Chapter 18

Industrial America

The U.S. had been steadily building a manufacturing economy since early in the 19th

century in the Northeast manufacturing was well established before the Civil War

But the accomplishments of the 1870s, 1880s and 1890s overshadow this earlier

progress

Factors contributing to the dramatic industrial growth

1. abundance of basic raw materials and energy sources –

coal

petroleum

water power

timber

iron, etc.

2. large and growing supply of labor

this labor a result of two migrations:

the movement of American farmers into the cities

the movement of European peasants to US cities

3. “Yankee ingenuity”

remarkable technological inventiveness

4. A talented, energetic, and ambitious group of Entrepreneurs

Were they “captains of industry” or “robber barons” (as this is your paper

topic for the next 2 weeks we’ll discuss this further at a later time)

they developed new financial and administrative structures to run large-

scale production and distribution systems

5. The Federal government

did not interfere with the prerogatives of capitalists

made public resources available for private exploitation on generous terms

Erected protective tariff barriers against foreign competition

Established new banking and currency systems

Provided subsidies of land and money

Industrial Technology

By 1860 there had been 36,000 patents granted

o From 1860 and 1890 there were 440,000 granted

Communications and Business aids

1866 – Cyrus Field – transatlantic telegraph cable

1870s – Alexander G. Bell – first telephone

o by the 1900, AT&T had installed 800,000 in American cities

1868 – Christopher Sholes – the first typewriter

1879 – James Ritty – the first cash register

1891 – William Burroughs – the first calculating/adding machine

Electricity – had the most revolutionary effect on industry and lives of urban Americans

Charles F. Brush – devised the arc lamp for street lighting

Thomas Edison – the incandescent lamp (light bulb) for street and home lighting

o He and others also designed improved generators and built large power plants to

furnish electricity

o By 1900 there were 2,774 power stations and some 2 million electric lights in the

US

o But remember that there were places in the US that did not get electricity until the

1950s or still don’t have it today

Steel – 1850s – Englishman Henry Bessemer and American William Kelly came up with

the Bessemer process

Blowing air through molten Iron to burn out the impurities

1868 – the open-hearth process introduced in the US by Abram Hewitt

Petroleum industry – late 19th century

Why: steel industry’s need for lubrication for its machines

1855 – Pennsylvania businessman George H. Bissell sent a sample of oil to Professor

Benjamin Silliman of Yale for analysis

Results: could be used for lighting purposes and also yield such products as: paraffin,

naphtha(a solvent), and lubricating oil

So Bissel raised the money for drilling—

In 1859 Edwin Drake drilled the first well near Titusville, PA

It yielded 500 barrels a month

By 1870 nearly 40 million barrels of petroleum had been produced and annual

production was approaching 20 million barrels coming from PA, Ohio, and W. VA

Food –

a. Refrigerated freight cars – expanded the meat packing industry

b. New ways to mill flour – came large milling companies (General Mills)

c. Canning foods and condensing milk helped establish the prepared-food industry with

Borden leading the way

Transportation – Late 19th century new ideas come forth

1. Development of the airplane

1st flight in 1903 by the Wright brothers at Kitty Hawk, NC

2. Cars – first designers in France, Germany and Austria

Only moderate success with an “internal combustion engine” (used expanding

power of gasoline to drive the pistons)

First in US – built by Charles and Frank Duryea in 1903 – powered by gasoline

1906 – Henry Ford

Earlier cars using fuel other than gasoline had appeared earlier but weren’t as

successful as Duryea’s and Ford’s cars

Nevertheless by 1900 companies were building about 4000 cars a year

By 1910 the automobile industry was a major US industry

o In 1895 there had been only 4 cars in America

o By 1917 there were nearly 5 million

Production

In order for industries to advance many thought they needed to turn to “Scientific

Management”

o Leader in this movement was Frederick Winslow Taylor so Scientific

Management is often called “Taylorism”

Idea – reorganize production by subdividing tasks

o Train workers how to operate machinery efficiently and effectively

In 1914 Henry Ford embraced these ideas and incorporated them into his Assembly

Line

o It made it possible to assemble a chassis in 1 ½ hours versus the 12 ½ hour it took

before the assembly line

Didn’t really catch on until the 1920s but many companies began to make small

change in production

Railroads – the catalyst for industrial development in the late 19th century

Big name in railroads is C. Vanderbilt

From 30,000 miles of track in 1860 it grew to 193,000 miles in 1900

Gave us:

1. Principal method of transportation

2. made possible the expansion of the national commerce – quick and inexpensive

access to markets and raw materials

3. gave us the corporation (bit later in the lecture)

4. Simulated economic growth through their construction and new equipment needs

5. helped improve technology – steel rails (popularized by Cornelius Vanderbilt)

when he replaced the old iron tracks of the New York Central

Heavier locomotives and cars

Uniform track gauges – 4”8 ½” – 1886

New braking system – 1870s (George Westinghouse)

6. New businessmen (the maker of millionaires) and many of them unscrupulous

“The railroads are not run for the benefit of the dear public. That cry is all nonsense.

They are built for men who invest their money and expect to get a fair percentage on the

same.” – William H. Vanderbilt, 1882

They also often manipulated stock (boomed it and busted it)

o Waged stock and traffic wars at the expense of their stockholders

Didn’t care about anything but themselves

EX: Cornelius Vanderbilt: when told the law stood in this way said, “Law! What do I

care about the law? Hain’s I got the power?”]

His son, William, when in 1883 was asked about the discontinuation of a mail

train said, “the public be damned!”

Corporations –

Had existed in colonial times but were given charters by the gov’t to run public

facilities

o Such as: bridges, roads and banks

After Civil War there was the realization that one person or even a small group could

not finance the railroads and other large businesses

Four things helped bring this realization:

1. rapid spread of technological innovations and the factory system

until 1870 a factory having 100 workers was a large business

But by 1905 the Singer Sewing Machines Co. had a working capital of $20

million had 8 factories and employed 90,000 people

2. A constant pressure on companies to compete by cutting costs and prices

This gave way to an impulse to eliminate competition and create monopolies

3. A relentless drop in prices

In the end though all benefited from this as consumers “gobbled up” goods

4. the failure of money supply to keep pace with productivity

This drove up interest rates and restricted credit

This was especially burdensome to farmers and small businessmen

So incorporate – raise money by selling stock to the public

o Why did people buy stock:

Limited liability – risked only the amount of their investment

Not liable for company debts

Spread quickly to other industries –

o Steal (Carnegie)

o Meat packing (Swift)

o Oil (Rockefeller)

Not only did companies sell/issue stock but began new business practices

1. separating ownership from management

formed new organizational and management structures

2. diversifying production facilities

3. Creating nation distribution and marketing systems (advertising)

4. set up accounting systems to document cost of every operation of each division

from coal consumption to repair of tracks and cars

this helped to set rates and predict profits

Advantages to US of corporate railroads

1. national market for goods and raw materials

2. Could virtually travel from any large city to another by rail

Disadvantages to US of corporate railroads

1. Debt (by 1900 the debt of all US railroads was $5.1 billion – the national debt was

only about $1 billion)

2. Railroads undercut each other

Jay Gould was the master of this!

Cut rates for large shippers

Made special arrangements for bulk goods

Gave free passes to politicians who supported them

Gave free passes to the press for favorable coverage

Gave rebates and kickbacks to favored clients

3. The practices above severely hurt farmers and small business who were forced to

pay higher rates and cut into their profits

4. “Stock watering” – issued stock for a price far in excess of its actual value just to

raise capital

investors would then lose money or take a long time to make it

Farmers need help!!!

Farmers and small businessmen turned to their state legislatures for help against the

Railroads

1. most passed rate discrimination laws (forbid it)

2. Finally federal government got involved after courts ruled in favor of railroads

a. 1887 – Illinois Senator Shelby M. Cullom proposed and got passed the

Interstate Commerce Act

1. It established the Interstate Commerce Commission

A 5 member board

a. To oversee the practices of railroads passing through more than 1

state

b. Banned the practices of rebates and short-distance rates

The Supreme Court weakened the Act by supporting the Railroads

o Before 1905 there was only 1 case out of many where they did not side with the

railroads

Finally – 1906 – Hepburn Act

o Gave the Interstate Commerce Commission the power to set rates

Andrew Carnegie Bio:

Born in Scotland

At 12 years old:

Immigrated to U.S. at age of 12 (1848) – Pittsburgh

Took a job for $1.20/week (equal to $30.64 today) as a bobbin boy

Worked 60 hours per week

Enrolled in a night course to learn bookkeeping

At 13 years old:

Took a job as Western Union delivery boy

Took over for operators who wanted a break

Soon became the city’s fastest telegraph operator

Because he decoded messages for every major business in Pittsburgh he gained an inside

knowledge of their operations

At 16 years old:

Tom Scott – Superintendent of PA’s railroads Western Division hired Carnegie as his

personal secretary and telegrapher

At 23 years old:

Carnegie becomes Superintendent of PA RR Western Division

As Division Superintendent of PA RR: 1. Cost analysis to maximize profits. Analyze techniques to double mileage and quadruple

traffic

2. Set up first night train dispatchers and ran trains 24 hours a day

3. When wrecks occurred he burned the cars or laid new track around the wreck to get service

going

4. Slashed commuter fares to keep trains full

At 32 years old (1868):

By investing his earnings in telegraph, sleeping car, and bridge construction companies he

was earning $56,000/year. Equal to $1.4 million today.

Early 1890’s:

Decided to build his own steel mill

Panic of 1893 led to depression so costs were low

Used the new Bessemer process which made steel purer and stronger by burning off carbon.

Andrew Carnegie's Steel Industry

Used special scales to measure materials in all parts of mill

Became 1st steel maker to establish actual product cost per ton of steel

o So cut expenses was the basis for deciding on new tools, machines etc.

Production

o 1875 – 1,000,000 tons produced

o 1890 – 5,000,000

o 1902 – 15,000,000

o 1915 – 35,000,000

Philosophy – “Watch the costs & profits will take care of themselves”

Beginning priced his rails at $65/ton ($5 less than competition)

Got price down to $50 /ton & asked railroad friends for favors & gave commissions

to railroad purchasing agents

1. Hired a chemist so only purchased best iron ore

2. Reprocessed scrap that broke off steel as went over rollers – most threw away

3. Got newest machines (one after 3 months)

4. Got into vertical integration – 1880

Explain vertical & horizontal integration

a. 1892 – bought an ore company in Minnesota

1890s annual profits rose to $40 million in1900

Producing rails 1900 for $11.50 a ton

Employed 20,000 people

Carnegie pursues philanthropic activities

Felt great fortunes corrupted

So resolved to donate $ to charity (to make him popular)

Set up foundations – eventually $300 million for libraries, universities & int’l

peace causes

Industrial Consolidation

Competition to consolidation also went into other fields, need capital to compete

Philip Armour & Gustavus Swift

o Made meat packing efficient (what else?)

o Refrigerated shipping

o Most of East’s meat

Oil –

1st well – 1859 Titusville (NW, PA) by Edwin Drake

Easy to get into to –

o Sank wells

o Erected small refineries

o Turned petroleum into oil (lubricant) & Kerosene (fuel for lights)

o Few ultimately survived

Survivor

John D Rockefeller

o Cleveland merchant

o Devout baptist

Passion for cost cutting & efficiency

1870 started Standard Oil Company

o daily went over books, etc.

o so picky – reduced from 40 to 39 the # of drops of solder used to seal kerosene

cans

o but save $1000s of dollars. (@ $1,000 = $24,000 today)

Stressed reliable product (got consumer loyalty)

o Built bulk depots & tank wagons for local kerosene distribution

o Insisted all equipment clean

Advertised to boost sales

o Used a Red 5 gal can

Vertical and horizontal integration

o 1872 – purchased own railroad tanker cars to keep costs down

o then went to pipelines

o when competition refused buyout

o strangled them out on business

o by 1879 controlled 90% of oil-refining business

Tried to eliminate competition (wasted resources)

o By 1882 established Standard Oil Trust

o Trusts legal – centralized control over a # of companies – board of trustees run

To do Rockefeller & associates persuaded stockholders of 40 companies to exchange

stock for trust certificates

Within 3 years had consolidated crude-oil buying & slashed # of refineries in half

Now Rockefeller reaped profits

1. enlarged refinery capacity

2. pipeline capacity - decreased his need to use Vanderbuilt railroads

3. expanded distribution network from North America to Asia, Africa,

and South America

By mid-1890s personal fortune of more than $1.2 billion. ($232 billion today)

He was the world's first billionaire

Rockefellers ideas spread to copper, sugar, whiskey, lead etc. industry

But all their tactics, monopolistic control

o Sky-high earning provoked public outcry (average worker earned less than

$1000/year)

1890 – Sherman Anti-Trust Act Passed

1. Outlawed trusts & any other contracts or combinations in restraint of trade

2. Fines of up to $5000 & 1 year in jail

1890-1904 – gov’t only prosecuted 18 suits & sympathetic to big business

By 1900 – 2/5 of capital was held by a few giant monopolies

Myth of Self-made man (1860- few millionaires by 1892 4000+)

o Rags to riches – however need to get there Vanderbilt

o Horatio Alger books

Society – few haves, lots of have nots

1. Capitalists – definite laissez-faire

Used Adam Smith’s The Wealth of Nations.

Self-interest is an “invisible hand” in the marketplace, automatically

regulating supply of and demand for goods + services

Social Darwinism –

o 1st to use Eng. Philosopher Herbert Spencer

1. struggle normal

weak fail, strong prevail

2. Society benefits because unfit are eliminated, talent survives

3. ideal man would eventually result

In US – Yale professor WM. Graham Sumner agreed

1883 what Social classes owe to each other & essays

Natural laws control social order

o “A drunkard in the gutter is just where he ought to be”

Social theorists, sentimental humanitarians and “labor fakers” (intent on uplifting the

poor & need were actually harming the forgotten man) (fm = hardworking individual

whose taxes were going to be used to do-good work

State only owed, -- law, order & basic political rights

Gospel of Wealth – A. Carnegie’s influential essay of 1889

Published right after Jonestown, PA flood which killed 2,200 townspeople.

Wealthy people had built a lake with a dam up river from Jonestown.

Dam gave away - Carnegie needed to go on damage control

Justified laissez-faire by using Social Darwinism

Said unregulated competition gives positive long-term social benefits

But rich need to help poor thru philanthropic work

Excess funds (personal go into trust funds that are administered for the good of the

community

Person of wealth “a mere trustee and agent for his poorer brethren.”

No direct aid – encourages dependency

Attacks on Social Darwinism and Gospel of wealth

Lester Frank War, Dynamic Sociology, (1883) geologist

“Laws of nature could be circumvented by human will”

State can regulate business, protect society’s weaker members & prevent the headless

exploitation of natural resources

Henry George, -- self-taught S.F. newspaper editor & economic theorist

Proposed to settle uneven distribution of wealth thru a single tax

Progress & Poverty (1879)

o Speculators reaped huge profits from rising prices of land that wasn’t dev. or

improved

o Tax profits

o Would bring benefits of socialism without stifling individual initiative

Labor Leaders – said yes

Wanted to humanize the industrial order

Everyone worked together

Also Marxist socialists got into picture

o Marx said as competition among capitalists increased, wages would decline to

starvation levels & even some capitalists would find selves out of business

New Technology

After 1870 corporations stepped up efforts to introduce lots of new consumer goods

1. Bessemer Process

2. New glassmaking techniques

3. Canning(mass)

4. Match production

5. Refrigerated Railcars

6. Cigarette rolling-machine (Bonsack machine)

o Could roll 120,000 cigs/day – machine replaced 60 workers

Products for the masses

1. sewing machine – mass produced

2. Telephone (1876) (by 1900 800,000 in US)

Thomas Edison

"Genius is one percent inspiration and ninety-nine percent perspiration"

3. Light bulbs – 1879 perfected

o Edison premier inventor – (Had 1093 inventions by the time of his death)

Mimeograph

Microphone

Motion picture camera & film

Storage battery

Phonograph – 1877

4. Electric streetcars (1st Richmond)

5. Flour mills could mass produce – Quaker Oats Pillsbury

6. Ivory Soap – 1879 (Proctor & Gamble)

7. George Eastman – 1880s dev. paper-based photo film – US glass plates

8. Kodak camera – “You press the button, we do the rest”

o Customer sent 100 picture film and camera to his Rochester factory – film

developed, camera reloaded shipped back ($10 charge)

Workers – Problems

1860-1900 number of industrial workers went from 885,000 – 3.2 mil.

Transition to factories vs. workshops profound

Ex – shoe & boot industry

o In 1840s every shoe still made by hand by 1 man

o Usually 1 shop had 4-5 shoemakers

Agreed to work certain hours, etc.

1850’s – ready-made shoes introduced

o 1851 – Cincinnati’s Filey & Chapin Co.

o moved into a large warehouse

o broke down the Man. Into a series of repetitive, easily master tasks

o Worked in teams of 4 – each one only did 1-2 parts

Workers lost freedom to come & go

o Drink on job

o Take off for “special” days

Workers would no longer help each other in sickness etc.

1880s – shoe factories larger & more mechanize & traditional skills vanished

replaced skilled workers w/ machines & lower-paid women & children

By 1890 35% of shoe industry workers were women

Problems

1. Bad pay –

1870s – unskilled labor = $1.30/day

o Bricklayer/blacksmith = $3.00/day

2. Worked 10-12 hour/day, 6 days a week

3. Lots of accidents

Why—

o Dangerous conditions

o Workers’ inexperience with complicated machines

o Rapid pace of production process

o Employers’ unconcern for safety – always more workers available

For adults most dangerous industry = railroads

o 1889 – 2000 workers killed on job & 20,000 injured

Little or no aid for injury/death on job

o Until 1890s courts considered it a normal risk

Co. owners fought adopting state safety & & health standards (too expensive)

For sickness/accidents benefits, workers joined & paid dues to fraternal

organizations & ethnic clubs – most cases too little to really help

Immigrant labor – many people came to US

o 1870-1900

o Hard to adjust to factories – most had done agricultural work in Europe

Women – 1870 13% women worked outside of home – 60% of them in domestic work

Most women hated the awfully long hours, had (low) pay, & social stigma of being a

servant

So when jobs in factories opened up in textile, food processing & garments industry

1870-1900 -- # of women working tripled

1890’s – women with HS education moved into clerical & secretarial work

Clean, safe working conditions & relatively good pay

1st rate typists could earn $6-7/week

Unions

why – low wages

dangerous & degrading conditions

Obstacles to –

1. immigrants were willing to work for low wages & work as strike breakers

2. ethnic & racial divisions in workplace

3. Skilled craftsmen little empathy for common laborers

4. Skilled craftsmen saw little reason to cooperate from 1 area to another. Job &

conditions to different

Knights of Labor – attempt with national labor Union to build a mass movement

Secret society based on free Masons

Welcomed all wage earners

Excluded only – doctors, lawyers, stockbrokers, professional gamblers & liquor

dealers

Demanded—

1. pay for women

2. End for child labor

3. End of convict labor

4. Graduated income tax

5. Cooperative employer – employed ownership of facotires, mines, etc

Why did union membership grow increase in the early 1800's?

Grew slowly at 1st partly because Catholic Church forbade Catholics to join

Early 1880s membership rocketed (1886 – 700,000 members)

1. ban on Catholics joining was lifted

2. leader - Terrance V. Powderly

Eloquent speaker

Successfully led labor clashes

Powderly –

a. opposed strikes (relic of barbarism)

b. gradual end to wages reorganize society or cooperative principles

c. Waged war against temperance

d. Advocated admission of blacks (could have segregated units in South)

e. Admitted women (by 1886 10% of members were women)

f. Restrictions on immigration & total ban on Chinese immigration

1877 – SF workers were demonstrating for 8 – hour day

destroyed 25 Chinese laundries

1882 – Congress 10 year moratorium on Chinese Exclusion Act (will discuss

later)

Decline in late 1880s –

1. Membership doesn’t listen to leadership

2. Failed series of unauthorized strikes

3. Jay Gould & others vendettas

4. Public mistrust of Unions

American Federation of Labor – May 1886 craft unions left Knights of Labor to form

AFL

Samuel Gompers – led AFL 1886-1924

1904 – 1.6 million members

Wanted & stressed bread & butter issues

1. Better wages

2. 8 hour workday

3. employer’s liability

4. Mine—safety laws

Still all in all 5% workers in unions

Strikes – 1881-1905

37,000 strikes (involving & 7mil workers)

In some cases became like mobs – property damage, looting, etc.

May 1 1886 – 340,000 worked off jobs to show support for 8-hours workday in

Cincinnati. Shut down city for 1 month

Haymarket Square

May 3 1886 – Chicago police shot & killed 4 strikers at McCormick harvester plant

May 4 1886 – protest rally (P.M.) at Haymarket Square – bomb thrown – 7 police

wounded or killed

Other famous strikes:

1892 – Homestead strike – cut wages, locked out workers

o Homestead Steel works in Homestead, PA

o Skilled union members were being replaced with unskilled labor as the plant

became more unionized

o Pinkertons and later the state militia was called in and broke up the strike

1894 – Pullman Strike – slashed wages, left rent same

o Pullman, Illinois

o Orders for rail cars plummeted during the Panic of 1893

o Workers wages were slashed but not rent at their company housing

o Strikers led by Eugene Debs

o President Cleveland sent in the military to keep the mail moving on trains

o Debs was arrested for interfering with the mail and found guilty of "defying a

court injunction against the strike".

o Spent 6 months in jail where he read "The Communist Manifesto" by Karl Marx

o

Reaction –

1. Virtual class war in U.S.

2. “yellow dog” contracts promised not to strike or join a union in order to get or keep

jobs

3. Some companies hired Pinkerton agents to serve as private police force

4. Some CO’s turned to US army to suppress

5. After Haymarket –

Arrested 8 men

No evidence linked them – all convicted

4 hanged

1 committed suicide in prison

6. Americans saw labor problems as “deadly foreign conspiracy”