1 14.3 Big Business Emerges 1865-1900 What were the factors that spurred Americas industrial growth?

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14.3 Big Business Emerges

1865-1900

What were the factors that spurred America’s industrial growth?

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Context• The Age of Monopolies, Trusts,

and Big Labor

• America accomplished heavy industrialization in the post-Civil War era. Spurred by the transcontinental rail network, business grew and consolidated into giant corporate trusts, especially in the oil and steel industries.

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Map: Industrial Production, 1919

Copyright © Houghton Mifflin Company. All rights reserved.

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Experience

• When was the last time you felt that the “game was rigged”?

• Have you experienced the power of a monopoly?

• Do you trust “big business”?

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Overview

• Efficient use of expensive machinery called for “bigness” and consolidation proved more profitable than ruinous price wars

The Corporation• Basically an “artificial legal person”• Advantages

– Secure capital, Limits on liability, Transferability of shares, perpetual life

• Disadvantages– Public records, double tax, lack of personal

connection between workers and employer

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Monopolistic practices• Monopoly = a firm that completely

controls an industry• Vertical integration = combining all

phases of manufacturing in to one organization (Carnegie)

• Horizontal consolidation = allying with competitors to monopolize a market (Rockefeller)

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• Other “Combinations”• Pools = secret agreement to fixes prices and

output (Railroad)• Trust = More permanent than a pool.

Stockholders of competing Companies turn over stock to a Board that coordinates companies within an industry to avoid competition (Standard Oil)

• Holding company = a corporation composed of various competing enterprises within one industry (JP Morgan’s US Steel)

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Tycoons1. Profiteering from the Civil War gives rise to

millionaire class (4000)2. Millionaires capitalize on Transcontinental

railroad, mechanization, industrialization, & expansion of markets

3. Surplus of raw materials, cheap labor, foreign investment ENCOURAGE CAPITALISM

4. Inventions Industrialization More Inventions More

Industrialization

ALL OF THIS GIVES RISE TO TYCOONS

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Key Inventors and Inventions

• Alexander Graham Bell = telephone (1876)• Thomas A. Edison = electric lights,

phonograph (c. 1890)• Bessemer Process/William Kelley = process

to convert iron to steel (1850)• Typewriter 1867 (Christopher Sholes)• Automobile / Assembly line (Ford)

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The Manufacture of Iron

Manufacturing iron was a hot and strenuous process, requiring workers to spend longs hours stoking hot blast furnaces. (Library of Congress)

The Manufacture of Iron


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Bessemer Process = process to convert iron to steel

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Andrew Carnegie = Steel Kingpin

• Steel is King : US pouring out 1/3 of world’s steel by 1890’s

• “bootstrap” story: poor immigrant to tycoon• Controls all means of production, eliminates

middle man• Sells to JP Morgan for 400 million• Becomes a philanthropist

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J P Morgan – Banker’s Banker

• Builds financial empire through railroads, banks, and holding companies

• Buys out Carnegie and enters steel business• Uses trusts and holding companies to

consolidate wealth and power• Forms US Steel Corporation – 1st ever

corporation worth more than one billion $

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Rockefeller – Standard Oil Corp.

• Kerosene and then Automobiles drive up US oil consumption

• Rockefeller ruthlessly uses horizontal consolidation to create largest monopoly

• See “The Octopus,” 1904 - Cartoon• 1877 controls 95% of US’s oil refineries • Robber Baron’s Baron

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Standard Oil MonopolyBelieving that Rockefeller's Standard Oil monopoly was exercising dangerous power, this political cartoonist depicts the trust as a greedy octopus whose sprawling tentacles already ensnare Congress, state legislatures, and the taxpayer, and are reaching for the White House. (Library of Congress)

Standard Oil Monopoly


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Compare the lives and beliefs of Carnegie and Rockefeller

using a Venn Diagram

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Justifications for Big Business

• Old Rich displaced by rule of the “new rich”

• Gospel of Wealth – discourages helping the poor by state

• Laissez faire = “let it be”• Justified by Social Darwinism –

survival of the fittest• Poor are poor due to lack of initiative

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Taking on the Trusts• Trusts and robber barons defended by 14th

amendment’s due process clause • Constitution’s “interstate commerce” clause

inhibits states from controlling trusts• Sherman Anti-Trust Act of 1890

– Largely ineffective (wording: Unreasonable restraint of Trade) and lack of enforcement, new forms of consolidation (holding Co.)

IRONY: Used effectively against unions

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Industry and the South• 1900: less manufacturing than before Civil War• South acts primarily as source of raw materials• Northerners control stock in Southern industry

(especially the RR), discouraged industrialization due to lack of capital

• Shift in cotton mills from NE to S in 1880’s• Cheap labor (virtually sharecropping) brings

rural white southerners to mill towns, and then traps them there

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Context• The Age of Monopolies, Trusts,

and Big Labor

• Industrialization radically transformed the condition of American working people, but workers failed to develop effective labor organizations to match the corporate forms of business.

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14.4 Workers of the Nation Unite

1865-1900

Part 2 – Impact of Industrialization

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Impact of Industrialization

• Urbanization• Erosion of Jeffersonian ideals• Women’s roles change

– Delayed marriages– Smaller families

• Accentuated class division– 1900: 1/10 of US owns 9/10 of US’s wealth– 1900: 2/3 of Americans are “wage slaves”

• Workers’ lives increasingly precarious

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Women telephone workers, Roanoke, VirginiaAs this telephone office in Roanoke, Virginia, reveals, women office employees usually worked under the direct supervision of male managers. (Library of Congress)

Women telephone workers, Roanoke, Virginia


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Child worker, glass factory

Child labor was common in the factories of 19th century America. (Library of Congress)

Child worker, glass factory


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Children in textile millsMuch of the new southern textile industry was based on child labor. These children were photographed by Lewis Hines in 1908. (National Archives/ Lewis Hines)

Children in textile mills


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Rise of Big Labor

• Increasing economic change social & economic disruption in workers’ lives

• Labor strengthened by Civil War, then declines. Why?

• Big Business doesn’t fight fair– Pools wealth to hire lawyers & scabs– “lockouts,” “yellow dog contracts,”

blacklists”– “company towns”

• National Labor Union – 1866

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Knights of Labor

Collective effort needed to counter trusts

• Founded as a secret society in 1869. Why?• Led by Terence Powderly, Irish, utopian• Inclusive and Diverse:

– men and women– white and black– skilled and unskilled

• Broad (utopian? Socialist?) goals• HURT by Haymarket Square riot, 1886,Chicago• Associated with anarchists, falls into decline

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Knights of LaborBlack delegate Frank J. Farrell introduces Terence V. Powderly, head of the Knights of Labor, at the organization's 1886 convention. The Knights were unusual in accepting both black and female workers. (Library of Congress)

Knights of Labor


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Management and LaborThis cartoon, from Puck, April 7, 1886, shows Terence Powderly, in the center, advocating the position of the Knights of Labor on arbitration. The Knights urged that labor and management (identified here as "capital") should settle their differences this way, rather than by striking. Note how the cartoonist has depicted labor and management as of equal size, and given both of them a large weapon; management's club is labeled "monopoly" and labor's hammer is called "strikes." In fact, labor and management were rarely equally matched when it came to labor disputes in the late nineteenth century. (Puck, April 7, 1886)

Management and Labor


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American Federation of Labor• Skilled workers split from Knights of Labor 1886• AF of L was elitist in membership, narrow in goals• Led by Samuel Gompers, Jewish cigar maker• Foe of socialism and “utopian” policies• Avoided politics and focused on union goals:

– Better wages– Eight-hour day– Better working conditions

• AF of L successful in many of its strikes and in meeting many of its goals

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STRIKES TURN VIOLENT: p. 430-431

Great Strike of 1877

Haymarket Affair HomesteadStrike

Pullman Strike

Year:Cause/Dispute:

Industry:

Outcome/Effect:

Year:Cause/Dispute:

Industry:

Outcome/Effect:

Year:Cause/Dispute:

Industry:

Outcome/Effect:

Year:Cause/Dispute:

Industry:

Outcome/Effect:

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Railroad strike of 1877This engraving depicts striking railroad workers in Martinsburg, West Virginia, as they stop a freight train on July 17, 1877, in the opening days of the great railway strike of that year. Engravings such as this, which show the strikers to be heavily armed, may or may not have been accurate depictions of events. But the photography of that day could rarely capture live action, and the technology of the day could not reproduce photographs in newspapers, so the public's understanding of events such as the 1877 strike was formed through artists' depictions. (Library of Congress)

Railroad strike of 1877


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The Baltimore Railroad Strike & Riot of 1877

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Key Players in the Labor Movement

Mother Jones and Pres. Calvin Coolidge-helped reform Child Labor

Eugene V. Debs- Socialist, leader of Pullman Strike, later leads IWW (Intl. Workers of the World) http

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Big Business v. Big Labor

Who was the winner?

Why? ( look on page 433)

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QUESTIONS TO CONSIDER

• Compare and Contrast Carnegie, Rockefeller, Morgan

• Compare and Contrast the Labor Movement and the Populist Movement.

• What were the Populists’ goals and why did they fail?

• What were the causes and effects of industrialization?

Documents

1 14.3 Big Business Emerges 1865-1900 What were the factors that spurred Americas industrial growth?