Chapter 18
The Rise of Industrial America
1865-1900
Introduction
• What brought about the prodigious industrial growth and
the rise of giant corporations in the period 1865-1900?
• How did some business leaders, such as Andrew
Carnegie and John D. Rockefeller, overwhelm
competitors and dominate their industries?
• How and why did Southern industrialization patterns
differ from Northern ones?
• How did workers respond to the changes resulting from
rapid industrialization and the growth of big business?
• In the labor-management clashes of the period, why did
management almost always win?
The Character of Industrial Change
• America’s vast coal deposits are used as cheap energy
to fuel Industrial expansion
• New Technology allows manufacturers to cut production
costs and employ low skilled and semi-skilled laborers
• Ruthless competition lowers prices and ruins weaker
companies. Large corporations begin to control each
industry
• Unrelenting competition leads business to exploit labor
and pollute the environment
• Prices fall, interest rates remain high and credit remains
tight because the money supply is not able to keep up
with the expansion of the economy
Railroad
Innovations
• By 1900 US has more rail miles than all of
Europe together
• Internal Markets open because of the Railroad
• Railroad companies develop new financial and
managerial ways of doing business
• Stock
• Railroad managerial innovations become the
model for other business
Consolidating the Railroad Industry
• Collis P. Huntington, Jay Gould, James J. Hill bought out their
competitors and by the 1890’s established great trunk lines that
controlled most of the track in America
• Standardized equipment and track gauge made railroads more
efficient
• Railroad Companies also abused their power by bribing politicians,
giving rebates and kickbacks to huge shippers, and over charging
small businesses and farmers
• 1870’s Midwestern states outlawed rate discrimination but this was
found to be unconstitutional by the Supreme Court saying the states
could not regulate interstate commerce
• 1887 Congress passed the Interstate Commerce Act: forbade pools,
rebates and other monopolistic practices
• Interstate Commerce Commission established to investigate
complaints and unreasonable rates
• By 1906 Seven giant corporations controlled all of the track
Applying the Lessons of Railroad to
Steel
• Andrew Carnegie copied the managerial
and business style of the Railroads and
applied them to the Steel industry
• Carnegie integrated horizontally and
vertically
• JP Morgan and Andrew Carnegie
combined to form US Steel in 1901
• $1 Billion in assets contained in 200
member companies
The Trust: Creating New Forms of
Corporate Organization
• By 1900 consolidation practices had placed the
Railroad and Steel industries under a few
corporate giants
• Oil Sugar and Meat-Packing also monopolized
• John D. Rockefeller led the way in the Oil
Industry, Standard Oil adopted all of the latest
technology, made deals with the railroads to get
special rates, aggressively ruined competitors
and created the first trust and holding company
The Trust: Creating New Forms of
Corporate Organization cont.
• Growth of Trusts, Oligopolies and Monopolies
led to public pressure for government
intervention
• 1890 Congress passed the Sherman Anti-Trust
Act, outlawed restraint of trade in interstate
commerce
• Law was too vaguely worded and proved
ineffective
• Supreme Court used the vague interpretation to
rule in the EC Knight case that manufacturing
corporations could be a monopoly
The Triumph of Technology
• 1860-1900 new machinery also helped bring
about large corporations
• Alexander Graham Bell 1876 invented the
telephone and Bell Telephone became a
monopoly
• Thomas Edison invented the light bulb,
phonograph, microphone and motion picture
camera. These inventions proved to be the
foundations of huge profitable businesses
Custom-Made Products
• Locomotives, women’s clothing, furniture
also expanded output and production of
these items took place in large factories
Advertising and Marketing
• Aggressive Marketing and Advertising
campaigns expanded sales and also
contributed to large businesses such as
Proctor and Gamble, American Tobacco
and Eastman Kodak
Economic Growth: Cost and
Benefits
• By 1900 the national economy was
dominated by a few large corporations
offering modern products
• The cost of these developments was the
ruin of many small businesses,
exploitation of workers and farmers and
the environmental issues
Obstacle to Economic
Development
• The South industrialized more slowly than
the North
• The reason for slow economic
development in the South was a shortage
of capital because of the damage of the
Civil War
• Other factors included high protective
tariffs, and the South’s poor system of
education
The New South Creed and
Southern Industrialization
• New South Creed- slogan pushed by
newspaper editors, planters and
businessmen- the region must industrialize
• Southern cities offered tax exemptions for
new businesses to locate there.
• Iron and Steel production expanded into
Alabama and Chattanooga Tennessee
• Iron and Steel industry employed unskilled
labor including blacks
The Southern Mill
Economy
• Southern textile mills opened in the countryside
• Most were located in Virginia, the Carolinas, Georgia
and Alabama.
• They recruited workers from the poor white farm
population of the Piedmont and hired whole families
including women and children
• Southern Mills paid 30 to 50% less that New England
Mills. The Textile industry dominated mill towns. The
Mills supplied schools, churches, stores and housing
• Mill workers often fell into debt with the mills much like
the sharecroppers and tenant farmers
The Southern Industrial Lag
• Southern industry developed much slower
than industry in the North
• Southern industry was largely controlled or
owned by Northern Industrialists
From Workshop to Factory
• The number of industrial
workers climbed from
885,000 to 3.2 million by
1900.
• Large scale mechanized
production changed the
nature of work
• Fewer artisans and skilled
laborers
• Factories hired low skilled
laborers, women and
children to do jobs that
were simple and repetitive
The Hardships of Industrial Labor
• 1880 1/3 of the workforce in Steel and the Railroad
industry were unskilled
• Common laborers drifted from city to city and industry
to industry working for wages that were 1/3 that of
skilled workers
• New diseases such as black and brown lung were
introduced
• Frequent accidents led to permanent disability or death
• Excessive hours and child labor contributed to work
related accidents
• Employers rarely paid compensation to injured workers
and opposed passage of state health and safety codes
Immigrant Labor
• More immigrants filled the least skilled, lowest
paid and most dangerous positions in the mines,
factories and railroads
• French Canadians worked in the new England
Mills
• Chinese and Irish worked on the Railroads
• Immigrant workers typically lived better than they
had in their homelands
• Factory work was fast paced, and subject to
rigid, strict discipline
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Management hired more women because they could be
paid less
Married women and children spent hours finishing
garments and rolling cigars
Women and
Young single women took factory jobs because they
were preferred to domestic work
Work in Industrial
Immigrant parents regularly sent their daughters to
work in the mills to supplement the family’s income
America
Women made up 17% of the workforce by 1900
Clerical positions made a little more than factory work
but there was not chance for promotion
Women were considered temporary employees
Hard Work and the Gospel of
Success
• Newspapers and Magazines preached the gospel that
America was the land of opportunity
• Rags to riches stories of people like Andrew Carnegie
fueled the American Dream.
• 95% of executives for large corporations were born in
America and came from Middle to Upper class families
• Skilled workers did have a chance for promotion,
however unskilled and immigrant laborers had virtually
no chance for promotion
• 1890 America’s richest families (top 10%) owned 73% of
the country’s wealth
Organizing the Workers
• Workers in the North began to join Unions
• William H. Sylvis founded the National labor Union in 1866
• Terrance Powderly led the Knights of Labor in the 1870’s. The
Knights of Labor called for social and economic reforms including
equal pay for men and women, abolition of child labor and inclusion
of black workers in Unions. They also called for a graduated income
tax.
• Knights of Labor called for Immigration restrictions. They accessed
immigrants, especially the Chinese for undercutting the native-born
workers by working for wages that were too low.
• The Federal Government responded in 1882 with the Chinese
Exclusion Act
• 1882 was the high water mark of the Knights of Labor with a
membership of 700,000. By the late 1880s workers were moving to
the newly formed American Federation of Labor
Organizing the Workers cont.
• Samuel Gompers led the American Federation
of Labor
• AFL worked for wages and hours for skilled
labor
• 1900 less than 5% of America’s workers
belonged to a Union
• Union membership was limited because of the
splits in the labor force between skilled,
unskilled, religious and ethnic divisions, and the
difference between workers over goals and
tactics
Strikes and Labor Violence
• 1881-1905 37,000 strikes took place involving 7 million workers
• In many cases violence broke out when scab workers were hired to
replace those on strike
• 1877 Railroad Strike, Haymarket Strike, Homestead Strike, Pullman
Strike
• Workers were forced to sign yellow dog contracts and owners hired
their own police forces
• The public regarded the Unions as radicals and dangerous
• The Federal Government continually sided with Management and
used the military to put down several strikes
• Eugene Debs- Union leader and Presidential candidate was
arrested for the Pullman strike
• As a result, strikes almost always failed to achieve the desired
results
Social Thinkers Probe for
Alternatives
• Social Darwinists like Andrew Carnegie and William
Graham Sumner believed that the struggle of labor was
inevitable as a constant survival of the fittest. They
opposed any government interference with the working
of natural laws
• Lester Ward, Henry George and Edward Bellamy
attributed the misery to the man made economic system
and unrestrained profit seeking. They called for
government regulation, tax reform and a cooperative
commonwealth
• Tiny anarchist and socialist group preached that only an
overthrow of the government and capitalism would
create a just society