INDUSTRIAL
AMERICA
Industrialization increased the
standard of living and the
opportunities of most Americans,
but at what cost?
In less than 125 years, America became the
leading industrial power of the world. Major
reasons for this quick rise to power include:
1.
RAILROADS!!!!!!!!!
2.
Resources
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3.
Government policy towards business
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4.
An abundance of natural resources
An abundance of human resources

unskilled & semi-skilled labor
Willing to help at all levels to stimulate growth
Market growing as U.S. population increased.
Entrepreneurs – talented group of
businessmen & advisors with abundant capital
5.
New inventions & technology
RAILROADS

The factor MOST responsible for growth
of American Industry.
 The Railroad fueled the growing US
economy:
 First big business in the US.
 A magnet for financial investment.
 The key to opening the West.
 Aided the development of other
industries.
 Became a consumer of other
industries.
Railroad Construction
“The Big Four” Railroad Magnates
Charles Crocker
Collis Huntington
Mark Hopkins
Leland Stanford
Transcontinental Railroad
(During Civil War – to connect CA with the Union)

RACE – Pacific Railway Act, 1862:
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Union Pacific: building west from Omaha,
NE
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Irish immigrants
Central Pacific: building east from
Sacramento, CA

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Received 20 sq. mi. of land for every mile of
track laid
$16,000 loan for every mile on flat land
$48,000 loan for every mile over mountains
Leland Stanford & the Big Four
Chinese immigrants used
Most difficult time – Sierra Nevada Mtns.
Union lays 1,086 miles & Central 689
WEDDING OF THE RAILS:

Improvements in RRs will increase their
profitability:
 Standardization & Consolidation:
 Binds all sections of country together into
one market
 Cornelius Vanderbilt:
 “The Commodore” – steamboat fleet
 Consolidates NY railroads into NY
Central RR Company
 Eventually leaves his RR empire to his
son, William H. Vanderbilt

Improvements in service:
 4 track main line
 Standard gauge track
 Use of Westinghouse air brake – allows
all cars to stop simultaneously…can then
carry heavier loads on longer trains
 Pullman Palace Cars – luxury cars
 Time Zones develop due to RR:
 Develop because needed for RR
scheduling
 Originally 4 in U.S.
 How many in U.S. now?
 Eventually spreads worldwide
How did the RRs impact:
 National
unity?
 Industry?
 Mining & agriculture?
 Growth of cities and urban
areas?
 Immigration?
 The Environment?
 Wealth?
Corruption in the Railroad
Industry:

Stock Watering
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Bribery

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An anti-competitive combination – group of RR
companies agree to divide business in a geographic
area and share the profits
Rebates and Kickbacks

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Of judges, legislature; free passes to politicians
The “pool”

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Exaggerating RR assets; selling stock at higher prices
than it’s worth
Reward powerful shippers for steady & assured traffic
Price Gouging

Rates are low on competing lines, but jacked up on noncompetitive lines
Government Regulation of RR:

State regulation – 1870s

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Encourages farmers to protest & organize (the
Grange) & pressure state legislatures into
passing regulations to control RR monopolies
Federal regulation

1886 – Wabash v. Illinois

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1887 – Interstate Commerce Act


Sup. Ct. rules that states CANNOT regulate interstate
commerce
Prohibits rebates, pools, requires that rates be
published, establishes ICC to enforce
Impact of the ICC


Provides forum for resolution of conflicts
A good first step, but not very powerful
Resources:
 Natural
Resources:
– amount mined doubles each
decade between 1840 & 1890
 Iron Ore – Great Lakes, PA, AL
 Oil – Western PA; to TX by 1900
 Coal
 Human
Resources:
 Population doubles between
1860 & 1890
 IMMIGRATION – 14 million
immigrants to U.S. during this time
(“new immigrants” from S & E
Europe)
Favorable Government Policy
Towards Business

LAISSEZ-FAIRE!!
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The ideology of the industrial age
Individuals should compete freely in the
marketplace.
No room for government in the market!
Industry has very few government regulations
and restrictions
ENTREPRENEURS


One who takes the risk of organizing and
beginning a new business
Received help from the U.S. government:
 High protective tariffs
 Cheap land
 Liberal immigration laws – cheap labor
JOHN D. ROCKEFELLER

OIL REFINING (Standard Oil
Co.)
 Consolidated 40 oil refining
companies – a nationwide
monopoly – controlled 95% of all
refineries by 1877
 Believed in “economies of scale”
 Ruthless in business! (dubbed
“Reckafellaw”)
 “American Beauty” rose
analogy – pluck off the early
buds…
 Used rebates, drawbacks,
spies & secret info from RR to
learn about competitors &
force them out of business
 Stock or Cash Buyouts

Treated his workers well
– the first to offer old-age
pensions & tried to
protect them in bad times
 Hated waste!
 Personally:
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Ambitious
Abstemious
Pious
Parsimonious
Devout churchgoer and
“GOD GAVE ME MY MONEY.” Sunday School teacher
John D. Rockefeller  Strong family man
 Only the strong survive
Standard Oil Refinery
 The
Octopus, 1904

Gave away dimes to
children on the street
 Retired at age 40
 Spent rest of his life
giving away money
 Gave away over $520
million to charities

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$78 million to colleges
$60 million to
medicine
$18 million to African
American education
Lots more to
education & research
University of Chicago
Died
at
age 98
at
Ormond
Beach ,
FL
ROCKEFELLER
EXPOSED BY JOURNALIST
IDA TARBELL
A
lifelong
Rockefeller hater
(her father took the
cash buyout)
 Exposed
Rockefeller’s
unethical business
dealings with RR,
etc.
ANDREW CARNEGIE
 STEEL (U.S. Steel
Corporation)
 Hired the best
technical & scientific
experts
 Used new process &
made steel so
cheaply it forced
competitors into
bankruptcy & then he
bought them
 Did
not treat his
workers as well as
Rockefeller
 Drove wages
down & hours up
for the common
laborers &
constantly fought
unionization
 But, made upper
level management
& experts partners
in the business


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“The first man gets the oyster,
The second man gets the shell.”
Andrew Carnegie
Poor Scottish immigrant
who went from “rags to
riches” – a true Horatio
Alger story
 Began work in 1848
as bobbin boy $1.20/wk
 By 1900 produces
half of nation’s steel
–$25 million/year
take-home pay
Ambitious, energetic, a
“gambler”
Deeply believed that if
one worked hard, saved
$ & invested wisely,
anyone could become
wealthy

“Gospel of Wealth” –
Wealthy are blessed with
greater talent and wealth
and have a duty to help
those who would try to help
themselves.


Inequality is inevitable and
good.
Wealthy should act as
“trustees” for their “poorer
brethren.”

Retired at 66 (bought out by
J.P. Morgan – becomes U.S.
Steel)
 Lived to be 84
“The man who dies
 Gave away over $350
million to charities
rich, dies disgraced.”
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
Mostly to libraries
Carnegie Hall & Museum, NY
New Financial Businessman
 The
Broker
Wall Street – 1867 & 1900
Beliefs defending class distinctions:
SOCIAL DARWINISM
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Philosophy that applied Darwin’s biological theory
of “survival of the fittest” to human society & those
who succeeded
Wealth no longer looked upon as bad; viewed as a
sign of God’s approval.
Yale professor William Graham Sumner:
“millionaires are a product of natural selection.”


Individuals must have absolute freedom to struggle,
succeed or fail. Therefore, state intervention to reward
society and the economy is futile!
Both Rockefeller and Carnegie were strong
believers in this philosophy
 Believed it was a method better than elections for
selecting leaders
 Only the strong survivors will control industry and
wealth
RUGGED INDIVIDUALISM

Equates to contempt for the poor
 Many of nouveau riche had “pulled
themselves up by their bootstraps”
 The poor are only poor because of
their laziness and lack of initiative
 Rev. Russell Conwell
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Christian duty to accumulate wealth
Should not help the poor.
“Acres of Diamonds” speech:
 “There is not a poor person in the U.S.
who was not made poor by his own
shortcomings.”
1/10 of people own 9/10 of all the
wealth by 1900
EFFORTS TO CURB COMPETITON:

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HORIZONTAL
INTEGRATION:
SEVERAL FIRMS IN
THE SAME KIND OF
BUSINESS
CONSOLIDATED,
JOINED TOGETHER
Best example:
 ROCKEFELLER
and his Standard
Oil Co.

VERTICAL
INTEGRATION

BUSINESSES IN
DIFFERENT BUT RELATED
ACTIVITIES JOINED
TOGETHER;
COMBINES ALL PHASES
OF THE PRODUCTION
PROCESS – gets rid of the
middlemen
Best examples:
 CARNEGIE
 Gustavus Swift, Meatpacking
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INTERLOCKING DIRECTORATES:

J.P. MORGAN
 “Banker’s banker”
 Put officers of his own
banking syndicate on
Board of Directors of
rival businesses
 Made millions financing
reorganization of RRs,
banks, insurance
companies
Due to huge sums required to build
railroads, corporations become major
business form in U.S.


A corporation is a
company formed
by a group of
investors who get
a share of
ownership in
proportion to the
amount of money
they invest
Corporate investors
enjoy LIMITED
LIABILITY … which
means that
investors risk ONLY
the amount of their
investment (stock
cost) and can’t be
held personally
liable for debts of
the corporation
ADVANTAGES OF
CORPORATIONS OVER OTHER
TYPES OF BUSINESSES:
Viewed as a legal “person” under the law –
can make contracts, sue and be sued, etc.
 PERMANENCE - they continue forever
 EASY TO RAISE LARGE SUMS OF MONEY
 Small amounts of $ from many individual
investors can be pooled into huge sums
of $ need to start or expand a large
company
 LIMITED LIABILITY!!!!!

Advantages of “Big Business?”
 Can
produce more and better goods
at a lower cost
 created jobs
 Can
afford to pay high salaries to get
the best experts
 increased efficiency by establishing
separate departments in business
What are the disadvantages of
“Big Business?”
 Methods
they used to get “Big”
 Demanded, & got, volume
discounts from shippers
 Underselling & forcing competitors
out of business
 Raising prices to the consumer
 Bribing of public officials
 Destruction of the environment
 Why would people put up with this?
U. S. Corporate Mergers
The ‘Robber Barons’ of the
Past
Images of the new elite
(from left to right)
John D. Rockefeller,
Andrew Carnegie,
Cornelius Vanderbilt,
and J.P. Morgan
Jay Gould – the
Archtype of the
Robber Baron
RR Developer – Union
Pacific
Dr. Thomas C. Durant, VicePres., Union-Pacific Railroad
Henry Flagler
An American tycoon who worked with
John D. Rockefeller to establish
Standard Oil. He helped develop
Florida as the vacation land it is today.
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Moves to St. Augustine
Founder of Palm Beach
“Father of Miami”
Founds the Florida East Coast
Railway
By 1912 Florida Overseas
Railroad was completed to
Key West
Flagler County, Flagler Beach,
Flagler College
Flagler Resort
Flagler College
Whitehall - 1st big mansion in West Palm –--- history museum there now
Distribution of wealth
in the Gilded Age
Regulating the Trusts
1877  Munn. v. IL – Farmers (the Grange) win victory
when Court rules states CAN regulate RR rates
1886  Wabash, St. Louis & Pacific
Railroad Company v. IL – overrules Munn;
federal gov’t controls RR interstate commerce
1890  Sherman Antitrust Act
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Forbids combinations in “restraint of trade”
No real means of enforcement
First lawsuits all decided in favor of the trusts
& against labor unions – restraining trade
1895  US v. E. C. Knight Co. – Fed. gov’t using
Sherman Act to get rid of sugar monopoly but lost.
Ct. held that manufacturing industries were local
industries not subject to fed. gov’ts interstate
commerce control
NEW INVENTIONS &
TECHNOLOGY:

Bessemer and open hearth process
 Created a lighter, stronger, rust-free
metal – STEEL
 U.S. producing 1/3 of world’s supply by
1890
 Refrigerated RR cars
 Edison
 light bulb
 phonograph
 motion pictures.
Thomas Alva Edison
"Genius is one
percent
inspiration and
99 percent
perspiration."
“Wizard of Menlo Park”
In his lifetime, Edison patented 1,093 inventions.
The Light Bulb
Birth of the Night Shift!
Industrial production now
possible 24 hrs. per day!
The Phonograph (1877)
The Ediphone or
Dictaphone
The Motion Picture Camera
Alexander Graham Bell
Telephone (1876)
New
jobs
for
women
CHRISTOPHER LATHAM SHOLES
 THE
TYPEWRITER
 Along
with the
telephone, leads to
feminization of the
work place
 Women
make up
5% of all office
workers in 1870;
40% by 1910
Alternate
Current
AC was safer than
Edison’s DC current
Air
Brake
George
Westinghouse
The Airplane
Wilbur Wright
Orville Wright
The craft soared to an altitude
of 10 feet, traveled 120 feet,
and landed 12 seconds after
takeoff.
Kitty Hawk, NC – December 7, 1903
U. S. Patents Granted
1790s  276 patents issued.
1990s  1,119,220 patents issued.

Problems of workers in the Industrial Age:
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Less value placed on skills
Depersonalized relations with corporate employers
Technological unemployment – machines replace
men
Glutted labor market –IMMIGRANTS!
Begin to look to unions for help
Corporate resistance to Labor Unions:
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Pressure politicians
Buy out the press
Import scabs, use of troops (Pinkertons) to break up
strikes
File for injunctions
Lockouts
Yellow Dog Contracts & ironclad oaths
Blacklists
Company-owned towns – Pullman, IL
LABOR UNIONS

Had difficulty organizing:
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Extreme opposition from
Employers
Courts & police favored
Employers over workers
Too many immigrant laborers
Several major unions form
in late 1800s:
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National Labor Union
Knights of Labor
American Federation of
Labor
American Railway Union
NATIONAL LABOR UNION

Formed 1866 - 600,000 workers at height
 General union with skilled & unskilled
workers, and farmers
 Sought social reform – 8 hr. day
 Get 8 hr. day for gov’t workers but 1870s
depression destroys union
 RR wage cuts in 1877 led to massive
strikes, federal troops called in & violence
erodes support for unions among
Americans
KNIGHTS
OF
LABOR,
1869



Led by Terrence Powderly
Originally a secret organization
ALL workers welcome:
unskilled and skilled
 Recruited women & blacks
 Sought broad reforms:
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
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Used political activity first;
preferred NOT to use strikes
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Health and safety codes
8 hour day; end to child labor, etc.
Cooperative ideas – eventually
workers would own factories
Successful strike against Gould’s
Wabash RR in 1885
Association with anarchy &
violence (Haymarket Square
Riot) causes end of Knights by
1890s
AFL, 1886

Led by Samuel Gompers
 A CRAFT Union
 ONLY skilled workers - why?
 (better bargaining power)
 Kept out blacks and women
 A “federation”
“All I want is more!”
 Sought “bread and butter” reforms:
 Higher Wages
 Shorter Hours
 Better/safer working conditions
 Also sought “closed shops” (union workers only)
 Relied on economic pressure: walkouts,
strikes and boycotts – collective bargaining
AMERICAN RAILWAY UNION
 Led
by Eugene V. Debs
 Later
became a socialist
while in jail after arrest in
Pullman Strike
 “INDUSTRIAL”
union
 All
workers in same
industry, regardless of their
craft or skill level, in the
same union
 Sought
less
violence/confrontations
but winds up in it anyway
THE MAJOR STRIKES:
 Great
RR Strike of 1877
& Ohio RR – cut wages during a
depression
 Striking & violence spread; Employers
called on federal gov’t for help
 Pres. Hayes sent in troops to restore order
 Baltimore
HAYMARKET SQUARE RIOT
1886

On May 1, 1886, unions called for national
strike in support of an 8 hour work day
 Thousands of workers demonstrated in
U.S. cities but Chicago was the center,
with 40,000 demonstrators
 After bomb thrown into crowd, police fired
upon strikers killing an unknown number
of workers – 12?
 Several anarchist labor leaders arrested
and tried and hanged without supporting
evidence
 Association between unions & violence
leads to demise of Knights of Labor
Images from Haymarket Riots, May 3, 1886
Haymarket Memorial,
Chicago
 Homestead
Strike, 1892
 Carnegie Steel – Homestead
Plant
 Carnegie’s partner (Frick) cut
wages; workers strike
 Pinkerton Detectives called in to
break strike

Led to deaths of 9 strikers & 7 detectives
 Anarchist
tried and failed to
assassinate Frick
 Strike called off – management
wins
 Unions’ association with
violence continues
Pullman Strike, 1894
US cavalry breaks up 1894
Pullman Car workers strike
 Pullman Strike, 1894
 Pullman Palace Car Company
 Company Town
 Laid off workers & cut wages after Panic
of 1893
 BUT didn’t cut rent & food prices
 Refused to bargain; shut down plant
 First true nationwide strike!
 Caused interference with mail delivery
 Pres. Cleveland got injunction to force
end to strike and sent in troops to enforce
it – sets a precedent
 Debs refused, arrested, jailed … socialist