Chapter 24: Industry comes of Age

By:Ricky, Sally, Bryan, Alex and Lucy Per. 8

OUR TWO MAIN OBJECTIVES

Identify the abuses in the railroad industry and discuss how these led to the first efforts at industrial regulation by the government

Describe how the economy came to be dominated by giant trusts, such as those in the steel and oil industries, and the growing class conflict it precipitated

Development of the Railroad System

Giant growth in railroads

- 1865: 35,000 miles of track

- 1900: 192,556 miles of track

- Cities along the railroad lines became mega-cities and hubs for travel and trade

- Building of railroads provided many Americans with jobs

Transcontinental Railroad

Deadlock over the project ended in 1862 when the South seceded

A big point that won over Congress was one that suggested that the Union should bind the Pacific Coast- more specifically California- to the rest of the Union and this railroad would do so

Project was ultimately handled by Union Pacific Railroad

Cornelius Vanderbilt (1794-1877)

Originally made his money off steam boating transportation

During the late 1860’s he ventured into railroads and amassed over 100 million dollars in profit

Vanderbilt helped popularize two significant improvements to the railroads: steel tracks and the development of a “first class” car

Standard Time Zones

Standard Time Zones were created because until the 1880’s, every town had their own “local” time

Train conductors worried about keeping schedules and avoiding accidents

On November 18, 1883 the major rail lines decreed that the continent would be divided into four “time zones”

Wrongdoing in Railroading

The first of many methods of corruption was “stock watering”

“Stock Watering” was when railroad stock promoters grossly inflated their claims about a given company’s assets and profitability and then sold stocks and bonds far in excess of the railroad’s actual value

High powered railroaders not only played with stocks but essentially bought and sold real people

Wrongdoing in Railroading Cont.

High Powered Railroaders regularly bought off judges and legislatures, or even elected their own people to high powered office positions

Railroad kings were often considered more powerful than the President because they had a greater impact on more peoples’ lives AND they were not limited to a four year term

The Government Fights Back

In 1887 Congress passed the Interstate Commerce Act which prohibited rebates and pools and required the railroads to publish their rates openly. It also forbade unfair discrimination against shippers and outlawed charging more for a short haul than a for a long one

ICC (Interstate Commerce Commission): set up by the act to administer and enforce the new legislation

The Interstate Commerce Act was the first large-scaled attempt to regulate business in the interest of society

TRUST TITANS

The three main “trust titans” were: Andrew Carnegie(steel), John D. Rockefeller (oil), and J.P. Morgan (banking)

Trust- a relationship whereby some sort of property is held by one party for the benefit of another

Andrew Carnegie (1835-1919)

Carnegie’s steel business was aided by his gifted organization ability and his high-class associates. He also made a lot of money by cutting out the “middle man”

By 1900, Carnegie was producing ¼ of the nations steel and he and his partners were taking in 40 million dollars a year

John D. Rockefeller (1839-1937)

Organized the Standard Oil Company in 1870

By 1877 Rockefeller controlled 95 percent of all of the oil refineries in the country

His company and power grew due to his genius move to develop trusts in which smaller oil companies gave a sizable piece of their stock to members of the board of his company allowing him to monopolize the industry quickly

J.P Morgan (1837-1913)

Financer and banker who orchestrated many famous business mergers such as the forming of General Electric in 1892, and the merger with the Carnegie Steel Company to form United States Steel Corporation in 1901

Was very aggressive and considered a “hot head” by his peers

“Gospel of Wealth”

As the gap grew between the rich and the poor, many wealthy businessmen found themselves crediting “heavenly help”

Steel tycoon Andrew Carnegie said that the wealthy, who were entrusted with society’s riches, had to prove themselves morally responsible according to a “Gospel of Wealth”

Social Darwinism

A survival-of-the-fittest theory developed by English professor Herbert Spencer and Yale professor William Sumner

The theory argued that individuals won their stations in life by competing on the basis of their natural talents, essentially the wealthy and powerful had demonstrated greater abilities than the poor

Very similar to “survival of the fittest”, “the millionaire were the product of natural selection” Sumner said

In Conclusion

As America grew after the Civil War so did the railroad system and also major monopolies over large industries. Money and power became more attractive than politics and high level corruption began to make its way into the business world. As the rich became richer, the gap widened between the upper and lower class and started the class conflict that still lingers today.