Industrialization and Its Discontents

The Rise of Big Business, Labor and Agriculture

The Industrial Revolution

• Involved the invention of new machines and new systems.

• Goods were produced on a massive scale for domestic and foreign markets.

• Industrial growth led to the development of a new type of business, the Corporation.

• Industrial Revolution was sparked by technological advances in many fields.

US Advantages in Industrialization

• Patent Laws: The Constitution gives Congress the power to issue patents to inventors.

• Corporate business organizations: sell shares in business to raise capital. Limited Liability shareholders.

• Corporations could raise significant amounts of capital needed for investment in industrial projects such as railroads.

Railroads Improve Transportation

• Transcontinental Railroad had its roots in the Civil War.• Congress of 1862 authorized the construction of the first

Transcontinental Railroad connecting the Atlantic and Pacific lines.

• Gov’t involvement was crucial because it was too expensive a project for private investors to handle.

• Gov’t provided subsidies by the mile in exchange for lower rates. (tens of thousands of dollars per mile)

• The Republican Congress also gave land grants to the railroads

• Railroad was completed in 1869 in Utah• Built by many Chinese and Irish laborers.

Railroads

• Cheaper, faster, and carried large quantities of goods.

• 1865 vs 1895 flour = $3.45 vs. $0.68• Poor safety, many train wrecks because of

communication problems and poorly design equipment.

Communications Revolution

The telegraph• Samuel F. B. Morse• Send messages over wires with

electricity• Operators tapped out patterns of

long and short messages that stood for letters of the alphabet.

• Morse code• After the Civil War, the telegraph

grew with the railroads. • Telegraph wires were strung along

the tracks, and train stations had telegraph offices in them.

The telephone• Alexander Graham Bell patented

his device 1876. • By 1900, more than a million

telephones had been installed across the nation.

• Companies found the telephone to be an essential business tool.

• People wanted to have them in their homes as well.

Advances in Transportation

• Streetcars were horse-drawn vehicles placed on rails on the street to make the ride smoother. Streetcars needed more power than horses could provide, and cable cars were invented in San Francisco to get cars up the steep hills there. The cars latched on to a moving cable underground.

• Subways developed as a result of increased traffic from horses and electric streetcars competing for space. Boston built the first subway line in 1897, with New York City following in 1904.

The Typewriter

• Christopher Latham Sholes developed the first practical typewriter in 1867.

• Designing the QWERTY keyboard, still the standard on keyboards today.

• The typewriter could produce legible documents very quickly.

• Businesses began to hire women as typists to manage company correspondence, opening up new job opportunities for women.

Electricity

• Thomas Edison– Electricity direct current, light bulb,

phonograph, etc etc • George Westinghouse

– alternating current

Bessemer Process

• Cheaper and quicker process to produce steel

• Lighter, stronger, and more flexible than iron.

• Led to mass production of steel• Building of the Brooklyn Bridge

Types Of Business• Proprietorships and partnerships

– Small businesses run by individual proprietors or more than one owner in a partnership. In either case, owners personally responsible for all business debts and obligations.

• Corporations– As industries grew, the structure of ownership changed.

Businesses owned by stockholders; decisions made by a board of directors with day-to-day operations run by corporate officers. Investment money raised by selling stock, and investors/stock holders bound only by the amount of their investment.

• Trusts and Monopolies– Some companies merged and turned their stocks over to a

board of trustees who ran the group of companies as a single entity. Sometimes a trust gained a monopoly, having complete control of an industry. With no competition, prices could be inflated or reduced at will.

Corporations

• Setup other forms of businesses to limited competition

• Pools: competing companies in one field make an agreement to fix prices and divide business.

• Trusts: group of corporations combine under a single board that controls the actions of all member corporations-stockholders have no say in the operations

Corporations Continued

• Monopoly: company or small group of companies that have complete control over a particular field.

• Conglomerate: Corporation that owns a group of unrelated companies - usually through mergers.

Economic trends 1865 - 1925

• Formation of corporations: to raise capital.• Develop business practices to eliminate

competition• Use pools and trusts to eliminate

competition• Mechanization and division of labor hurt the

competitiveness of small businesses.• Economies of Scale• Horizontal and vertical integration• “Captains of Industry” or “Robber Barons”?

Social Darwinism

• Inequalities are always part of any natural order.

• Charles Darwin believed that members of a species compete for survival in a natural selection process.

• Applied to society, stronger people, businesses, and nations would prosper, and weaker ones would be surpassed by “the fittest.”

Robber Barons (?)

• Made their fortunes by stealing from the public.

• Were not regulated by government and did whatever they could to make as much money as possible.

• Believed in Social Darwinism.• Believed in laissez faire economics: no

gov’t regulation of business.• Jay Gould & Jim Fisk

Captains of Industry (?)

• A more positive view• Seen as making huge contributions to

society– Increased the supply of goods– Built new factories– Created new jobs and technology– Raised productivity and economic conditions– Major philanthropy: Contributed to

universities, museums, libraries, etc.

Andrew Carnegie

• Built steel mills in Pennsylvania that used the new Bessemer process.

• Built his company into an empire using vertical integration.

• Integrated his production process by buying out all of the companies – coal, iron ore and so on needed to produce, transport, and sell the steel.

• Preached Gospel of Wealth: make as much money as possible and then contribute to charities. 3000 libraries and supported artistic and research institutes.

• List all the objects, words, or people you see in the cartoon.

• Which of the objects on your list are symbols? What do you think each symbol means?

• Which words or phrases in the cartoon appear to be the most significant? Why do you think so?

• Explain the message of the cartoon.

• What special interest groups would agree/disagree with the cartoon's message? Why?

John D. Rockefeller

• Standard Oil Company in 1870• 10 years later refined 90% of all the oil in the

US.• 1882 Standard Oil Trust: Samuel Dodd• His aim was to control the market and ruin his

competitors by the following methods.– Rebates from the railroads; used to lower prices– Always offered to buy out competitors– Avoided shipping costs by building pipelines: used

both vertical and horizontal integration

Thomas Edison

• Obsessed with progress– In 1886, he opened his

own research laboratory in Menlo Park, N.J.

• Hard work– Wizard of Menlo Park. – Over his lifetime, Edison

earned over 1,000 U.S. patents.

• Electric lighting– Developed practical

electric lighting. – Incandescent bulb the

need for widely available electricity.

– Produced all of the parts necessary for an electricity network.

– Electric power plants spread across the country.

“Genius is 1 percent inspiration, 99 percent

perspiration.”

Henry Ford

• Interchangeable parts and the assembly line.

• Paid high wages• Electrical engineer• Created a whole community in Detroit for

his car company

J. P. (Pierpont) Morgan

• Banker loans to growing businesses.• Purchased Carnegie Steel and created US

Steel.• Also took control of bankrupt railroads and

reorganized them.• Involved in insurance, electrical, and

shipping companies.

Effects of Railroad Development & Regulation

• Rise of business cycle: boom and bust• Panic of 1893: 500 banks and 15,000

businesses went bankrupt; caused by overproduction and speculation in the railroads and in silver production.

• 4 year depression – deepest in US history• Overproduction of goods led to lower

prices, lower (or no) profits, laying off of workers and/or lowing of wages.

Important Supreme Court Decision

• 1886: Wabash, St. Louis & Pacific Railway Company v. Illinois

(commonly known as Wabash v. Illinois) • Constitutional Principles:

– National power v. state power– Property rights– Interstate commerce– federalism

• Why Decision is important:– Invalidated Illinois state law that set railroad rates– Declared it a federal power to regulate rates– Strengthened Congress’ Commerce Clause power– Led to the creation of the ICC

Government Regulation

• Interstate Commerce Act (1887) and the Interstate Commerce Commission (ICC)

• ICC set up to end abuses such as railroad rebates to special customers, pools and trusts.– Railroad rates had to be fair and just– Pools were illegal– Rebates to favored customers were illegal– Could not charge more for a short haul than a large one

• Sherman Antitrust Act (1890): designed to increase competition and end monopolies and other business practices that restrain trade and/or competition.

Work Force

• Shift in work force– 9 million Americans move to the cities– 14 million immigrate to the US – nativist

reaction: Chinese Exclusion Act (1882) Alien Contract Labor Act (1885)

Working Families

• Family affair• Children often left school at 12 or 13• Girls worked so that boys could stay in

school• Women entered the workforce• Children as young as 6 or 7• 70+ hour work weeks • Poor working conditions

Government help or lack of help

• Americans believed that the government shouldn’t help – laissez faire (“hands off”) ECONOMICS and GOV’T POLICY

• No unemployment insurance• No health insurance• No sick days• Social Darwinism & laissez faire were the rule• Only private and religious charities

Factory Work

• 12 hour days• System of piecework• Favors young and strong workers• Increasing Efficiency: Frederick Winslow Taylor: Time

and Motion studies.• Division of labor: separate tasks• Impersonal: hands or operatives• “Fine or fire”• Boring, noise was deafening, lighting, ventilation• 675 killed weekly• Deadly fires• By 1900, one in six children between the ages of 10 and

15 held factory jobs.

Unions

• Collective Bargaining: union members representing workers negotiate labor issues with management.

• If collective bargaining failed, labor unions often used strikes/work stoppages.

Knights of Labor

• National Trade Union first nationwide union.• Most died out during the panic and depression

of 1837.• Philadelphia in 1869: The Noble Order of the

Knights of Labor.– Open membership– Goals and methods: arbitration– Formed cooperatives– Sudden rise and sudden fall

American Federation of Labor

• A F of L • Limited membership• Samuel Gompers organized a federation of craft

unions that kept their independence.• The leadership set overall policy for achieving

common objectives.• Goals: higher wages, shorter hours, and better

working conditions; if necessary – strikes• 1900: ½ million workers• Clashes with state and federal troops in the Great

Railway Strike (1877) and the Pullman Strike (1894)

Labor Conflicts• Haymarket Riot (1886): bomb blast by anarchist

kills many people including 7 police officers in Chicago.

• Homestead Strike (1892): pay cut at Carnegie Steel’s Homestead plant. Plant hired guards - violence broke out and 16 people were killed. The National Guard was called in. Only 25% got jobs back.

• Pullman Strike (1894): railway car makers. President Grover Cleveland sent in federal troops.

• Sets off a constitutional debate over Cleveland’s actions.

• 1895: In Re Debs case

Supreme Court Case

• In Re Debs 1895• Constitutional Principle: National Power and the

commerce clause.• Why decision is important: ruled that the federal

government under the commerce clause of the Constitution had the right to halt the strike.

• Said strike hurt the general welfare of nation by disrupting commerce and mail delivery.

An era of Strikes, late 1800s

Gap between Rich and Poor grows larger

TensionsIncrease between

Workers & owners

WorkersOrganize

unions

BusinessLeaders Opposeunions

1877 starts era ofViolent

Strikes: Great Railway,

Haymarket,Homestead, Pullman

Gov’t sides with Business leadersSometimes using

Troops to put downstrikes

Farmers v. railroads, merchants, and banks

• Farm families’ only assets were good cheap land and their own hard labor.

• Expenses were high.• Major expense was high railroad rates for storing

crops in grain elevators and shipping the crops to the city.

• To meet expenses until crops were sold farmers depended on credit from merchants and loans from banks.

• Natural disasters and low prices often prevented farmers from paying their debts and losing their farms.

• Farmers came to resent railroads, merchants, banks, and buyers who expected lower prices when production increased.

The Granger Movement

• Founded in 1867 to bring farm families together for social purposes but soon focused on coping with troubling economic issues.

• Railroads competed for business over long routes and therefore charged low rates to bigger businesses.

• They made up their losses by overcharging farmers who had to ship crops over less competitive short routes.

• Also high charges for storing grain in grain elevators

Grange Laws

• 1870s Grangers persuaded state legislatures to pass laws regulating railroad freight rates and elevator storage rates.

• Munn v Illinois: the US Supreme Court (SCOTUS) ruled that states could set maximum rates for grain storage but could not regulate freight rates

• First major gov’t foray into private industry permitted by SCOTUS

The Populist Party

• Farm prices fell in the late 1800s (starting with Panic of 1873), farmers joined a movement that became the POPULIST PARTY.

• Populist objectives, 1892– Graduated income tax– Government ownership of railroads and telephone and

telegraph companies.– 8 hour work day– The initiative (voters’ power to propose new ideas for new state

laws) and the referendum (voters’ power to approve or reject new laws)

– Secret ballot– Popular election of senators instead of state legislatures– Limit terms of president and vice president to one

The Populists and Inflated Money

• Wanted to inflate currency by printing paper money or coining silver. 16 silver dollars for every gold dollar. Actual exchange rate was 17/1, so created artificial inflation. Populists believed there was a connection between the hording of gold coins and the lower prices they received on their products.

• Populists wanted to create inflation

Silver Against Gold

• Election of 1896: William Jennings Bryan• Silver Democrats v Northern and Eastern

Democrats who favored gold.• Bryan loses to William McKinley

Successes of the PopulistsMinor parties sometimes have a major impact on

politics

Graduated Income Tax

(16th Amendment)Passed 1913

Popular electionOf Senators

(17th Amendment)Passed 1913

Populist party dies out after election

of 1896Farm Prices Rise

Third parties even when they fail to get Elected frequently

address issues avoided by the

Major parties

Changes In Immigration

• Immigration Before the Civil War– Colonial Times British, French, Germans,

Dutch, Swedes, African slaves.– After the Revolution: British, Germans

(including a large number of Jews), Irish– Latin Americans1848 after the Mexican War.

New Immigration

• Italy, Greece, Russia, Austria-Hungary and other southern and eastern European citizens.

• Assimilation issue: new immigrants not trusted by Americans.– Protestants vs Roman Catholics and Eastern

Orthodox– Did not speak English

Reasons for Immigration

• Population pressures• Recruitment campaigns• Economic conditions• Political Opposition• Enter the Immigrants from Asia

– 300,000 Chinese– 150,000 Japanese

Contributions

• Built railroads• Turned prairies and forests into farms• Made NYC a garment industry center• Opened Macys and Marshall Field’s• Manned the factories• Were scientists and inventors

Nativist reaction

• Nativism: the belief that foreign born persons threatened the majority culture and should be barred from this country.

• Know Nothings: 1849 political party favored restricting immigration; especially disliked Catholics.

• The Yellow Peril: fear of the Chinese– Chinese Exclusion Act (1882)– Gentlemen’s Agreement (1908): no labor

immigration from Japan

Immigration Restrictions

1882 Chinese Exclusion

Act

1882Pauper,

Convicts, & mentally defective

1891Prostitutes, polygamists & Diseased

persons

1917Literacy

Test

1921First quota law

Limited to 3% of the # arriving

In 1910

1924New Quota law1. No Asians

2. No more than 150,0003. 2% of the number arriving in

1890