Chapter 24: Industry Comes of Age--1865-1900
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“The wealthy class is becoming more wealthy; but the poorer class is becoming more
dependent.” Henry George 1879
Industry Comes of Age
• Great men aren’t politicians
• Great men are lured to big business
• America is now an industrial giant in the world wide market
The Iron Colt Becomes an Iron Horse
• RR’s explode after ACW
• Very 1st big business – became a monopoly.
• Govt wanted to build transcontinental railroad because:
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For security of U.S. - transport military quickly in war time.
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Tie nation together economically – wealthy manufacturing east with goldrich CA
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Move products from east to west
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Traded goods with Asia could make it to the east
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Postal mail transportation
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Move natural resources – iron, ore, coal, produce
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Move people to populate the west – spurring growth
• To spur railroad building, Federal govt passed Pacific Railroad Act - to subsidize the
transportation system without raising taxes, and a way to use land as enticement to get
businessmen to profit from building the railroad
• Issued large tracts of land to 2 railroad companies – Union Pacific and Central Pacific.
• For each mile of track built companies granted:
• 1). builders receive 20 square miles of land
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2). a federal loan – $16,000 for flat land & up to $48,000 for mountainous land –
155 million acres in total
• People upset by “giveaways” but RR’s hook up government with preferential rates for postal
service and military traffic.
Union Pacific Railroad
• Began in Omaha, Nebraska and moved west
• Credit Mobilier pocketed 73 million: bribed congressmen to continue supporting the Pacific
Railroad Act.
• Irish Paddies were the workers (Irish who had fought in the Union Army)
• “Hell on wheels”: tented towns sprang up at rail’s end – drinking and debauchery.
Central Pacific Railroad
• Began in Sacramento, CA and moved east
• Chinese built the railroad – high death rate due to explosions on mts.
• Transcontinental Railroad completed 1869
• Met at Promontory Point, UT
• No other railroads received loans, but they did receive large land grants.
Effects of Transcontinental Railroad
• Linked entire continent via railroad and by telegraph, paved way for westward movement
• Created huge domestic market for U.S. raw materials and manufactured goods.
• Stimulated creation of new industries of mining, agriculture and ranching
• Facilitated large influx of immigrants.
• Led to great exodus to urban areas.
• Spurred investment from abroad.
• Creation of distinct time zones.
• Native Americans displaced and herded onto reservations
Binding the Country with RR ties
• Four other Transcontinental lines were built. None received cash grants, but three received
land grants
• Many other RR went bankrupt and fleeced investors.
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Towns competed with bribes to RR promoters to get the RR to come to their town. Many of
these RR took the money and ran.
Railroad Consolidation & Mechanization
• Cornelius Vanderbilt: owned NY Central Railroad; popularized steel rail - stronger and
could carry heavier loads than iron tracks.
• Jay Gould And Russell Sage: controlled most of Western railroads - hurt other
railroads by stock watering and keeping profits rather than reinvesting.
• Pools created – agreement to divide the business in a given area and share the
profits.
Government Bridles the Iron Horse
• Midwestern farmers (small) hate RR
• But society embraces free enterprise
• Depression in 1870’s groups farmers (Grange) to try to regulate RR
Wabash Case 1886
• Wabash, St. Louis & Pacific Railroad Company v. Illinois: Supreme Court declared invalid
an Illinois railroad law because it was an infringement on the exclusive powers of Congress
granted by the commerce clause of the Constitution.
• Result: denial of state power to regulate interstate rates for railroads- led to creation of the
Interstate Commerce Commission.
1887 Interstate Commerce Act
• Prohibited rebates and pools.
• Required railroads to publish rates.
• Forbid unfair discrimination against shippers. Outlawed charging more for short hauls than
for a long haul.
• Set up the Interstate Commerce Commission (ICC) to administer and enforce the Act.
• The first large scale attempt of the federal govt. to regulate business in the interest of society.
Miracles of Mechanization
• 1865-1895 saw a huge industrial boom.
• Reasons:
• Much more liquid capital
• Natural resources started to be exploited
• Massive immigration provided cheap unskilled labor
• American inventions made businesses and factories more efficient.
• Telegraph, mass production, cash register, stock ticker .
• Alexander Graham Bell: telephone – giant communications network was
built. Women took jobs as switchboard operators.
• Thomas Edison: dictaphone, phonograph, moving picture, electric light bulb
The Trust Titans Emerges
• Businesses, left alone, hate competition.
• Ways to avoid competition
• 1. Vertical Integration-combining into one organization all phases of manufacturing
from mining to marketing -Andrew Carnegie’s Steel operations.
• 2.Horizontal Integration-allying with competitors to monopolize a given market Rockefeller and Standard Oil
• 3.Trusts-consolidate operations of all rivals Rockefeller
• 4. Interlocking Directorates- consolidate rival enterprises and to ensure future
harmony by placing officers of his own banking syndicate on their various boards of
directors J.P. Morgan
Supremacy of Steel
• Steel became King after the Civil War.
• Foundation for much of the industrial expansion
• America biggest Steel producer by 1900.
• Produced 1/3 of the world’s steel.
• Bessemer Process – method of making cheap steel (use cold air to eliminate impurities)
Carnegie And Other Sultans Of Steel
• Andrew Carnegie-US Steel
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King of American Steel “Napoleon of the Smoke Stacks”
Produced ¼ of nation’s steel
• Carnegie- worried about dying with too much wealth, spends rest of life in
philanthropy
Rockefeller and Standard Oil
• 1859 – First Oil Well- in Penn. “Drake’s Folly” pours out “black gold”
• Automobile industry drives oil industry
• Rockefeller and Standard Oil (1870, trusts formed in 1882)
• 1887- controlled 95% of all oil refineries in US
• Rockefeller and Standard Oil
• “Reckafeller” big believer in commercial Darwinism.
• Ruthless business man
• Trusts = profits
J P Morgan: Banker and Financier
• Financed the reorganization of railroads, insurance companies, and banks.
• Morgan bought out Carnegie for over $400 million. (Philanthropist: Carnegie donated
millions)
• 1901 launched the larger U.S. Steel Corporation = America’s 1st billion dollar corporation.
Social Darwinists
• Some business leaders equate success to god ( divine right of kings)
• Others – Social Darwinists (Herbert Spencer and William Graham Sumner) – are that people
won their stations in life by competing on basis of natural talent.
• Later applied to countries
• Russell Conwell- “Acres of Diamonds” – “There is not a poor person in the US who was not
made poor by his own shortcomings”
“Gospel of Wealth”
• Carnegie “Gospel of Wealth”
• Inequality is inevitable and good.
• Wealthy should act as “trustees” for their “poorer brethren.”
• Wealthy had to prove they deserved their wealth.
• Give back to the community as a whole, not to individuals
Government Tackles the Trust Evil
Sherman Anti Trust Act of 1890
• Forbids combinations in restraint of trade.
• Did not prove very effective because went after bigness and not badness.
• Not very effective because penalties weak and loopholes
• Biggest effect was unintended--Was used against unions.
• Importance of the law was not its immediate effect but the shift in thinking that it represented.
The South In The Age Of Industry
• Smaller production
• Most area is sharecropping
• James Duke - American Tobacco Company
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“New South”
• Henry Grady editor of Atlanta Constitution
– Become “Georgia Yankees”
• Major barrier to South development- RR regional rates- RR give better rates to manufactured
goods moving from the North
• 1880’s Bring the mills to the cotton
– Why
• Cheap labor
• Less unions
• Tax benefits
– Most blacks excluded from mill jobs
• Entire poor white families worked “hillbillies and lintheads”
– Paid half as much as northern workers
– Often times paid in credit
The Impact Of Industrialization
Ø Standard of living rose sharply
Ø Workers enjoyed many more physical comforts
Ø Urban centers mushroomed
Ø Jeffersonian Ideal of nation of small farmers died
Ø Concept of time changed.
Ø Many more women in the workforce
Ø Delayed marriages and smaller families
Ø New class system
Ø Workers becoming more dependent and more vulnerable.
In Unions There is Strength
• New technology means less skilled workers
– Individual workers were powerless to bargain
• Companies- use lawyers, buy local press, pressure politicians, scabs, or hire thugs
– Court injunctions- make strikes illegal
– Companies can request federal troops
– Lockouts
– Yellow dog contracts
– Black lists
– Company “towns”
• Unions strengthened after the Civil War.
• National Labor Union organized in 1866 and did well,
– 600,000 members, both skilled and unskilled
– Did not recruit women or blacks (there was a Colored National Labor Union)
– Goals: arbitration of industrial disputes, 8-hour day
– damaged by the depression in the 1870s
Labor Limps Along
• Knights of Labor (1881 becomes public) took over where the National Labor Union had left off.
– Sought to include all labor in one big Union.
– They stayed out of politics, but campaigned hard for economic and social reform.
– Their biggest issue was the 8-hour work day.
– Won that fight from a number of industries and their ranks swelled.
– Chinese prohibited from joining
Unhorsing The Knights Of Labor
• 1886- ½ of May day strikes fail
• Haymarket Square Incident (Chicago 1886)
1886 Haymarket Square Riot:
• A rally to support striking workers at Haymarket Square in Chicago.
• Dynamite bomb thrown at police.
• Bomb blast/gunfire caused deaths of 8 police officers and civilians.
• 8 anarchists tried for murder;
• 5 convicted, 4 executed and 1 committed suicide in
prison. (none of the defendants had thrown the bomb)
• Why does the Knights of Labor die?
• 1. KofL now wrongfully linked with anarchism
• 2. Fusion of skilled and unskilled workers
AFL: American Federation of Labor
• Began 1886 - Samuel Gompers served as Pres from 1886-1924 (except for 1 year)
• Broke away from Knights of Labor - An association of self-governing national unions, each with
its independence, but with AF of L unifying the strategy.
• Major goal: “trade agreement” authorizing the “closed shop” = employer agrees to hire union
members only, so have only all-union labor.
• Sought better wages, hrs, working conditions. Used walkouts, boycotts, and “we don’t patronize”
signs.
• Dominated and composed of skilled craftsman (carpenters, bricklayers, etc.)