Unit 3: Birth of Modern America

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Unit 3 Birth of Modern America
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Chapter 9

• Industrialization

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Intro to Industrialization
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I. Introduction to Industrialization

• Industrial Revolution
• - the movement from small-scale manufacturing
  to the production of heavy industry, using
  machines to replace human laborers
• Factors that set the stage for Industrialization
• 1. Expansion of the West
• 2. Expansion of Industry pre Civil War
• 3. Growth of Cities

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• Fun Facts about Industrialization
• 1. What the Brits did in a century, the US
  outdid in ½ the time!
• 2. By end of 1800s, US was the most
  industrialized nation in the world
• 3. 1865 2B in goods produced
• 1900 13B in goods produced
• 4. moved from 4th to 1st in productivity
  (productivity rose 12 X).

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Now time for a little economics lesson
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D. Types of Economic Systems

• 3 basic economic questions
• What to make?
• How much to make?
• Who to make it for?

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Traditional Economy (subsistence economy)

• a. all goods svc produced consumed by the
  family/for family
• b. Very little surplus or exchange of goods
• c. Survival drives economic decisions
• d. Found in poor countries, mostly in rural
  areas

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Market Economy

• People freely choose what to buy sell
  according to the laws of supply demand
• Individuals or companies make decisions about
  production distribution competition
• Capitalism biz, industries, resources are
  privately owned
• - Competition leads to the best product at the
  lowest cost!
• d. In US, govt provides some svc imposes some
  govt regulations
• Pure capitalism govt plays NO part in economy
• Profit drives economic decisions

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Capitalism
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3. Command Economy

• Central Govt makes decisions about
  production/distribution - decides what to make,
  where to make it, how much to make, what price
  to charge, what to pay workers
• Production doesnt necessarily reflect consumer
  demand
• Communist economy govt owns, operates all major
  farms, factories, utilities, stores
• Social goals drive economic decisions

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D. Mixed Economy

1. Combo of command market economies
2. Socialism state owns/operates some basic
   industries while allowing pvt enterprise in other
   parts of economy
3. Belief that wealth should be distributed more
   equally all entitled to certain goods/svcs
4. welfare states characterized by HIGH TAXES to
   pay for the many social svcs like housing, health
   care, child care, pensions

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Mixed Economy (Socialism)
Government
Private Enterprise
Laws of Supply Demand
Determine price production
Determine price production
Operates some businesses
Owns some businesses
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II. Rise of Industry

• Factors that contributed to rapid
  industrialization
• 1. Natural Resources
• a. Western Minerals (access to these thanks to
  settlement of West!), iron, coal, timber,
  copper, water power, etc.
• b. Could be obtained cheaply
• c. Little need for imports

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2. Innovations in transportation and
communication - Infrastructure a. Made for
efficient distribution of products and
information b. Telegraph, Telephone allowed
biz to be conducted quickly across long
distance c. Roads, Canals, RRs allowed mass
distribution of raw materials, farm
produce and products of manufacture
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• 3. New Energy Sources
• a. Steam Engine
• b. Electric Dynamo
• c. Petroleum power (internal combustion
  engine)
• - already in demand as Kerosene
• - oil fields opened from PA to TX
• - economy expands with production
  increase

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• 4. Business-Friendly Govt
• a. Republican dominated (became party of big
  biz)
• b. Govts role in Industrialization
• - kept taxes/spending low
• - few costly regs on industry
• - didnt control prices/wages
• - protective tariffs
• - subsidies in land and money
• subsidy Monetary assistance granted by
  a govt to a person or group in support of an
  enterprise regarded as being in the public
  interest

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• c. Laissez-Faire Economics theory that govt
  should not interfere in economic affairs
• - govt role to protect pvt property keep
  the peace
• - supply demand, not govt regulates prices
  wages
• - supports belief that govt regs increase
  price and hurt
  society in long run
• - free market w/ competing co.s leads to
  efficiency wealth
  for all
• - low taxes ensure that pvt individuals, not
  govt make decision
  on how nations wealth is spent
• - govt debt should be kept to minimum if
  govt borrows from banks, not available
  for individuals for their own use
• - entrepreneurs people who risk their
  organizing/running a biz should be free to
  pursue rewards of bldg a biz making a
  profit for themselves
• d. Govt corruption often took bribes etc.

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5. Economic Stimuli a. Lots of Capital ()
from Europe, Americans, Western
minerals b. Population Boom immigration (20m
btwn 1870-1910) high birth rate, lrg
families (adv. in med tech, nutrition,
infrastructure lower infant
mortality rate) - Lrg workforce/cheap
labor - created demand for consumer goods
produced by factories
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c. New ways of selling/organizing - 1st
dept store Macys - 1st chain store A
P - 1st mail order Wards -
advertising/packaging to attract
consumers
Macys NY
A P
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• 6. New Technologies - you name it, somebody
  invented it!
• a. Textile Industry
• - Factory System Samuel Slater
• - 1st built the first successful
  water-powered textile mill in America
• - Cotton Gin Eli Whitney
• - revived slavery
• - Sewing Machine Elias Howe
• - switch from home-made to machine-
  made clothes
• - Sewing Machine Isaac Singer
• - challenged Howe for patent
• - installment plan

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The Factory System
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Rise of the Sewing Machine Industry
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• b. Railroads
• - Standardized Gauges John Stevens
• - width btwn rails 56 ½ contributes to
  completion of Transcontinental RR
• - Air Brakes George Westinghouse
• - more precise stopping of trains
• - Sleeping Car George Pullman
• - comfortable, luxurious travel

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Pullman Car

• Beveled mirrors, ornate carvings, and polished
  brass were the hallmarks of travel in a Pullman
  parlor car, such as the one depicted here from
  1893.
• First-class passengers enjoyed plush swivel seats
  and could eat their meals in equaling lavish
  dining cars.
• The wealthiest owned their own luxuriously
  appointed private cars.

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• c. Steel
• - Bessemer Process Henry Bessemer,
  William Kelly
• - mass production of steel heat iron ore to
  liquid state, blast w/
  hot air to burn out impurities, end product
  steel
• - Iron RR tracks replaced by steel tracks
• - Birth of Skyscrapers

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Bessemer Process
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Bessemer Process
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• - Elevator Elisha Otis
• - Skyscrapers made practical
• - Suspension Bridge John Roebling
• - uses steel cables
• - London Bridge 1st
• - Brooklyn Bridge 1st in US
• - Trolley Car Frank Sprague
• - early mass transit
• - runs on steel cables
• - Light Bulb Thomas Edison
• - uses a dynamo (primitive electric
  generator)
• - factories can be built away from natural
  source of power
• - can work longer hrs

Thomas Edison
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• d. Oil
• - Oil Well Pump Edwin Drake
• - launched an oil boom nationwide
• - cheap source of fuel for autos (future)

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• e. Business Industry
• - Telegraph Samuel Morse
• - Morse code
• - allows biz to communicate quickly across
  long distances
• - Telephone Alexander Graham
• Bell
• - communication revolution
• - allows biz to communicate quickly across
  long distances
• - Transatlantic Cable Cyrus
• Fields
• - uses telegraph to send impulses - communicate
  with Europe
• - Typewriter Christopher Sholes
• - Cash Register James Ritty

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• f. Food Industry
• - Mechanical Reaper Cyrus McCormick
• - harvest grain quickly using machines
• - Steel Plow John Deere
• - Evaporated Milk Gail Borden
• - Food Preservation (w/o canning) HJ
  Heinz
• - Refrigerated RR Car Gustavus Swift
• - can ship slaughtered meat across long
  distances safely
• - leads to growth of meatpacking industry
  in Chicago

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Chicago Stockyards
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• - Dried Flake Cereal John Kellog
• - More cereal CW Post
• - leads to cereal wars and use of gimmicks
  to sell products

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• g. Miscellaneous Inventions
• - Kodak Camera George Eastman
• - Airplane Orville Wilbur Wright
• - revolution in transportation
• - revolution in warfare

First flight at Kitty Hawk, NC on December 17,
1903
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III. Railroads

• Linking the Nation
• 1. Expansion after Civil War (by 1900, 200,000
  mi of track. Only 30,000 in 1860) 5
  Transcontinental RRs built
• 2. 1st Transcontinental RR completed 1869
• a. Pacific Railway Act (1862)
• b. Transcont. RR built by 2 companies
  Central Pacific from CA used Chinese labor
  Union Pacific From MW used Irish
  immigrants, ex-cons, veterans etc.
• RRs contribution to Industrial Growth
• 1. Impact on economy
• a. increased market for many products by
  linking nation
• b. stimulated economy by spending lots of on
  steel, coal, timber etc.

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Railroads
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Transcontinental RR
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• 2. Linking other lines
• a. lots of unconnected lines a challenge
  to create single rail system
• b. Large RRs lines take over small.
  Consolidation. Then 7 main systems
  with terminals in major cities w/
  branches to the country
• c. Cornelius Vanderbilt RR consolidator.
  Merged NY RRs. 1st svc from NYC to
  Chicago
• 3. Benefits of a National System
• a. Time Zones before 1880, clocks set by
  suns position in sky at high noon
  (example at 1200 pm in Chicago, it
  was 1250 pm in DC
• problem with scheduling, pax safety 2
  trains on same track could collide
  from scheduling errors caused by
  time variations
• solution 1883 4 time zones made RR
  travel safer and more reliable

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Time Zones
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• b. Large integrated RRs benefit US.
• - increase in efficiency
• - decrease in time spent on long distance
  travel
• - united Americans from different regions
• C. Land Grant System
• 1. Land Grants given to RRs by govt to
  encourage RR construction
• 2. RR companies able to cover their
  construction costs by selling land to
  settlers, real estate agencies other
  biz

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Govt Land Grants to RRs
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• D. Robber Barons
• 1. Some RR entrepreneurs engaged in corrupt
  practices that led to the acquisition of
  great wealth - another way to put it
• Robber Barons people who loot an
  industry and dont give anything back
• - used ruthless biz tactics against their
  competitors
• a. Jay Gould used info to manipulate
  stock prices to his benefit (insider
  trading)
• b. RR investors realized they could make
  more by selling land grants than by
  running a RR bribed Congress to
  vote for more land grants

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• 2. Credit Mobilier Scandal 1872
• a. Stockholders from UP RR set up CM a
  construction co.
• b. CM overcharged RR
• c. Since same investors controlled both
  co.s, RR paid bills
• d. Investors made millions, RR almost
  bankrupt
• 3. More corruption
• a. RR wanted more land grants
• b. Convinced Congress to issue them by
  giving Congress members shares of UP
  stock at price below market value
• c. Several Congressmen implicated
  including
• James Garfield (becomes
  President later)

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• 4. Great Northern
• a. Success w/o corruption
• b. James Hill built RR from St Paul, MN
  to Everett, WA w/o any land grants or
  subsidies
• c. Built along good land passed thru
  towns
• d. Offered low fares to settlers who
  homesteaded along route
• e. Carried products to WA for shipment to
  Asia thus, RR earned by
  hauling goods E W
• f. Most successful TC RR never bankrupt

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IV. Big Business

• Rise of Big Biz
• 1. Role of corporations
• a. Corporation an organization owned by many
  people but treated by law as if it were a
  single person
• b. people who own the corporation are known as
  stockholders
• c. Stockholders own shares of the company
  called stock
• d. Advantages of incorporating?
• - can raise from sale of stock invest
  in new tech, hire workforce, buy machines to
  increase efficiency
• - limit liability spread out financial risk

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• 2. Economies of Scale
• a. Corps ability to make goods more
  cheaply b/c they produce so much so quickly
  using lg. manuf. facilities
• b. Cost of Biz
• 1) Fixed Costs cost a biz pays whether its
  operating or not (mortgage, loans, taxes)
• 2) Operating costs occur when running
  company(wages, shipping, raw materials)
• 3) Small vs. Large Company
• small low fixed, high operating costs. If
  biz slow, cheaper to shut down and wait
• large high fixed, lower operating. Keep
  operating in an economic recession

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• c. Advantages of Big Corporations
• 1) produce goods cheaply efficiently
• 2) could continue to operate in poor economic
  times by cutting prices to increase sales
  instead of shutting down
• 3) could negotiate deals/rebates to lower
  operating costs further
• d. Effect on Small Biz?
• - some couldnt complete against big biz
  forced out of biz

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• B. Consolidation of Industry
• consolidation the combining of separate
  companies into a single one
• 1. Falling prices benefited consumers, but cut
  into
• industry profits
• a. To stop falling prices, some companies
  organized pools.
• Pools agreements between companies to
  maintain prices at a certain level
  
• b. problem with pools interfered with
  competition and property rights thus not
  supported in courts or legislature
• c. Usually broke apart when 1 member would
  try to lower prices to steal biz away
  from another

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• 2. Andrew Carnegie and Steel
• a. Idea to make by investing in companies
  that served the RR industry
• 1) invested in iron mills, sleeping cars, RR
  bridges
• 2) sold RR bonds in Europe
• b. Investments in Steel Industry
• 1) Bessemer Process process for making
  steel efficiently and cheaply
• 2) opened a steel co. customized his mills
  to use Bessemer process

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• 3. Vertical Horizontal Integration
• - biz often sought to better consolidate
  industries, to bring efficiency and to reduce
  cutthroat competition. Found 2 general
  ways to do this
• a. Vertical integration ala Andrew Carnegie
  (US Steel)
• owns all stages of production the diff
  biz on which a company depends for its
  operation
• - allows biz to save , enables big company
  to get bigger

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• b. Horizontal Integration ala Rockefeller
  (Standard Oil)
• combining smaller biz into one,
  concentrate on the most profitable stage
  of production
• - Standard Oil controlled 26 similar companies
  gained control of 90 of worlds oil
  refining industry

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Standard oil..the dangerous monopoly!
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Vertical Horizontal Integration
Carnegie Rockefeller
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• c. If a single company controls an entire
  market, it is a monopoly.
• The problem with monopolies free to charge
  whatever they wanted! Quality not guaranteed!

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• 4. Trusts
• a. due to fear of monopolies and mistrust of
  lg corps, laws passed making it illegal
  for one company to own stock in another
  w/o permission from state leg.
• b. to skirt around these laws, TRUSTS were
  formed a group of companies whose stock
  is controlled by a central board of
  directors
• - a way to merge companies w/o breaking the
  law
• - instead of buying another co. outright, co.
  gives stock to board of trustees. These
  stockholders receive a portion of
  trusts profits. Since they just managed the
  stock, didnt own it, they were not
  violating the law

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• 5. Holding Companies
• a. Holding companies do not produce anything
  they own the stock of companies that do
  produce the goods
• b. control all companies it owns sort of
  merging them into one large company

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• Unions
• A. Working in the US
• 1. Repetitive tasks, unhealthy dangerous
  working conditions
• a. lint, dust, toxic fumes in the air
• b. lack of safety devices caused injury
• 2. Rise in standard of living
• - but growing division of income btwn wealthy
  working class
• 3. Deflation (1865-1897) a rise in value of
• a. Caused prices to fall so companies cut
  wages
• b. A call for union organization

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So what is a UNION?
Higher Wages Shorter Hours, Better Working
Conditions

• an organization of workers formed for the purpose
  of advancing its members' interests in respect to
  wages, benefits, and working conditions

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Status of Industrial Workers

• With the machine age the growth of industry,
  the status of US workers changed from that of
  artisans owning their own tools to employees
  running their bosses machines. Problems grew

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Problems

• Alienation personal relationships btwn owners
  employees vanished as corporate execs replaced
  owner-managers. Concern for workers welfare
  diminished, as did workers loyalty to employers
• Job insecurity technical changes
  layoffs/unemployment
• Physical Danger accident rate high b/c of
  complicated machinery, noise, dust
• Loss of communityworkers with machines only
• Low wages 1.00 - 1.50/day
• Long Hrs10-14 hr/day, 6 days week

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Changes in the workforce
Total work force Workers in manufacturing
1870 12,920,000 2,130,000
1900 29,070,000 6,250,000

• Sources of Labor
• farmers were main source of industrial labor as
  farm machines increased production with fewer
  workers

Agricultural workers Non-agricultural workers
1870 6,207,634 4,325,116
1900 10,911,998 18,161,235

• Immigrants were the 2nd most important source of
  industrial labor. Almost 12 m came
• btwn 1870-1900. By 1880, immigrants 13 of
  population 32 of work force

• Women children were hired as workers b/c they
  could be paid less. Most women
• worked in factories. Most children worked in
  textile mills, coal mines, meat-packing plants

Women Children (lt15)
1870 1,900,000 750,000
1900 5,300,000 1,750,000
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• B. Early Unions
• 1. Type of industrial workers in 1800s craft
  workers vs. common labor
• a. craft workers special skills training.
• - higher wages
• - control of time
• - formed trade unions. Limited to people
  w/ specific skills
• b. common labor few skills
• - lower wages

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• 2. Industry opposes unions
• a. employers regard unions as conspiracies.
• - interfered w/ property rights
• b. lrg corps opposed Industrial Unions (those
  that united craft common laborers in a
  particular industry)
• c. Actions taken to prevent unions from
  forming
• 1) sign oath/contract promising not to join
  union
• 2) undercover agents identify union organizers
• 3) workers blacklisted list of
  troublemakers, made it difficult to get
  another job
• 4) lockouts locked union members out of
  property refused to pay them
• 5) if strike? Hired strikebreakers
  (replacement workers

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• 3. Political Social Opposition
• a. difficult to organize
• - no legal rights
• - courts ruled against them
• b. perceived as a threat to American
  institutions
• - seen as MARXIST
• - Marxism belief that basic force shaping
  capitalist society was the class struggle
  btwn workers owners
• - Marx believed workers would eventually
  revolt, take over factories, seize the
  govt, seize pvt property, divide wealth
  evenly.
• - result? A classless society

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Marxism
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• c. some workers advocate anarchism
• - belief that society doesnt need any govt
• d. Marxism/Anarchism spreading in Europe. At
  same time, Europeans immigrating to US
• - scared Americans

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• C. Struggle to Organize
• 1. Great Railroad Strike of 1877
• a. Panic of 1873 led to wage cuts followed by
  NATIONWIDE labor protest biggest in the
  US to date
• b. RR workers across country walked off jobs
• - involved 80,000 workers in 11 states
  affected 2/3 of US RRs
• c. Workers smashed equip., tore up tracks,
  blocked rail svc
• d. States send militias. Gun battles erupted
• e. President Hayes sent army. Restored order,
  but 100 people dead property destroyed

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The Great Railroad Strike of 1877
July 21- 22, 1877, rioters destruction in
Pittsburgh, PA
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• 2. The Knights of Labor
• a. 1st nationwide industrial union
• b. demands
• - 8 hr workday
• - equal pay for women
• - abolition of child labor
• - creation of worker-owned factories
• c. Supported arbitration (impartial 3rd party
  workers and mgmt reach agreement
• d. Began using strikes by 1880
• - successful
• - membership rose

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• 3. The Haymarket Riot Chicago, Haymarket
  Square May 1886
• a. demanded 8 hr workday organizers called
  strike to show support for it on May Day
• b. strikers police clash 1 striker killed
• c. Anarchists organize meeting, 3000 people.
  Police come, bomb is thrown, police fire,
  workers fire,
• - 7 police dead
• - 4 workers dead
• d. 8 arrested. 7 are German immigrants who
  anarchism
• e. All 8 convicted, 4 executed
• f. 1 convicted was Knights of Labor member
  reputation ruined

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Haymarket Riot
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• 3. The Pullman Strike
• a. American Railway Union (ARU) organized in
  1893
• b. Pullman Co made Pullman RR cars
  forced workers to live in Pullman, IL and buy
  goods from company stores
• c. Depression of 1893. Pullman slashed wages.
  Workers had trouble paying rent paying
  high prices at the company stores

Pullman, IL (George Pullmans company town)
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Pullman, IL
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• d. workers who complained were fired. Strike
  began
• e. ARU members nationwide stopped handling
  Pullman cars. Threatened to paralyze US
  economy
• f. US Mail cars attached to Pullmans to
  interfere w/ mail is violation of federal law
• g. Court ordered halt to boycott. Strike
  ARU
• collapsed

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The Pullman Strike

• In 1898, the Illinois Supreme Court ordered
  Pullman Town sold off, ruling that a company town
  was incompatible with the spirit of America.

Violence in Chicago escalated when federal troops
came to break the 1894 Pullman factory strike, as
illustrated in this drawing from Harper's Weekly.
More than one thousand rail cars were destroyed,
and 13 people were killed. (Photo Courtesy of
Chicago Historical Society)
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• D. American Federation of Labor
• 1. organized 20 trade unions, led by Samuel
  Gompers
• a. believed unions should stay out of politics
• b. rejected socialist/communist ideas c.
  Fought for higher wages/better working
  conditions
• d. Strikes ok, negotiate better
• 2. Goals
• a. recognize unions/agree to collective
  bargaining
• b. push for closed shops companies hire only
  union workers
• c. 8 hr workday

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American Federation of Labor

• Samuel Gompers

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• E. Working Women
• 1. by 1900, women 18 of labor force
• a. 1/3 domestic servants 1/3 nurses,
  teachers 1/3 industrial (garment/food
  processing)
• b. wages less than men for same job (men had
  to support the family)
• 2. Womens Trade Union League (WTUL)
  organized to promote womens labor issues
• a. 8 hr day
• b. Create minimum wage
• c. No evening work for women
• d. Abolish child labor