1. The Rise of Industrial America 1865 – 1900 chapter 18

2. World’s Fair
1892, 200,000 watched opening of World’s Columbian Exposition in Chicago
Marked 50 years of industrial development
Had 25 million visitors
Those in late 19th century found themselves unsettled and exhilarated as nation was transformed by industrialization
US now produced 35% of world’s manufactured goods but at a high cost

3. The Rise of Corporate America
Early 19th century corporate business raised money for turnpikes and canals
After the Civil War business leaders created kinds of business organizations that made new technologies, creative management structures, and limited liability if the business should fail

4. The Character of Industrial Change
Six features dominated large-scale manufacturing after the Civil War
Exploitation of coal
Innovation in transportation, communication, factories
Demand for workers who could be controlled
Competition by cutting prices and costs, eliminate rivals, create monopolies
Relentless drop in prices
Failure of the money supply to keep pace with productivity
Factors that led to growth of US economy
Plenty of raw materials
Lots of labor
Large market for goods
Lots of capital
Labor saving technologies
Friendly government policies
Talent entrepreneurs
Business leaders’ drive to reduce costs created them colossal fortunes but forced millions of wage earners near subsistence
Demands for consumer goods stimulated industry’s production of capital goods

5. Railroad Innovation
Competition among RR was most intense – more lines in US than all of Europe
RR faced financial and organizational problems – to raise capital obtained land and loan subsidies from governments but still had to borrow heavily by selling stocks and bonds
By 1900 yearly interest repayment required on combined debt of US RR - $5.1 billion – cut heavily into profits
RR management innovations became a model for other businesses seeking a national market

6. Consolidating the Railroad Industry
1870 hundreds of small companies used different gauge of track
Bigger RR devoured small lines to create large network
Vanderbilt created New York Central Railroad 1867
W. of the Mississippi 5 companies controlled most of the track by 1893
RR became largest business in the world, standardized all equipment and facilities
1883 American Railroad Association divided US into 4 time zones
Had its costs – debt and crooked business practices forced them to compete recklessly with each other
Due to high rates and secret kickbacks, farmers and small businesses turned to the state for help; 1870s Midwestern states outlawed rate discrimination –negated in 1880s when Court ruled states could not regulate interstate commerce
1887 Congress passed Interstate Commerce Act to oversee RR
RR challenged commission; Court ruled for RR in all but 1 – all but negated ICC
Hepburn Act 1906 strengthened ICC by letting it set rates
1893 depression forced number of rails into J. Pierpont Morgan’s hands - by 1906, 7 networks controlled 2/3 of nation’s rails

7. Why are monopolies bad for consumers?
Answer
Why are monopolies bad for consumers?
2 Minutes

8. Applying the Lessons of the Railroads to Steel
Andrew Carnegie worked his way up in Pittsburgh textile mill - invested earnings into the RR, by 1868 earning $56,000 a year
Decided early 1870s to build own steel mill, his connections with RR ensured his success, used Bessemer Process to make high grade steel – believed by watching costs could make profit
Lowered production costs and prices below competitors, asked for favors to win business to drive out the rest of his competitors
Used vertical integration – Carnegie Steel became the classic example of business that increased production and slashed consumer prices
He donated money to charity, in his lifetime gave over $300 million
1900 Carnegie Steel employed 20,000 - world’s largest industrial corporation – 1901 J. P. Morgan purchased Carnegie’s companies and set up US Steel Corporation – 1st business with over $1 billion in capital, over 200 member companies employing 168,000

9. The Trust: Creating New Forms of Corporate Organization
Edwin L. Drake drilled 1st successful oil well 1859; oil spills constant problem
John D. Rockefeller created Standard Oil – practiced vertical integration
1872 purchased own tanker cars and got 10% rebate from RR for hauling his own oil & kickback on competitors’ shipments
When firms teamed up against him, he set up a pool to set production quotas and fix prices
Worried about competition 1882 set up Standard Oil Trust – replaced pool with a trust – stockholders turn over stocks for trust certificates – got profits but trust controlled production
Rockefeller used vertical integration and horizontal integration
James B. “Buck” Duke formed American Tobacco trust – targeted youth – created oligopoly
1888 both political parties denounced them passed Sherman Anti-Trust Act – government only prosecuted 18 antitrust suits and when Standard Oil was challenged in 1892, lawyers just reorganized trust into holding company
United States v E.C. Knight Company – ruled manufacturing is NOT interstate commerce and threw case out – Court was sympathetic to big business
By 1900 trusts held 2/5 of all capital invested in manufacturing

10. Answer: Why does the Supreme Court back big business?
HINT: look at the picture
2 Minutes

11. The Triumph of Technology
Development of safe, practical way to generate electricity made possible number of motors, household application, lighting systems
Sewing machine, telephone, and light bulb changed American way of life
Edison’s 1st invention earned him enough money to create an “invention factory” in Menlo Park with university-trained scientists
Knew lighting had to be easy to repair and cheaper/more convenient than kerosene or gas lighting; 1882 built system with help of J. P. Morgan – Edison Illuminating Company lit 85 buildings in NYC
By death had $6 million, over 1,000 patents, set standard for industrial research labs
George Westinghouse – created AC 1885 – advanced transportation, life

12. Specialized Production
Using skilled labor - made one-of-a-kind or small batch of articles
Until turn of 20th century women’s apparel was custom made in small shops run by women who were paid good wages; enabled them shift styles quickly to follow latest fashions

13. Advertising and Marketing
Discovered output exceeded what market could absorb; began advertising and marketing
With flour for example - companies developed new products like cake mixes and breakfast cereals and sold them with brand names
Packaged foods became more common in US homes
Mail order companies allowed people to get goods in “wish book”
Created customer loyalty by unique products – George Eastman – ship camera to his store with $10 and he developed the film, printed the pictures, reloaded the camera, and shipped it back

14. Social and Environmental Costs and Benefits
Expansion brought social benefits: labor-saving products, lower prices, advances in transportation and communication
Cost – bankrupted companies, poor wages, devastation of the environment
Overall created new social and economic order in the 20th century
NYC – West St. 1885

15. Answer
Why do you think the South was lagging behind the North as far as industrialization?
2 Minutes

16. The New South Entered industrial era slower than NE
South’s $509 per capita income less than ½ of the North’s
Industrialization hurt by
Civil War
Racism
Scarcity of towns and cities
Lack of capital
Illiteracy
Northern control of financial markets and patents
Lower rate of technological innovation
Perception as Lost Cause – traditional and unchanging

17. Obstacles to Economic Development
Had only 2% of nation’s banks but over ¼ its population
Country merchants and storekeepers became bankers by default
Specializing in cotton or tobacco made small southern famers vulnerable to fluctuations of commercial agriculture
South’s shortage of funds affected economy in indirect ways – limited resources for education – during Reconstruction some groups begun modest expansion of public schooling for blacks and whites but southern states operated segregated schools and refused to tax property for school support until 1889 – school attendance stayed low
Southern states often contributed modest funds they had to war veterans’ pension – built white patronage system for Confederate veterans and helped reinforce southerners’ idealization of the Old Confederacy

18. The New South Creed and Southern Industrialization
Southern newsmen like Henry W. Grady Atlanta Constitution and Henry Watterson Louisville Courier Journal championed doctrine called New South creed – South’s raw materials and cheap labor made it natural site for industrial development
1880s momentum to industrialize – offered tax exemptions for new business, set up expositions, leased prison convicts to serve as cheap labor
FL and TX gave huge land to RR; other states sold forest and mineral rights on nearly 6 million acres of federal lands to speculators who expanded production
Southern iron and steel expanded - by 1900 Birmingham Alabama nation’s largest pig-iron shipper - contributed to migration of blacks to cities – % of southern black population was urban, 1900 made up 60% of unskilled workers
Black coal miners recruited to W. Virginia with free transportation, high wages, company housing – initially paid same as whites and joined biracial labor unions but depression 1893 weakened union and workers became segregated
Segregation opened new opportunities for black barbers, doctors, businessmen but economic opportunities for blacks remained limited

19. The Southern Mill Economy
Textiles mills expanded in south and created new towns and villages – by 1920 South was nation’s leading textile-mill center
Augusta, GA with 2,800 mill workers became Lowell of the South
Sharecroppers and tenant farmers at first felt new cotton mills was a way out of rural poverty – but men exploited their workers, paying just 7 – 11 cents an hour – 30 – 50% less than what was paid in NE
Mill operator built and owned workers’ housing and company store, supported village church, financed local elementary school and pried into mill workers lives
Usually paid them just 1x a month in scrip to prevent them from moving – families often overspent and fell behind in their payments – way to keep them in cycle of poverty
Mill workers kept their own gardens, raised chickens, cows, pigs

20. The Southern Industrial Lag
Progressed more slowly in South than in North – needed outside financing, technology, and expertise
Southern economy remained essentially in a colonial status
Array of factors created backward industrialization
Banking regulations required large reserves
Scare capital
Wartime debts
Lack of industrial experience
Segregated labor force
Discrimination against blacks
Control by profit-hungry northern enterprises
Poorly educated whites, largely unskilled blacks
At turn of century finally restructured and went through consolidation that had happened in the north in 1880s – brought with it environmental damage

21. Factories and the Work Force
Industrialization proceeded unevenly nationwide and most late 19th century Americans still worked in small shops
As century unfolded large factories with armies of workers sprang onto the industrial scene
From 1860 to 1900 number of industrial workers jumped from 885,000 to 3.2 million

22. From Workshop to Factory
Changes in factory production had impact on artisans and unskilled laborers – example – shoemakers
Most shoes were custom made in small shops, aristocrats in world of labor who were taught in apprentice system – controlled quality of their products
Distinctive working class culture subdivided along ethnic lines - evolved among shoemakers
By 1850s ready-made shoe market emerged – by 1880s shoe factories became larger and mechanized - replaced with lower-paid, less-skilled women and children

23. The Hardships of Industrial Labor
In construction trades workers were seasonal
Transient, unskilled laborers drifted from city to city and industry to industry – late 1870s earned $1.30 a day – only unskilled southern mill workers earned less at 84 cents a day
Unskilled and skilled workers worked 12 hours shifts, faced grave hazards to health and safely, child laborers entered work at 8 or 9
For adults the RR was most dangerous – 1889 about 2,000 RR workers killed, over 20,000 injured
Disabled workers/widows received minimal financial aid from employers – until 1890s courts considered employer negligence normal risks borne by employees
RR and factory owners fought adoption of safety and health standards because of costs – for sickness and accident benefits, workers joined fraternal organizations and ethnic clubs – helped but not enough

24. Immigrant Labor
Factory owners turned to unskilled immigrants for dangerous and undesirable jobs; French-Canadians n NE textile mills, Chinese immigrants in mining, canning, and RR construction
But those that lived frugally in boardinghouses and worked 84 hour week could save $15 a month – more than in their homeland
Life was very different from farm life
Some sponsored temperance societies and Sunday schools to teach punctuality and sobriety; other cut wages and put workers on piecework system, paying them only for the items produced; sometimes provided low-cost housing to prevent work stoppages; if workers went on strike, boss evicted them
Immigrants from E. Europe were darker and employers called them nonwhite so didn’t give them the same compensation as native-born Americans – Irish, Greek, Italian, Jewish who are all part of the Caucasian race were considered nonwhite

25. What message is this cartoon portraying?
ANALYZE
What message is this cartoon portraying?
2 Minutes

26. Women and Work in Industrial America
Woman’s work shaped by marital status, social class, and race – 1 in 5 adult women in 1900 in labor force for wages
Upper-class white married women - separate spheres
Working-class married women took in sewing, button-making, borders, doing laundry - only 5% of married women worked outside the home
Clothing - hired out finishing tasked to lower-class married women and kids
Young, working-class single women viewed factory work as an opportunity – woman cooks, maids, cleaning ladies, laundresses intensely disliked long hours, low pay, social stigma of being a servant so when industry jobs open, took them for better-paying work
Discrimination barred black women
1870 – 1900 number of women working outside the home nearly tripled
Variety of factors propelled rise in employment of single women like changes in agriculture and immigrant parents’ need for income of children
Treated as temporary help, 1890 earned as little as $4 for 70 hours of sewing
Still many young women relished their own income and joined work force in larger numbers, managed to help families, but few paid enough to provide homes for themselves
Typewriter and telephone in 1890s provided new opportunities, women with high school education took clerical and secretarial jobs; $6-8 a week, higher prestige, steadier work
Popular press portrayed women’s work as temporary

27. Hard Work and the Gospel of Success
Ragged Dick 1867 Horatio Alger – wrote about honest but poor men who rose through initiative and self-discipline – Carnegie often offered as proof
Mark Twain 1871 chided public - said business success was for those that lied and cheated
1883 testimony of Thomas B. McGuire before Senate committee - investigation of labor conditions
Best chance for native-born working-class Americans to get ahead was to master a skill and rise to the top in a small company
Opportunities for advancement of unskilled immigrant workers were considerably more limited – some did move to semiskilled or skilled positions but most immigrants moved far more slowly than middle and upper class Americans
There was a rise in real wages, climbed 31% for unskilled workers and 74% for skilled workers between 1860 – 1900 but gains in purchasing power were undercut by injuries and unemployment during economic slumps
Unskilled immigrant labor was shaky – of every 5 nonagricultural workers was unemployed at least 1 month a year – forced many to brink of starvation
Late 19th century – top 10% of families owned 90% of nation’s wealth while less than half the industrial laborers earned more than the $500 annual poverty line
In between rich and poor – skilled immigrants and small shopkeepers improved their economic position

28. Labor Unions and Industrial Conflict
Labor leaders searched for ways to create broad-based, national organizations that could protect their members
Drive to create nationwide labor movement faced many problems
employers deliberately accentuated ethnic and racial divisions to hamper unionizing
skilled craft workers felt little kinship with low-paid common laborers
two groups National Labor Union and Knights of Labor struggled to build labor movement to unite skilled and unskilled workers – collapsed
more effective will be American Federation of Labor but only represented small portion of total labor force
labor unrest during economic downturns reached crisis levels

29. Organizing Workers
From 18th century on skilled workers had union but effectiveness was limited – some felt could change this by creating one big association transcending all groups
William H. Sylvis 1866 called convention to form National Labor Union – endorsed 8 hour day, end to convict labor, creation of federal department of labor, currency and banking reform, immigration restriction, working women, urged black workers to unionize in separate unions
Turned to national political reform – 1868 NLU convention invited Anthony and Stanton but when Sylvis died suddenly NLU faded
Movement that combined skilled and unskilled workers founded in 1869 with Noble and Holy Order of the Knights of Labor – led by Uriah H. Stephens – demanded equal pay for women, end to child labor and convict labor, employer/employee ownership of businesses, progressive tax
Grew slowly at first but in 1880s when Terence V. Powderly replaced Stephens at head, grew quickly
Urged temperance, advocated for admission of blacks but allowed southern local assemblies to be segregated, welcomed women , supported restriction on immigration and total ban on Chinese immigrants

30. 1880 both party platforms included anti-Chinese immigration plans – Congress passed Chinese Exclusion Act – 10 year moratorium – extended 1902, repealed 1943
1885 Jay Gould tried to get rid of Knights of Labor on his Wabash RR by firing active union members, Union instructed all Knight to walk off the job
Crippled Gould, met with Powderly, ended campaign against Knights of Labor
Became disillusioned with series of unauthorized strikes in 1886, declined at same time new union was gaining strength – American Federation of Labor
AFL replaced Knights’ grand visions with practical tactics – Samuel Gompers head 1886 until death in 1924 – higher wages necessary to enable working class to live decently
Felt would have to harness bargaining power of skilled workers who businesses could not replace – focus on raising wages and reducing hours
Organized it as a federation of trade unions so that they would work together without violating their sense of craft autonomy
Demand 8 hour workday, employers’ liability for workers’ injuries, mine safety laws; did little to recruit women workers because they believed women workers undercut men’s wages; by 1904 AFL grew to over 1.6 million – less than 5% of work force joined union ranks – were only occasionally effective

31. Strikes and Labor Unrest
1881 – 1905 close to 37,000 strikes erupted, nearly 7 million workers participated
First wave began 1873 with Wall Street crash triggered and major depression – 6,000 businesses closed, striking PA coal miners fired and evicted from homes, turned deadly in 1877
Strike exploded up and down RR lines – rioters in Pittsburgh torched Union Depot, Rutherford B. Hayes called out troops and quelled strike – nearly 100 died and 2/3 of RR idle
Middle class worried – employers capitalized on public hysteria and required workers to sign “yellow dog” contracts , some hired Pinkerton agents , turned to US government/Army
May 1, 1886 workers walked off their jobs in support of 8 hour workday; 3 days later Chicago police shot and killed 4 strikers at McCormick Harvester plant – at protest rally at Haymarket Square someone threw a bomb killing 7 policemen - police fired and killed four
Public lashed out at labor, 8 men were arrested , no evidence connected them but all were convicted of murder and 4 were executed
Mine Owners’ Protective Association cut wages in Idaho 1892 skilled dynamiters blew up the mill and captured the guards sent to defend it – National Guard had to be called in
Homestead Strike – to destroy union cut wages and locked out workers – workers fired on armed men from Pinkerton Detective Agency who came to protect the plant – battle broke out – 7 union members and 3 Pinkertons died – sent out National Guardsmen to restore order – union was crushed and mill in full operation in a month

32. 1894 Pullman Palace Car Company Strike – 1880 Pullman created town – provided homes, parks, playgrounds, but also closely policed workers’ activities, outlawed saloons, insisted on profit
Depression of 1893 hit, slashed workers’ wages without reducing rents – thousands joined newly formed American Railway Union and went on strike – led by Eugene V. Debs – union members working for nation’s largest RR refused to use Pullman cars, paralyzing rail traffic
General Managers’ Association imported strikebreakers, asked US attorney general Richard Olney for an injunction against strikers for refusing to move RR cars carrying US mail
Union volunteered to carry mail cars to trains that did not carry Pullman cars , RR delayed mail by refusing to send trains without full complement of cars – Olney and President Cleveland cited Sherman Anti-Trust Act & got injunction against leaders of American Railway Union
Union refused to order members back to work, Debs arrested, federal troops poured in, during ensuing riot workers burned 700 freight cars, 13 people died, 53 wounded – strike crushed
Identified strikers with anarchism and violence
Supreme Court in In re Debs upheld Deb’s prison sentence and legalized use of injunctions against labor unions
1897 Mary Harris Jones persuaded coal miners in PA to join United Mine Workers of America – used women and children to make her point– wages restored because owners need to restore production
Efforts of unions to build a national working class labor movement achieved only limited success

33. Social Thinkers Probe for Alternatives
Defenders of capitalism preached laissez-faire argument; Reverend Russell Conwell said everyone had a duty to become rich
The Gospel of Wealth 1889 by Andrew Carnegie justified laissez-faire saying it insured the survival of the fittest
William Graham Sumner disapproved of government interference - What Social Classes Owe Each Other – applied evolutionary theories of Darwin to human society – called Social Darwinism –asserted natural laws controlled the social order – the state only owes its citizens law, order, and basic political rights
In Dynamic Sociology 1883 – Lester Frank Ward argued the state could regulate big business, protect society’s weaker members, prevent the exploitation of natural resources
Henry George – proposed a single tax – Progress and Poverty 1879 – government should tax speculators profits from land and use it to end the misery caused by industrialization –bring the benefits of socialism without stifling initiative

34. Karl Marx in Das Kapital 1867 said
Looking Backward tells of a world without poverty or strife, a centralized state-run economy and religion of solidarity where everyone works for common welfare –caused nearly 500 Bellamyite organizations, called Nationalist clubs, to spring up
Karl Marx in Das Kapital 1867 said
labor required to produce a commodity was the only measure of commodity’s value
any profit made was “surplus value” appropriated from exploited workers
as competition increased, wages would decline to starvation levels
society would be divided between shrinking bourgeoisie and impoverished proletariat
proletariat would revolt and seize control of the state
state would wither away and a classless utopia would emerge
Marxism had little appeal to anyone other than small group of primarily German-born immigrants – Socialist Labor party 1877 attracted only about 1,500 members by 1890
Alarming to the public was the handful of anarchists who rejected Marxist discipline and preached the destruction of capitalism, overthrow of state, creation of utopia
1892 Alexander Berkman attempted to assassinate Henry Clay Frick, manager of Andrew Carnegie’s Homestead Steel Works – didn’t ignite a workers’ insurrection that he had hoped