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The Rise of Industrial America, 65-00 Chapter 18 outline.

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1 The Rise of Industrial America, 65-00 Chapter 18 outline

2 5 Major themes Innovative tech. & bus. Practice changed production Monopoly of industries by bus. Leaders Why was industrialization in the S. differ from the N. & Midwest Workers response to work & growth of corporations The tactics used by corporate executives to undercut labors bargaining power

3 Character of Industrial Change 1.Coal deposits as cheap energy PA, WV, KT Fueled railroad, factories, & urban growth 2.Innovative transportation, communication, & factory systems 3.Need for enormous numbers of workers Tech. enables cost cutting & hiring cheap unskilled & semiskilled 4.Intense competition led to cutting costs & prices and to monopolies Cost cutting led to ruthless elimination of competition Colossal fortune at the top but suffering of working class 5.Relentless drop in prices 6.Failure of the money supply to keep pace w/ productivity, which drove up interest rates & restricted the availability of credit

4 Railroad innovation Most intense competition among railroads By 1900, US had more miles (193,000) than all of Europes, including Russias Railroads changed corporate enterprise culture by….

5 Issued stock & bonds for huge capital needs –Borrowed heavily & had to appeal for generous land & loan subsidies fr. fed., state, & local govt –Interest repayments cut heavily into earnings –Collis P. Huntington = Central Pacific Railroad –Jay Gould = Union Pacific –James Hill = Northern Pacific Separation of ownership from management Natl distribution & marketing: –relied on magnetic telegraphs New organizational & managerial structures –Hierarchical, separate geographic units –Elaborate accounting & reports: set rates & predict profits

6 Consolidating the Railroad Industry Huntington, Gould, & others killed hodgepodge of smaller railroad companies: financed by eastern & British banks Created integrated track (481/2 gauge) networks; standardized basic equipments/facilities Corrected delay problems by divided country into 4 time zones Uniform rates nationwide Railroad leaders depicted as robber barons & villains

7 1.Why is the image of Uncle Sam tied to a telegraph pole so powerful? What other images does it bring to mind? Why are the ropes around him labeled N.Y. World, N.Y. Tribune, and [N.Y.] Evening Express? 2.Why are the telegraph lines depicted as snakes? What is the decoration on them? ( Chapter 18) Abusive Monopoly Power: Cartoon from Puck Magazine Jay Gould (1836-92) was one of the wiliest financial entrepreneurs on Wall Street. In 1868 he bribed the New York legislature to defeat Cornelius (Comodore) Vanderbilt and gain control of the Erie Railroad. In 1869, with the flamboyant Jay Fisk, he had tried to corner the gold supply and control the currency. In the next decade, despite his public image, in the words of Maury Klein, his recent biographer, as a deadly and elusive predator, Gould took advantage of the cutthroat railroad competition to take control of the Union Pacific, the Kansas Pacific, the Wabash, the Michigan Central, and the Canadian Southern railroads. He eventually even controlled the elevated railway system in New York City. At the same time, recognizing the value in emerging telegraphic communications industry, Gould gained control of Western Union, undersea cable connections, the Associated Press, and several leading newspapers. Western Union and its competitor, the Atlantic and Pacific Telegraph Company, which Gould also controlled, dominated telegraph transmission of the news nationwide. Rival newspapers lambasted him as an evil wizard out to control society itself.

8 (Chapter 18) Cartoon from Puck Magazine 1.Why is the image of Uncle Sam tied to a telegraph pole so powerful? What other images does it bring to mind? Why are the ropes around him labeled N.Y. World, N.Y. Tribune, and [N.Y.] Evening Express? 2.Why are the telegraph lines depicted as snakes? What is the decoration on them?

9 Bad side of consolidation Debt, overextended systems, crooked bus. Practices led to reckless cost cutting for traffic Favored kickbacks & rebates to special clients Free passes for politians Special rates for larger shippers Hurt small farmers & businesses: turned to state govt for help –Supreme Court in 80s ruled that states could not regulate interstate commerce –But passed Interstate Commerce Act in 87 & 5-member ICC (Interstate Commerce Commission) was est. Banned monopolies among other laws Railroads challenged ICC in 16 cases before 05 & won all, but one, but then Hepburn Act in 06 empowered ICC to set rates Competition abated when depression hit in 1893 –Railroads in the hands of JP Morgan & other investment bankers –JP reorganized their systems & refinanced their debts

10 Applying lessons of Railroad to Steel Andrew Carnagie fr. Scottland, came to US in 48 "I don't believe in God. My god is patriotism. Teach a man to be a good citizen and you have solved the problem of life." ~ Andrew Carnegie Worked as bobbin boy $1.20/wk (60hrs) Messenger boy to telegraph operator –Hired then by Tom Scott of PA Railroad –Became of head of companys western division at age 24 –Used complex cost analysis to cut cost & increase traffic –Earned $56,000 yr fr. Investment in the railroads –Built his own steel mill in 70s & used Henry Bessemer method; knew actual production cost of each ton of steel due to his cost analysis.

11 Figure 18.1: Iron and Steel Production, 1875–1915

12 Figure 18.2: Mergers in Mining and Manufacturing, 1895–1910

13 Figure 18.2: Mergers in Mining and Manufacturing, 1895–1910 (contd)


15 Railroad to Steel: Carnegie Lower production cost by limiting wage increases Discovered vertical integration: fr. Mining & smelting of ore to selling the steel Philanthropic activities: gave more than $300 M to libraries, uni., & intl peace causes Carnegie Steel = worlds largest industrial corporation by 1900 Consolidation of Carnegie w/ Federal Steel = 1 st business capitalized at more than $1b

16 The Trust: Creating New Forms of Corporate Organization Industries like oil, salt, sugar, tobacco, meapacking followed cost cutting method Philip Armour & Gustavus Swift (Chicago) raised efficiency of using every part of cattle Edwin Drake drilled 1 st crude oil in 59 in PA: distilled into kerosene…oil in rivers John D. Rockefeller fr. Cleveland also into cost cutting & efficiency –Head of Standard Oil Company in 73; also used vertical integration –Also aggressively forced out competitors –By79 he seized 90% of US s oil-refinering capacity –Est. the Standard Oil Trust to eliminate competition Verbal agreement among groups of companies to controll prices & markets –Oligopoly –By merging competing companies into a giant, he also used horizontal integration

17 The Trust: denounced by govt Sen. John Sherman (OH): passed Sherman Anti-Trust Act in 90 –Outlawed trusts & other monopolies: fines up to $5000 & 1 yr. in jail –Failed to define trust or restraint of trade –Corporate lawyers simply organized trusts into holding company, which owns a share of stock of more or more firms, which makes money as well –Supreme Court sympathized win big bus: hamstrung Congress US v. EC Knight Company …favored company by ruling that manufacturing was not interstate commerce

18 Economic Growth: Tech New inventions stimulated consumer demand Example: Safe electricity led to electrical motors, appliances, & lightning systems Bonsack machine rolled 120 TH cigarettes a day, replaced 60 skilled handworkers Success of Singer sewing machine 60s –Innovative use of interch. Parts + advertising campaigns –Mass produced cloth= expanded wardrobe Phone: Alex. Graham Bell 76 Light bulb: Thomas Edison 79

19 Economic Growth: Edison Edison had little edu, like A. Carnegie He studied Thomas Paine's Age of Reason before he was 12, and recognized no power greater than Nature Earlier work: telegraph, stock quotation printer, phonograph or sound writer Light bulb: –had to be easy to repair/install –More convenient than gas or kerosene lighting Merged w/ competitor to form GE 92 Westinghouse & GE exchanged patents: –Patent-pooling as mechanism for market domination Later inventions: mimeograph, microphone, motion- picture camera & film, storage battery Died in 1931: had patented 1,093 inventions

20 Economic Growth: Custom-made Philadel.s Baldwin Locomotive Works –Employed 2TH workers; made 900 engines/yr –Each machine was custome designed; no standardization Womens apparel: most was custom produced until 1900 –Dressmakers & milliners (fancy goods vendors) paid high wages to skilled seamstresses –Shift styles quickly to follow fashion

21 Economic Growth: Ad. & Marketing Flour industry shows mass production & marketing concepts Output exceeds market demands –Excess led mills to create new products: cake flours, breakfast cereals (Quaker Oats) Marketing for consumer loyalty: brand names, trademarks, guarantees, slogans, endorsements, & other gimmicks –Ivory soap (Proctor & Gamble) 79: 99 and 44/100 pure –Cigarettes: James Buck Duke used trading cards, circulars, box-top premiums, prizes, testimonials, & scientific endorsements –Campbell soup ad 90: as good as gourmet food Kodak camera you push the button, we do the rest –Market: customers return film & camera, factory developed, printed, reload & shipped back …all for $10 –Revolutionized industry & democratize a visual medium

22 Economic Growth: Costs & Benefits Industrial competition led to many bankrupted co. Also high costs for US workers: immigrants & natives –Subsistence wages & could be fired on moments notice Devastated the environment: chemical waste, garbage, pollution Benefits: labor-saving products, lower prices, advances in communication & transportation Benefits & liability sometimes interconnected: –Ex: sewing machine created thousands of new jobs Wider variety of clothes Eased the lives of millions of housewives Young women toiled long hours in sweatshops for pitifully low wages

23 The New South: economically weak wars physical devastation few towns/cities lack of capital Illiteracy northern control of financial markets & patents low rate of tech. innovations nostalgia for pre-war era… perpetuated image of the South as traditional & unchanging

24 The New South: lack capital as Obstacles to Progress By 65 had only 2% of nations banks –Fed policies made banking difficult: $50 Th required to start a bank –Merchants/storekeepers lend supplies in lieu of cash in return for crops; farmers in debt & grew only cash crops (tobacco & cotton) to repay; short labor for industry –Cash crops: farmers vulnerable to fluctuations of commercial agriculture Cotton 11c/lb in 75 to 5c/lb in 94 High tariffs made imported machines expensive to farmers Demonetization of silver limited capital availability Discriminatory freight rates hiked expense of shipping

25 The New South: lack education Limited resources reduced education Operated segregated schools Refused to tax property to fund schools until 89 School attendance remained low; limited educated work force Built white patronage system by modest funds to veterans –Reinforce old south idea: Lost Cause –1911 veterans pensions ate 22% of GAs state budget –Leaves little for educational & economic developm.

26 The New South Creed & Industrialization The New South creed: doctrine created by newspaper (Henry Grady & Henry Watterson) that the South is the El Dorado for the next half century Industrialization gained momentum in 80s –Offered tax exemptions, leased prison convicts to serve as cheap labor, gave huge tracts of lands to railroads Southern iron & steel mills as large scale recruiters if black workers –1900, black population in urban = 20% –60% work force = black; but no chance of advancement –Southern blacks in iron/steel earned more than whites in textile Segregation: black women cleaned tobacco leaves, white women ran machines that made cigarettes

27 The Southern Mill Economy Textile mills as catalyst for new towns (like NE in 1820s) –Largely in Piedmond: central VA to GA to AL –Towns increased due to railroad –1920 the South was leading nation in textile-mill Poor black & white tenant farmers still vulnerable to exploitations by merchants, lawyers, doctors, & bankers –Commercial agriculture –Paid workers 30-50% less than in NE –Built & owned workers housing, company store, supported church, financed elem. School –Prevent movement of workers: paid once/mo in script Certificate redeemable only in goods from company store –Families in debt cycles like tenants & sharecroppers –Whole family worked: bring babies along

28 The Southern industrial lag Southern industrialization compared to the N. –Smaller scale & slower rate –Depended far more in outside financing, tech., & expertise Ex: steel was more expensive for southerners to buy –US Steel executives priced steel based in Pittsburg:

29 Factories & the Work Force: Fr. Workshop to factory Transition to factory economy evident by boot/shoe industry Shoes still custom made in 1840s; shoemakers had high status Ready-made shoe market eroded status –Skilled shoe artisans now work as team of 4, reach w/ one function –Lost freedom to drink on the job or take time off for special occasion –Working class culture now viewed as wasteful/inefficeint Large factories grew; traditional skills vanished –Replaced by lower paid, less skilled women/children

30 Factories & the Work Force: hardships of industrial labor Factory system increased = unprecedented demand for unskilled labor Contract system: subcontractor responsible for managing gangs of laborers –Seasonal & transient, laid off when not needed –Unskilled; pushed hard by foreman/boss pushers 70s skilled ones earned $3/day; unskilled $1.30 Industrial accidents: –Dangerous working conditions –Inexperience –rapid pace of production process Child labor: starts at age 8 or 9 –Coal mine = black lung disease leads to tuberculosis & emphysema

31 Factories & the Work Force: immigrant labor Unskilled immigrant labor for heavy construction industries, mills, railroads… Philadelphia: –skilled dominated by native born & German immigrants –Unskilled by Irish until 90s when replaced by eastern & southern Europeans (new immigrants) Northeast: poor French-Canadians in textile mill West Coast: Chinese in mining, canning, railroad Immigrants must adjust from farm pace to production pace –Factory owners tactic: temperance societies, Sunday schools to teach punctuality & sobriety –Gain leverage by offering low cost housing; strike= evicted –Used race concept on darker Europeans: Irish, Greek, Italian, Jewish, & others Non-white; didnt deserve same compensation as white

32 Factories & the Work Force: Women & work Womens work experiences White married women of all classes accepted separate spheres & remained at home Working class: needed extra income & earned wages at home –Sewing, button-making, taking in boarders, & doing laundry –Exploited by entrepreneurs: lease tenements in return for long work hours in apartments Cigar manufacturers Single women preferred working in textile rather than domestic work to avoid being a servant –Except black women due to discrimination –Low pay: $5/70hours 1900 female comprise 17% of nations work force Typewriter & telephone led to new job opportunity –Typist paid $6-8/wk; steadier & more prestige

33 Factories & the Work Force: hard work & gospel of success Horatio Alger: Unitarian minister turned dime novelist –67 Ragged Dick: praised poor, honest lads rose through ambition & self-discipline –Andrew Carnegie inspired rags to riches Mark Twain chided public for naiveté –Essay in 71: business success likely on lies & cheats –His ideas reflected by Thomas McGuires testimony of destitution & tenement life Facts: 95% of industrial leaders came fr. Middle- & upper-class backgrounds Advancements were limited due to discrimination; exception = Donahue brothers wealthy fr. Union Iron Works Native born whites advantage: higher education & family financial backing Positives: real wages rose 31% for unskilled & 74% for skilled; middle class enlarged Neg: purchasing power undercut by injuries & lay off; gap between the poor & well-offs

34 Mark Twain: ordered his uncensored book not to publish until 100 years after his death A God who could make good children as easily a bad, yet preferred to make bad ones; who could have made every one of them happy, yet never made a single happy one; who made them prize their bitter life, yet stingily cut it short; who gave his angels eternal happiness unearned, yet required his other children to earn it; who gave is angels painless lives, yet cursed his other children with biting miseries and maladies of mind and body; who mouths justice, and invented hell -- mouths mercy, and invented hell -- mouths Golden Rules and foregiveness multiplied by seventy times seven, and invented hell; who mouths morals to other people, and has none himself; who frowns upon crimes, yet commits them all; who created man without invitation, then tries to shuffle the responsibility for man's acts upon man, instead of honorably placing it where it belongs, upon himself; and finally, with altogether divine obtuseness, invites his poor abused slave to worship him! 6/5/2014AP Planning34

35 Labor Union & Industrial Conflict Labor leaders sought to organize national to protect workers & resist corporate power Labor movement challenge: Ethnic & racial divisions Skilled & unskilled division Different trades; lack unity Natl Labor Union & Knights of Labor Tried to unite workers regardless of specialties Efforts collapsed American Federation of Labor (AFL): More success; represented amalgamation of powerful craft unions But small portion of nations total labor force Crisis that shaped USs legal environment, state laws, & progressive reform strike & violence out of intolerable conditions

36 Organizing the Workers William Sylvis organized Iron Molders Intl Union & renamed it Natl Labor Union (NLU) –Name change to include all workers –8 hr/day –End convict labor –Est. federal department of labor –Currency & banking reforms –Endorsed restriction of immigrants; particularly Chinese (blamed for undercut wage level) –Supported cause of working women; elected a woman as natl officers –Urged blacks to organized; although segregated racial unions Sylvis died in 69, NLU vanished

37 Organizing the Workers: Knights of Labor Founded by Uriah Stephens & other taylors in 69 in Phila Named the Noble and Holy Order of the Knights of Labor Secret society like the Masonic order Included all wage earners; excluded bankers, doctors, lawyers, gamblers, liquor dealers Called to end convict & child labor Equal pay for women Graduated income tax (no fed. Income yet) Cooperative employer/employee ownership of factories, mines, & other business

38 Organizing the Workers: Knights of Labor Membership skyrocketed after Terence Powderly replaced Stephens in 80s Apposed strikes & urged temperence Welcomed women (10% membership) & blacks (allowed segregated unions in South) –Mary Jones = Mother Jones Total ban on Chinese immigration Riots against Chinese in CA: workers destroyed Chinese-run laundries & terrorized Chinese population 1900 govt passed Chinese Exclusion Act & made permanent in 1902 Struck against Wabash railroad (Jay Gould) & succeeded & membership soared by 86 Unauthorized strikes failed in 86 –Haymarket riot contributed to decline of union

39 Organizing the Workers: AFL Union crafts broke off fr. Knights of Labor to form AFL American Federation of Labor, AFL, led by Samuel Gompers Gompers led from 86 to 1924 immigrant cigar maker Raising wages & reducing work hours Liabilities for injuries & mine safety laws Federation by allowing various trade unions to be independent by tied to natl organization Believed women belonged in the home Grew 1.6 million members by 1904 Yet labor organization remained weak; only 5% of workforce joined union

40 Organizing the Workers: strikes & Violence 37 TH strikes erupted fr. 1873-1905 1877 deadly strike sparked by wage reduction –Strike exploded along rail line spreading to NY, Pittsburgh, St. Louis, Kansas City, Chicago, & San Francisco –New Pres. Rutherford Hayess called troops to quell it –100 people died; 2/3 nations railroads stood idle Middle class terrified of mob violence & employers capitalized on hysteria –Forced workers to sign yellow dog contracts Promise not to strike –Hired Pinkerton agents as their own private police force –Turned to fed. Army & US army to suppress labor unrest 86 Haymarket: a bomb thrown killing 7 policemen & police fired into crowd killing 4 protestors –8 men arrested; 4 of these executed although no evidence –Animosity towards unions intensified Pullman Palace Car Co. 94 strike: George Pullman slashed wage w/out reducing rent (nice planned community) –Eugene Debs led union to strike & paralyzed Chicago, the hub –Debs was arrested & fed troops poured in 700 rail cars burned, 13 died, 53 wounded Corporate leaders played unions as anarchist & violent Fed. & state govt sided with employers & hamstrung labors efforts Ended up weak w/ negative image up to 1930s

41 Organizing the Workers: Alternatives Walt Whitman observed the spread of the poor Laissey Faire advocates cited Adam Smiths the Wealth of Nations (1776) –Andrew Carnegie justified laissez faire by citing Charles Darwins evolutionary theories survival of the fittest by ignoring the practice of monopoly earlier by praising unregulated environment as beneficial –William G. Sumner, professor, also shared disapproval of govt interference –Conservative social brand = Social Darwinism Lest F. Ward claimed that govt could regulate bus., protect societys weaker members, & prevent exploitation of natural resources Henry George proposed single tax & state controlled ecnomy to distribute wealth evenly Edward Bellamy wrote utopian novel 88: state-run; equal,conflict free society These 3 sought to humanize industrialization Karl Marx in Das Kapital envisioned a class struggle to form a classless society: Bourgeosie v. proletariat

42 (Chapter 18) Worlds Fair Poster This poster for the 1893 Chicago Worlds Fair makes specific reference to Chicago Day, October 9 th, the anniversary of the Fire. The reference harks back to the great fire of 1871. Chicago at the time had 330,000 inhabitants and was the fourth largest city in the nation. The fire had swept over nearly 2,000 acres of the city, destroying 18,000 buildings, or nearly one-third of the city. 100,000 people lost their homes. Thus, the reference to the Chicago fire contrasts the marvelous white city of the Fair to the ruins that had existed a scant thirty-two years earlier. Built on a swamp, with interior lagoons, electric lights, and even its own heating plant, the White City was testimony to the regeneration of Chicago and the power of planning and technological innovation. The poster shows the massive Manufactures and Liberal Arts building in the upper half and the stately Court of Honor in the lower section. The uniform building height and the classical revival architecture in the Court of Honor created a sense of monumentality and grandeur. It also implicitly announced that Chicago and the United States had become a world power, much as Rome had been in the ancient world. The pageantry, evening parades, and the Grand Reunion of the States by Youths and Maidens announced to all that the U.S. had overcome its internal divisions and stood poised for international greatness. 1.Why is it significant that manufacturing and the liberal arts were grouped together in the largest building at the fair? 2.Why would the city of Chicago want to celebrate the anniversary of the fire? 3.What purpose do the parades play? Why does the poster boast that these events will be the most Significant and grandest special of Modern Times?

43 (Chapter 18) Worlds Fair Poster 1.Why is it significant that manufacturing and the liberal arts were grouped together in the largest building at the fair? 2.Why would the city of Chicago want to celebrate the anniversary of the fire? 3.What purpose do the parades play? Why does the poster boast that these events will be the most Significant and grandest special of Modern Times?

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