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Capital and Labor in the Age of Enterprise, 1877–1900. What factors led to the economic success of industrial capitalism in America after 1877? How were business practices organized and new technologies harnessed in order to maximize profits in American industry?
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What factors led to the economic success of industrial capitalism in America after 1877? • How were business practices organized and new technologies harnessed in order to maximize profits in American industry? • What were the working conditions of American industrial laborers? • How and why did American workers seek to improve their working conditions in the late nineteenth century?
Industrial Capitalism Triumphant • The Age of Steel • The Railroad Boom • Large-Scale Enterprise
The keys to large-scale enterprise in late-nineteenth-century America were • a. A rapidly growing population. • b. The lack of internal trade barriers. • c. The protection of domestic manufacturers through high tariffs. • d. The availability of cheap labor.
The introduction and ready acceptance of new technologies such as the Bessemer steel furnace. • Rapidly expanding markets. • An abundance of natural resources. • Available labor. • Available capital. • High profits.
Early factories produced consumer goods-goods that replaced articles made at home or by individual artisans. • Gradually, capital goods-goods that added to the productive capacity of the economy-began to drive America's industrial economy. • Central to the capital-goods sector was a technological revolution in steel making. • In 1856 British inventor Henry Bessemer designed the Bessemer converter, a furnace that refined raw iron into steel, which is more durable than wrought iron.
In October, 1855, Bessemer took out a patent for his process of rendering cast iron malleable by the introduction of air into the fluid metal to remove carbon. Bessemer's industrial process was similar to a Chinese method to refine iron into steel, developed in the second century BCE. They called this process the "hundred refinings method" since they repeated the process 100 times.
Andrew Carnegie was the first to fully exploit Bessemer’s invention; in 1872, he erected a massive steel mill that used the Bessemer converter. • The Edgar Thompson Works of Pittsburgh became a model for the modern steel industry.
The technological breakthrough in steel spurred the intensive mining of some of the country's rich mineral resources: iron ore and coal. • The nation's energy revolution was completed with the coupling of the steam turbine with the electric generator; after 1900 American factories began a conversion to electric power.
We also need to understand the significance the massive American rail network • a. Railroads linked the various sections of the country together: virtually every American lived fairly close to a rail line. • b. The railroads made possible the rapid movement of large numbers of passengers and vast amounts of freight at a decreasing cost. • c. The railroads spurred the growth of the steel industry because rails were the chief product of American steel mills in the 1870s and 1880s. • d. The tremendous sums needed to finance track construction revolutionized American capital markets as large stock and bond issues were floated to underwrite the building boom. • e. The explosive growth in track mileage made mass marketing possible.
Americans were impatient for year-round, on-time transportation service that canal barges and riverboats could not provide; the arrival of locomotives from Britain in the 1830s was the solution. • The United States chose to pay for its railroads by free enterprise, but the government played a big role, helping to underwrite the cost of railroad construction with land grants and financial aid. • The most important boost that government gave the railroads was a legal form of organization-the corporation with limited liability.
Railroad building generally was handed over to construction companies, which were primarily financial structures and oftentimes corrupt. • The companies would often hire contractors and suppliers and persuade them to accept the bonds as payment, and, when that failed, wheel and deal to raise cash by selling or borrowing on the bonds.
The most successful railroad promoters were those with access to capital; Cornelius Vanderbilt and James J. Hill were the most famous.
Vanderbilt James J. Hill
Despite its fierce competition and sometimes sordid ways, railroad development in the United States resulted in a rail network bigger than the rest of the world combined; by 1900 virtually no corner of the country lacked rail service. • Along with this prodigious growth came increasing efficiency-in 1883, the railroads divided the country into the four standard time zones to manage scheduling, and, by the end of the 1880s, the track gauge was standardized.
The inventor George Westinghouse perfected the automatic coupler, the air brake, and the friction gear; this resulted in a steady drop in freight rates for shippers.
For investors the price of railroad competition was high; when the economy turned bad, as in 1893, a third of the industry went into receivership. • After 1893 the investment banks J. P. Morgan & Co. and Kuhn Loeb & Co. stepped in to persuade investors to accept lower interest rates or put up more money, and they eased competitive pressure by consolidating railroad rivals.
After 1893 the investment banks J. P. Morgan & Co. and Kuhn Loeb & Co. stepped in to persuade investors to accept lower interest rates or put up more money, and they eased competitive pressure by consolidating railroad rivals. • By the early twentieth century, a half dozen great regional systems had emerged out of the jumble of rival systems and shifted the nerve center of American railroading to Wall Street.
. Large-Scale Enterprise • Until well into the industrial age, most manufacturers operated on a small scale for nearby markets. • America's population, swelled by immigration and a high birthrate, jumped from 40 million in 1870 to more than 60 million in 1890. • The railroads linked expanding cities and brought America's expanding markets within the reach of distant producers. • Americans were ready consumers of standardized, mass-marketed goods.
How mass marketing was executed in the United States can be seen from the example of the meatpacking industry. • With the 1865 opening of the Union Stock Yard in Chicago, livestock came in by rail from the Great Plains, was auctioned off in Chicago, and then shipped east for processing in "butchertowns."
This arrangement-a national livestock market but localized processing-could have met the needs of the exploding population, but Gustavus F. Swift had a different vision.
Swift pioneered the creation of a new kind of enterprise-a vertically integrated firm capable of handling within its own structure all the functions of an industry from central processing to distribution (via newly developed refrigerated rail cars and wagons to deliver meat to retailers) to constructing additional facilities to process by-products.
Others shared Swift's insight that the essential step was to identify a mass market and then develop a national enterprise capable of serving it. For example, John D. Rockefeller's Standard Oil Company had a national distribution system for kerosene.
The retail business went through comparable changes. Montgomery Ward and Sears, Roebuck developed into national mail order houses for rural consumers, John Wanamaker pioneered the department store, and chain stores such as A&P and Woolworth's were created.
In 1872 Aaron Montgomery Ward established the first mail-order business at Clark and Kinzie Streets in Chicago, with $2,400 capital. The first catalog consisted of a single-sheet price list, 8 by 12 inches, showing the articles for sale with ordering instructions. By 1904, three million catalogs weighing 4 pounds each were being mailed to customers. Ward's early customers were primarily from rural America, lured by a large selection of items and a promise of "satisfaction guaranteed."
In 1887, Sears hired watch repairman Alvah Curtis Roebuck to handle many of the returns that needed repaired. Roebuck was not only Sears's first employee, but he later became co-founder of Sears, Roebuck & Company. Roebuck's contribution to the corporation was short-lived, however, and due to personal considerations he sold his share of the company to Sears in 1895 for $25,000. Sears himself clashed with new business partner, Julius Rosenwald, and quit the business in 1908. He later sold his portion of Sears stock in 1913 and died that same year. To this day, Sears's advertising and promotional skills remain legendary, and today's most sophisticated marketer's continue to employ the tried and true concepts that Sears made famous.
Before Wanamaker invented the price tag, most buying was done by haggling.
In the late nineteenth century, modern advertising appeared as big businesses set about the task of creating a national demand for their brand names. • Drawing on the experience of rail companies, many of the new vertically integrated firms adopted a centralized, functionally departmentalized plan, with a central office housing top executives and departments covering specific areas of activity purchasing, auditing, production, transportation, or sales.
Functionally defined departments gave rise to "middle management," which directed the flow of goods and information through the integrated enterprise. • By the turn of the century, the hundred largest companies controlled roughly a third of the nation's total productive capacity, and the dominant form of industrial organization had become large-scale enterprise. • Despite the rise oflarge firms, small manufacturers still flourished, making a variety of goods through a system called "flexible specialization."
The World of Work • Labor Recruits • Working Women and the Family Economy • Autonomous Labor • Systems of Control
. Labor Recruits • Industrialization set people in motion; farm folk migrated to cities and artisans entered factories. • Rural Americans mostly rejected factory work; though they lacked industrial skills, • They did have language, literacy, and cultural skills that made them employable in white-collar jobs. • The United States could not rely primarily on its own rural population for a supply of workers, except in the South, where a low-wage industrial sector emerged after Reconstruction.
Southern textile mills recruited workers from the surrounding hill farms; mill wages exceeded farm earnings, but not by much. • The new southern mills had an advantage over those of the long-established New England industry-southern mills' wages were as much as 40 percent less. • A "family system" of mill labor developed, with a labor force that was half female and very young. • Blacks sometimes worked as day laborers and janitors but seldom got jobs as operatives in the cotton mills. • In natural resources, the South's other growth sector, employers recruited with little regard for race. Logging and the iron industries were both racially integrated.
