Chapter 24 The Industry Comes of Age
- US in many ways weaker politically, but would gain a lot of “great leaders” in its economy during Industrial Revolution.
The Iron Colt Becomes an Iron Horse
- Unparalleled outburst of railroad to that of more than Europe combined
o Much of it west of Mississippi.
- Required governmental loans due to cost and high risk.
o Extension of railroads into less populated regions wouldn’t be profitable until areas built up.
o TF liberal loans to two favored cross-continent companies 1862 and enormous donations of acreage to paralleling the tracks.
§ Land grants were made in broad belts along proposed belt.
· Within belts railroads allowe to choose alternate mile-square sections in a checkerboard section
§ MW while deciding route, railroads would hold all land from other users.
o Grant would end this 1887 when unclaimed public portions of land-grant areas open for settlement.
- Criticism of letting private companies earn from selling land-grants
o But government benefited = avoided new taxes for direct cash grants.
o Would make the land around it be worth more when previously it did not.
- Towns would compete to host railroad stopping points.
Spanning the Continent with Rails
- Deadlock in 1850s over whether transcontinental railroad would go North or South was when South seceded.
o 1862 first shot fired, Congress began to build railroad to tie California closer.
o Where the Union Pacific Railroad to start in Omaha Nebraska.
- Company granted 20 mi square land for every mile of track constructed and builders also received generous federal loan for every mile built.
- Laying of trails began 1865 and massive loans and land grants made promoters make all possible haste.
o Lots of bribery in Credit Mobilier to make congressmen not look their way.
- Construction gangs, many Irish “Paddies” (Patricks) worked at fast pace.
o Some Indian attacks led to loss of lives on both sides.
o Slept in tented towns, crowded, “hells on wheels”.
- Line from California under taken by Central Pacific Railroad who were supported by the Big Four, or chief financial backers of the enterprise, including Leland Stanford and Collis P. Huntington.
o Relatively little corruption and still managed to have millions of profit.
o Had same subsidies as the Union Pacific and worked w/ same haste with Chinese laborers > thousands of deaths as they were expendable.
§ When reaching Sierra Nevada, progress was slow.
- “Wedding of rails” finally at Ogden, Utah 1869 as “facing on a single track, half a world behind each back”.
o Union Pacific 1086 miles, Central Pacific 689 miles.
- Led to making West coast more connected to Union and a flourishing trade with Asia.
o Paved ways for growth of Great West.
Binding the Country with Railroad Ties
- Four other transcontinental lines built before century’s end.
o None with monetary loans from fed gov.
o Great Northern received land grants while others were Northern Pacific Railroad (1883), the Atchison, Topeka, and Santa Fe in 1884, as well as Southern Pacific in same year.
- Great Northern Railroad organized by James J. Hill was probably greatest railroad builder of all.
o Believed that prosperity of railroad depended on prosperity of area it served.
o Distributed bulls to farmers in his area and enterprise was very soundly organized.
- HV many were overambitious and built railroads to places of nowhere.
o When going into bankruptcy, carried down savings of investors, characterizing post-Civil War as time of endless bankruptcies, mergers, and reorganizations.
The Railroad Consolidation and Mechanization
- Success of Western lines due to expanding eastern networks, NYC > “Commodore” Cornelius Vanderbilt.
o Previously made millions in steamboating, then started career in railroading.
o Superior railroad service for lower rates.
- Improvements to the railroad.
o Steel rail which Vanderbilt popularized by replacing tracks of New York Central with steel.
- Safer, more efficient as it could bear heavier load.
o Standard gauge of track width eliminated expenses/inefficiency in changes from one line or another.
o Westinghouse air brake great efficiency and safety.
o Pullman’s Palace Cars as luxurious traveling hotels.
- Though criticized for lack of safety.
Revolution by Railways
- Railroads united America physically and provided a domestic market for raw materials and manufactured goods.
o Helped beckon to foreign and domestic investors.
- Also spurred industrialization of post-war years.
o Railroads themselves largest single source of orders for steel industry.
o Locomotives opened to markets due to efficiency of which they are transported to factories.
- The Iron horse stimulated mining and agriculture esp. West.
- Led to great cityward movement.
- Stimulated mighty immigration
o Would often transport newcomers to their new land (often land grants sold for a profit) for free.
- Environmental impact.
o Drained cornfields, elimination of grass displaced buffalo which were hunted to near extinction, forests gone.
- Time also bent to railroads’ needs.
o 1880s every town had “local” time.
o HV as railroads worried about keeping schedules and avoiding wrecks, 1883 time zones established (four time zones where most quickly adopted the “standard” time)
- Railroad was maker of millionaires.
Wrongdoing in Railroading
- Corruption involved Credit Mobilier but soon other companies.
o Jay Gould most adept in corruption where for nearly 30 years played w/ inside information of stocks of Erie, Kansas, Union Pacific and other railroads.
- One of tactics was “stock watering”.
o Came from feeding cattle salt to make them thirsty then bloating them w/ water before weighing them.
o Would inflate their claims about a railroad’s assets and sold stocks far in excess of railroad’s actual value.
§ AR railroad managers forced to pay off exaggerated financial obligations.
- Time of corruption as Cornelius Vanderbilt said “Law! What do I care about the law? Hain’t I got the power?”
o Millionaires abused the public.
o Bribed governmental officers, elected their own “creatures” to high office.
- For the timebeing had more direct control over lives of more people than did the president.
o Had entered into defensive alliances to protect profits.
- Earliest form of combination was the “pool” – an agreement to divide the business in a given area and share the profits.
o Would reduce rates in competitive areas, but still have high prices in non-competitive areas.
Government Bridles the Iron Horse
- Railroad plutocracy an issue for poor masses.
- HV were slow to respond to economic injustice.
o Were dedicated to free enterprise and that competition is soul of trade.
o Jefferson’s ideals were hostile to government interference w/ business.
o Also believed in the “American dream”
- TF te depression of 1870s finally made farmers protesting against being “railroaded” into bankruptcy.
o Under pressure from agrarian groups like Grange (Patrons of Husbandry) mid-western legislatures tried to regulate railroad monopoly.
- HV in 1886 Supreme Court ruled on Wabash Case that individual states had no power to regulate interstate commerce.
o TF the federal government would have to do the job.
o Cleveland did not like interference but Congress passed the Interstate Commerce Act 1887.
§ Prohibited rebates and pools and required the railroads to publish rates openly.
o Also prohibited unfair discrimination against shippers and outlawed charging more for a hosrt haul than a long one over same line.
o Most important was that it set up the Interstate Commerce Commission (ICC) to administer and enforce the new legislation.
- HV Interstate Commerce Act did not represent a popular victory over corporate wealth
o The supervision of the railroads by the government is entirely nominal.
o Did provide a place where competing businesses can resolve conflicts in peaceful ways.
§ Could avoid rate wars and “confiscatory” attacks on the lines by state legislatures.
o Meant to stabilize not revolutionize business system.
- However act was still a red letter law.
o First large-scale attempt by government to regulate business at interest of society.
o Precedent to series of regulatory commissions in next century.
§ Foreshadowed that there was public interest in private enterprise government was bound to protect.
Miracles of Mechanization
- When Lincoln elected 1860, Republic 4th in manufacturing.
- By 1894 United States the top manufacturing nation in the world.
o Liquid capital was part of the reason
§ “Millionaire” not termed until 1840s and in 1861 only handful of individuals eligible for this class.
§ HV through Civil War immense fortunes, accumulations combined w/ borrowings from foreign capitalists.
o Natural resources to be exploited including coal, oil and iron.
§ Minnesota-Lake Superior Region and Mesabi Range rich deposits of oil.
- Cornerstone of steel empire.
o Massive immigration made unskilled labor cheap and plentiful.
§ Steel industry heavily relied on this.
- Techniques of mass production (pioneered by Eli Whitney) vital role in second American industrial revolution.
o Inventiveness prevalent – 1860 and 1890 some 440,000 patents issued.
o Attracted women to industry and made business more efficient.
§ Cash register, stock ticker, type writer, refrigerator car, electric dynamo, electric railway which displayed animal-drawn cars.
- Most ingenius invention was the telephone by Alexander Graham Bell in 1876
o Led to “telephoniacs” and “number please” women.
- Thomas A. Edison – “Genius is one percent inspiration and 99% perspiration”
o Invented the phonograph, mimeograph, Dictaphone and the moving picture, as well as the electric light bulb.
o Changed average human sleep time from 9 hours to 7 hours.
The Trust Titan Emerges
- Industrial giants controlled competition in their field.
§ Andrew Carnegie the steel king, John D. Rockefeller the oil investor, and J. P. Morgan, the banker’s banker.
- Carnegie integrated every phase of his steel-making operation.
§ His miners mined ore from Mesabi Range, Carnegie ships transported it to factories where Carnegie’s employees touched the product.
§ TF created the entrepreneurial tactic of “vertical integration”, combining into one organization of all phases of manufacturing.
· Improved efficiency by making supplies more reliable, controlling quality at all stages and eliminating middlemen’s fees.
- Less efficient was horizontal integration which meant allying w/ competitors to monopolize a given market.
§ Rockefeller perfected the trust, where stockholders in various smaller oil companies assigned their stock to directors in Standard Oil Company (1870).
§ Then consolidated and concerted operations of previously competing enterprises.
· “Let us prey” was unwritten motto.
§ Standard Oil Company virtually cornered entire world petroleum market where companies out of trust agreement failed.
· Rockefeller’s success led many to imitate and use trust to describe any large-scale business combination.
- JP Morgan also eliminated “wasteful” competition when in depression of 1890s placed officers of his own bank in various boards of directors of other companies.
§ Businessmen would go to his bank due to extreme competition during depression.
§ Came to be known as “interlocking directorates”.
The Supremacy of Steel
- Steel marked dominance of “heavy industry” which concentrated on making “.capital goods” contrasted with “consumer goods” such as clothes and shoes.
- Previously steel a scarce commodity during Lincoln’s times.
§ Iron went into railroads but steel was expensive.
§ When Vanderbilt first started using steel rails in NYCentral, forced to import them from Britain.
- US soon to produce 1/3 of world’s supply of steel, by 1900 as much as Britain and Germany combined.
§ The Bessemer Process or method of making cheap steel brought about transformation.
· When cold air blown on red-hot iron caused metal to become white-hot by igniting the carbon and eliminating impurities, applied the method to steel.
§ America also one of few places to have abundant coal for fuel, iron ore for smelting and other essential ingredients together.
· Also abundant labor supply.
Carnegie and Other Sultans of Steel
- Carnegie successful due to picking out high-class associates and eliminating many middlemen.
§ Previously was very poor.
§ Not a monopolist and disliked monopolistic trusts where his organization had a partnership that involved many “Pittsburg millionaires”
· Carnegie steel production would be ¼ of nation’s Bessemer steel production
§ Partners approx. $40 mil while he would take hom $25 million.
· These were pre-income tax days, when millionaires made real money and profits represented take-home pay.
- JP Morgan financed reorganization of railroads, insurance companies and banks.
§ Known for integrity, and believed that “money power” was dangerous in wrong hands – but did not think his hands were dangerous.
- Collission between Carnegie and JP Morgan
§ Carnegie was weary of turning steel into gold and eager to sell his holdings, while Morgan had meanwhile turned heavily to steel-manufacturing.
§ TF Carnegie cleverly threatened to invade the same business and threatened to ruin rival if he did not receive his price.
§ So bought Carnegie’s holdings for over $400 million.
· Which made Carnegie fear of dying “disgraced” with so much wealth and spending about $350 million being a philanthropist.
- MW Morgan expanded and added others, and launched United States Steel Corporation.
§ First billion dollar corporation.
§ Larger sum than total estimated wealth of nation in 1800.
Rockefeller Grows an American Beauty Rose
- First well in 1859 did it pour out liquid “black gold”
§ Where Kerosene, derived from petroleum, was first major product of infant oil industry.
· Brighter flame than whale oil.
§ By 1870s would be America’s fourth most valuable export where whaling industry began to decline.
- HV soon invention of Thomas Edison’s lightbulb 1885, 15 years later kerosene industry would be rendered useless.
- Oil industry might have remained modest until the invention of the automobile.
§ By 1900 bested its rivals, steam and electricity as superior means of automobile propulsion
· Note automobile is gasoline-burning internal combustion engine, not necessarily the car.
- John D. Rockefeller MW 1870 organized Standard Oil Company and made it nucleus of great trust by 1882.
§ Previously born to poor family but successful businessman by 19
§ Sought to eliminate middlemen and competitors.
- Pursued policy of rule or ruin, flourished in era of complete free enterprise.
§ Where he ordered people to “sell all the oil that is sold in your district”
§ By 1877 would control 95% of all oil refineries in the country.
§ His son explained that the American Beauty rose could only be produced by “sacrificing the early buds that grew up around it” where his father pinched off small buds with complete ruthlessness.
· Employed spies and extorting rebates (partial refunds) from railroads
- Rockefeller thought he was obeying the law of nature
§ “Time was ripe” for aggressive consolidation, and all had to save ourselves from “wasteful conditions” – where Individualism has gone, never to return.
§ HV consolidation was more profitable than price wars.
- MW other trusts like sugar trust, tobacco trust, leather trust, harvester trust also blossomed along the American Beauty of oil.
§ Includes Gustavus F. Swift and Philip Armour’s meat-packing business.
- These trusts reminded of older American aristocracy and the class of the “new rich” now more prestigious than old patrician families.
§ Anti-trust crusaders often by these “best men”.
The Gospel of Wealth
- Some industrial plutocrats like John D. Rockefeller and Andrew Carnegie agreed that wealthy had to prove themselves morally responsible according to the Gospel of Wealth.
- HV most defenders of free enterprise relied on Social Darwinism.
§ Where “millionaires are products of natural selection” – William Sumner
§ The plutocrats did provide material progress.
- Self-justification by wealth also involved contempt for poor.
§ Many of the rich, esp. newly rich had started out very poor.
§ Reverend Russell Conwell – “ There is not a poor person in the US who was not made poor by his own shortcomings”.
- Plutocracy also protected by the Constitution.
§ Congress had sole jurisdiction over interstate commerce, so big industrialists often use it to thwart state legis.
§ 14th Amendment -- used to say corporation was a legal “person”.
- Great industrialists also incorporated in “easy states” with little restrictions, incl. New Jersey and Kentucky.
Government Tackles the Trust Evil
- When people failed to curb monopoly through state legis, appealed to Congress.
§ AR the Sherman Antitrust Act of 1890 signed into law.
§ Forbade combinations in restraint of trade without any distinction between “good” trusts and “bad” trusts.
· So bigness, not badness, was wrong.
§ Therefore was ineffective because it had legal loopholes and also used to curb labor unions deemed to be restraining trade. FAILED.
- Prosecution of Sherman Act 1890 neither vigorous or successful.
§ More trusts formed in 1890s under President McKinley than any other.
- HV Sherman Act along with Interstate Commerce Act foreshadowed that private greed must be subordinate to public need.
The South in the Age of Industry
- Civil War had made South produce smaller percentage of nation’s goods than before the war.
§ HV with machine-made cigarettes as opposed to hand-made, tobacco consumption skyrocketed.
§ James Buchanan Duke would take advantage of tech and mass-produce “coffin nails”.
- 1890 had absorbed main competitors into the American Tobacco Company.
- Region remained primarily rural despite industrialists’ attempts to make it into factories.
§ Prominent among promoters of “new South” was Henry v. Grady of Atlanta Constitution.
- Barriers to southern industrialization was paper barrier of regional rate-setting systems by northern-dominated railroad interests.
§ Railroads gave preferential rates to manufactured goods from south to north.
§ In opposite direction was discriminated.
§ AR kept South in “third world” servitude to North.
· “Pittsburg plus” pricing system in steel industry
· Iron ore mined w/ low-wage southern labor in Alabama yet did not have competitive edge as Pittsburg steel lords pressured railroads to charge fictional fee (as if it had been shipped from Pittsburg, from North to South).
- Cotton industry better as it was “bring the mills to the cotton”
§ 1880 cotton mills erected in South by North due to tax benefits and cheap nonunionized labor there.
§ HV cheap labor was primary Southern attraction
· Note blacks were excluded from all but the most menial jobs in mills
§ Depressed working conditions, but southern white south still saw employment in mills as salvation.
§ Often offered farm-fugitive families to remain together.
The Impact of the New Industrial Revolution on America
- Increased wealth, rose standard of living where it was usually higher than their counterparts in any other industrial nation.
§ Industries made more immigrants go in.
- Jeffersonian ideals of small farms (and concepts of free enterprise with neither help nor hindrance from DC) thrown out of window.
- Industry timetable sometimes had to be forcibly taught to immigrant workers.
- Women received many new opportunies in typewriter to stenographers and “hello girls”.
§ The “Gibson Girl”, magazine image of independent “new woman”.
§ Careers in industry for middle class women = delayed marriages and smaller families.
§ However working was out of economic necessity and earned less for “women’s jobs”.
- Sharper divisions between class, and increasingly socialists and radicals (recent European immigrants) criticized.
§ By 1900 10% owned 90%.
- Farmers > wage earners, from 1860 half self-employed to 1900 2/3 depending on wages
§ Higher real wages, but also fear of unemployment.
§ Reformers struggled to introduce a measure of security and provision for temporary unemployment into working class.
- Strong pressures for foreign trade as industry begins to dominate domestic market
In Unions There is Strength
- Individual originality and creativity of less value than before, and more emphasis on manual skills.
§ Before Civil War worker might hail the employee and ask of their health.
§ Now depersonalized, conscienceless.
§ Also in fairness of stockholders not inclined to engage in privage philanthropy.
- New machines displaced employees.
§ In long run however, more jobs created than destroy.
§ However in short run, manual worker often hard hit.
- Massive pool of labor = lower wages generally where several hundred thousand unskilled workers came in a year.
§ Employers could have vast wealth through stockholders, lawyers, buy local press, employ thugs to beat up labor organizers.
§ Jay Gould – “I could hire one half of the working class to kill the other half”
§ Easily had political power to quell strikes, request them to bring in troops.
· Through “lockout” can starve them into submission.
· Sign “ironclad oaths” or “yellow-dog contracts” to make them not join labor union.
§ Corporation could own the “company town” and have high-priced grocery stores and “easy credit”.
· Similar to serfdom = perpetual debt.
- HV middle class public also annoyed bu strikes as American wages highest in world and poor people like Carnegie and Rockefeller worked their way to top.
Labor Limps Along
- Labor Unions previously few and disorganized in 1861, given strong boost by Civil War.
§ War drained resources, increased cost of living = incentive to unionize.
§ National Labor Union in 1866 lasted 6 years, 600,000 members (excluded Chinese and nominal efforts to include women and blacks).
· Won 8 hour workday for government workers and though depression of 1870s it was hard hit still managed to have successful strikes.
§ Colored National Labor Union (for black workers) though their support of Republicans and racism of white unionists prevented two national unions from working together.
- Knights of Labor began as secret society until 1881 (which forestalled possible reprisals
§ Like National Labor Union, sought to include all workers in “one big union”.
§ Barred only “nonproducers” (the rich people).
- Campaigned for economic and social reform and for an 8 hour workday.
§ Under leadership of Terence V. Powderly, won a number of strikes and had successful strike against Jay Gould’s Wabash Railroad in 1885
· Membership mushroomed to ¾ million after that.
Unhorsing the Knights of Labor
- Soon involved in May Day strikes 1886, half of which failed.
- Haymarket Case made Knights of Labor associated w/ anarchists in the public’s view and led to downfall.
§ Chicago had Knights but also few hundred anarchists who advocated violent overthrow of American government.
§ Tensions built and police soon arrived.
§ Suddenly bomb went off and 5 anarchists sentenced to death, other 4 unfortunate fates.
· John P. Altgeld studied Haymarket case and pardoned three survivors but was attacked and died in obscurity “The Eagle Forgotton”.
- By accepting both skilled and non-skilled workers, skilled soon saw that their skills weren’t being appreciated fully and went to exclusively skilled craft unions, the American Federation of Labor and made Knights membership decline to 100,000 members.
The AF of L to the Fore
- Elitist American Federation of Labor 1886 born due to Samuel Gompers.
§ Elected president of foundation for every year but one 1886-1924.
§ Was a federation as it consisted of self-governing national unions all which kept its independence.
§ Where no individual laborer could join the central one.
- Used down-to-earth methods and all he wanted as “more”, such as better wages, hours, working conditions.
§ Major goal of Gompers was the “trade agreemen” authorizing the all-union labor.
§ Chiefly used “walkout” or “boycott”.
- Pooled funds which amassed a war chest to enable them to ride out prolonged strikes.
- HV fell short of representating all workers.
§ Only skilled people and was largely nonpolitical.
- In panic of 1893 did fairly well and 1900 had 500,000.
§ 23,000 strikes from 1881 to 1900 and were successful about half the time.
§ HV was only of 3% of workers in 1900.
- MW by 1900 public beginning to concede right of workers to organize, bargain and strike.
§ As a sign, Labor Day made legal holiday by Congress in 1894.
§ Few industrialists had wisdom to avoid costly econ warfare by bargaining w/ unions.
- HV a majority of employers would cont to fight w/ unions.
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