The Rise of Industrial The Rise of Industrial America, 1865-1900America, 1865-1900

““The Gilded Age”The Gilded Age”

President Grover Cleveland, 1888President Grover Cleveland, 1888

As we view the achievements As we view the achievements of aggregated capital, we of aggregated capital, we discover the existence of discover the existence of trusts, combination and trusts, combination and monopolies, while the citizen is monopolies, while the citizen is struggling far in the rear or is struggling far in the rear or is trampled to death beneath an trampled to death beneath an iron heel. Corporations, which iron heel. Corporations, which should be the carefully should be the carefully restrained creatures of the law restrained creatures of the law and servants of the people, are and servants of the people, are fast becoming the people’s fast becoming the people’s masters.masters.

1900: U.S. led the world in industry1900: U.S. led the world in industry

Natural resources: coal, iron ore, copper, lead, timber, and oilNatural resources: coal, iron ore, copper, lead, timber, and oilLabor supply: hundreds of thousands of immigrants between 1860 Labor supply: hundreds of thousands of immigrants between 1860 and 1900and 1900Growing populationGrowing populationAdvanced transportation networkAdvanced transportation networkCapital was plentiful: even Europeans invested in the U.S.Capital was plentiful: even Europeans invested in the U.S.Development of laborsaving technologiesDevelopment of laborsaving technologiesOver 440,000 new patents between 1860 and 1900Over 440,000 new patents between 1860 and 1900Laws protected private propertyLaws protected private propertySubsidized RRs with land grants and loansSubsidized RRs with land grants and loansProtective tariffsProtective tariffsLittle regulation on businessLittle regulation on businessFew taxes on corporate profitsFew taxes on corporate profitsEntrepreneurshipEntrepreneurship

The RailroadsThe Railroads

RR mileage increased more RR mileage increased more than 5x from 1865 to 1900than 5x from 1865 to 1900Nationwide RR network Nationwide RR network created a market for goodscreated a market for goodsEncouraged mass production, Encouraged mass production, mass consumption, and mass consumption, and economic specializationeconomic specializationPromoted growth of coal and Promoted growth of coal and steel industriessteel industriesDivided into 4 time zones in Divided into 4 time zones in 18831883Modern stockholder Modern stockholder corporationcorporationDevelopment of structures in Development of structures in finance, business finance, business management, and regulation management, and regulation of competitionof competition

Eastern Trunk LinesEastern Trunk Lines

Major route between Major route between large citieslarge cities

Cornelius Vanderbilt used Cornelius Vanderbilt used steamboat profits to steamboat profits to merge local RRs into the merge local RRs into the New York Central New York Central Railroad in 1867 (NY to Railroad in 1867 (NY to Chicago)Chicago)

Baltimore and Ohio RRBaltimore and Ohio RR

Pennsylvania RRPennsylvania RR

Western RailroadsWestern Railroads

Coincided with settlement of the last Coincided with settlement of the last frontierfrontier

Promoted settlement on the Great PlainsPromoted settlement on the Great Plains

Linked the West with the EastLinked the West with the East

Federal Land GrantsFederal Land Grants

80 RR companies received more than 170 80 RR companies received more than 170 million acres of public landmillion acres of public land

Gov’t expected them to sell land around RR Gov’t expected them to sell land around RR routes in order to finance constructionroutes in order to finance construction

Negative ConsequencesNegative Consequences Quick and poor constructionQuick and poor construction Corruption in governmentCorruption in government Credit Mobilier ScandalCredit Mobilier Scandal RRs controlled half of the land in some western statesRRs controlled half of the land in some western states

Transcontinental RailroadsTranscontinental RailroadsCongress authorized The Union Congress authorized The Union Pacific and the Central Pacific to Pacific and the Central Pacific to build during the Civil Warbuild during the Civil WarUnion PacificUnion Pacific

Across Great Plains, starting in Across Great Plains, starting in Omaha, NEOmaha, NE

War veterans and Irish immigrantsWar veterans and Irish immigrants

Central PacificCentral Pacific Through Sierras from SacramentoThrough Sierras from Sacramento 6,000 Chinese immigrants6,000 Chinese immigrants

Came together May 10, 1869 at Came together May 10, 1869 at Promontory Point, UT (Golden Promontory Point, UT (Golden Spike)Spike)By 1900, 4 more transcontinental By 1900, 4 more transcontinental RRs existedRRs existedJames Hill’s Great Northern was James Hill’s Great Northern was the only one built without subsidiesthe only one built without subsidies

Competition and ConsolidationCompetition and Consolidation

RRs were overbuilt and some RRs were overbuilt and some were unprofitablewere unprofitableMismanagement and fraudMismanagement and fraudSpeculators (Jay Gould) made Speculators (Jay Gould) made quick profits by selling off quick profits by selling off assets and watering stock: assets and watering stock: inflating value of assets and inflating value of assets and profits before selling to publicprofits before selling to publicOffered rebates and kickbacks Offered rebates and kickbacks to favored shippersto favored shippersFarmers often had to pay Farmers often had to pay higher priceshigher pricesPools: competing companies Pools: competing companies agreed secretly to fix prices agreed secretly to fix prices and share businessand share business

Panic of 1893Panic of 1893Forced ¼ of RRs into Forced ¼ of RRs into bankruptcybankruptcyJ. Pierpont Morgan and other J. Pierpont Morgan and other bankers took control and bankers took control and consolidated RRsconsolidated RRsStabilized rates and reduced Stabilized rates and reduced debtsdebtsBy 1900, 7 giant systems By 1900, 7 giant systems controlled 2/3 of the RRscontrolled 2/3 of the RRsInterlocking directorates: same Interlocking directorates: same directors ran competing directors ran competing companies creating regional companies creating regional RR monopoliesRR monopoliesWilliam Vanderbilt: “The public William Vanderbilt: “The public be damned.”be damned.”Granger Laws overturned by Granger Laws overturned by courtscourts

Industrial EmpiresIndustrial Empires

Shift in industrial production in the late 19Shift in industrial production in the late 19thth centurycentury

Early factories had produced textiles, Early factories had produced textiles, clothing, and leather productsclothing, and leather products

““Second Industrial Revolution” after the Second Industrial Revolution” after the Civil WarCivil War

Heavy industry: steel, petroleum, electric Heavy industry: steel, petroleum, electric power, and industrial machinerypower, and industrial machinery

The Steel IndustryThe Steel Industry

Henry Bessemer in Henry Bessemer in England and William England and William Kelly of the U.S. Kelly of the U.S. discovered an new discovered an new process of making process of making large quantities of large quantities of steel: “The Bessemer steel: “The Bessemer Process”Process”

Great Lakes Region Great Lakes Region became leading steel became leading steel producerproducer

Andrew CarnegieAndrew Carnegie

Poor Scottish immigrant who Poor Scottish immigrant who became the superintendent became the superintendent of a PA RR.of a PA RR.

1870s: started manufacturing 1870s: started manufacturing steel in Pittsburghsteel in Pittsburgh

Vertical integration: company Vertical integration: company controls every stage of the controls every stage of the industrial processindustrial process

Mining raw materials to Mining raw materials to transporting the finished transporting the finished productproduct

Carnegie Steel was at top by Carnegie Steel was at top by 19001900

U.S. Steel CorporationU.S. Steel Corporation

Carnegie wished to retire Carnegie wished to retire and devote himself to and devote himself to philanthropyphilanthropySold company to J.P. Sold company to J.P. Morgan for over $400 Morgan for over $400 millionmillionFirst billion-dollar First billion-dollar companycompanyLargest enterprise in the Largest enterprise in the worldworld

168,000 employees168,000 employees Controlled over 3/5 of the Controlled over 3/5 of the

nation’s steel businessnation’s steel business

The Oil IndustryThe Oil Industry

11stst U.S. oil well drilled U.S. oil well drilled by Edwin Drake in by Edwin Drake in 1859 in PA1859 in PA

Rockefeller and Standard OilRockefeller and Standard Oil

Applied latest Applied latest technologies and more technologies and more efficient practicesefficient practicesRebates from RR Rebates from RR companies and companies and temporarily cut prices to temporarily cut prices to eliminate competition eliminate competition (“one-two punch”)(“one-two punch”)Controlled 90% of the oil Controlled 90% of the oil refinery business by 1881refinery business by 1881Formed a “trust”: Formed a “trust”: horizontal integrationhorizontal integrationOther industries copied Other industries copied and organized trustsand organized trusts

Antitrust MovementAntitrust Movement

Sherman Antitrust Act (1890): prohibited Sherman Antitrust Act (1890): prohibited any “contract, combination, in the form of any “contract, combination, in the form of trust or otherwise, or conspiracy in restrain trust or otherwise, or conspiracy in restrain of trade or commerce.”of trade or commerce.”Too vague to be enforcedToo vague to be enforcedUnited States v. E.C. Knight Co. (1895)United States v. E.C. Knight Co. (1895) ruled that the law could only be applied to ruled that the law could only be applied to commerce, not manufacturingcommerce, not manufacturingFew convictions until the Progressive EraFew convictions until the Progressive Era

Laissez-Faire CapitalismLaissez-Faire Capitalism

The government should stay out of the economyThe government should stay out of the economy

The government should not regulate businessesThe government should not regulate businesses

Conservative Economic TheoriesConservative Economic Theories

The Wealth of NationsThe Wealth of Nations (1776): economist Adam (1776): economist Adam Smith argued that Smith argued that business should not be business should not be regulated, but supply and regulated, but supply and demand should be the demand should be the determining economic determining economic forcesforcesAmerican industrialists American industrialists used laissez-faire used laissez-faire economics to justify their economics to justify their business practicesbusiness practices

Social DarwinismSocial Darwinism

Theory of natural selectionTheory of natural selectionEnglish social philosopher Herbert English social philosopher Herbert Spencer believed that the theory should Spencer believed that the theory should be applied to the marketplacebe applied to the marketplaceThe concentration of wealth should be The concentration of wealth should be held by the “fit.”held by the “fit.”Professor William Graham Sumner of Yale Professor William Graham Sumner of Yale argued that help for the poor would argued that help for the poor would interfere with the laws of natureinterfere with the laws of nature

Gospel of WealthGospel of Wealth

Used religion to justify wealthUsed religion to justify wealth

J.D. Rockefeller applied the Protestant J.D. Rockefeller applied the Protestant work ethic: hard work and success are work ethic: hard work and success are signs of God’s favorsigns of God’s favor

Carnegie’s article “wealth” argued that the Carnegie’s article “wealth” argued that the wealthy had a God-given responsibility to wealthy had a God-given responsibility to carry out acts of civic philanthropycarry out acts of civic philanthropy

Technology and InnovationsTechnology and Innovations

InventionsInventions Telegraph by Samuel MorseTelegraph by Samuel Morse Improved transatlantic cable (1866)Improved transatlantic cable (1866) Telephone by Alexander Graham Bell (1876)Telephone by Alexander Graham Bell (1876) Typewriter (1867)Typewriter (1867) Cash register (1879)Cash register (1879) Calculating machine (1887)Calculating machine (1887) Adding machine (1888)Adding machine (1888) Kodak camera by George EastmanKodak camera by George Eastman Fountain penFountain pen Gillette’s safety razorGillette’s safety razor

Edison and WestinghouseEdison and Westinghouse

Thomas EdisonThomas Edison ““Invention Factory”Invention Factory”

More than 1000 patentsMore than 1000 patentsPhonographPhonographIncandescent lampIncandescent lampMimeographMimeographMotion picture machineMotion picture machine

George WestinghouseGeorge Westinghouse More than 400 patentsMore than 400 patents Air brake for the railroadsAir brake for the railroads Transformer for electrical currentTransformer for electrical current

Made possible lighting for cities and operation of streetcars, Made possible lighting for cities and operation of streetcars, subways, and appliancessubways, and appliances

Marketing Consumer GoodsMarketing Consumer Goods

R.H. Macy in NYCR.H. Macy in NYC

Marshall Field in ChicagoMarshall Field in Chicago

Frank Woolworth’s Five and Ten Cent StoresFrank Woolworth’s Five and Ten Cent Stores

Sears Roebuck and Montgomery Ward provided Sears Roebuck and Montgomery Ward provided for catalog ordersfor catalog orders

Packaged foods: Kellogg and PostPackaged foods: Kellogg and Post

Refrigerated railroad cars and canning changed Refrigerated railroad cars and canning changed the war Americans atethe war Americans ate

Created a consumer cultureCreated a consumer culture

Impact of IndustrializationImpact of Industrialization

Raised the standard of living for most Raised the standard of living for most peoplepeople

Created sharper economic and class Created sharper economic and class divisions among the rich, middle class, divisions among the rich, middle class, and the poorand the poor

Concentration of WealthConcentration of Wealth

By the 1890s, the richest 10% controlled By the 1890s, the richest 10% controlled 9/10 of the nation’s wealth.9/10 of the nation’s wealth.

New class of wealthNew class of wealth Newport, RI “cottages”Newport, RI “cottages”

Horatio Alger mythHoratio Alger myth

Author’s novels sold more than a million copiesAuthor’s novels sold more than a million copies

Portrayed a young man who became rich and Portrayed a young man who became rich and successful through honesty, hard work, and a successful through honesty, hard work, and a little lucklittle luck

In reality, few experienced this rags-to-riches In reality, few experienced this rags-to-riches storystory

Typical wealthy business person was a white, Typical wealthy business person was a white, Anglo-Saxon, Protestant male who came from Anglo-Saxon, Protestant male who came from an upper or middle-class backgroundan upper or middle-class background

Expanding Middle ClassExpanding Middle Class

Growth of corporations provided a need Growth of corporations provided a need for white-collar workersfor white-collar workers

Middle management was neededMiddle management was needed

Expanded middle class through creating Expanded middle class through creating jobs for accountants, clerical workers, and jobs for accountants, clerical workers, and salespersonssalespersons

Wage EarnersWage Earners

By 1900, 2/3 worked for wages that required By 1900, 2/3 worked for wages that required them to work ten hours a day, six days a weekthem to work ten hours a day, six days a weekDetermined by supply and demandDetermined by supply and demandFactory wages were barely above subsistenceFactory wages were barely above subsistenceReal wages rose steadily, but most families still Real wages rose steadily, but most families still could not support a family on one incomecould not support a family on one incomeWomen and children were working to make up Women and children were working to make up the differencethe difference1890: 11 million of the 12.45 million families 1890: 11 million of the 12.45 million families averaged less than $380 a yearaveraged less than $380 a year

Working WomenWorking Women

1 out of every 5 women were working in 1 out of every 5 women were working in 19001900

Most were young and singleMost were young and single

Women usually worked in textile, garment, Women usually worked in textile, garment, and food-processing industriesand food-processing industries

Secretaries, bookkeepers, typists, and Secretaries, bookkeepers, typists, and telephone operatorstelephone operators

Labor DiscontentLabor Discontent

Assigned one step in the production; Assigned one step in the production; monotonousmonotonous

Exposed to chemicals and pollutantsExposed to chemicals and pollutants

Changed jobs on average every 3 yearsChanged jobs on average every 3 years

Many joined unionsMany joined unions

Struggle of Organized LaborStruggle of Organized Labor

Industrial WarfareIndustrial Warfare Businesses held most of power because of the Businesses held most of power because of the

surplus of cheap laborsurplus of cheap labor LockoutLockout BlacklistsBlacklists Yellow-dog contractsYellow-dog contracts Private guards and state militiaPrivate guards and state militia Court injunctionsCourt injunctions Great railroad strike of 1877Great railroad strike of 1877

Hayes used federal troops to end labor violenceHayes used federal troops to end labor violence

Attempts to Organize National Attempts to Organize National UnionsUnions

National Labor UnionNational Labor Union Attempt to organize all workers skilled and unskilledAttempt to organize all workers skilled and unskilled

Knights of LaborKnights of Labor Began secretly by Terrence PowderlyBegan secretly by Terrence Powderly Opened membership to all, including women and African-Opened membership to all, including women and African-

AmericansAmericans Worker cooperativesWorker cooperatives Abolition of child laborAbolition of child labor Abolition of trusts and monopoliesAbolition of trusts and monopolies Wanted to arbitrate rather than strikeWanted to arbitrate rather than strike

Haymarket bombingHaymarket bombingAmerican Federation of LaborAmerican Federation of Labor

Samuel GompersSamuel Gompers Higher wages and improved working conditionsHigher wages and improved working conditions

StrikebreakingStrikebreaking

Homestead StrikeHomestead Strike Failure set back the union movement in the Failure set back the union movement in the

steel industry until the New Dealsteel industry until the New Deal

Pullman StrikePullman Strike Federal court issued an injunction forbidding Federal court issued an injunction forbidding

interference and ordering workers to abandon interference and ordering workers to abandon the strikethe strike

Eugene Debs (American Railway Union) and Eugene Debs (American Railway Union) and other union leaders were arrested and jailed.other union leaders were arrested and jailed.