
• Between the 1860s and 1870s the cost of building oil refineries
was comparatively low -- low barriers to entry – typically less
than $25,000.
• As a result, the oil industry was convulsed by virtually
uncontrolled cutthroat competition among many small
refining companies
13
14
II.
Old Industries Transformed, New Industries Born
C. Rockefeller Grows An American Beauty Rose (cont.)
• Rockefeller, who began his business career at nineteen, was
already a shrewd and successful businessman as this era
dawned.
• In 1870, John D. Rockefeller incorporated the Standard Oil
Company of Ohio – the precursor of today’s Exxon-Mobil
Corp.
• Rockefeller, the largest oil refiner in Cleveland, eliminated
middlemen and squeezed out competitors by following a
policy of ‘rule or ruin’, which included:
(1) demanding secret rebates from railroads on the freight bills of his
competitors, (2) employing spies to infiltrate his competitor’s businesses to
gain information, and (3) demanding secret rebates from railroads in
exchange for guarantees of his business
15
II.
Old Industries Transformed, New Industries Born
C. Rockefeller Grows An American
Beauty Rose (cont.)
• These business practices enabled Standard Oil Company to
undercut his competitors prices and dominate more than 90
percent of the oil business by the 1890s
• In addition, these techniques enabled Rockefeller to pressure
competing refiners to sell their companies to him or face ruin and
bankruptcy
• Then, in 1882, Rockefeller established a new corporate structure
– the ‘Trust’, a business model designed to control the market
through ‘horizontal integration’ of all aspects of the oil ‘refining’
process
16
II.
Old Industries Transformed, New Industries Born
C. Rockefeller Grows An American
Beauty Rose (cont.)
• The ‘trust’ allowed Standard Oil Co. ‘trustees’ to hold stock in
various refinery companies ‘in trust’ and coordinate policy
between the refineries – a means to guarantee that refiners
would adopt prices and practices dictated by Rockefeller
• Rockefeller bought controlling shares in competing refinery
companies in order to place his ‘trustees’ on their boards of
directors
• The ‘Standard Oil Trust’, valued at $70 million, enabled
Rockefeller to monopolize the oil-refining industry
• After the federal government threatened to outlaw the trust as a
monopolistic violation of free trade and fair competition,
Rockefeller transformed the Standard Oil Company into a new
business form – the ‘Holding Company’
17
II.
Old Industries Transformed, New Industries Born
C. Rockefeller Grows An American
Beauty Rose (cont.)
• The ‘Holding Company’ eliminated the ‘trust’ and ‘trustees’ by
bringing competing oil companies (which he owned controlling
shares of stock in) under one central administration
• Between 1902 and 1905, journalist Ida B. Tarbell exposed
Rockefeller’s business practices in a series of articles appearing
in ‘McClure’s Magazine’ – Rockefeller had ruined her father’s
business
18
II.
From Competition to Consolidation
D. J. Pierpont Morgan, Finance Capitalist
& Sultan of Steel
• J. Pierpont Morgan was the
most influential banker of his
day – he built his reputation
by financing the
reorganization of banks,
railroads, and insurance
companies
• Consolidation restructured
American industry as the
‘corporation’ developed into
the dominant form of
business organization
19
II.
From Competition to Consolidation
D. J. Pierpont Morgan, Finance Capitalist
& Sultan of Steel (cont.)
• Financiers like J.P. Morgan and various banks played key roles
in sponsoring the shift from individual entrepreneurship to
‘finance capitalism’
• Morgan viewed corporate competition as wasteful and inefficient
– seeking to eliminate it through corporate consolidations and
centralized control of operations
• In the 1890s, ‘Jupiter Morgan’ rescued bankrupt railroads by
creating a ‘community of interest’ – using handpicked managers
he eliminated wasteful competition in the industry through
‘interlocking directorates’
20
II.
From Competition to Consolidation
D. J. Pierpont Morgan, Finance Capitalist
& Sultan of Steel (cont.)
• Using ‘interlocking directorates’, he placed officers of his own
banking syndicate on the various boards of directors of these
railroads – ena-bling J.P. Morgan & Co. to control them as if they
were one railroad
• Morgan’s consolidation of the railroad industry, using ‘interlocking
directorates’ and ‘holding companies’, concentrated America’s
railroads in the hands of his directors – creating a railroad empire
controlling two-thirds of the nation’s track
• Morgan’s efforts to bring order to the nation’s railroad industry
had its price – railroads were burdened with heavy debt because
J.P. Morgan & Company engaged in ‘stock watering’ for shortterm profits
21
II.
From Competition to Consolidation
D. J. Pierpont Morgan, Finance Capitalist
& Sultan of Steel (cont.)
• Morgan’s consolidation achieved stability and kept investors
happy but inflated the value of railroad stock – more stock was
sold than the assets of his rail lines justified [‘stock watering’]
• As a result, Morgan’s managers ran the railroads from an
accounting and profit perspective – discouraging long-term
investments in innovative technologies and organizational
innovation
• Business consolidations earned Morgan’s financial empire
millions of dollars from commissions and blocks of stock acquired
through handling such transactions
22
II.
From Competition to Consolidation
D. J. Pierpont Morgan, Finance Capitalist
& Sultan of Steel (cont.)
• In 1898, J. Pierpont Morgan & Co. plunged heavily into the steel
industry – manufacturing steel pipe tubing which threatened to
cut into Andrew Carnegie’s business and profits
• Morgan’s steel empire, created by consolidating several smaller
steel companies, forced Andrew Carnegie to build a new plant for
the manufacture of finished steel products [i.e. steel tubing, wire,
hoops, nails, etc.]
• By 1900, the press characterized the duel between Carnegie and
Morgan as the ‘battle of the giants – in actuality, Carnegie (who
was anxious to retire) maneuvered Morgan into buying out
Carnegie Steelworks for $480 million dollars [equivalent to $9.6
billion in current dollars]
23
II.
From Competition to Consolidation
D. J. Pierpont Morgan, Finance Capitalist
& Sultan of Steel (cont.)
• Morgan’s buyout of Carnegie Steel marked the beginning of the
new corporate world – after the acquisition, Morgan consolidated
other competitors into United States Steel capitalized at $1.4
billion
• United States Steel became the largest steelmaker in the world –
yet it did not monopolize the steel industry [ today it is known as
USX]
• Significant smaller steelmakers, including Republic and
Bethlehem Steel, remained competitive within an ‘oligopoly’ - a
system in which several large companies controlled production
• The meatpacking industry, pioneered by men like Gustavus F.
Swift and Philip Armour, also functioned as ‘oligopolies’ modeled
after the steel industry – Swift, Armour and other ‘meat kings’
took their place among America’s new royalty
24
II.
From Competition to Consolidation
D. J. Pierpont Morgan, Finance Capitalist
& Sultan of Steel (cont.)
• J. Pierpont Morgan, at his death in 1913, left an estate valued at
$68 million, far less than the personal fortune of Andrew
Carnegie – but Morgan was motivated by the power to control
billions of dollars in assets, not by the accumulation of personal
wealth
• J. Pierpont Morgan, more than men like Rockefeller and
Carnegie, left a lasting mark on the twentieth century –
pioneering the model for corporate consolidation that social
scientists and economists justified through the theory of ‘Social
Darwinism’
25
II.
From Competition to Consolidation
E. The ‘Gospel of Wealth’ & ‘Social
Darwinism’
• In the age of ‘absolute monarchs’ royalty invoked the divine right
of kings to justify their power, wealth, and actions – in the age of
wide-open capitalism, the ‘Captains of Industry’ embraced the
survival-of-the-fittest theories of Charles Darwin and ‘natural
selection’
• British naturalist Charles Darwin’s, ‘On the Origin of Species’
(1859), theorized that the process of adaptation and survival
triggered a ‘natural selection’ among species that led to
evolutionary progress and change
• At Yale University, Professor William Graham Sumner borrowed
heavily on Darwin’s theories in arguing that, “The millionaires are
a product of natural selection” – going further, Sumner stated,
“They get high wages and live in luxury, but the bargain is a good
one for society”
26
II.
From Competition to Consolidation
E. The ‘Gospel of Wealth’ & ‘Social
Darwinism’ (cont.)
• British theorist Herbert Spencer, like Sumner, borrowed on
Darwin’s theories to reach the same conclusions
• Sumner and Spencer co-developed the theory of ‘Social
Darwinism’, which when applied to human society, concluded
that progress resulted from relentless competition in which the
strong survive and the weak died out
• Those who embraced ‘Social Darwinist’ theory believed equated
wealth and power with ‘fitness’ for survival – they also believed
that for humanity to achieve progress, the less fit must be
allowed to die off according to the laws of nature and evolution
27
II.
From Competition to Consolidation
E. The ‘Gospel of Wealth’ & ‘Social
Darwinism’ (cont.)
• ‘Social Darwinist’ theory presented formidable obstacles to social
reform aimed at helping the less fortunate in American society –
it was also used as a formidable argument by the wealthy to
justify their social status, the means by which they ran their
monopolistic corporations, and their accumulation of vast
amounts of wealth
• At the core of ‘Social Darwinist’ theory lay the key component of
racism – which judged Angle-Saxons superior to all other groups
• In 1889, Carnegie published, ‘The Gospel of Wealth’ – an essay
that softened the harsh tone of ‘Social Darwinism’ by arguing that
he was essentially acting as a trustee for the benefit of his poorer
brethren, using the natural gifts God gave him to improve their
lives as well as his own
28
II.
From Competition to Consolidation
E. The ‘Gospel of Wealth’ & ‘Social
Darwinism’ (cont.)
• Through his ‘Gospel of Wealth’, Carnegie preached philanthropy
and implored the rich to live ‘unostentatious’ lives and to
‘administer surplus wealth for the good of the people’
• Most millionaires, including J. Pierpont Morgan, followed
Carnegie’s lead – but to varying degrees
• ‘Social Darwinism’ assuaged the America’s conscience in an era
of gross inequality of wealth, and neglect of the poor in the name
of ‘race progress’
29
III.
Politics & Culture
A. The South in the Age of Industry
• The ‘Compromise of 1877’ ended the Radical Republican’s
military ‘Reconstruction’ of the South – in every Southern state
the ‘Democratic’ party speedily reasserted its control, voted
‘Republicans’ out of office, and suppressed black civil rights
• Southerners voted for ‘Democratic’ candidates in every
presidential election for the next seventy years
• At state and local levels, ‘Democrats’ in the so-called ‘Solid
South’ had to contend with third-party challenges and changing
political alliances resulting from economic pressures to overhaul
the region’s devastated infrastructure and economy
30
FILM CLIP
31
III.
Politics & Culture
A. The South in the Age of Industry (cont.)
• As the South’s economy
languished after the Civil
War, the North’s economy
continued to grow at an
unprecedented speed –
prompting a group of
influential Southerners to call
for a ‘New South’ modeled on
the industrial North
• Henry W. Grady [editor of the
weekly ‘Atlanta Constitution’]
used his paper to promote
industrialization of the South
32
III.
Politics & Culture
A. The South in the Age of Industry (cont.)
• Grady, and other forward-thinking Southerners, achieved only
modest success in a region with abundant in natural resources
and cheap labor - the South remained largely backward and rural
• In the 1880s, James Buchanan Duke began to manufacture
machine-made cigarettes using the new technologies of massproduction – by 1890, he incorporated the ‘American Tobacco
Company’ which swallowed many of his smaller competitors
• Beginning around 1880, northern capitalists began investing in
the South – building cotton textile mills which took advantage of
(1) tax benefits, (2) cheap and plentiful non-unionized labor, and
(3) the close proximity of raw materials (cotton fiber) to the actual
mills
33
III.
Politics & Culture
A. The South in the Age of Industry (cont.)
• Grady, and other forwardthinking Southerners,
achieved only modest
success in a region with
abundant in natural resources and cheap labor the South remained largely
back-ward and rural
• In the 1880s, James
Buchanan Duke began
manufacturing machinemade cigarettes using the
new technologies – by 1890,
he incorporated the
‘American Tobacco
Company’
34
III.
Politics & Culture
A. The South in the Age of Industry (cont.)
• This investment motivated
southern men and women of
all colors to join the migration
of people from farm to city
• Northern investment in southern textile mills produced two
major regional changes New England’s textile
industry be-gan to decline,
and by 1900 the South
became the nation’s lead-ing
producer of cotton textiles
35
Cotton Manufacturing Moves South, 1880-1980
36
III.
Politics & Culture
A. The South in the Age of Industry (cont.)
• Railroads opened the South for industrial development – in fact,
they were the first large industry to invest in the South
• Between 1865 and 1890, railroad investments in the post-Civil
War period quadrupled the number of track miles constructed
• These northern-dominated railroad interests served, (1) to
connect northern manufacturers with southern markets and
sources of raw materials, and (2) provide rapid rail transportation
for shipment of southern textiles, also dominated by northern
financial interests, to northern markets and overseas shippers
37
III.
Politics & Culture
A. The South in the Age of Industry (cont.)
• Despite the South’s
advantages in cheap labor
and abundant natural
resources, northern bankers
and investors didn’t allow the
South to compete equally
with the North
• Ex: railroads gave
preferential rates to
manufactured goods moving
south from the north, but
charged higher rates for
southern products shipped
north
38
III.
Politics & Culture
A. The South in the Age of Industry (cont.)
• Moreover, northern-dominated railroad interests gave preferential
low rates for southern raw materials shipped to manufacturers in
the North
• The net effect of this form of economic discrimination was to
keep the South in a state of virtual ‘Third World’ servitude to the
Northeast
• The ‘New South’ was most proud of its growing iron and steel
industry which grew in the region around Birmingham, Alabama –
it too faced the same kind of economic discrimination by
northern-dominated banking, financial, and manufacturing
interests
39
III.
Politics & Culture
A. The South in the Age of Industry (cont.)
• One example of this economic discrimination against Southern
iron and steel mills was the ‘Pittsburgh plus’ pricing system – an
elaborate mechanism for inflating the price of southern steel in
order to protect Pittsburgh’s steel companies and their customers
from competition
• Under the ‘Pittsburgh plus’ system, Pittsburgh’s steel lords [i.e.
Carnegie Steelworks and other companies] brought pressure to
bear on railroads to charge Birmingham steel companies a
fictional fee to inflate the price of southern steel – essentially
charging them as if it their steel had been shipped from
Pittsburgh
40
III.
Politics & Culture
A. The South in the Age of Industry (cont.)
• As a result of the North’s industrial and financial domination, the
industrialized ‘New South’ achieved only limited gains – the
South remained largely rural and agricultural, tied to the ‘croplien’ system that kept white and black southern farmers poor and
in debt
• Between 1865 and 1900, black and white voters occasionally
entered into political alliances to achieve common goals – the
‘Readjusters’, a Virginia coalition formed to lower the state’s debt
and promote public education, was one such alliance that
captured state elective offices from 1879 to 1883
41
III.
Politics & Culture
B. The Impact of the Industrial Revolution
on America
• In the ‘Gilded Age’, Americans enjoyed a sharply rising standard
of living and more comforts than workers in other industrial
nations – however, it did not come easy and workers did not
share proportion-ately with their employers in the benefits of the
age of big business
• During this period, America was transformed from a nation of
farmers and independent producers to a nation of wage earners
– by 1900, two out of three American workers depended on
wages
• American workers dependent on wages became increasingly
vulnerable to economic cycles and the power of their employers
– resulting in constant fears of illness, injury, and economic
downturns that could leave them unemployed
42
III.
Politics & Culture
B. The Impact of the Industrial Revolution
on America (cont.)
• During this period, the insatiable demand for factory labor lured
rural American migrants and peasant European immigrants to
growing urban centers – there, industries imposed discipline and
revolutionized the very concept of time by forcibly compelling
them to adhere to strict work schedules
• The industrial revolution of America’s ‘Gilded Age’ profoundly
impacted the lives of women – opening new economic and social
oppor-tunities made possible by recent inventions including the
typewriter and telephone switchboard
• For working middle-class women, careers frequently meant
delaying marriage and having fewer children
43
III.
Politics & Culture
B. The Impact of the Industrial Revolution
on America (cont.)
• By the 1890s, the ‘Gibson Girl’ became the romantic ideal of the
‘new woman’ – an image created by artist Charles Dana Gibson
for his magazine ‘The Gibson Girl’
• In the ‘Gilded Age’, most women worked out of necessity – not
for independence or to conform to romantic images of what a
woman should be
• America’s industrial revolution during this period heightened
class divisions – a growing problem made all the more apparent
as ‘captains of industry’ openly displayed their bloated fortunes
• Evoking bitter criticism, such open displays of wealth gave rise to
a small but increasingly vocal group of radicals and socialists
44
III.
Politics & Culture
B. The Impact of the Industrial Revolution
on America (cont.)
• By 1900, approximately one-tenth of the people owned ninetenths of America’s wealth – a testament to the existence of an
oligarchy of money
• Reformers struggled against this oligarchy of money to ensure
some measure of security for working class Americans –
measures including job and wage security and unemployment
provisions
• Toward the end of the ‘Gilded Age’, strong internal pressures
within the nation and external pressures with other nations arose
in competi-tion for markets – developments which put America
on a course of empire and conflict with other nations
45
Download