Industry Comes of Age, 1865-1900

1. Industry Comes of Age, 1865-1900 Chapter 24

2. Why Railroads? • Prior to the railroad it was difficult for companies to move products to distant locations. • A transportation system was needed to efficiently and cheaply move both raw materials to the factories and the finished goods to the consumers. • River and canal transportation were limited to areas near water routes. In addition, frozen water prevented their use during the winter. • Railroads solved the problems and within a few decades of development, railroads became the most important method of moving goods and people.

3. Innovations • The width of the rail tracts (gauge) was standardized which allowed trains from different railroads to switch tracks. • Four standardized time zones were created for the entire nation in 1883. This made it possible to create train arrival and departure times across the country. • Steel rails replaced iron rails, which could carry heavier loads. • The state and federal governments gave railroads huge grants of land amounting to over 180 million acres. This provided an incentive to build more lines and encouraged settlement. • George Westinghouse patented the first automatic air brake, which made train travel much safer.

4. Land Issues • The land granted to the railroad companies was often times occupied by Native Americans. • Indian raiding parties would attack construction workers, pull up rails, and other forms of sabotage. • Native Americans were upset by the hunting of buffalo and occupation of their land. • Ultimately this struggle was won by the railroad companies.

5. Chinese Laborers • A few factors led to the need for more labor on the Central Pacific line. • First, a silver rush in Nevada drew away many workers. Second, the white workers often went on strike for higher wages. Third, the completion deadline was rapidly approaching. • Charles Crocker convinced his partners to hire the Chinese, many of whom had emigrated during the Gold Rush in the 1840s.

6. Philosophy: Laissez-Faire • Term originated in France during the Enlightenment • Based on the idea that the government should not intervene in business or the economy; instead natural law or market forces would regulate • Adam Smith popularized the term and concept in his book Wealth of Nations in 1776 • This approach was embraced by industrialists during this era who did not want the government to regulate them in any way

7. Philosophy: Social Darwinism • Philosopher Herbert Spencer applied Darwin’s theory of evolution and natural selection to human society • Darwin had argued that plants and animals had evolved throughout the years and that weaker species would die out • Many Christians were outraged at the conclusions Darwin made about the origin of the species • Spencer argued that society evolved through competition and the idea of “Survival of the Fittest”

8. Individualism • The idea that a person should not rely upon others for success • This philosophy was evident from the beginning of United States history • Author Horatio Alger made this concept the theme of his books in which a poor young man is able to create wealth and success through his hard work • Later the term “rugged individualism” becomes popular

9. The Rise of Big Business • Big businesses came to be because they could produce goods more cheaply and efficiently than small businesses • This forced many small companies out of business • Oil was discovered in Pennsylvania and Rockefeller created Standard Oil Co. to cash in on the discovery • Steel became profitable because of the Bessemer Process and the demand for railroads

10. The Self Made Man • Andrew Carnegie emigrated to the US from Scotland in 1848 • He worked his way from bobbin boy in a textile factory making $1.20 a week to making $50,000 a year with a railroad company and creating his own business investing in the steel industry • Preached a “gospel of wealth”: make as much money as you can, but give it away

12. Billionaires in 1900

13. Robber Barons vs. Bill Gates

15. Cornelius Vanderbilt • Borrowed money from parents to buy a boat that took passengers between Staten Island and New York City when he was a teen • Commissioned during the War of 1812 to transport items for the government around New City • made him enough money to buy several more ships • 1829: Formed a steamship company on the Hudson River and charged lower fares than his competitors • Became the most powerful shipping tycoon in the region and made him a millionaire by 1846, earning the nickname "Commodore" • 1860s: Began investing in railroads and eventually built the first line connecting New York City and Chicago • Also built New York’s Grand Central station • Most historians estimate that when he died he was worth $100 million ($1.7 billion in today’s dollars)

16. John D. Rockefeller • Sold farm implements, fertilizers and household goodswith partner • In 1862 met and went into business with Samuel Andrews who had developed a better and cheaper way of refining crude petroleum • Named the company Standard Oil • Negotiated first major deal to lower his cost of transporting oil and refined oil by guaranteeing the railway company sixty carloads a day • This allowed him to lower the prices he charged for oil, his sales skyrocketed, and in less than a year some of his competitors went out of business • Rockefeller bought out Andrews for a million dollars and eventually monopolized oil refining in Cleveland • Dominated the oil industry across the nation by putting local companies out of business • By 1890 Standard Oil was a monopoly that could fix its own prices and terms of business • Rockefeller was worth about $9 billion dollars ($190 billion in 2002 dollars)

17. “If you have to ask how much it costs you can’t afford it”-John Piermont Morgan • Born into a wealthy family • 1857: he worked as an accountant in his father’s firm in London • After returning to the U.S. worked for several New York banking firms until he became a partner in Drexel, Morgan and Company in 1871 • In 1895 he reorganized the company into J.P. Morgan and Company • Made a huge amount of money by financing railroad companies that were in financial trouble • Hated competition and instability in the economy and dedicated his career to brokering and financing deals that yielded consolidations in the electric and steel industries • 1901: created U.S. Steel, the world's first billion-dollar corporation • By the early 1900s, Morgan controlled almost all of the major industries in the U.S. and had a large stake in the financial and insurance industries • Morgan was an avid art and book collector

19. Vertical and Horizontal Integration Vertical Integration • Buying all of the different businesses that the operation of a company depends upon • Example: • A clothing company would own the trucks to distribute, the factory, the cotton farm, etc. • Buying several small businesses to create one large business • Example: • Independent oil companies combine to create the US Oil Company • When a single company controls an entire market it becomes a monopoly • Many Americans feared monopolies because they could charge whatever price they wanted to Horizontal Integration

20. Working in the United States • Working conditions were not very regulated • Workers breathed in toxic fumes, lint, and dust • The average industrial worker in 1900 made 22 ¢ per hour and worked 59 hours per week

21. % of world manufacturing by nations 1870-1913. “Other Nations” means every other country in the world combined.

22. Inventions and Innovations • Alexander Graham Bell – Telephone • Christopher Latham Sholes – Typewriter • Thomas Edison – DC (Direct Current) electric generator, phonograph, incandescent light bulb • Nicola Tesla – AC (Alternating Current) electric generator, hydroelectric power

23. Edison • First patent was in 1868 for an Electrical Vote Recorder • 1869: Received patents for an improved stock ticker and several other devices • Between 1872 and 1876 he invented the motograph, automatic telegraph systems, paraffin paper, the electric pen (mimeograph machine), and many other useful machines • 1876-1877 he invented the carbon telephone transmitter "button", which made telephony a commercial success • First phonograph was made in Edison’s lab • 1879 he invented the first commercially practical incandescent electric lamp and later invented the machinery for the commercial use of electricity • Altogether Edison obtained almost 1100 patents and developed the first research lab at Menlo Park, NJ

24. Trusts • Business entity designed to create a monopoly over an industry • Some formally organized under the law • They were created when corporate leaders convinced, often through coercion, the shareholders of all the companies in one industry to turn over their shares of a corporation to a board of trustees, in exchange for dividend-paying certificates • The board would then manage all the companies in "trust" for the shareholders • This translated to an emphasis on the elimination of competition in the process of managing all of the companies in order to maximize profits • Eventually the term was used to refer to monopolies in general

25. Early Unions • Many workers thought the way to improve working conditions was to form unions and bargain for better working conditions and higher wages • Unions were opposed by company owners because they saw them as illegitimate conspiracies that interfered with their property rights • To prevent unions from forming companies required workers to sign contracts against unions, hired detectives to identify union organizers, and blacklisted workers who tried to unionize • Companies would lock workers out of their property and refuse to pay them until they broke up the union

26. Marxism • Marxism (a set of ideas of Karl Marx) started to scare people in the capitalist US • Marx believed that workers would revolt and seize control of factories • Many European immigrants had heard the ideas of Marx and when they came to the US nativism (anti-immigrant feelings) started to spread

27. The Struggle to Organize • The recession that started in 1873 continued into 1877 • Railroad workers across the country walked onto the tracks and refused to move • After property had been destroyed and people killed, President Hayes sent the army out to stop the strike

28. The Haymarket Riot and the Pullman Strike • Haymarket Riot • Movement for 8 hour workday gained support • A nationwide strike took place on May 1, 1886 • In Chicago, a clash between strikers and police left one striker dead. The next day a protest was organized in Haymarket Square • Police entered the square and someone threw a bomb • Police opened fire and workers shot back • 8 German men were arrested, though the evidence was weak, and 4 were executed • Pullman Strike • Workers at the Pullman Factory who had been required to live in a company town went on strike because of slashed wages and the firing of 3 workers who complained • Workers across the country boycotted Pullman cars and refused to handle them, tying up railroads and threatening to paralyze the economy • Railroad managers arranged for US mail cars to be attached to Pullman cars because the workers would then be interfering with the US mail (violation of federal law) and President Grover Cleveland sent in troops