The Rise of Big Business, Labor and Agriculture

1. The Rise of Big Business, Labor and Agriculture

2. The Industrial Revolution • Involved the invention of new machines and new systems • Goods were produced on a massive scale for domestic and foreign markets. • Industrial growth led to the development of a new type of business, the Corporation. • Industrial Revolution was sparked by technological advances in many fields.

3. US Advantages in Industrialization • Patent Laws: The Constitution gives Congress the power to issue patents to inventors. • Corporate business organizations: sell shares in business to raise capital. Limited Liability shareholders. • Corporations could raise significant amounts of capital needed for investment in industrial projects such as railroads.

4. Railroads Improve Transportation • Transcontinental Railroads had its roots in the Civil War. • Congress of 1862 authorized the construction of the first Transcontinental Railroad connecting the Atlantic and Pacific lines. • Gov’t involvement was crucial because it was too expensive a project for private investors to handle. • Gov’t provided subsidies by the mile in exchange for lower rates. (tens of thousands of dollars per mile) • The Republican Congress also gave land grants to the railroads • Railroad was completed in 1869 • Built by many Chinese and Irish laborers.

5. Railroads • Cheaper, faster, and carried large quantities of goods. • 1865 vs 1895 flour> 3.45 vs .68 • Poor safety, many train wrecks because of communication problems and poorly design equipment.

6. Communications • Telegraph • Western Union Telegraph Company • AT&T

7. Electricity • Thomas Edison • Electricity direct current, light bulb, phonograph, • George Westinghouse: • alternating current

8. Bessemer Process • Cheaper and quicker process to produce steel • Lighter, stronger, and more flexible than iron. • Led to mass production of steel • Building of the Brooklyn Bridge

9. Other Sources of Power • Kerosene: used to light homes • Gasoline

10. Types Of Business • Sole Proprietors: Owned by one person • Partnerships: small business 2 or more owners. • Corporation: many investors own shares and stocks- receive portion of profit

11. Corporations • Setup other forms of businesses to limited competition • Pools: competing companies in one field make an agreement to fix prices and divide business. • Trusts: group of corporations combine under a single board that controls the actions of all member corporations-stockholders have no say in the operations

12. Corporations Continued • Monopoly: company or small group of companies that have complete control over a particular field. • Conglomerate: Corporation that owns a group of unrelated companies- usually through mergers.

13. Economic trends 1865 - 1925 • Formation of corporations: to raise capital. • Develop business practices to eliminate competition • Use pools and trusts to eliminate competition • Mechanization and division of labor hurt the competitiveness of small businesses. • Economies of Scale • Horizontal and vertical integration

14. Robber Barons or Captains of Industry? • Big businessmen not politicians controlled the new industrial age. • Young men enticed by the business world because of huge profits.

15. Robber Barons • Made their fortunes by stealing from the public. • Were not regulated by government and did whatever they could to make as much money as possible. • Believed in Social Darwinism. • Believed in Laissez Faire Economics: no taxation of business or regulation

16. Captains of Industry • A more positive view • Seen as making a contribution to society • Increased the supply of goods • Built new factories • Created new jobs • Raised productivity • Contributed to universities, museums, and libraries.

17. Andrew Carnegie • Built steel mills in Pennsylvania that used the new Bessemer process. • Built his company into an empire using vertical integration. • Integrated his production process by buying out all of the companies – coal, iron ore and so on needed to produce, transport, and sell the steel. • Preached Gospel of Wealth: make as much money as possible and then contribute to charities. 3000 libraries and supported artistic and research institutes.

18. John D. Rockefeller • Standard Oil Company in 1870 • 10 years later refined 90% of all the oil in the US. • 1882 Standard Oil Trust: Samuel Dodd • His aim was to control the market and ruin his competitors by the following methods. • Rebates from the railroads; used to lower prices • Always offered to buy out competitors • Avoided shipping costs by building pipelines

19. Henry Ford • Interchangeable parts and the assemble line. • Paid high wages • Electrical engineer

20. J Pierpoint Morgan • Banker loans to growing businesses • Purchased Carnegie Steel and created US Steel • Also took control of bankrupt railroads. And reorganized them. • Involved in insurance, electrical, and shipping companies.

21. Vertical Integration Steel mill Shipping facilities Limestone quarry Coal mines Iron mines

22. Horizontal Integration Independent steel mills Integrated Steel Company Independent steel mills are taken over by one large steel company. Destroys competition

23. Government Regulation • Interstate Commerce Act 1887 and the Interstate Commerce Commission • ICC set up to end abuses such as railroad rebates to special customers, pools and trusts. • Railroad rates had to be fair and just • Pools were illegal • Rebates to favorite customers were illegal • Could not charge more for a short haul than a large one. • Sherman Anti-Trust Act: designed to increase competition and end monopolies or any other business practice that restrain trade or competition.

24. Effects • Business cycle boom and bust • 1893 500 banks and 15,000 businesses went bankrupt. • 4 year depression • Over production of goods led to laying off workers or lowing wages.

26. Supreme Court Decision • 1896: Walbash, St. Louis & Pacific Railroads v. Illinois • Constitutional Principle: • National power v. state power • Property rights • Interstate commerce • federalism • Why Decision is important: • Invalidate state law that set railroad rates. • Declared it a federal power to regulate rates. • Strengthen the Constitution’s Interstate Commerce Clause • Led to the creation of the ICC

27. Work Force • Shift in work force • 9 million Americans move to the city • 14 million immigrate to the US/ Contract labor Act.

29. Working Families • Family affair • Children left school at 12 or 13 • Girls worked so that boys could stay in school • Women entered the workforce. • Children at young as 6 or 7 • 70 hour work weeks • Poor working conditions

31. Government help or lack of help • Americans believed that the government shouldn’t help. • No unemployment insurance • No health insurance • No sick days • Social Darwinism was the rule • Only private charities

32. Factory Work • 12 hour days • System of piecework • Favors young and strong workers • Increasing Efficiency: Frederick Winslow Taylor: Time and Motion studies. • Division of labor: separate tasks • Impersonal: hands or operatives • Fine or fire • Boring, noise was deafening, lighting, ventilation • 675 killed weekly • Deadly fires

33. Women and Children • Long hours and low pay • No advancement • Children of the Poor: written by Jacob Riis

35. Worker Insecurity • Dissatisfied workers were easy to replace: • Immigrants eager to work • Women and children • Farm youths heading to the cities • African Americans leaving the south for a better life.

36. Knights of Labor • Early trade Unions • National Trade Union first nation wide. • Most died out during the panic and depression of 1837. • Philadelphia in 1869: The Noble Order of the Knights of Labor. • Open membership • Goals and methods: arbitration • Formed cooperatives • Sudden rise and sudden fall

37. American Federation of Labor • A F of L • Limited membership • Samuel Gompers organized a federation of craft unions that kept their independence. • The leadership set overall policy for achieving common objectives. • Goals: higher wages, shorter hours, and better working conditions./strikes • 1900 ½ million workers • Clashes with state and federal troops in the Great Railway Strike(1877) and the Pullman Strike (1894)

38. International Ladies’ Garment Workers Union • 1900 • 1910 successful strike.

39. Unions • Collective Bargaining: union members representing workers negotiate labor issues with management. • If collective bargaining failed, labor unions often used strikes or worked stoppages.

40. Labor Conflicts • Great Railway Strike 1877: pay cuts; federal troops. • Haymarket Riot 1886: bomb blast kills many people including 7 police officers. • Homestead Strike: 1892 pay cut at Carnegie steel plant in Homestead. Plant hired guards violence broke out and 16 people were killed. The National Guard was called in. Only 25% got jobs back.

41. Labor Conflicts • Pullman Strike: 1894 railway car makers. President Grover Cleveland sent in federal troops. • Sets off a constitutional debate over Cleveland’s actions. • 1895 In Re Debs case • Lawrence Textile Strike: Industrial Workers of the World (IWW)

42. Supreme Court Case • In Re Debs 1895 • Constitutional Principle: National Power and the commerce clause. • Why decision is important: ruled that the federal government under the commerce clause of the Constitution had the right to halt the strike. • Said strike hurt the general welfare of nation by disrupting commerce and mail delivery.

43. An era of Strikes, late 1800s Gap between Rich and Poor grows larger Tensions Increase between Workers & owners Workers Organize unions Gov’t sides with Business leaders Sometimes using Troops to put down strikes 1877 era of Violent Strikes; Great Railway Strike, Pullman Strike, Homestead Strike Business Leaders Oppose unions

44. Farmers Against the Railroads • Availability of Cheap land • Homestead Act 1862 gave 160 acres of land to citizens just by promising to cultivate it for 5 years.

45. Farmers v railroads, merchants, and banks • Farm families only assets were good cheap land and their own hard labor. • Expenses were high. • Major expense was high railroad rates for storing crops in grain elevators and shipping the crops to the city. • To meet expenses until crops were sold farmers depended on credit from merchants and loans from banks. • Natural disasters and low prices often prevented farmers from paying their debts and losing their farms. • Farmers came to resent railroads, merchants, banks, and buyers who expected lower prices when production increased..

46. The Granger Movement • Founded in 1867 to bring farm families together for social purposes but soon focused on coping with troubling economic issues. • Railroads competed for business over long routes and therefore charged low rates. • They made up their loses by overcharging farmers who had to ship crops over less competitive short routes. • Also high charges for storing grain in grain elevators

47. Grange Laws • 1870s Grangers persuaded state legislatures to pass laws regulating railroad freight rates and elevator storage rates. • Munn v Illinois the Supreme Court ruled that states could set maximum rates for grain storage but could not regulate freight rates

48. The Populist Party • Farm prices fell in the late 1800s, farmers joined a movement that became the POPULIST PARTY. • Populist objectives 1892 • Graduated income tax • Government ownership of railroads and telephone and telegraph companies. • 8 hour work day • The initiative (voters’ power to propose new ideas for new state laws) and the referendum voters’ power to approve or reject new laws) • Secret ballot • Popular election of senators instead of state legislatures • Limit terms of president and vice president to one

49. The Populists and Inflated Money • Inflate currency by printing paper money or coining silver. 16 silver dollars for every gold dollar. Populist believed there was a connection between the hording of gold coins and the lower prices they received on their products. • Populist wanted to create inflation

50. Silver Against Gold • Election of 1896: William Jennings Bryant • Silver Democrats v Northern and Eastern Democrats whom favored gold. • Bryant loses to William McKinley