The Rise of Big Business in America: Factors and Influential Leaders

1. The Industrial Movement Unit 7 Notes

2. The Rise of Big Business In America • Factors Promoting big business in America: • Abundant Natural Resources • New Technologies • Transportation • Cheap Labor

3. Abundant Natural Resources • Coal • Oil • Iron Ore • Water

4. New Technologies • Factory System • Steam Engine • Railroads and Steamships • New Machines and Tools • Interchangeable Parts

5. Transportation • Canals, steamships, and especially railroads • Greatly improved the ability to transport both raw materials and finished products

6. Cheap Labor • Large families and the arrival of immigrants meant a huge population that needed work • High demand for jobs kept the cost of labor down for business

7. Economic Environment • Investment Capital: • Local and International investors saw a bright future for American Industry • (Many investors had made their money through the old Triangle Trade) • Laizzes-Faire: • The government did not get involved in setting prices and wages – the market was allowed to control this through “supply and demand” forces • More people wanting jobs  Less jobs available  People will work for less money

8. Economic Environment • Federal Government Support • High tariffs kept foreign goods out of US markets • Gave away lands to railroad companies to promote railroad development • Sold lands to mining companies for less than real value • Stayed out of most of the affairs of business – allowed “free enterprise” to take place

9. Social Attitudes • Social Darwinism • The ideas of “survival of the fittest” as applied to the business community • The strongest should survive and the weakest businesses will fail • Social Darwinism was used as justification for many actions • Also applied against government thoughts to help the poor – was seen as “against the laws of nature”

10. Social Attitudes • Horatio Alger Myth: • Based on books by the author Horatio Alger • His characters often embodied the “Puritan Ethic” – hard work brings success • Often featured the dream of a poor boy rising to become a wealthy businessmen • “The American Dream”

11. Characteristics of Big Business • New ways began at this time to organize business • Incorporation • Corporations are businesses that have many investors owning shares of the business • Shareholders hope to receive a share of the profits at a future time • Losses are spread out to only what a shareholder owns • This increased capital investment in American industry

12. Characteristics of Big Business • Trusts • A group of corporations in a related field, such as oil or railroads – used to control prices, etc. • They were later made illegal • Department Stores • Putting several small stores together under one roof – more efficient shopping • Mail Order Catalogs • Sears and Montgomery Ward opened up department store shopping to rural areas

13. Case Study: Important Business Leaders • Andrew Carnegie • Early Life: Immigrant from Scotland, work in textile mill at age 12 • Big Break: worked for the PA Railroad, familiarized himself with Bessemer’s process of steel making • Industry: Steel

14. Case Study: Important Business Leaders • Andrew Carnegie: • Reason for Success: • Vertical integration: merging steps of production to cut cost of production • Acquired coal mines, iron ore fields, limestone quarries • His prices were lower than any other competitor • Later Life: • Sold his company for a quarter of a billion dollars • Believed the wealthy had an obligation to society and gave away millions of dollars – philanthropy • Underwrote many public libraries across the United States

15. Case Study: Important Business Leaders • John D. Rockefeller • Early Life: Born and raised in NY state, focused on accounting from an early age • Big Break: moved to Cleveland, got involved in oil business at it’s beginnings • Industry: oil refining (controlled 90% worldwide)

16. Case Study: Important Business Leaders • John D. Rockefeller • Reasons for Success: • Horizontal integration: merging companies that produce the same product • Single minded, goal oriented focus • Able to adapt to changing government policies • Formal trusts in response to anti-monopoly legislation • Later Life: • His son, John Jr., tried to change his father’s image into a loveable billionaire (handed out Rockefeller dimes)

17. Other Important Business Leaders • Cornelius Vanderbilt: • Began as a ship captain and ended up owning large railroad companies • Owned the New York Central and dominated railroad business between New York City and Chicago

18. Other Important Business Leaders • J.P. Morgan • Began as a banker – made money making loans to growing businesses • Took over many bankrupt railroads and merged them into larger profitable ones • Later bought Carnegie Steel and merged it with others to form U.S. Steel

19. Other Important Business Leaders • Henry Ford • Revolutionized auto making by using the assembly line to produce more affordable cars

20. Impact of Big Business • Urban Growth • Why they came: • For jobs and better housing • Immigrants settled in ethnic neighborhoods of cities they landed in • Visions of improved opportunities and prosperity

21. Impact of Big Business • Urban Growth: • Where they went: • The urban industrial centers of the north, mostly • Immigrants tended to settle in the port city of where their boat landed

22. Impact of Big Business • Urban Growth: • Influx of foreign immigrants • “Old” Immigration: Early 1800’s – mostly from northern and western Europe • “New” Immigration: Late 1800’s – mostly from southern and eastern Europe and also from Asia

23. Impact of Big Business • Urban Growth • Problems: • Crowded tenement apartment buildings were unsafe and unpleasing living conditions • Crime was prevalent – especially in the poorer areas • Corruption in political sectors was rampant and did not improve most people’s daily lives

24. Work and the Workers • Factory working conditions: • Long hours (12-16 hour days) • Low pay • Unsafe conditions – machines, factories, mines • Replaceable workers (more people than jobs) • Child labor: • Kids were used when possible because business owners could pay them less • Conditions were much more dangerous to kids who often had trouble operating machines and working long hours

25. Work and the Workers • Two-wage earners: • New opportunities for women to work came about at this time • Women took jobs out of economic necessity – or to take a greater role in society • Paid less than men were paid for similar jobs (like children) • New job opportunities for women: • Factories (Textile Mills): factory work for women was usually limited to textiles • Domestic: jobs done as house cleaners, cooks, and nannies – usually done in homes of wealthy • Clerical: new inventions, such as the typewriter and telephone opened up new job opportunities for women

26. Abuses of Big Business • Monopolies: • Attempts by companies to eliminate competition and “corner the market” for a certain business sector • Influence on Government • Contributions to campaigns and candidates at a state and federal level in hopes to gain favorable legislation

27. Abuses of Big Business • Anti-Organized Labor: • Government sided with management against unions at this time • Unsafe products: • Companies often took advantage of lack of regulations on products

28. Abuses of Railroad Industry • Long and Short Haul Abuses: • Charging more for short hauls than long ones • Unfair Storage fees: • Charged farmers higher rates (especially in grain industry) • Rebates: • Industrialists given refunds as incentive to use specific railroads

29. America Responds to Big Business • Populist Movement: • The populist movement originated with farmers that wanted changes in national politics that would make their situation easier. It was a real threat to Southern Democrats, but eventually died out as economic conditions changed.

30. Populist Movement • The Grange • Originally organized as a social organization for farming families • Eventually turned into a powerful lobbying group for pro-farmer legislation • Developed into a co-op for agricultural communities to help regulate farm prices • The Granger Movement • Pressed Congress to pass laws to regulate the railroads and the prices they charged farmers • Developed co-ops to store and distribute agricultural products in order to better control prices of farm products

31. The Government Responds • Munn v. Illinois (1877) • First of the famous “Granger Cases” – reactions against railroads charging unfair prices to the farming industry • The issue: whether or not a state could regulate prices of railroad activities • Did the US Constitution permit a state to regulate privately owned business? • 7-2 decision in favor of the state – gave states power to regulate local businesses

32. The Government Responds • Interstate Commerce Act (1887) • First federal government regulation of Big Business • Marks an end to the established concept of unquestioned “laissez-faire” • Created the Interstate Commerce Commission – to monitor and regulate interstate businesses – especially railroads – and began to end abuses in this industry

33. The Growth of Labor Unions • Early National Labor Unions • Knights of Labor: • Led for many general reforms: 8 hour days, end to child labor, equal pay for women • Declined in power after a few unsuccessful strikes and competition from the A.F. of L. • A. F. of L. • American Federation of Labor – led by Samuel Gompers • Fought hard for basic rights and conditions for workers • Became very popular – but did not welcome women, immigrants, or African-Americans

34. Objectives of Labor Unions • Better wages for workers • Better working conditions: less hours and safer conditions • Better associated benefits like health care, sick days, vacation time, etc.

35. Important Leaders of Labor • Samuel Gompers: Early leader of the AFofL • Debbs: Leader of the American Railway Union – organizer of the Pullman strike

36. Conflict and Struggle • Tools of Management • Yellow-dog Contracts: Owners required workers to sign oaths not to join unions • Detectives were often hired to search out union organizers – then fire them • Lock-outs prevented workers from working – and getting paid!! • Owners often hired replacement workers (scabs) during a strike • Black lists: owners often shared names of troublemakers – no one else would then hire them

37. Conflict and Struggle • Tools of Unions • Collective bargaining – third party representatives used to negotiate contracts • Strikes – organized action of not reporting for work by employees • Picket – standing near business with signs to call attention to unfair conditions • Boycott – organized action of not buying products of a certain business

38. Major Strikes • Homestead • Workers at a Carnegie Steel Plant in Homestead, PA went on strike to protest a large wage cut • Management brought in security to protect the plant and continue work • Violence erupted and some people were killed and many wounded • Workers gave in and only a few of them got their jobs back • A major setback for unions – especially in the steel industry

39. Other Labor Unions (Mid 1900’s) • CIO • Congress of Industrial Organizations • Organized skilled and unskilled laborers in various industries • American Railway Union and United Mine Union were part of the CIO • AFL-CIO • 1955 – Two largest labor unions in America merged to form an even more powerful labor organization – became largest in the world