CH 24: INDUSTRY COMES OF AGE

IRON COLT TO IRON HORSE • After Civil War, railroad production grew tremendously

• 35,000 miles of track laid in 1865 to 192,556 miles laid in 1900

• Congress gives a total of 155,504,994 acres of land to railroad companies

• Companies were allowed alternate square mile sections in a checkerboard fashion. All land was withheld from other users.

• Railroads gave land their values

• Towns where railroads ran became larger cities while those it skipped turned into ghost towns

SPANNING CONTINENT WITH RAILS • Congress wanted to build a transcontinental railroad but the Civil War got in

the way.

• During war, Congress commissioned the Union Pacific to begin from Omaha Nebraska to California.

• They got huge sums of money and land (of course also caught up in Credit Mobilier scandal)

• Irishmen immigrated and worked to construct, sometimes 10 miles a day

• When Indians attacked, they would drop picks and pick up rifles. Many on both sides died during construction.

• In California, the Central Pacific was to extend the railroad westward

• They used Chinese workers and got same incentives as the Union Pacific, but also had to blast through the Sierra Nevada mountains

• In 1869, the transcontinental line was completed near Ogden, Utah

• 1086 track by Union Pacific, 689 by Central Pacific

BINDING THE COUNTRY WITH RAILROAD TIES

• By 1900 four other transcontinental lines were built

• Northern Pacific from Lake Superior to the Puget Sound (1883)

• Atchison, Topeka to Santa Fe (1884)

• Southern Pacific goes from New Orleans to San Fransisco (1884)

• Great Northern from Minnesota to Seattle (1885)

• Many had over invested in land however, and the banks that had supported them often failed and went bankrupt as much of the land was worthless

• Older eastern railroads, some owned by Vanderbilt like the New York Central, often financed the western railroads

• Advancements in rail made building and riding much easier

• They began to use steel rails which was stronger and lasted longer

• Westinghouse airbrake increased safety

• Pullman palace cars were luxurious liners for the rich

• Telegraphs for communication

• Block signals and double racking (like a two lane road instead of one)

• Railroads stitched the nation together, creating many jobs and markets for goods

• Stimulated mining and agriculture in the west

• The Great Plains were settled

• Nov 18, 1883 the four national time zones were created (previously each city had own time)

• Railroads also created wealth and millionaires

WRONGDOING IN RAILROADING • Railroads did good, but also heavily corrupt

• Credit Mobilier

• Jay Gould made millions in shady railroad stock deals

• Some participated in ‘stock watering’ where railroad companies over inflated the worth of their stock and sold them at huge profits

• Railroad owners abused consumers, bribed judges and legislatures, employed rough lobbyists in Congress, ran political machines to elect officials, and gave newspapers free passes to get them on their side

• They also began to use trusts, or pools, to ally themselves with other railroad companies

GOVERNMENT BRIDLES THE IRON HORSE • People were aware of the railroad injustices, but slow to combat it

• The ‘Grange’ was formed by farmers to battle the corruption

• Worked as a farmer cooperative where farmers could pool their resources, buy wholesale, and also ship as a pool too (lower rates)

• Many states attempted to pass laws against railroad monopolies

• Supreme Court struck these down when they said in the Wabash case that states cannot regulate ‘interstate commerce’.

• 1887, Interstate Commerce Act was passed that banned rebates and pools and required the railroads to publish their rates openly

• Also forbid them from discriminating against shippers and charging more for short haul than a long one

• Also set up the Interstate Commerce Commission to regulate this

DAY 1 WRITE THE QUESTION IN THE SPACE PROVIDED

• A: What challenges were there in creating the transcontinental railroad?

• B: Describe three technological advances that helped the railroad become safer.

• C: Explain various ways in which railroad companies were corrupt in their dealings with consumers and the government.

• D: Describe how the Interstate Commerce Act attempted to prevent further railroad corruption.

MIRACLES OF MECHANIZATION • In 1860, USA was the 4th largest manufacturer in world

• By 1894 it was #1

• Reasons:

• 1-Abundant liquid capital (money to invest and start up with)

• 2-Fully exploited natural resources (coal, iron, oil)

• 3-Immigration=cheap labor

• 4-American ingenuity and inventions (cash register, stock ticker, typewriter, refrigerator car, electric railway

• 5-Manipulation of mass production (Whitney, Ford)

• 1876, Alexander Graham Bell invents telephone

• Thomas Edison (Wizard of Menlo Park) invented lightbulb and loads of others

THE TRUST TITAN EMERGES • Industry giants used various means to eliminate competition and maximize

profits

• Andrew Carnegie used “VERTICAL INTEGRATION”, where he controlled all aspects of an industry

• EX: mined the iron, transported it, refined it, turned it into steel, then sold it

• John D Rockefeller used “HORIZONTAL INTEGRATION”, where he controlled competitors to monopolize his market

• EX: He formed Standard Oil in this way, undercutting competition and forcing them into bankruptcy and then purchasing their company and resources

• These men were also known for their “TRUSTS” (giant, monopolistic corporations)

• Rockefeller and others placed their own men on the boards of directors of rival corporations, “INTERLOCKING DIRECTORATES”, and could control other companies through this manner as well

THE SUPREMACY OF STEEL • During Civil War, steel was scarce and expensive (also brittle

and would warp)

• By 1900 USA produces as much steel as Germany and England combined (#2 and #3 in world manufacturing)

• Due to an invention which made steel cheaper and more effective. Cold air blown onto hot iron burned off the carbon in the iron and made it stronger

• Known as the “Bessemer Process”

• USA is one of few nations that has a lot of coal for fuel, iron for smelting, and the transportation to get it done

CARNEGIE AND OTHER SULTANS OF STEEL

• Carnegie started off as poor and in a bad job

• Started off in the Pittsburgh area, created a giant steel corporation, and by 1900 was producing ¼ of the nation’s Bessemer steel

• JP Morgan had made a fortune in the banking industry and Wall Street.

• Morgan bought Carnegie’s entire steel business for $400 million

• Carnegie spent $350 million of it on charity, schools, and libraries

• Many programs are still around today

• “GOSPEL of WEALTH”

• Morgan launched United States Steel Corp in 1901(first billion dollar corporation in the world)

DAY 2 WRITE THE QUESTION IN THE SPACE PROVIDED

• A: Describe the reasons that the USA became the world’s leading manufacturer.

• B: Explain how vertical and horizontal integration led to men like Carnegie and Rockefeller amassing large control over industries.

• C: How did the Bessemer Process change the steel industry and also industrialization as a whole?

• D: What is the “Gospel of Wealth”?

ROCKEFELLER GROWS AN AMERICAN BEAUTY ROSE

• By 1870, kerosene made from oil was used in lamps all across the nation

• By 1885, Edison’s electric light bulbs were in use, and soon made kerosene almost obsolete

• Oil however had profits from gasoline and the internal combustion engine

• John D Rockefeller was ruthless and merciless as a businessman

• Organized Standard Oil Co of Ohio in 1882 (in five years he controlled 95% of all oil refineries in USA)

• He crushed weaker competitors, worked under trusts, horizontal integration, and also interlocking directorates to weaken and bankrupt rivals

• All in all however, Standard Oil did produce a better and safer product

• The American Beauty Rose can be produced in the splendor and fragrance which bring cheer to its beholder only by sacrificing the early buds which grow up around it. This is not an evil tendency in business. It is merely the working-out of a law of nature and a law of God.

THE GOSPEL OF WEALTH • Many of the newly rich had started in poverty to become wealthy

• The belief that some people in the world were destined to become wealthy and to help society with their money

• Carnegie and Rockefeller both gave considerable sums of money to charities and organizations to help the needy and other efforts

• Reverend Russell Conwell even preached (and made lots of money doing so) a sermon titled “Acres of Diamonds”

• Said that poor people made themselves poor and rich people made themselves rich. Everything was because of one’s actions.

GOVERNMENT VS THE EVIL TRUST

• In 1890, Sherman Anti-Trust Act was made law

• It forbid combinations of businesses that would restrain trade

• It did not distinguish between bad or good trusts

• Largely ineffective until 1914 under Woodrow Wilson when it was actually enforced and the people actually punished

THE SOUTH IN THE AGE OF INDUSTRY • The South had remained agrarian although the nation was moving along

industrially.

• Some early backers of the South

• James Buchanan Duke who started the American Tobacco Company and donated huge sums to what is today Duke University.

• Henry Grady of the Atlanta Constitution newspaper urged the South to industrialize

• Many northern companies set rates however to keep the South from doing so

• The South actually had large deposits of iron and coal, but could not capitalize on them

• Cheap labor was rampant in the South

IMPACT OF NEW INDUSTRIAL REVOLUTION • As the revolution spreads, standards of living rose.

• Immigrants streamed into the US

• Jeffersonian ideal of agriculture was diminishing, a nation of farmers was becoming a nation of wage-earners

• Women started to work in the factories as well

• With huge flow of immigrants came a large labor force that would agree to work for low wages and poor conditions

• With so many seeking jobs, those that went against owners for better conditions often found themselves without a job

• Corporations had many weapons against strikers

• Often they would hire strike-breakers

• Sometimes they would try to get a court order to force them to stop

• Often if they did not they had the means to bring in troops (or their own private ones)

• Other methods included lockouts to starve the workers

• They would also force them to sign ‘ironclad oaths’ or ‘yellow dog contracts’ which said they would not join a union

• The workers did not have an ally in the middle class who just grew tired of the ceaseless strikes

• View was that if people really wanted to get to the top, they had to work to improve their situation

LABOR • The industrial machine that arose during Civil War put a premium on labor

• National Labor Union formed in 1866, attracted 600,000 workers, but only lasted 6 years

• Excluded blacks, Chinese, and women

• Worked to arbitrate labor disputes and also an 8 hour work day

• 1869, Knights of Labor was formed

• Barred liquor dealers, gamblers, lawyers, bankers, and stockbrokers.

• Wanted economic and social reforms

• Led by Terence V Powderly, won a number of strikes for the 8 hour day

• Won a strike in 1885 vs Gould’s Wabash Railroad and membership went to 750,000

UNHORSING KNIGHTS OF LABOR • Knights of Labor soon came to be involved in many May Day strikes, half of them

failed

• In Chicago, home to 80,000 Knights and many anarchists that advocated overthrow of the government, tensions were building

• May 4, 1886, Chicago police were advancing on a meeting that was called to protest brutality by authorities

• A bomb was thrown killing and injuring several dozen

• 8 anarchists were rounded up and five of them sentenced to death on conspiracy, other three heavy prison time

• They were later pardoned by the Governor of Illinois

• This was the Haymarket Square Bomb

• The Knights from then on were associated with anarchists and lowered their popularity and membership

THE AF OF L

• 1886, Samuel Gompers founded the American Federation of Labor

• Consisted of association of self-governing unions, which worked independently with the AF of L as a unifier

• Gompers demanded better wages, hours, and working conditions

• It was only composed of skilled workers

• From 1881-1900 there were over 23,000 strikes with 6.6 million workers, with a total loss on both sides of $450 million

• By 1900, workers were starting to get the public on their side and get some of what they wanted

• Owners started to see that they lost money to fight the unions and strikes

• 1894, Labor Day made a national holiday

DAY 3 WRITE THE QUESTION IN THE SPACE PROVIDED

• A: Describe how Rockefeller became extremely rich in his oil business.

• B and C: Why do you think that the super wealthy adhered to the Gospel of Wealth? Was it a moral dilemma?

• D: What is a trust and why would the government want to shut down trusts with legislation such as the Sherman Antitrust Act?