History 202 Chapters 19 and 20

Industrial America

The “Gilded Age

Railroads

Big Business

Workers/Labor

IntroductionAt the hear of the new order reshaping

American society was not just industry but a system of industry—transportation, communication, corporations, finance, labor and conditions.

At the heart was something referred to as “The Gilded Age.” Also a sardonic euphemism called “Robber Barons.”

The Gilded AgeTerm derives from a novel written by

Mark Twain and Charles Dudley Warner.

It is a critical examination of big business and political corruption during the late 19th century—

Questions:1) How did the federal government

transform the American economy during this “Gilded Age?”

Gilded Age2) Why was corruption so rampant in

American politics during this period? Was it worse than today? If so, why?

3) Was there really any difference between the republican and Democratic parties at this time? If so, what?

We will answer these questions then move into Corporations and labor.

Gilded AgeTwo general themes caused tension during

the Gilded Age:Laissez-faire—a doctrine opposing

government interference in economic affairs;

Concentration of Power—power in the hands of the government at all levels of state and local government—Gov’t assumes authority and power and bureaucratic control over all major areas of government policy—whether federal or local.

Homestead ActBegins here; this act set in motion a

program of public land grants to small farmers—Gave the federal government control over public lands and underlined the supremacy of Federalism over states rights.

South had always rejected to federal control wishing to reserve the right of each state and territory to decide how best to distribute and tax land grants

Homestead ActUnfortunately the government never

made any money off the land grants—it became corrupt and fell into the hands of shady land speculators;

It did help lead to an agriculture and transportation revolution and it did assist in the rise of Land grant Agriculture and mechanical Colleges.

Railroads First real big business;

Could reach interior areas where canals were not feasible;

Did not have to worry about physical breakdowns as with animals and Wagon trains—ran year round

Mostly reliable

Railroads 1840 there was about

3000 miles of track in the US; by 1860, 30,000 miles of track.

Pacific railway Acts of 1862 and 1864.

Gov’t made direct grants to private corporations—for every mile of track, the private corporation received 12800 acres of land and was guaranteed $48000 for every mile of track laid.

Railroads Guaranteed 30 yr

subsidized loans below market value.

The Union Pacific railroad, the central Pacific began an odyssey culminating in the famous connection at Promontory Point Utah in the spring of 1869.

Credit Mobilier Major Stock holders of the Union Pacific

formed a stock company—they sold or gave shares in the company to influential congressmen who could enact favorable laws and approving federal subsidies—huge profits were made. i.e., steel stock that cost 5million dollars was credited with 10 million—of course the tax payer was paying this.

It ruined some congressmen’s reputations and added to the scandals already rocking the Grant administration.

Political Corruption It forced awareness by the media and the

public—both parties were implicated in many shady dealings.

Opened a can of worms concerning political parties—Republicans repeatedly warned the public that to vote for a Democrat was to vote for the part of secession—the Democrats warned that a vote for Republicans was vote for the amalgamation of society. This was the notion of “Waving the Bloody Shirt” meaning dishonor to Lincoln or to White society.

Mugwump Name calling and

corruption became somewhat comical.

“Bloody Shirt” rebels.

Mugwumps was a derogatory term for Republicans who refused to vote for Blaine and voted for Cleveland—jumping parties—Reagan democrats good example or independent voters

Businessmen and Corporations

James J. Hill, Andrew Carnegie, John D Rockefeller and Cornelius Vanderbilt struck terror in the hearts of many—yet they have inspired many others.

These were the “Captains of Industry” or “The Robber Barons” however you choose to interpret them.

They created this creature called corporation

Captains of IndustryWho were some of these captains of

industry, how did they operate and why were they referred to as “Robber Barons?”

What was the corporation revolution? How did it transform America?

Did these guys make America better or worse?

Captains of IndustryTwo major factors precipitated the rise of

industry:New Businessmen and New ways of doing

business.

New BusinessmenHistorians describe the new businessmen

in two contradictory ways.

Contradiction in Terms

Captains of Industry—described as ingenious and industrious capitalists who transformed America—embodied the “American Dream” from ‘rags to riches.’

Robber Barons—described as immoral, greedy, and corrupt—Ii.e, bribery, kickbacks, illegal business practices and insensitivity to workers and workers families (J.D. Rockefeller the exception)

Daniel Drew (1797-1879),

financier. Born in Carmel, New York

a reputation for sharp dealing

"stock watering“ give his cattle salt—allow them to fill up on water to increase market weight.

director and treasurer of the Erie Railroad

Jay Gould (1836-1892), financier. Gould

grew up in relative poverty and received little formal education.

quick mind and had few scruples

1860, speculating in railroad securities

director of the Erie Railroad in 1867

combined "stock watering" and bribes to New York City's "Boss" Tweed as well as state legislators; eventually assembled an empire; remained ruthless, unscrupulous, and friendless to the end.

Jim Fisk 1834-1872), financier.

little schooling; title of "Barnum of Wall Street"

life of a sybarite Broadway showgirls,

expensive horses, and honorary but gaudy military posts

quarrel over certain business matters and a favorite mistress, the actress Josie Mansfield, he was shot by Edward S. Stokes on January 6, 1872.

Cornelius Vanderbilt 1794-1877), financier. 16, he purchased a small

sail and began a passengers service between Staten Island and New York; formed his own steamboat company in 1829.

By 1846, "Commodore" Vanderbilt had become a millionaire

He soon became immersed in the railroad trade; most famously the Erie and New York

Erie Railroad Wars Vanderbilt began buying up Erie shares to drive out

competition; Erie treasurer Daniel Drew, saw an opportunity to swindle Vanderbilt out of millions of dollars.

He, Gould, and Fisk, printed up 100,000 worthless stock certificates, which Vanderbilt promptly bought.

Realized the stocks had no value. Although Vanderbilt

had once said, "Law, what do I care about the law? Ain't I got the power?" he appeal to government authorities to arrest Fisk, Gould, and Drew. They went on the Lam—convinced legislators to make it legal to buy the “Watered stock” from Vanderbilt—they made Millions and Vanderbilt appeared a “Robber Baron” to the public and media—did recoup some of his losses.

Corporation Revolution Although American businessmen had always

strived to make money, the Gilded Age saw the rise of new methods of capitalism that allowed individuals to limit their liability and maximize their profits.

Before the Gilded Age, individuals had looted

society;

no longer the individual; now it was the corporation

Corporation Revolution

1) Key features of the Corporation

2) What was a corporation?

3) Corporations in the past

4) Combinations of corporations

Corporation Revolution

Key features--increasing concentration of power in large entities

Business and government became bigger; while operations became intertwined

government had used its power and money to encourage businessmen to build railroads; encouraged corporations;

Government more involved in the welfare of the nation.

What was a Corporation?A corporation was formed when a group

of people requested a charter from the state legislature that provided them with a set of legal rights and (presumably) responsibilities. State law treated the corporation as an individual. Unlike a partnership, in which liability ran high for individual investors, the corporation involved limited liability. Limited liability makes individual investors legally liable only for their share of the investment.

What was a Corporation?Partnership, if one party dies etc …

other partners are responsible; however, in corporation law, one is only responsible for their percentage.

“Immortal” Corporations can buy, sell, and inherit property; thus, they took on their own identity. Individual investors may come and go, but the corporation has an indefinite lifespan.

Past Corporations Corporations began before the Civil War.

1850s, American businessmen began using corporations differently; ownership no longer meant control of the corporation.

Pre-Civil War investors had a great deal of power over production.

Post-War corporations allowed managers and directors absolute control, while investors reaped the benefits of limited dividends. This allowed a handful of corporate directors to profit enormously with little personal risk.

Combinations of Corporations

A salient characteristic was the continual combination and merging of corporations.

These new "mega corporations" were known as trusts.

Though trusts were certainly larger, more efficient, and more profitable than smaller corporations, they also destroyed the healthy competition that often makes capitalism a viable economic model.

Standard Oil of New Jersey1879, JD Rockefeller founded Standard

Oil—prototype of Corporation efficiency and consolidation.

At Rockefeller’s death: $815,647,796.89.Not counting 40Million per yr in dividends.

Purchased small companies in public, he also seized power privately through take-over techniques—not beyond hiring Pinkerton agents to persuade owners to sell. (hostile takeovers—mergers and acquisitions)

Trust BustersAmericans began to realize the social

problems that went hand-in-hand with untrammeled business growth

Began to pass federal laws to slow the growth and power of trusts

The Sherman anti-trust act was mere token legislation until after WWI.

As wealth became concentrated in fewer hands, public animosity increased towards the businessmen.

Labor Unions and WorkersWhile Andrew Carnegie and Rockefeller

took advantage of lax corporation laws, mass production and mechanization threatened the independence of the American worker—things were quickly moving from skilled crafts to unskilled assembly line boredom.

Originally workers organized in “Workingmen’s Parties” to control local politics.(mostly middle and upper class leaders—not actual workers themselves).

Labor Unions and WorkersOriginally began in Philadelphia, New

York, and Chicago—believed they could reform society.

Vast majority were skilled laborers; believed they were important to society—performed a vital function; were not alienated socially or economically;

Class consciousness would not emerge until after the Civil War.

Labor Unions and Workers Industrialization undermined skilled

workers; needed more unskilled workers than skilled.

Two factors created this phenomenon:1) Industrialization created mechanization

not need for skilled artisans or guilds;

2) Urbanization created larger work force. People came to the city for bright lights and opportunity—many were unskilled.

Sources of Labor

Many displaced agriculture workers and Immigrants filled the cities; women and children became a significant part of the work force;

Demographics—Single, between 18-24 and strangely many women also came to the cities.

By 1910, 25% of American children were employed in factories.

Demographics Worked 16 to 18 hr

days in 1865—1870 11 to 12 hr days.

1880s demanded shorter hrs—got 10.

The issue was owners believed that workers benefited from long hours—kept them from gambling, drinking, and prostitution

Wage Theory Why should wages be so low? 1) High wages hurt profit; needed profits to

open more factories and hire more workers. 2) Moral reasons. Subsistence wages

prevented workers from wasting their money on alcohol, gambling, and other vices.

Many as a result lived below the subsistence levels.

Average Family of 4 in 1890 was 380$. That same year the Census Bureau estimated that a subsistence income needed to be $530—morality, no Greed!!

Samuel Gompers Anglo-Jew from

working class parents;

13, joined the Cigars Makers’ Union;

Became its president (1874-81); Organized the American federation of Labor.

President until his death in 1924 (exception is 1895)

Knights of Labor Founded 1869; secret order of tailor’s in

Philadelphia; Uriah S. Stephens.

Most Important leader was Terence V. Powderly—national persona with a central office; open to all workers.

1) first significant labor organization; local chapters; centralized agenda and directives;

2) Open to all workers except lawyers, bankers, gamblers, and liquor merchants; even management could join;

Knights of Labor Open to African-

Americans (10%);

Sought work place and wage reforms and in society at-large;

“tried to be all things to all people…” But were too inclusive and too broad principled—failed.

A F of L-CIO Largest of unions until it

merged in 1955 with CIO (congress of industrial organization); It used strikes and boycotts to force collective bargaining.

Conservative—only accepted skilled workers; better pay, better hours, safety insurance, workplace safety (OSHA) and family social conditions.