Unit 1 Rising Industrialization in the U.S. and Big Business

Key Concept 6.1: The rise of big business in the United States encouraged massive migrations and urbanization, sparked government and popular efforts to reshape the U.S. economy and environment, and renewed debates over U.S. national identity.

RISING INDUSTRIALIZATION IN THE U.S.1. Characteristics of American Industrialization

a. Production by machineb. Increased proportion of work force in manufacturing

i. Subdivide tasks to decrease the need for highly skilled workersc. Production concentrated in large, intricately organized factories.

i. Mass production ii. Assembly lines

d. Accelerated technological innovationi. New emphasis on invention and applied sciences

ii. General Electric 1900 first corporate lab.iii. Partnership between academic and commercialiv. Decentralization of government sponsored research

e. Expanding marketsf. Growth of nationwide transportation network based on railroad, and communication

based on telegraph and telephone.g. Increased capital $$ accumulation for investment in expansion of production.h. Growth of large enterprises and specialization in all forms of economic activity.i. Steady increase in size and predominance of cities. “BIG CITIES”

2. Industrial Technologiesa. Most important technological advancement was new iron and steel production techniques.b. Steel industry emerged in Pennsylvania and Ohio.c. New transportation industries emerged to serve steel industry.

i. Freighters on Great Lakesii. Railroads used steel to build and also was used to transport

3. The Airplane and Automobilea. Automobile dependent on growth of gasoline and internal combustion engine (1870s).b. First gas car built in 1903, Henry Ford begins production on 1906.c. Airplane – Wright Brothers, North Carolina, 1903.

4. Railroad Expansiona. Railroad growth due to industrial developmentb. 1860 Lincoln promises the transcontinental railroad

i. government subsidies + land to encourage buildingc. 1862 Pacific Railroad Act

i. binds California to Union ii. Union Pacific (Omaha to West)

iii. Central Pacific (Sacramento to East)

1. Big Four: a. Leland Sanfordb. Collis Huntingtonc. Mark Hopkinsd. Charles Crocker

iv. Railroad Companies given land and money from congressv. Money stolen – billing for work never done and overcharging

1. Credit Mobiliervi. Race between Union and Central Pacific to see who can lay more track

1. Basis of AMC Series “Hell on Wheels”vii. Frontier towns live and die based on access to railroads

d. Building Railroadsi. Union Pacific – African Americans, Germans, Irish

ii. Central Pacific – Chinesee. May 10, 1869 two rail lines connected

i. Signified joining of east and west and trade with Asiaf. Northern Pacific and Southern Pacific railroads completed by 1893g. Time Zones created to enable consistent railroad schedules

5. Impact of Railroadsa. End of Indian Control West

i. White settlers, hunters, miners overrun Indian landsb. Economies of East and West tied togetherc. Raw materials and processed goods sent eastd. Manufactured goods sent west

i. Help grow American industrye. Help people settle and farm the West

i. Farmers grew more productsii. Railroads control farmers with pricing of shipping

iii. Eastern farmers control farmers by what they boughtf. Change thoughts of environment

i. Trains could move in any weatherg. Immigration encouraged because of availability to land

6. South in the Age of Industrya. Most southerners worked as sharecroppers and had absentee landlordsb. Very limited industries develop in steel, cloth, tobaccoc. Development of cigarette industry by James Buchanan Duke and American Tobacco

Companyd. Railroads repaired but railroad companies charged higher rates for goods shipped north

than those going southe. Steel trusts forced railroads to charge higher prices for steel in Birmingham instead of

Pittsburghf. Although more money in South still earned ½ of northerners

i. Attractiveness of south was cheap labor, so industrialists intentionally kept wages low

g. New South based on industrialization and modernization was supported7. Impact of Industrial Revolution

a. 1900 2/3 of population were wage earnersi. Ended Jeffersonian ideal of small agriculturalists

ii. Ended Hamiltonians idea of manufacturing without government interferenceb. People treated as interchangeable parts

i. Workers had little contact with management

1. Makes it difficult for both sides to understand each otherii. Children as young as 6 would work in mines and factories

1. Hands small could fit in machines2. Were faster than adults3. Frequently used orphans

iii. Changed traditional relationships between family, communities and timec. Sweatshops – places where people work long hours, unsafe conditions for little pay

BIG BUSINESS8. The Corporation

a. Modern corporation emerged after civil wari. More capital needed = more investors

b. Businesses begin to sell stock – allowed capital to be raisedc. Began in railroad industry and spread to othersd. Corporate organizations developed new management techniques

i. Divide responsibilitiesii. Control hierarchy

iii. Cost-accounting proceduresiv. “middle manager”

9. Consolidation Corporate Americaa. Horizontal integration

i. Forming competing firms into single corporationb. Vertical Integration

i. Control production from raw materials to distributionc. Pools

i. Informal agreements to stabilize rates, divide markets - Failure d. Consolidation used to cope with “cutthroat competition”

i. Fear that too much competition lead to instability. Best was to eliminate and absorb competition

10.The Trust and Holding Companya. Failures of pools led to less cooperation and more centralized controlb. Trust

i. Stock transferred to group of trustees who made all decisions but shard profits)c. Beginning with NJ in 1889 states changed laws to allow companies to buy other companies,

trust unnecessaryd. “Holding companies” emerged as corporate body to buy up stock and establish formal

ownership of corporations in trust.e. End of 19th century 1% of corporations controlled 33% of manufacturing

i. Power in the hands of the fewf. Substantial economic growth from this arrangement

i. Costs cutii. Industrial infrastructure formed

iii. New markets stimulatediv. New unskilled jobs

g. Big divide between the rich and poor

11.Robber Barons and Captains of Industry

a. Wealthy entrepreneurs who gained control over entire industriesb. J.P. Morgan

i. Formed United States Steel – controlled by 2/3 of nation’s steel production.c. Andrew Carnegie

i. Scottish immigrant who built the steel industry with a mill that integrated all stages of refinement process, made deals with Railroad industry, purchased coil mines – Vertical integration

d. John Rockefelleri. Formed Standard Oil Co. – through vertical and horizontal integration came to

control 90% of refined oil in the U.S.e. Cornelius Vanderbilt

i. Built empires in both the steamboat and railroad shipping industriesf. Used ruthless tactics to expand wealth and take controlg. Used their wealth to build hospitals, schools and other philanthropic assets

i. Gospel of Wealth (1901) by Andrew Carneigie advocated idea that with great wealth came great responsibility to use riches to advance social progress.

12.Wrongdoings in Railroada. Manipulation of stock prices to gain wealth

i. Forced railroads to charge enormous rates to make profitb. Railroad tycoons took advantage of public so money could be madec. Limits on competition

i. Pools, trusts, holding companiesii. Sherman Anti-Trust Act 1890

1. Passed to try and limit power of trusts2. Forbade combinations of business that would restrain trade3. Did not distinguish between good and bad trusts4. Was ineffective against business but was used against labor unions5. Did establish precedent that private business could be limited in favor of

public good13.Limits on Railroad Industry

a. Government slow to respond to correct economic injusticesb. Grange – founded by Oliver Kelley in 1867

i. Called for changes to political organizationii. Farmers gathered to talk about their problems

iii. Led to calls for change

c. Munn v. Illinois 1877i. Supreme Court says government can control private business if public interest is

involvedii. Allows for future regulation government regulation of business

d. Wabash v. Illinois 1887i. Individual states could not regulate INTERstate commerce

e. Interstate Commerce Act 1887i. Created Interstate Commerce Commission (ICC) federal agency to regulate

interstate trade.ii. First attempt of federal government to regulate trade

14.Capitalism and its Criticsa. The Self-Made Man

i. Defenders argued that capitalistic economy was expanding opportunities for individual advancement – some tycoons were self-made – but most came from wealthy families

ii. Many industrialists were modest entrepreneurs trying to carve a role for their business in a unstable economy and fragmented, highly competitive industries

b. Survival of the Fittesti. Social Darwinism

ii. Assumptions that wealth earned through hard work and thrift and that those who failed earned their failure

iii. Only fittest individuals survived and flourished in marketplace1. William Graham Sumner – philosopher – promoted ideas – absolute freedom

to struggle, compete, succeed, fail.iv. Appealed to businessmen because it justified their tactics – efforts to raise wages by

labor through unions or government regulation would fail, laws of supply and demand and “invisible hand” or market forces would determine wages.

1. Ironic, competition was limited due to tycoonsv. Author Horatio Alger promoted stories of individual success in his works – anybody

could become rich through work, perseverance and luck.c. Alternative Visions

i. Groups challenged corporate and capitalistic viewsii. Sociologist Lester Ward in Dynamic Sociology 1883 argued that natural selection

didn’t shape society, and active government in positive planning is best for society. He was skeptical of the Laissez Fair (Let business take care of business) capitalist principal. People should intervene to serve their needs.

iii. Emergence of parties to challenge ideas1. Socialist Labor Party 1870s2. Progress and Poverty by Henry George 1879 argued poverty was due to

wealth of monopolists and their high land values.3. Looking Backward by Edward Bellamy 1888 spoke of “fraternal cooperation”

and of a future society where government would distribute wealth equallyd. Problems of Monopoly

i. Few questioned capitalism1. Movement grew in opposition to monopolies and economic concentrations

a. Seen as creating artificially high prices and an unstable economyb. Recession and havoc was seen from 1873 every 5-6 years

ii. Resentment increased because of new class of conspicuously wealthy people who lived rich lifestyles

iii. Standard of living rising for everyone but the gap between rich and poor was growing.

INDUSTRIAL WORKERS IN THE NEW ECONOMY15.The Immigrant Work Force

a. Industrial work force grew late 19th century because of migration to industrial cities from both rural areas and foreign immigration

i. Late 19th century most immigrants from England, Ireland, and other European areas.b. Immigrants came to escape poverty, lured by opportunity and advertisements by

companies,c. Ethnic tensions increased because of job displacement and competition for jobs.

16.Wages and Working Conditionsa. Standard of living rose but wages were lowb. Little job security because of boom or bust cyclec. Unskilled labord. Long hourse. Unsafe conditions

i. Loss of control over work conditions seen as worst part of factory labor as corporate efficiency and managers centralized workplace.

17.Women and Children at Worka. Abundant unskilled labor led to use of women and children who could be paid lower than

men.b. Most women were young immigrants working in textile industry and domestic service

i. Some singleii. Some married supplemented (added) to husbands earnings

c. Children were employed in agriculture and factories with little regulation – dangerous18.The Struggle to Unionize

a. Labor attempted to fight conditions by creating large combinations of workers (unions)i. Little success

b. First attempt to federate separate labor unions came in 1866 with National Labor Union (disintegrated after the Panic of 1873)

19.The Great Railroad Strikea. Railroad Strike 1877

i. Began after 10% wage cut announcedii. Strikers disrupted the rail service

iii. State militia mobilizediv. Strike collapse after many deathsv. Example of workers unrest over working conditions

20.Knights of Labora. First effort at National Labor Organization 1869b. Lacked strong central directionc. Local “assemblies championed” 8-hour work day, end to child labor, but also interested in

long range reform economy.d. Allowed women to joine. 1870s under Terrance Powderly Order sees rapid expansion

i. By 1890 Knights had collapsed due to failure of strikes in Gould railway system21.The AFL

a. 1880 American Federation of Labor createdi. Became more important enduring national labor group

ii. Collection of autonomous craft unions of skilled workers

iii. Samuel Gompers1. Goal to secure greater share of capitalism’s material rewards workers2. Opposed fundamental economic reform

iv. Wanted creation of national 8-hour work dayv. National strike, May 1 1886 to achieve goal

vi. Chicago – violence broke out between strikers and police deaths in Haymarket Square bombing –

vii. “Anarchism” became widely feared by middle class, associated it with radical labor.22.Homestead Strike

a. Amalgamated Association of Iron and Steel Workers (craft union in AFL) held large amount of power in steel industry because of reliance on skilled workers

b. 1880s Efficient Carnegie process led management to want more control over labor and needed fewer skilled labor

c. Wages cut at homestead plant in Pittsburgh to break union.d. 1892 strike called after company stopped consulting Amalgamatede. Pinkerton Detective Agency brought in as strikebreakers and were attackedf. The National Guard of PA was called in to stop attacks

23.The Pullman Strikea. Strike at Pullman Palace Car Company in 1894 after Pullman cut wagesb. Workers began to strike with the American Railway Union of Eugene V. Debsc. Day following thousands of railway workers went on strike and transportation frozed. President Grover Cleveland asked to intervene with federal troops because the passage of

mail had been blocked.e. Cleveland sent 2,000 troops to protect strikebreakers and strike collapsed

24.Sources of Labor Weaknessa. Late 19th Century labor suffered many lossesb. Wages rose slowlyc. Whatever progress made not enforcedd. Reasons for failure

i. Leading labor organizations included only small percentage of work forceii. Ethnic tensions

iii. Many immigrant workers planned to stay in country for short while and moved very often – erodes willingness to organize and were believed not to be part of permanent working class.

iv. Couldn’t match efforts of powerful and wealthy corporations

25.Populism and the Rise of the Populist Party

a. Populism: a political doctrine that appeals to the interests and conceptions (such as hopes and fears) of the general people, especially contrasting those interests with the interests of the elite. A party for the little guy

b. Farmers Problems:i. Crop prices fell

ii. Farmers had no cash, went further into debt, and their lenders foreclosed on their mortgages

iii. The railroad companies charged outrageous prices to ship crops (no regulation!)c. Farmers Demands:

i. Regulate the railroad companies (Stop them from charging such high rates)ii. Make cash more available (back the dollar with silver, not gold, so dollar would be

worth less)iii. Constitutional demands: single term for President and Vice-President, secret

ballot, popular election of Senatorsiv. To get industrial workers to support them:

8-hour workday, restrict immigrationd. Different Labor Groups Representing Farmers Interests

i. 1867: The Patrons of Husbandry (The Grange)1. Granger Laws – Munn v. Illinois (1877) overruled by Wabash v. Illinois (1886)

ii. 1880s: Farmers’ Alliance and Colored Farmers’ National Allianceiii. 1892: Birth of the Populist, or People’s Party

1. Created to challenge the growth of government power over the agricultural sector.

2. Pushed for stronger government control over the economy and radical redistribution of power.

e. 1892 Presidential Election: Populist candidate won over a million votes!i. Made solid gains between 1892 and 1896.

ii. Perhaps the most successful third party in the nineteenth century.

f. 1896 Electioni. Democrats – 1890s

1. Southerners2. Wealthy farmers3. Supported low tariffs (wanted other countries to buy their crops)

ii. Republicans – 1890s1. Northerners2. Wealthy business men (connected to the railroad)3. Southern African Americans (poor farmers)4. Supported high tariffs (didn’t want to compete with other countries’

products)iii. Populists decide to improve their chances by supporting the Democratic candidate,

William Jennings Bryan, who agreed to support the silver-backed dollar.iv. McKinley winsv. Resulted in the demise of the Populist Party.

vi. Positions of the two parties shape the political landscape well into the 20th century.1. Republican party – aligned with pro-business interests2. Democratic party – champion of the “little guy”