THE RISE OF INDUSTRIAL AMERICA 1865 1900 CHAPTER

THE RISE OF INDUSTRIAL AMERICA 1865 – 1900 CHAPTER 18

WORLD’S FAIR 1892, 200, 000 watched opening of World’s Columbian Exposition in Chicago Marked 50 years of industrial development Had 25 million visitors Those in late 19 th century found themselves unsettled and exhilarated as nation was transformed by industrialization • US now produced 35% of world’s manufactured goods but at a high cost • •

THE RISE OF CORPORATE AMERICA • Early 19 th century corporate business raised money for turnpikes and canals • After the Civil War business leaders created kinds of business organizations that made new technologies, creative management structures, and limited liability if the business should fail

THE CHARACTER OF INDUSTRIAL CHANGE • Six features dominated large-scale manufacturing after the Civil War • • • Exploitation of coal Innovation in transportation, communication, factories Demand for workers who could be controlled Competition by cutting prices and costs, eliminate rivals, create monopolies Relentless drop in prices Failure of the money supply to keep pace with productivity • Factors that led to growth of US economy § § § § Plenty of raw materials Lots of labor Large market for goods Lots of capital Labor saving technologies Friendly government policies Talent entrepreneurs • Business leaders’ drive to reduce costs created them colossal fortunes but forced millions of wage earners near subsistence • Demands for consumer goods stimulated industry’s production of capital goods

RAILROAD INNOVATION • Competition among RR was most intense – more lines in US than all of Europe • RR faced financial and organizational problems – to raise capital obtained land loan subsidies from governments but still had to borrow heavily by selling stocks and bonds • By 1900 yearly interest repayment required on combined debt of US RR - $5. 1 billion – cut heavily into profits • RR management innovations became a model for other businesses seeking a national market

CONSOLIDATING THE RAILROAD INDUSTRY • • • 1870 hundreds of small companies used different gauge of track Bigger RR devoured small lines to create large network Vanderbilt created New York Central Railroad 1867 W. of the Mississippi 5 companies controlled most of the track by 1893 RR became largest business in the world, standardized all equipment and facilities 1883 American Railroad Association divided US into 4 time zones Had its costs – debt and crooked business practices forced them to compete recklessly with each other Due to high rates and secret kickbacks, farmers and small businesses turned to the state for help; 1870 s Midwestern states outlawed rate discrimination – negated in 1880 s when Court ruled states could not regulate interstate commerce 1887 Congress passed Interstate Commerce Act to oversee RR RR challenged commission; Court ruled for RR in all but 1 – all but negated ICC Hepburn Act 1906 strengthened ICC by letting it set rates 1893 depression forced number of rails into J. Pierpont Morgan’s hands - by 1906, 7 networks controlled 2/3 of nation’s rails

ANSWER Why are monopolies bad for consumers? 2 Minutes

APPLYING THE LESSONS OF THE RAILROADS TO STEEL • Andrew Carnegie worked his way up in Pittsburgh textile mill - invested earnings into the RR, by 1868 earning $56, 000 a year • Decided early 1870 s to build own steel mill, his connections with RR ensured his success, used Bessemer Process to make high grade steel – believed by watching costs could make profit • Lowered production costs and prices below competitors, asked for favors to win business to drive out the rest of his competitors • Used vertical integration – Carnegie Steel became the classic example of business that increased production and slashed consumer prices • He donated money to charity, in his lifetime gave over $300 million • 1900 Carnegie Steel employed 20, 000 - world’s largest industrial corporation – 1901 J. P. Morgan purchased Carnegie’s companies and set up US Steel Corporation – 1 st business with over $1 billion in capital, over 200 member companies employing 168, 000

THE TRUST: CREATING NEW FORMS OF CORPORATE ORGANIZATION • Edwin L. Drake drilled 1 st successful oil well 1859; oil spills constant problem • John D. Rockefeller created Standard Oil – practiced vertical integration • 1872 purchased own tanker cars and got 10% rebate from RR for hauling his own oil & kickback on competitors’ shipments • When firms teamed up against him, he set up a pool to set production quotas and fix prices • Worried about competition 1882 set up Standard Oil Trust – replaced pool with a trust – stockholders turn over stocks for trust certificates – got profits but trust controlled production • Rockefeller used vertical integration and horizontal integration • James B. “Buck” Duke formed American Tobacco trust – targeted youth – created oligopoly • 1888 both political parties denounced them - 1890 passed Sherman Anti-Trust Act – government only prosecuted 18 antitrust suits and when Standard Oil was challenged in 1892, lawyers just reorganized trust into holding company • United States v E. C. Knight Company – ruled manufacturing is NOT interstate commerce and threw case out – Court was sympathetic to big business • By 1900 trusts held 2/5 of all capital invested in manufacturing

Answer: Why does the Supreme Court back big business? HINT: look at the picture 2 Minutes

THE TRIUMPH OF TECHNOLOGY • Development of safe, practical way to generate electricity made possible number of motors, household application, lighting systems • Sewing machine, telephone, and light bulb changed American way of life • Edison’s 1 st invention earned him enough money to create an “invention factory” in Menlo Park with university-trained scientists • Knew lighting had to be easy to repair and cheaper/more convenient than kerosene or gas lighting; 1882 built system with help of J. P. Morgan – Edison Illuminating Company lit 85 buildings in NYC • By death had $6 million, over 1, 000 patents, set standard for industrial research labs • George Westinghouse – created AC 1885 – advanced transportation, life

SPECIALIZED PRODUCTION • Using skilled labor - made one-of-a-kind or small batch of articles • Until turn of 20 th century women’s apparel was custom made in small shops run by women who were paid good wages; enabled them shift styles quickly to follow latest fashions

ADVERTISING AND MARKETING • Discovered output exceeded what market could absorb; began advertising and marketing • With flour for example - companies developed new products like cake mixes and breakfast cereals and sold them with brand names • Packaged foods became more common in US homes • Mail order companies allowed people to get goods in “wish book” • Created customer loyalty by unique products – George Eastman – ship camera to his store with $10 and he developed the film, printed the pictures, reloaded the camera, and shipped it back

SOCIAL AND ENVIRONMENTAL COSTS AND BENEFITS • Expansion brought social benefits: labor-saving products, lower prices, advances in transportation and communication • Cost – bankrupted companies, poor wages, devastation of the environment • Overall created new social and economic order in the 20 th century NYC – West St. 1885

Answer Why do you think the South was lagging behind the North as far as industrialization? 2 Minutes

THE NEW SOUTH • Entered industrial era slower than NE • South’s $509 per capita income less than ½ of the North’s • Industrialization hurt by • Civil War • Racism • Scarcity of towns and cities • Lack of capital • Illiteracy • Northern control of financial markets and patents • Lower rate of technological innovation • Perception as Lost Cause – traditional and unchanging

OBSTACLES TO ECONOMIC DEVELOPMENT • Had only 2% of nation’s banks but over ¼ its population • Country merchants and storekeepers became bankers by default • Specializing in cotton or tobacco made small southern famers vulnerable to fluctuations of commercial agriculture • South’s shortage of funds affected economy in indirect ways – limited resources for education – during Reconstruction some groups begun modest expansion of public schooling for blacks and whites but southern states operated segregated schools and refused to tax property for school support until 1889 – school attendance stayed low • Southern states often contributed modest funds they had to war veterans’ pension – built white patronage system for Confederate veterans and helped reinforce southerners’ idealization of the Old Confederacy

THE NEW SOUTH CREED AND SOUTHERN INDUSTRIALIZATION • Southern newsmen like Henry W. Grady Atlanta Constitution and Henry Watterson Louisville Courier Journal championed doctrine called New South creed – South’s raw materials and cheap labor made it natural site for industrial development • 1880 s momentum to industrialize – offered tax exemptions for new business, set up expositions, leased prison convicts to serve as cheap labor • FL and TX gave huge land to RR; other states sold forest and mineral rights on nearly 6 million acres of federal lands to speculators who expanded production • Southern iron and steel expanded - by 1900 Birmingham Alabama nation’s largest pig-iron shipper - contributed to migration of blacks to cities – 1900 20% of southern black population was urban, 1900 made up 60% of unskilled workers • Black coal miners recruited to W. Virginia with free transportation, high wages, company housing – initially paid same as whites and joined biracial labor unions but depression 1893 weakened union and workers became segregated • Segregation opened new opportunities for black barbers, doctors, businessmen but economic opportunities for blacks remained limited

THE SOUTHERN MILL ECONOMY • Textiles mills expanded in south and created new towns and villages – by 1920 South was nation’s leading textile-mill center • Augusta, GA with 2, 800 mill workers became Lowell of the South • Sharecroppers and tenant farmers at first felt new cotton mills was a way out of rural poverty – but men exploited their workers, paying just 7 – 11 cents an hour – 30 – 50% less than what was paid in NE • Mill operator built and owned workers’ housing and company store, supported village church, financed local elementary school and pried into mill workers lives • Usually paid them just 1 x a month in scrip to prevent them from moving – families often overspent and fell behind in their payments – way to keep them in cycle of poverty • Mill workers kept their own gardens, raised chickens, cows, pigs

THE SOUTHERN INDUSTRIAL LAG • Progressed more slowly in South than in North – needed outside financing, technology, and expertise • Southern economy remained essentially in a colonial status • Array of factors created backward industrialization • • Banking regulations required large reserves Scare capital Wartime debts Lack of industrial experience Segregated labor force Discrimination against blacks Control by profit-hungry northern enterprises Poorly educated whites, largely unskilled blacks • At turn of century finally restructured and went through consolidation that had happened in the north in 1880 s – brought with it environmental damage

FACTORIES AND THE WORK FORCE • Industrialization proceeded unevenly nationwide and most late 19 th century Americans still worked in small shops • As century unfolded large factories with armies of workers sprang onto the industrial scene • From 1860 to 1900 number of industrial workers jumped from 885, 000 to 3. 2 million

FROM WORKSHOP TO FACTORY • Changes in factory production had impact on artisans and unskilled laborers – example – shoemakers • Most shoes were custom made in small shops, aristocrats in world of labor who were taught in apprentice system – controlled quality of their products • Distinctive working class culture subdivided along ethnic lines - evolved among shoemakers • By 1850 s ready-made shoe market emerged – by 1880 s shoe factories became larger and mechanized - replaced with lower-paid, less-skilled women and children

THE HARDSHIPS OF INDUSTRIAL LABOR • In construction trades workers were seasonal • Transient, unskilled laborers drifted from city to city and industry to industry – late 1870 s earned $1. 30 a day – only unskilled southern mill workers earned less at 84 cents a day • Unskilled and skilled workers worked 12 hours shifts, faced grave hazards to health and safely, child laborers entered work at 8 or 9 • For adults the RR was most dangerous – 1889 about 2, 000 RR workers killed, over 20, 000 injured • Disabled workers/widows received minimal financial aid from employers – until 1890 s courts considered employer negligence normal risks borne by employees • RR and factory owners fought adoption of safety and health standards because of costs – for sickness and accident benefits, workers joined fraternal organizations and ethnic clubs – helped but not enough

IMMIGRANT LABOR • Factory owners turned to unskilled immigrants for dangerous and undesirable jobs; French-Canadians n NE textile mills, Chinese immigrants in mining, canning, and RR construction • But those that lived frugally in boardinghouses and worked 84 hour week could save $15 a month – more than in their homeland • Life was very different from farm life • Some sponsored temperance societies and Sunday schools to teach punctuality and sobriety; other cut wages and put workers on piecework system, paying them only for the items produced; sometimes provided low-cost housing to prevent work stoppages; if workers went on strike, boss evicted them • Immigrants from E. Europe were darker and employers called them nonwhite so didn’t give them the same compensation as native-born Americans – Irish, Greek, Italian, Jewish who are all part of the Caucasian race were considered nonwhite

ANALYZE What message is this cartoon portraying? 2 Minutes

WOMEN AND WORK IN INDUSTRIAL AMERICA • Woman’s work shaped by marital status, social class, and race – 1 in 5 adult women in 1900 in labor force for wages • Upper-class white married women - separate spheres • Working-class married women took in sewing, button-making, borders, doing laundry only 5% of married women worked outside the home • Clothing - hired out finishing tasked to lower-class married women and kids • Young, working-class single women viewed factory work as an opportunity – woman cooks, maids, cleaning ladies, laundresses intensely disliked long hours, low pay, social stigma of being a servant so when industry jobs open, took them for better-paying work • Discrimination barred black women • 1870 – 1900 number of women working outside the home nearly tripled • Variety of factors propelled rise in employment of single women like changes in agriculture and immigrant parents’ need for income of children • Treated as temporary help, 1890 earned as little as $4 for 70 hours of sewing • Still many young women relished their own income and joined work force in larger numbers, managed to help families, but few paid enough to provide homes for themselves • Typewriter and telephone in 1890 s provided new opportunities, women with high school education took clerical and secretarial jobs; $6 -8 a week, higher prestige, steadier work • Popular press portrayed women’s work as temporary

HARD WORK AND THE GOSPEL OF SUCCESS • Ragged Dick 1867 Horatio Alger – wrote about honest but poor men who rose through initiative and self-discipline – Carnegie often offered as proof • Mark Twain 1871 chided public - said business success was for those that lied and cheated • 1883 testimony of Thomas B. Mc. Guire before Senate committee - investigation of labor conditions • Best chance for native-born working-class Americans to get ahead was to master a skill and rise to the top in a small company • Opportunities for advancement of unskilled immigrant workers were considerably more limited – some did move to semiskilled or skilled positions but most immigrants moved far more slowly than middle and upper class Americans • There was a rise in real wages, climbed 31% for unskilled workers and 74% for skilled workers between 1860 – 1900 but gains in purchasing power were undercut by injuries and unemployment during economic slumps • Unskilled immigrant labor was shaky – 1890 1 of every 5 nonagricultural workers was unemployed at least 1 month a year – forced many to brink of starvation • Late 19 th century – top 10% of families owned 90% of nation’s wealth while less than half the industrial laborers earned more than the $500 annual poverty line • In between rich and poor – skilled immigrants and small shopkeepers improved their economic position

LABOR UNIONS AND INDUSTRIAL CONFLICT • Labor leaders searched for ways to create broad-based, national organizations that could protect their members • Drive to create nationwide labor movement faced many problems • employers deliberately accentuated ethnic and racial divisions to hamper unionizing • skilled craft workers felt little kinship with low-paid common laborers • two groups National Labor Union and Knights of Labor struggled to build labor movement to unite skilled and unskilled workers – collapsed • more effective will be American Federation of Labor but only represented small portion of total labor force • labor unrest during economic downturns reached crisis levels

ORGANIZING WORKERS • From 18 th century on skilled workers had union but effectiveness was limited – some felt could change this by creating one big association transcending all groups • William H. Sylvis 1866 called convention to form National Labor Union – endorsed 8 hour day, end to convict labor, creation of federal department of labor, currency and banking reform, immigration restriction, working women, urged black workers to unionize in separate unions • Turned to national political reform – 1868 NLU convention invited Anthony and Stanton but when Sylvis died suddenly NLU faded • Movement that combined skilled and unskilled workers founded in 1869 with Noble and Holy Order of the Knights of Labor – led by Uriah H. Stephens – demanded equal pay for women, end to child labor and convict labor, employer/employee ownership of businesses, progressive tax • Grew slowly at first but in 1880 s when Terence V. Powderly replaced Stephens at head, grew quickly • Urged temperance, advocated for admission of blacks but allowed southern local assemblies to be segregated, welcomed women , supported restriction on immigration and total ban on Chinese immigrants

• 1880 both party platforms included anti-Chinese immigration plans – 1882 Congress passed Chinese Exclusion Act – 10 year moratorium – extended 1902, repealed 1943 • 1885 Jay Gould tried to get rid of Knights of Labor on his Wabash RR by firing active union members, Union instructed all Knight to walk off the job • Crippled Gould, met with Powderly, ended campaign against Knights of Labor • Became disillusioned with series of unauthorized strikes in 1886, declined at same time new union was gaining strength – American Federation of Labor • AFL replaced Knights’ grand visions with practical tactics – Samuel Gompers head 1886 until death in 1924 – higher wages necessary to enable working class to live decently • Felt would have to harness bargaining power of skilled workers who businesses could not replace – focus on raising wages and reducing hours • Organized it as a federation of trade unions so that they would work together without violating their sense of craft autonomy • Demand 8 hour workday, employers’ liability for workers’ injuries, mine safety laws; did little to recruit women workers because they believed women workers undercut men’s wages; by 1904 AFL grew to over 1. 6 million – less than 5% of work force joined union ranks – were only occasionally effective

STRIKES AND LABOR UNREST • 1881 – 1905 close to 37, 000 strikes erupted, nearly 7 million workers participated • First wave began 1873 with Wall Street crash triggered and major depression – 6, 000 businesses closed, striking PA coal miners fired and evicted from homes, turned deadly in 1877 • Strike exploded up and down RR lines – rioters in Pittsburgh torched Union Depot, Rutherford B. Hayes called out troops and quelled strike – nearly 100 died and 2/3 of RR idle • Middle class worried – employers capitalized on public hysteria and required workers to sign “yellow dog” contracts , some hired Pinkerton agents , turned to US government/Army • May 1, 1886 workers walked off their jobs in support of 8 hour workday; 3 days later Chicago police shot and killed 4 strikers at Mc. Cormick Harvester plant – at protest rally at Haymarket Square someone threw a bomb killing 7 policemen - police fired and killed four • Public lashed out at labor, 8 men were arrested , no evidence connected them but all were convicted of murder and 4 were executed • Mine Owners’ Protective Association cut wages in Idaho 1892 skilled dynamiters blew up the mill and captured the guards sent to defend it – National Guard had to be called in • Homestead Strike – to destroy union cut wages and locked out workers – workers fired on armed men from Pinkerton Detective Agency who came to protect the plant – battle broke out – 7 union members and 3 Pinkertons died – sent out National Guardsmen to restore order – union was crushed and mill in full operation in a month

• 1894 Pullman Palace Car Company Strike – 1880 Pullman created town – provided homes, parks, playgrounds, but also closely policed workers’ activities, outlawed saloons, insisted on profit • Depression of 1893 hit, slashed workers’ wages without reducing rents – thousands joined newly formed American Railway Union and went on strike – led by Eugene V. Debs – union members working for nation’s largest RR refused to use Pullman cars, paralyzing rail traffic • General Managers’ Association imported strikebreakers, asked US attorney general Richard Olney for an injunction against strikers for refusing to move RR cars carrying US mail • Union volunteered to carry mail cars to trains that did not carry Pullman cars , RR delayed mail by refusing to send trains without full complement of cars – Olney and President Cleveland cited Sherman Anti-Trust Act & got injunction against leaders of American Railway Union • Union refused to order members back to work, Debs arrested, federal troops poured in, during ensuing riot workers burned 700 freight cars, 13 people died, 53 wounded – strike crushed • Identified strikers with anarchism and violence • Supreme Court in In re Debs upheld Deb’s prison sentence and legalized use of injunctions against labor unions • 1897 Mary Harris Jones persuaded coal miners in PA to join United Mine Workers of America – used women and children to make her point– wages restored because owners need to restore production • Efforts of unions to build a national working class labor movement achieved only limited success

SOCIAL THINKERS PROBE FOR ALTERNATIVES • Defenders of capitalism preached laissez-faire argument; Reverend Russell Conwell said everyone had a duty to become rich • The Gospel of Wealth 1889 by Andrew Carnegie justified laissez-faire saying it insured the survival of the fittest • William Graham Sumner disapproved of government interference - What Social Classes Owe Each Other – applied evolutionary theories of Darwin to human society – called Social Darwinism –asserted natural laws controlled the social order – the state only owes its citizens law, order, and basic political rights • In Dynamic Sociology 1883 – Lester Frank Ward argued the state could regulate big business, protect society’s weaker members, prevent the exploitation of natural resources • Henry George – proposed a single tax – Progress and Poverty 1879 – government should tax speculators profits from land use it to end the misery caused by industrialization –bring the benefits of socialism without stifling initiative

• Looking Backward tells of a world without poverty or strife, a centralized staterun economy and religion of solidarity where everyone works for common welfare –caused nearly 500 Bellamyite organizations, called Nationalist clubs, to spring up • Karl Marx in Das Kapital 1867 said labor required to produce a commodity was the only measure of commodity’s value any profit made was “surplus value” appropriated from exploited workers as competition increased, wages would decline to starvation levels society would be divided between shrinking bourgeoisie and impoverished proletariat • proletariat would revolt and seize control of the state • state would wither away and a classless utopia would emerge • • • Marxism had little appeal to anyone other than small group of primarily Germanborn immigrants – Socialist Labor party 1877 attracted only about 1, 500 members by 1890 • Alarming to the public was the handful of anarchists who rejected Marxist discipline and preached the destruction of capitalism, overthrow of state, creation of utopia • 1892 Alexander Berkman attempted to assassinate Henry Clay Frick, manager of Andrew Carnegie’s Homestead Steel Works – didn’t ignite a workers’ insurrection that he had hoped