Big Business and Organized Labor

Chapter 6

Bethlehem Steel Works, 1896 Library of Congress

Industrialization: Introduction

What made America in the 1880s so different from the 1860s was a new industrial order. The process of industrialization had begun at least

three decades before the Civil War. Small factories had produced light consumer goods

like clothing, shoes, and furniture. They catered to local markets in an economy of farmers and merchants.

They could not meet the demands of the rapidly growing national market.

Industrialization: Introduction

After the 1850s the industrial economy matured, with large factories, more machines, greater efficiency, and national markets.

Entrepreneurs developed systems of mass production and distribution. Huge corporations came to dominate the economy.

Ordinary Americans scrambled to adjust and an organized labor movement would emerge.

The Second Industrial Revolution

The first had occurred in Britain during the late 18th century. Coal-powered steam engine ;Textile machines for spinning

thread and weaving cloth; Blast furnaces to produce iron The second occurred in the the U.S. and

Germany during the second half of the 19th century. National transportation and communication network that created

a national and even international market. The use of electric power. The application of scientific research to the industrial process.

Example: the production of steel and chemicals. Also inventions.

Natural Resources and Industrial Technology

National Markets and the Expansion of the Railroad

Railroads helped tie the nation together by lowering transportation costs railroads.

Allowed manufacturers to reduce prices, attract more buyers, and increase business.

Railroads:America’s First Big Business

Railroads stimulated economic growth simply because they required so many resources to build – coal, wood, glass, rubber, brass, and steel.

As America’s first big business they devised new techniques of management that would soon be adopted by other companies.

Railroads establish standard time zones (1883)

Railroads: America’s First Big Business

Financing the railroads Built by private companies. Raised money for construction by selling

bonds to American and foreign investors. Also received federal land grants, as well as

loans and tax breaks from federal, state, and local governments.

Cornelius “Commodore” Vanderbilt and others made fortunes on the railroad.

Manufacturing and Inventions: Electricity

Thomas Edison invented the first successful incandescent light bulb, making electric light available. (1879) His company, General Electric, created a unified

electrical power system. By 1898 he had setup 3000 power stations

lighting more than 2 million bulbs as well as powering trolley cars, subways, and factory machinery.

Factories no longer had to cluster around waterfalls and coal supplies.

Manufacturing and Inventions

Edison also patented the phonograph, the motion picture, and hundreds of other devices.

Alexander Graham Bell invented the telephone in 1876, vastly improving communication.

Even small inventions such as typewriter (1867), mimeograph machines (1892), and carbon paper (1872) helped ease business transaction.

Improvements in Industrial Technologies

Steel could be refined from iron (cheaply) (Bessemer process developed in 1850s) Allowed for the production of telephones,

typewriters, adding machines, sewing machines, cameras, elevators, and farm machinery – and lowered consumer prices.

New distilling methods allowed kerosene and gasoline to be refined from crude oil.

The Corporation

The growing scale of enterprise led to the use of the corporation, which was a form of ownership. A corporation could raise large sums quickly by selling

“stock certificates” or shares in its business. It could also outlive its owners. It limited liability – owners were no longer responsible

for corporate debts. Professional managers now operated complex

businesses because owners were no longer responsible for day-to-day management of the company.

Finance Capital

As national wealth increased, people began to save and invest more of their money.

The New York Stock Exchange (around since 1792) linked eager investors with money-hungry firms. By the end of the 19th century the stock market

had established itself as the basic means of making capital available to industry.

Entrepreneurs(Robber Barons)

John D. Rockefeller –Standard Oil (oil refiner who took advantage of the Pennsylvania oil rush of the 1860s) By 1879, he controlled 90 to 95 percent of oil refined

throughout the country (Horizontal growth) Used vertical integration so that he would not have to

depend on the middlemen. Made its own barrels, cans, and whatever else it

needed. “Pay nobody a profit” Rockefeller made a fortune, but also became a leading

philanthropist donating more than $500 million during his 98 year-life.

Entrepreneurs(Robber Barons)Andrew Carnegie

Made his fortune in the steel industry. Used economic depressions to buyout his

competitors and expand.

Carnegie Integrates Steel

The Growth of Big Business

J.P. Morgan – financier (investment banker) – bought up railroads during the Panic of 1893 Merger movement - bought out Carnegie’s steel holdings

for $500 million and created United States Steel Corporation (1st billion-dollar corporation)

Richard Sears and Alvah Roebuck dominated the mail-order industry and helped create a truly national market (1890s) The catalog (6 million distributed per year) became second most read book in the nation (Bible was 1st)

The Growth of Big Business

Corporate Defenders The Gospel of Wealth - “super wealthy demonstrated

the superiority of the free enterprise system” Social Darwinism and “survival of fittest” Rising standard of living for most

Corporate Critics - Working conditions Average workweek: 59 hours. (6 – 10 hour workdays).

Many worked 12 hours a day, 7 days a week. Poor health and safety conditions in factories. 1913 – 25,000 factory fatalities & 700,000 injuries that

required at least a month’s disability.

Labor

1860 – 4.3 million industrial workers1900 – 20 million industrial workersThe pool of labor came from a huge

influx of European immigrants as well as a massive migration of rural Americans.

Also, growing number of women and children.

Labor Unrest

It was difficult for workers to organize. Property rights were respected more than labor

rights. Workers were a diverse group that resisted

forming unions.Disorganized Protest

Even without unions, workers staged spontaneous protests over long working hours and wage cuts.

Often became violent.

Incidents in the 1870sMolly McGuires

An Irish group in Pennsylvania coal fields. Aimed to improve working conditions by intimidation, beatings, and

killings. Arrested and put on trial, 20 were hanged and wages at the mines

were reduced. Railroad Strike of 1877

First major interstate strike. Caused by wage cuts. Workers waked off the job, picketed, and burned railroad property

from Maryland to San Francisco. Over 100 people killed and millions of dollars in property destroyed. The strikes failed because they lacked organized bargaining power.

Toward Permanent Unions

National Labor Union (1866) Persuaded Congress to enact an 8-hour workday for federal

employees and repeal the 1964 Contract Labor Law, which bound immigrants to employers in exchange for passage to America.

Died out in the 1870s after the death of its president.The Knights of Labor

Started in 1869 but became a national organization in 1878. 700,000 members by 1886. Liberal membership policy. Preferred boycotts to strikes as a way to pressure

employers.

Haymarket Square Riot

May 3, 1886, strikers and policemen clashed at Chicago’s International Harvester plant. One striker killed.

May 4, 1886, leaders of an anarchist movement held a protest to the killing in Haymarket Square. When policemen arrived to disperse the crowd, someone threw a

bomb, killing one and injuring others. Police fired into the crowd killing 4 demonstrators. Six policemen

were also killed.Americans associated alien anarchists and

labor radicals with the Knights of Labor, which disappeared by the turn of the century.

The American Federation of Labor (AFL)

Crafts unions (skilled workers) organized the AFL in 1886. A federation of independent crafts unions.

Samuel Gompers served as president until his death in 1924.

Focused on concrete aims rather than politics. Worked with management for agreements on union

recognition. Closed shops could hire only union members. 1900 – 500,000 members; 1920 – 2 million.

Labor Unrest

Homestead Steel Strike (1892) 300 Pinkerton detectives were used to barricade the

plant and bust the unions. 9 workers and 7 Pinkerton agents killed. 8,000 state militiamen called in to put down the strike.

The union was dead.Pullman strike (1894)

Started in Chicago 3,000 railway workers were laid off and wages cut 25-40 percent.

President Cleveland sent in federal troops to protect interstate commerce.

Eugene V. Debs and the Socialist Party Industrial Workers of the World (Wobblies)

1859 First oil well drilled in Pennsylvania

Significant Events

Chapter 19

1866 National Labor Union founded

1870 Rockefeller incorporates Standard Oil

1876 Alexander G. Bell invents telephone 1879 Edison develops incandescent lightbulb 1882 Standard Oil Company becomes nation’s

first trust

1883 Railroads establish standard time zones 1886 Haymarket Square bombing

1894 Pullman Strike