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

Women and Work in Industrial

America

• Management hired more women because they could be paid less

• Married women and children spent hours finishing garments and rolling cigars

• Young single women took factory jobs because they were preferred to domestic work

• Immigrant parents regularly sent their daughters to work in the mills to supplement the family’s income

• 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