Chapter 24 Industry Comes of Age 1865-1900

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Chapter 24Industry Comes of Age1865-1900
First Oil well
Standard Oil as a powerful , sprawling octopus
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Captains of Industry or Robber Barons
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Business Philosophy During Gilded Age

• The idea that the government should not interfere
  with economic development, or specific
  businesses, is known as Laissez-faire. This idea
  originated with British economist Adam Smith and
  was published in 1776 in The Wealth of Nations.
  He believed that the laws of supply and demand,
  combined with profit motive, would be the most
  efficient type of economy. Many business leaders
  in the 1800s echoed these sentiments and wanted
  the government to leave their businesses alone.

• Two social philosophies also seemed to support
  laissez-faire capitalism. Horatio Alger wrote
  popular fictional books in which the protagonist
  poor boys became wealthy through their honesty
  and hard work. These novels demonstrated the idea
  of the Puritan Work Ethic which was  introduced
  by the Puritans during the Colonial Era. This
  ethic held that hard work was its own reward and
  built character.
• Social Darwinism stated that success in society
  was determined by "survival of the fittest." This
  interpretation of Charles Darwin's theory caused
  many to believe that the poor were deceitful and
  lazy, while the rich were honest and
  hard-working. This also explained how healthy
  businesses thrived while unhealthy ones went
  bankrupt.

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The Gospel of Wealth

• Many of the newly rich had worked from poverty to
  wealth, and thus felt that some people in the
  world were destined to become rich andthen help
  society with their money. This was the Gospel
  ofWealth.
• Social Darwinism applied Charles
  Darwinssurvival-of-the-fittest theories to
  business. It said the reason aCarnegie was at
  the top of the steel industry was that he was
  most fit to run such a business.

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The Gospel of Wealth

• The Reverend Russell Conwell of Philadelphia
  became rich bydelivering his lecture, Acres of
  Diamonds thousands oftimes, and in it he
  preached that poor people made themselves poor
  and rich people made themselves rich everything
  was because of ones actions only.
• Corporate lawyers used the 14th Amendment to
  defend trusts, thejudges agreed, saying that
  corporations were legal people and thus entitled
  to their property, and plutocracy ruled.

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The Iron Colt Becomes an Iron Horse

• After the Civil War, railroad production grew
  enormously, from35,000 mi. of track laid in 1865
  to a whopping 192,556 mi. of tracklaid in 1900.
• Congress gave land to railroad companies totally
  155,504,994 acres.
• Railroads gave land their value towns where
  railroads ran becamesprawling cities while those
  skipped by railroads sank into ghosttowns, so,
  obviously, towns wanted railroads in them.

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Spanning the Continent with Rails The Union
Pacific Railroad

• Deadlock over where to build a transcontinental
  railroad was brokenafter the South seceded, and
  in 1862, Congress commissioned the UnionPacific
  Railroad to begin westward from Omaha, Nebraska,
  to gold-richCalifornia.
• The company received huge sums of money and land
  to build itstracks, but corruption also plagued
  it, as the insiders of the CreditMobilier reaped
  23 million in profits.
• Many Irishmen, who might lay as much as 10 miles
  a day, laid the tracks.
• When Indians attacked while trying to save their
  land, the Irishdropped their picks and seized
  their rifles, and scores of workers andIndians
  died during construction.

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Spanning the Continent with Rails The Union
Pacific Railroad

• Over in California, the Central Pacific Railroad
  was in charge ofextending the railroad eastward,
  and it was backed by the Big Fourincluding
  Leland Stanford, the ex-governor of California
  who had usefulpolitical connections, and Collis
  P. Huntington, an adept lobbyist.
• The Central Pacific used Chinese workers, and
  received the sameincentives as the Union
  Pacific, but it had to drill through the
  hardrock of the Sierra Nevada.
• In 1869, the transcontinental rail line was
  completed at PromontoryPoint near Ogden, Utah
  in all, the Union Pacific built 1,086 mi.
  oftrack, compared to 689 mi. by the Central
  Pacific.

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The two railroads meetThe golden spike
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Chinese Coolie Labor and Irish Paddy Labor on
the railroads
Coolie labor was viewed as a new form of slavery
since employers of coolies were not legally
required to take care of their men outside of
paying a minimum wage and supplying basic
provisions. Also since fraud and kidnapping were
often employed to acquire recruits.
Many Irish men labored in coal mines and built
railroads and canals. Railroad construction was
so dangerous that it was said that there was an
Irishman buried under every railroad tie.
Usually, other jobs were not available for the
Irish
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Binding the Country with Railroad Ties

• Before 1900, four other transcontinental
  railroads were built
• The Northern Pacific Railroad stretched from Lake
  Superior to the Puget Sound and was finished in
  1883.
• The Atchison, Topeka, and Santa Fe stretched
  through the Southwest deserts and was completed
  the following year, in 1884.
• The Southern Pacific (completed in 1884) went
  from New Orleans to San Francisco.
• The Great Northern ran from Duluth to Seattle and
  was the creationof James J. Hill, probably the
  greatest railroad builder of all.
• However, many pioneers over-invested on land, and
  the banks thatsupported them often failed and
  went bankrupt when the landwasnt worth as much
  as initially thought.

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Revolution in Railways

• Railroads stitched the nation together, generated
  a huge market and lots of jobs, helped the rapid
  industrialization of America, andstimulated
  mining and agriculture in the West by bringing
  people andsupplies to and from the areas where
  such work occurred.
• Railroads helped people settle in the previously
  harsh Great Plains.
• Due to railroads, the creation of four national
  time zones occurredon November 18, 1883, instead
  of each city having its own time zone(that was
  confusing to railroad operators).
• Railroads were also the makers of millionaires
  and the millionaire class.

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Railroad Consolidation and Mechanization

• Older eastern railroads, like the New York
  Central, headed byCornelius Vanderbilt, often
  financed the successful western railroads.
• Advancements in railroads included the steel
  rail, which wasstronger and more enduring than
  the iron rail, the Westinghouse airbrake which
  increased safety, the Pullman Palace Cars which
  wereluxurious passenger cars, and telegraphs,
  double-racking, and blocksignals.
• Nevertheless, train accidents were common, as
  well as death.

Cornelius Vanderbilt and the Pullman Palace Car
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Wrong Doing in Railroading

• Railroads were not without corruption, as shown
  by the Credit Mobilier scandal.
• Jay Gould made millions embezzling stocks from
  the Erie, Kansas Pacific, the Union Pacific, and
  the Texas and Pacific railroadcompanies.
• One method of cheap moneymaking was called
  stockwatering, in which railroad companies
  grossly over-inflated the worth of their stock
  and sold them at huge profits.

Financier Jay Gould
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Gilded Age Business Organizations

• During the 1800s, the United States began to
  industrialize. Whole industries and companies
  grew large, sometimes forming monopolies, or a
  company or group of companies that completely
  controls a single industry. Often, monopolies
  were created through mergers, where one company
  obtains legal control over another. There were a
  variety of types of business organizations that
  became monopolies

• Business Organization
• Conglomerate A group of unrelated business owned
  by a single corporation.
• Pool Competing companies that agree to fix prices
  and divide regions among members so that only one
  company  operates in each area.
• Trust Companies in related fields agree to
  combine under the direction of a single board of
  trustees, which meant that shareholders had no
  say.
• Holding Company A company that buys controlling
  amounts of stock in related companies, thus
  becoming the majority shareholder, and holding
  considerable say over each company's business
  operations.

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Wrong Doing in Railroading

• Railroad owners abused the public, bribed judges
  and legislatures,employed arm-twisting
  lobbyists, elected their own to political
  office,gave rebates (which helped the wealthy
  but not the poor), and used free passes to gain
  favor in the press.
• As time passed, though, railroad giants entered
  into defensivealliances to show profits, and
  began the first of what would be calledtrusts,
  although at that time they were called pools.
  Apool (AKA, a cartel) is a group of supposed
  competitorswho agree to work together, usually
  to set prices.

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Government Response

• Eventually a grass-roots movement to combat the
  abuses of business was formed from the farmers'
  social organization called the Grange. During
  their informal meetings, members of the Grange
  discovered that many of their group were being
  charged enormous amounts by the railroad
  companies for short hauls, while big businesses
  like Standard Oil were receiving rebates where
  they were charged less for long hauls.
• Through the use of bloc-voting, this group was
  able to get candidates elected to state
  legislatures who supported railroad reform
  legislation. These state laws were eventually
  challenged in Supreme Court, eventually forcing
  the Federal Government to pass regulatory
  legislation.

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Birth of Populism

• As the rich became wealthier, and the poor more
  so, people began to question these philosophies,
  and some even attacked leading industrialists
  calling the Robber Barons, while others
  maintained that they were Captains of Industry
• Farmers decided to more formally organize their
  political views and in doing so founded the
  Populist Party. This third political party was
  largely unsuccessful, but introduced ideas that
  were later adopted by the Republican and
  Democratic parties during the Progressive Era.

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Miracles of Mechanization

• In 1860, the U.S. was the 4th largest
  manufacturer in the world, but by 1894, it was
  1, why?
• Now-abundant liquid capital.
• Fully exploited natural resources (like coal,
  oil, and iron, the iron came from the
  Minnesota-Lake Superior region which yielded
  therich iron deposits of the Mesabi Range).
• Massive immigration made labor cheap.

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Miracles of MechanizationAmerican ingenuity
played a vital role

• Popular inventions included the cash register,
  the stock ticker,the typewriter, the
  refrigerator car, the electric dynamo, and
  theelectric railway, which displaced
  animal-drawn cars.
• Thomas Edison, the Wizard of Menlo Park, was
  the most versatile inventor, who, while best
  known for his electric light bulb,also cranked
  out scores of other inventions.

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Communication

• In 1876, Alexander Graham Bell invented the
  telephone and a new age was launched.

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The Trust Titan Emerges

• Industry giants used various ways to eliminate
  competition and maximize profits.
• Andrew Carnegie used a method called
  verticalintegration, which meant that he
  bought out and controlled all aspects of an
  industry (in his case, he mined the iron,
  transported it, refined it, and turned it into
  steel, controlling all parts of theprocess).

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Carnegie and Other Sultans of Steel

• But Carnegie, fearing ridiculefor possessing so
  much money, spent the rest of his life donating
  350million of it to charity, pensions, and
  libraries.
• Meanwhile, Morgan took Carnegies holdings, added
  others, andlaunched the United States Steel
  Corporation in 1901, a company thatbecame the
  worlds first billion-dollar corporation (it
  wascapitalized at 1.4 billion).

• Andrew Carnegie started off as a poor boy in a
  bad job, but by working hard, assuming
  responsibility, and charming influential
  people,he worked his way up to wealth.
• He started in the Pittsburgh area, but he was not
  a man who liked trusts still, by 1900, he was
  producing 1/4 of the nationsBessemer steel, and
  getting 25 million a year.
• J. Pierpont Morgan, having already made a fortune
  in the banking industry and in Wall Street, was
  ready to step into the steel tubing industry, but
  Carnegie threatened to ruin him, so after some
  tense negotiation, Morgan bought Carnegies
  entire business at 400 million (this was before
  income tax).

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J.P. Morgan and U.S. Steel

• Meanwhile, J.P. Morgan took Carnegies holdings,
  added others, andlaunched the United States
  Steel Corporation in 1901, a company that became
  the worlds first billion-dollar corporation (it
  wascapitalized at 1.4 billion).
• J.P. Morgan also placed his own men on the boards
  of directors ofother rival competitors to gain
  influence there and reduce competition,a process
  called interlocking directorates.

A man generally has two reasons for doing a
thing. One that sounds good, and a real one.
Mr. Morgan
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The Supremacy of Steel

• In Lincolns day, steel was very scarce and
  expensive, but by1900, Americans produced as
  much steel as England and Germany combined.
• This was due to an invention that made
  steel-making cheaper andmuch more effective the
  Bessemer process, which was named after
  anEnglish inventor even though an American,
  William Kelly, had discoveredit first
• Cold air blown on red-hot iron burned carbon
  deposits and purified it.
• America was one of the few nations that had a lot
  of coal for fuel,iron for smelting, and other
  essential ingredients for steel making,and thus,
  quickly became 1.

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Rockefeller Grows an American Beauty Rose

• In 1859, a man named Drake first used oil to get
  money, and by the1870s, kerosene, a type of oil,
  was used to light lamps all over the nation.
• However, by 1885, 250,000 of Edisons electric
  light bulbswere in use, and the electric
  industry soon rendered kerosene obsolete, just as
  kerosene had made whale oil obsolete.
• Oil, however, was just beginning with the
  gasoline-burning internal combustion engine.

Drake First Oil Well
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Standard Oil and Mr. Rockefeller

• John D. Rockefeller, ruthless and merciless,
  organized the Standard Oil Company of Ohio in
  1882 (five years earlier, he had already
  controlled 95 of all the oil refineries in the
  country).
• John D. Rockefeller, master of horizontalintegra
  tion, simply allied with or bought out
  competitors tomonopolize a given market.
• He used this method to form Standard Oil and
  control the oil industry by forcing weaker
  competitors to go bankrupt.

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Sherman Anti-Trust Act

• In 1890, the Sherman Anti-Trust Act was signed
  into law it forbadecombinations (trusts, pools,
  interlocking directorates, holdingcompanies) in
  restraint of trade, without any distinction
  betweengood and bad trusts.
• It proved ineffective, however, because it
  couldnt be enforced.
• Not until 1914 was it properly enforced and those
  prosecuted for violating the law were actually
  punished.

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The South in the Age of Industry

• The South remained agrarian despite all the
  industrial advances
• However, cheap labor led to the creation of many
  jobs, and despitepoor wages, many white
  Southerners saw employment as a blessing.
• Blacks were largely sharecroppers

Sharecropper shack
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The Impact of the Industrial Revolution on America

• As the Industrial Revolution spread in America,
  the standard of living rose, immigrants swarmed
  to the U.S., and early Jeffersonian ideals about
  the dominance of agriculture fell.
• A nation of farmers was becoming a nation of wage
  earners, but the fear of unemployment was never
  far, and the illness of a breadwinner(the main
  wage owner) in a family was disastrous.
• Strong pressures in foreign trade developed as
  the tireless industrial machine threatened to
  flood the domestic market.

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Women in the Age of Industrialism

• Women, who had swarmed to factories and had been
  encouraged by recent inventions, found new
  opportunities, and the Gibson Girl, created by
  Charles Dana Gibson, became the romantic ideal of
  the age.
• The Gibson Girl was young, athletic, attractive,
  and outdoorsy (not the stay-at-home mom type).
• However, many women never achieved this, and
  instead toiled in hard work because they had to
  do so in order to earn money.

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In Unions There Is Strength

• With the inflow of immigrants providing a labor
  force that wouldwork for low wages and in poor
  environments, the workers who wanted to improve
  their conditions found that they could not, since
  their bosses could easily hire the unemployed to
  take their places.
• Corporations had many weapons against strikers,
  such as hiring strikebreakers or asking the
  courts to order strikers to stop striking,and if
  they continued, to bring in troops. Other methods
  included hiring scabs or replacements or
  lockouts tostarve strikers into submission,
  and often, workers had to sign ironclad oaths
  or yellow dog contracts which banned them from
  joining unions.
• Workers could be blacklisted, or put on a list
  and denied privileges elsewhere.

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Unions lack middle class support

• The middle-class, annoyed by the recurrent
  strikes, grew deaf to the workers outcry.
• The view was that people like Carnegie and
  Rockefeller had battledand worked hard to get to
  the top, and workers could do the same ifthey
  really wanted to improve their situations.

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Labor grows slowly

• The Civil War put a premium on labor, which
  helped labor unions grow.
• The National Labor Union, formed in 1866,
  represented a giant bootstride by workers and
  attracted an impressive total of 600,000
  members,but it only lasted six years.
• However, it excluded Chinese and didnt really
  try to get Blacks and women to join.
• It worked for the arbitration of industrial
  disputes and theeight-hour workday, and won the
  latter for government workers, but thedepression
  of 1873 knocked it out.

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Labor grows slowly

• A new organization, the Knights of Labor, was
  begun in 1869 andcontinued secretly until 1881.
  This organization was similar to theNational
  Labor Union.
• It only barred liquor dealers, professional
  gamblers, lawyers,bankers, and stockbrokers, and
  they campaigned for economic and socialreform.
• Led by Terence V. Powderly, the Knights won a
  number of strikes forthe eight-hour day, and
  when they staged a successful strike againstJay
  Goulds Wabash Railroad in 1885, membership
  mushroomed to 3/4of a million workers.

Terence Powderly and Knights Labor leaders
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Haymarket Square Riot

• The Haymarket Riot in Chicago in May 1886 killed
  several people, and resulted in a highly
  controversial trial followed by executions of
  four men who may have been innocent. The American
  labor movement was dealt a severe setback, and
  the chaotic events resonated for many years.
• American Labor on the Rise
• American workers had begun organizing into unions
  following the Civil War, and by the 1880s many
  thousands were organized into unions, most
  notably the Knights of Labor.

• In the spring of 1886 workers struck at the
  McCormick Harvesting Machine Company in Chicago,
  the factory that made farm equipment including
  the famous McCormick Reaper. The workers on
  strike demanded an eight-hour workday, at a time
  when 60-hour work weeks were common. The company
  locked out the workers and hired strikebreakers,
  a common practice at the time.

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Haymarket Square Riot

• On May 1, 1886, a large May Day parade was held
  in Chicago, and two days later, a protest outside
  the McCormick plant resulted in a person being
  killed.
• Protest Against Police Brutality
• A mass meeting was called to take place on May 4,
  to protest what was seen as brutality by the
  police. The location for the meeting was to be
  Haymarket Square in Chicago, an open area used
  for public markets.
• At the May 4th meeting a number of radical and
  anarchist speakers addressed a crowd of
  approximately 1,500 people. The meeting was
  peaceful, but the mood became confrontational
  when the police tried to disperse the crowd.

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Haymarket Square Riot

• The Haymarket Bombing
• As scuffles broke out, a powerful bomb was
  thrown. Witnesses later described the bomb, which
  was trailing smoke, sailing above the crowd in a
  high trajectory. The bomb landed and exploded,
  unleashing shrapnel.
• The police drew their weapons and fired into the
  panicking crowd. According to newspaper accounts,
  policemen fired their revolvers for a full two
  minutes.
• Seven policemen were killed, and its likely that
  most of them died from police bullets fired in
  the chaos, not from the bomb itself. Four
  civilians were also killed. More than 100 persons
  were injured.

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Haymarket Square Riot

• Labor Unionists and Anarchists Blamed
• Public outcry was enormous. Press coverage
  contributed to a mood of hysteria. Two weeks
  later, the cover of Frank Leslie's Illustrated
  Magazine, one of the most popular publications in
  the US, featured an illustration of the "bomb
  thrown by anarchists" cutting down police and a
  drawing of a priest giving the last rites to a
  wounded officer in a nearby police station.
• The rioting was blamed on the labor movement,
  specifically on the Knights of Labor, the largest
  labor union in the United States at the time.
  Widely discredited, fairly or not, the Knights of
  Labor never recovered.
• Newspapers throughout the US denounced
  anarchists, and advocated hanging those
  responsible for the Haymarket Riot. A number of
  arrests were made, and charges were brought
  against eight men.

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Haymarket Riot a Setback for American Labor

• It was never officially determined who threw the
  bomb in Haymarket Square, but that didn't matter
  at the time. Critics of the American labor
  movement pounced on the incident, using it to
  discredit unions by linking them to radicals and
  violent anarchists.
• The Haymarket Riot resonated in American life for
  years, and there is no doubt it set back the
  labor movement. The Knights of Labor had its
  influence plummet, and its membership dwindled.
• At the end of 1886, at the height of the public
  hysteria following the Haymarket Riot, a new
  labor organization, the American Federation of
  Labor was formed. And the A.F.L. eventually rose
  to the forefront of the American labor movement.

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The birth of the AFL

• In 1886, Samuel Gompers founded the American
  Federation of Labor.
• It consisted of an association of self-governing
  national unions,each of which kept its
  independence, with the AF of L unifying
  overallstrategy.
• Gompers demanded a fairer share for labor.
• He simply wanted more, and sought better wages,
  hours, and working conditions.
• The AF of L established itself on solid but
  narrow foundations,since it tried to speak for
  all workers but fell far short of that.
• Composed of skilled laborers, it was willing to
  let unskilledlaborers fend for themselves.
  Critics called it the labortrust.

Samuel Gompers
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The Birth of the AFL

• From 1881 to 1900, there were over 23,000 strikes
  involving6,610,000 workers with a total loss to
  both employers and employees ofabout 450
  million.
• Perhaps the greatest weakness of labor unions was
  that they only embraced a small minority3of
  all workers.
• However, by 1900, the public was starting to
  concede the rights ofworkers and beginning to
  give them some or most of what they wanted.
• A few owners were beginning to realize that
  losing money to fightlabor strikes was useless,
  though most owners still dogmatically
  foughtlabor unions.
• If the age of big business had dawned, the age of
  big labor was still some distance over the
  horizon.
•  

In 1894, Labor Day was made a legal holiday.