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Rise of industrial America

Chapter 18. Rise of industrial America. Rise of Corporate America. Early 19 th century Corporate business used to raise capital for transportation Separated manager from owner Sold stock and bonds to raise capital After Civil War New forms of business organization

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Rise of industrial America

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  1. Chapter 18 Rise of industrial America

  2. Rise of Corporate America • Early 19th century • Corporate business used to raise capital for transportation • Separated manager from owner • Sold stock and bonds to raise capital • After Civil War • New forms of business organization • Combined innovative technology, creative management structures, and limited liability • Depression years • 1873-1879 • 1893-1897 • Character of Industrial Change • 6 features dominated large-scale manufacturing after Civil War • Exploitation of Coal deposits= cheap energy • Increase in pollution • Rapid spread of technological innovation in transportation, communication, and factory systems • Need for enormous # of workers • Constant pressure on firms to compete by cutting costs and prices • Drive to maximize efficiency • Relentless drop in price levels • Avalanche of consumer goods • Failure of money supply to keep pace with productivity • Cost of living not = paid wages

  3. Railroad Innovations • Federal land grants • New internal market • Created national market for goods • Encouraged mass production, mass consumption, and economic specialization • Created new internal market • Promoted growth of iron and steel • Corporate enterprise • Issuance of stock • National distribution and marketing systems • New organizational and management structures • Use of technology • Telegraph • Accounting systems

  4. Consolidating the Rail Industry • 1870s a state of chaos for Railroads • No set standards for small companies • 4 lines in NE • 5 lines in West • Industry expansion (1870s-1880s) • Huntington and Gould • Robber barons • Manipulated stock market • “Trunk” systems • Largest business enterprises in world • Costs and Consequences • Overextended systems • Crooked business practices • Farmers/ small business caught in the middle • Rate discrimination outlawed • Interstate Commerce Act (ICC) • Oversee practices, challenged in court • Hepburn Act 1906 • Strengthened ICC, fixed prices • Depression of 1873 • Rail industry plagued • Lines shut down • J.P. Morgan • Bought up bankrupt lines • Reorganized administration • Refinanced debts • Built interstate alliances • Consequences • By 1900 7 giant systems controlled 2/3 of railways • Created modern stockholder corporation • Development of complex structures in finance, business management, and regulation of competition • Example for other industries

  5. Steel • Close connection with rail industry • Abundance of Iron Ore in Great Lakes • Andrew Carnegie • 1870s built steel mill • Used Bessemer’s technology and cost-analysis approach • Created vertical integration • Every stage of process controlled • By 1900 Carnegie Steel employed 20,000 people • World’s largest at time • 1901 bought by J.P. Morgan for $500 million • U.S. Steel Corporation • First Billion dollar business • New scale for industrial enterprise • Employed 168,000

  6. The Trust • Other industries followed • Created Oligarchy • Limited # of sellers influence price • Public outcry • Sherman Anti-Trust Act 1890 • Outlawed trusts and monopolies that fixed prices • Feared unchecked power • Too vague in wording • U.S. v. E.C. Knight Company • Sherman Anti-Trust could ONLY be applied to commerce, not manufacturing • Fierce competition led to consolidation in: • Oil, salt, sugar, tobacco, meat-packing industries • = lower prices, reduced costs • New organizational methods • Oil- 1st drilled 1859 by Edwin Drake • J.D. Rockefeller • Standard Oil Company 1873 • Small changes save thousands of $ • Horizontal integration • 1882 created new type of organization: Standard Oil Trust • Trust: Created umbrella corporation to run all companies • Exchanged stock for trust certificates • Stockholders retained share of profits, trust controlled production

  7. Stimulating Economic Growth • Technology • Streamlined manufacturing of traditional products • Stimulated customer demands by creating new product lines • Innovations: • Bessemer process • Swift’s refrigerated railcars • Transatlantic cable (1866) • Telephone (1876) • Changed communication and social conventions • Electricity (1879) • Freed people from dependence on daylight • Light bulb • Thomas Edison • Menlo Park • First modern research facility • Westinghouse • Sewing machine(1860s) • Expansion in personal wardrobe • Typewriter (1867) • Cash register (1879) • Calculating machine (1887) • Kodak camera (1888) • Fountain pen (1884) • Gillette's razor and safety blade (1895) • Specialty Production • Small, specialized businesses • Jewelry • Women’s clothes • Still not mass produced • Advertising/ Marketing • Output exceeded what market could absorb • Two kinds of businesses • Manufacturing devices for personal use • Sewing machines • Mass produced consumer goods • Flour, soap) • Needed marketing/advertising • Brand names, trademarks, guarantees • Packaged Foods • Kellogg, Post • Department Stores • Macy’s, Marshall Fields • Dime Stores • Woolworth’s • Home-Shopping • Sears, Roebuck, and Montgomery Ward • America now a “shopping population”

  8. Economic growth • Costs • High cost for workers • Low wages • Unreliable employment due to technological innovations • Encouraged sweatshops • Long hours • Rags to riches “myth” • Concentration of wealth • 1890s- 10% richest controlled 9/10ths of nation’s wealth • Devastated environment • Oil, chemical waste • Air pollution • Benefits • Social • Labor-saving products • Lower prices • Advances in transportation and communication • Created thousands of jobs • Middle-class administrative jobs • Accountants, clerks, etc. • Wider variety of clothing

  9. New South • Industrialization delayed • Physical devastation • Scarcity of towns and cities • Lack of capital • Southern banking destroyed • Illiteracy • Northern control of markets and patents • Low rate of technological innovation • “lost cause myth” • Federal policies that limited growth • High tariffs • New southern creed • Championed by Henry Grady and Henry Watterson • Newspaper editors • “natural” for industrial development • Rich iron, coal, timber resources and cheap labor • Southern mill economy • Represented shift from agricultural economy • Catalysts for villages and towns • Mainly in Piedmont • Opened new markets • Augusta, GA “Lowell” of the South • Hired poor white workers • Also exploited them • Dominated community • Church • School • Mill community strong • Industrial lag • Smaller scale and slower than in North • Southerners paid higher prices despite cheaper production costs • Poorly educated white population unskilled in modern technology

  10. Factories and the Work Force • 1860-1900 • From 885,000 to 3.2 millions workers • From workshop to factory • Transition series of jolts • Varied in strength and duration • Impact on artisans and unskilled laborers • Example: Shoe industry • Hardships • Unprecedented demand for unskilled workers (wage earners) • Subcontractors • Pushers (foreman) • Hazardous work • Child labor • No disability • No safety and health standards • Immigrant Labor • Plenty of unskilled labor • Darker, southern immigrants paid less • Horrible conditions • Women • Shaped by marital status, social class, and race • White, married women accepted “separate spheres” • Single working-class women saw factory work as an opportunity • Hated “domestic” service • Rise in employment • Changes in agriculture • Immigrant families needed $ • Inexpensive, unskilled labor • Did not foster independence • Didn’t make enough to live alone • Office work in 1890s • Often considered temporary • One in 5 women working for wages by 1900

  11. Hard Work and “Gospel of Success” • Any man can achieve success • Ex. Andrew Carnegie • Mark Twain • Success only to those who lied and cheated • 95% of leaders came from good backgrounds • Rise in real wages • 31% for unskilled labor • 74% for skilled labor • Overall economic mobility complex

  12. Labor Unions and Industrial Conflict • Needed a broad-based, national organization to protect workers and resist corporate power • Problems: • Ethnic racial divisions within workplace • Division between skilled/unskilled workers • Labor the new “slave power” • Three major unions: • National Labor Union • Knights of Labor • Against labor contracts and Social Darwinism • American Federation of Labor • Intolerable conditions led to violence • Terms: lockout, blacklist, yellowdog contracts

  13. Organizing Workers • Began during civil war • William H. Sylvis • President of Iron Molders’ International Union • Endorsed 8 hour workday • Wanted end of convict labor, currency and banking reform, and restriction on immigration to increase wages • National Labor Union • 1st attempt to organize nationally • Founded 1866 • Broad social program • Equal rights for women and blacks • Monetary reform • 8hr workday • Lost support after Depression of 1873 • Knights of Labor 1869 • Started by 9 Philadelphia Tailors • Led by Uriah H. Stevens • Molded on secretive societies, i.e. Masons • Demanded equal pay for women ,end child/ convict labor, a tax on all earnings • Boomed after Terrence Powderly took charge in 1881 • Went public • Urged temperance, opposed strikes • Advocated admission for blacks and women • Restrictions on immigrants, esp. Chinese • Peak 1886 = 730,000 workers • Declined in late 1880’s due to failed riots • Change in public opinion

  14. Unions and Violence • American Federation of Labor 1886 • Craft unions from KOL (25) • Samuel Gompers • Trade unionism • High wages= respectable working class families • Skilled workers had bargaining power • Wanted to attract all trades • Solution a “federation” • Each controlled by own members but linked by executive council • Focused on short-term improvements • 8 hr workday, injury disability, mine-safety laws • NO women (separate spheres!!) • 1.6 million members by 1904 • Still only 5% of workforce • Strikes • 1881-1905 = 37,000 Strikes • 7 million workers • 1st wave • 1877 Wildcat Railroad Strike (July) • Ignited by wage reduction • During economic depression • Baltimore & Ohio RR • Spread throughout country • 11 states • President Hayes forced to call in troops • 2/3 railroad idle for 2 weeks • Stunned middle-class America • Terrified of corporate abuse of power and mob violence • Resulted in crackdown • Pinkertons • 100 killed

  15. Strikes Continue • May Day Movement • May 1, 1886 • Called for general strike to achieve 8hr workday • 340,000 workers • Shut down Cincinnati for a month • Haymarket Riot 1886 • McCormick Plant • Chicago • May 3: 4 workers die • May 4: Bomb killed 7 policemen, police opened fire killed 8 protesters (martyrs) • 8 tried and sentenced to death • Public response • Turn against labor unions • Thought was radical • Anti-labor • Linked riots to immigrants

  16. 2nd Wave • West • Idaho 1892 • Wages cut • Protesters blew up mill and captured guards • Idaho National Guard called in • Homestead Strikes 1892 • Carnegie’s plant • Henry Clay Frink • Cut wages 20%, locked out union workers • Protesters fired on Pinkertons • 10 died, National Guard called in • Set back Union movement • Failure, lasted 5 months • 1894 Pullman Strikes (Chicago) • Wages slashed due to depression • Thousands went on strike • Led by Eugene V. Debs • Leader of American Railroad Union • Paralyzed rail traffic • General Manager’s Association responded • Hired strikebreakers • Asked Attorney General for an injunction • Interrupted mail service • Appealed to President • Attorney General Richard Olney • Cited Sherman Anti-Trust Act • Debs arrested, troops arrived • For not responding to injunction • 700 rail cars burned • 13 died, 53 wounded • 1895 Supreme Court Case In re Debs • Upheld prison sentence • Legalized injunctions • Government hampered development of Union

  17. Social Alternatives • Working class poverty unsettling • Should government become mechanism for helping poor and regulating big business?

  18. Defenders of Capitalism • “Liberals” • Most Americans viewed the concentration of wealth as inevitable, natural, and justified by progress • Adam Smith • Wealth of Nations • Laissez-faire argument • Self-interest “invisible hand” regulated market • Andrew Carnegie • Gospel of Wealth • Applied Darwinism • “god’s favor” • Rev. Russell Conwell • Acre of Diamonds • Everyone has duty to be rich • Civic philanthropy a necessity • Social Darwinism • Herbert Spencer= most influential • Believed concentration of wealth in hands of the “fit” a benefit to future of human race • William Graham • What Social Classes Owe Each Other • Natural laws controlled social order • Social Darwinism • State owed citizens nothing but the law, order, and basic political rights • Thought interference with poor weakened them • Survival of the fittest

  19. Socialists • Lester Frank Ward • Laws of nature could be circumvented by human will • Government could regulate big business, of natural resources protect society's weak, and prevent exploitation • Henry George • Progress and Poverty 1879 • Solve uneven wealth with a single tax • Tax on speculators • Very popular • Rejected land = freedom • Edward Bellamy • Looking Backward 1888 • Utopian novel • Centralized, state-run economy for common good • Cooperation replaces class strife, excessive individualism, and cutthroat competition • Inspired local organizations • Karl Marx • Das Kapital 1867 • Stratified society= unrest • Basis of Socialism

  20. Conclusion • Industrialization propelled U.S. to major world power • New technology and innovations • Vertically integrated companies • Cost high • Exploited workers • Pollution • violence

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