INDUSTRIALIZATIONINDUSTRIALIZATION1865 - 19011865 - 1901

LATE 19TH CENTURY AMERICA

EXPERIENCED AN INDUSTRIAL

BOOM

Gross National Product trade union

Laissez-faire industrial union

Entrepreneur lockout

corporation Marxism

pool arbitration

vertical integration holding company

horizontal integration closed shop

Monopoly deflation

Trust Fixed cost

Economies of scale operating costs

Land grant Time Zone

• Even though the Even though the Industrial Revolution began Industrial Revolution began in the in the USA in the USA in the early 1800s, early 1800s, our our nationnation was was still largelystill largely a a rural rural farmingfarming country country when the Civil War started when the Civil War started in in 1860.1860.

• Out of a population of more than 30 million, Out of a population of more than 30 million, only only about 1.3 million Americans worked in industry in about 1.3 million Americans worked in industry in 1860.1860.

• After the Civil war After the Civil war (won by the North)(won by the North) industry grew rapidly industry grew rapidly and expanded. Consequently, millions of Americans and expanded. Consequently, millions of Americans left their farms to work in mines and factories. left their farms to work in mines and factories. (factories in Cities)(factories in Cities)

• By the early By the early 1900s1900s, the , the USAUSA became the worlds became the worlds leading industrial nationleading industrial nation and by 1914 our gross and by 1914 our gross national product (GNP) national product (GNP) the total value of all goods and services the total value of all goods and services

produced by a countryproduced by a country – was eight times greater than it had – was eight times greater than it had been when the Civil War ended in 1865.been when the Civil War ended in 1865.

THE EXPANSION OF INDUSTRY

• This enormous growth was due to three factors; 1) Natural Resources 2) Governmental support 3) Urbanization

BLACK GOLD

• In 1859, Edwin Drake used a steam engine to drill for oil

• This breakthrough started an oil boom in the Midwest and later Texas – Spindle TOP

• At first the process was limited to transforming the oil into kerosene and throwing throwing out the gasoline out the gasoline -- a by-product of the process

• Later, the gasoline was used for carsEDWIN DRAKE PICTURED

WITH BARRELS OF OIL

BESSEMER STEEL PROCESS

• The Bessemer process (Henry Bessemer & William Kelly)

• Oil was not the only valuable natural resource

• Coal and iron were plentiful within the U.S.

• When you removed the carbon from iron, the result was a lighter, more flexible and rust resistant compound – Steel BESSEMER CONVERTOR

CIRCA 1880

NEW USES FOR STEEL

• The railroads, with thousands of miles of track, were the biggest customers for steel

• Other uses emerged: barbed wire, farm equipment, bridge construction (Brooklyn Bridge- 1883),and the

first skyscrapersskyscrapers BROOKLYN BRIDGE SPANS 1595 FEET IN NYC

Causes of IndustrializationCauses of Industrialization

• National Resources (Raw Materials)– Water, timber, coal, iron, copper– Consumer Needs helped settle the West –

RR expanded during this time• Oil (petroleum) turned into . . .

– Kerosene – lanterns & stoves– 1859 - Edwin DrakeEdwin Drake 11stst oil oil well,

Titusville, Pa.• Population Increase – Large workforce

– 1860 – 1910, USA tripledtripled due to immigration & large families

• Free Enterprise– Laissez –faire– Entrepreneurs

Causes of IndustrializationCauses of Industrialization

• Free Enterprise

– Laissez –faire

– Entrepreneurs

The The USA practiced laissez-USA practiced laissez-faire faire economics in the economics in the late late 1800s1800s..

State and federal State and federal governments kept taxes and governments kept taxes and spending lowspending low and did not and did not impose costly regulations on impose costly regulations on industry. The GOVT. did not industry. The GOVT. did not try to control wages and try to control wages and prices. prices.

• Civil War StrugglesCivil War Struggles– NorthNorth, , high tariffs high tariffs to protect American industry from to protect American industry from

foreign competitionforeign competition• Federal Federal subsidiessubsidies (free money) (free money) for for roads, RR, & canals roads, RR, & canals to to

the Westthe West

– SouthSouth, , low tariffs low tariffs to promote trade to promote trade (cotton) (cotton) with with Europe . . . . Europe . . . . Texas was the largest cotton producing state at Texas was the largest cotton producing state at that timethat time

• Morrill TariffMorrill Tariff……… ……… voted in when the SOUTH seceded voted in when the SOUTH seceded

Republicans in Control of Congress.. Republicans in Control of Congress.. TripledTripled taxes taxes on on imports, gave away western land for RRimports, gave away western land for RR

• Free Trade - be able to compete internationallyFree Trade - be able to compete internationally

• 1876- Thomas Alva Edison established the world’s first research lab in New Jersey

• There Edison perfected the incandescent light bulb in 1880

• Later he invented an entire system for producing and distributing electricity

• By 1890, electricity powered numerous machines

EDISON

• Another important invention of the late 19th century was the telephone

• Alexander Graham Bell and Thomas Watson unveiled their invention in 1876

BELL AND HIS PHONE

New InventionsNew Inventions• Alexander Graham Bell Alexander Graham Bell

– 1876, Telephone (AT&T)1876, Telephone (AT&T)

• Thomas Alva Edison Thomas Alva Edison – 1877, Phonograph1877, Phonograph– 1879, Light Bulb1879, Light Bulb– 1889, Edison General Electric Company (GE)1889, Edison General Electric Company (GE)

• Textile IndustryTextile Industry– Northrup Automatic Loom Northrup Automatic Loom (clothes made faster)(clothes made faster)

– Standard Sizing Standard Sizing (ready made clothing)(ready made clothing)

– Power-driven Sewing MachinePower-driven Sewing Machine– Mass production of ShoesMass production of Shoes

RailroadsRailroads• Linking the NationLinking the Nation

– 1865, 35,000 miles1865, 35,000 miles– 1900, 200,000 miles1900, 200,000 miles

• Transcontinental Transcontinental RailroadRailroad– 1862, Pres. Lincoln, 1862, Pres. Lincoln,

Pacific Railway ActPacific Railway Act– Union Pacific – Irish Union Pacific – Irish

immigrantsimmigrants– Central Pacific – Chinese Central Pacific – Chinese

immigrants immigrants labor shortage labor shortage in California in California

Railroads cont.Railroads cont.• Spurring GrowthSpurring Growth

– Increased markets & desire for raw materialsIncreased markets & desire for raw materials– Consolidation of smaller lines (Vanderbilt)Consolidation of smaller lines (Vanderbilt)

– Allowed cars to be shifted from Allowed cars to be shifted from one section of one section of the country to anotherthe country to another based on seasonal needsbased on seasonal needs..

• American Railway Association - 1883American Railway Association - 1883– Time Zones, safer more reliableTime Zones, safer more reliable– Air Brakes, pull longer, heavier trainsAir Brakes, pull longer, heavier trains– Standard Gauge, unite all linesStandard Gauge, unite all lines

• Land Grant SystemLand Grant System - - National Govt. helps National Govt. helps finance the construction of a National Railroad System.finance the construction of a National Railroad System.– Gave RR companies land in the unsettled WestGave RR companies land in the unsettled West– Sold land for $$ to finance rail constructionSold land for $$ to finance rail construction

Refrigerated Railroad Car made it possible to ship meat ship meat from slaughterhouses to citiesfrom slaughterhouses to cities

Railroads cont.Railroads cont.

RAILROAD AND TIME• Before 1883, each

community still operated on its own time

• For example: Noon in Boston was 12 minutes later than noon in New York City

• Indiana had dozens of different times

• No standard time reference

PROFESSOR DOWD CREATES TIME ZONES

• In 1869, to remedy this problem, Professor C.F. Dowd proposed dividing the earth into 24 time zones

• The U.S. would be divided into 4 zones: the eastern, Central, Mountain, and Pacific

• 1883 – Railroads synchronized their watches across U.S.

• 1884 – International Conference adopts zones

PROFESSOR DOWD EXPLAINS HIS TIME ZONES

The corruption in the railroad industry became public in 1872 when the credit Mobilier scandal erupted.

CREDIT MOBILIERCREDIT MOBILIER was a construction company set up by set up by several stockholders of the Union Pacific RRseveral stockholders of the Union Pacific RR, including Oakes Ames, a member of Congress.

Acting for both the Union Pacific and Credit Mobilier, the investors signed contracts with themselves. Consequently, Credit Mobilier (the construction company) Credit Mobilier (the construction company) overcharged Union Pacific for the work it didovercharged Union Pacific for the work it did, and since the same investors controlled both companies, the railroad agreed to pay the huge bills, because in effect --- THEY WERE PAYING THEMESELVES.

– The great wealth many railroad The great wealth many railroad ENTREPRENEURS acquired in the late 1800s led ENTREPRENEURS acquired in the late 1800s led to accusations that they had built their fortunes by to accusations that they had built their fortunes by swindling investors and taxpayers, bribing swindling investors and taxpayers, bribing government officialsgovernment officials, and cheating on their , and cheating on their contracts and debts.contracts and debts.

– The person with The person with probably the worst probably the worst REPUTATIONREPUTATION for this kind of activity was for this kind of activity was JAY JAY GouldGould, , whom often practiced whom often practiced “insider “insider trading” trading”

– He used information he received as a railroad He used information he received as a railroad owner to owner to manipulate stock pricesmanipulate stock prices to his financial to his financial benefit.benefit.

• Characterized as Robber BaronsRobber Barons– RR Entrepreneurs-owners– Built fortunes by swindling taxpayers, bribing

govt. officials, & cheating on contracts

ROBBER BARONS

• Famous “Robber Barons” included Carnegie, Rockefeller, Vanderbilt, Stanford, and J.P. Morgan

J.P MORGAN IN PHOTO AND CARTOON

THE GRANGE AND THE RAILROADS

• Farmers were especially affected by corruption in the railroad industry

• Grangers (a farmers organization) protested land deals, price fixing, and charging different rates to different customers

• Granger Laws were then passed protecting farmers

• States were given regulation control of railroads by the Courts

GRANGERS PUT A STOP TO RAILROAD CORRUPTION

Were the founders of American industry "robber barons" or "captains of industry?"

The wave of industrialism that we have been studying was often driven by a few great men known as industrialists. There can be no mistaking their motives: wealth. There is some debate, however, on

the how history should portray these industrialists. Some feel that the powerful industrialists of the gilded age should be referred to as "robber barons." This view accentuates the negative.

It portrays men like Vanderbilt and Rockefeller and Ford and cruel and ruthless businessmen who would stop at nothing to achieve great

wealth. These "robber barons" were accused of exploiting workers and forcing horrible working conditions and unfair labor practices

upon the laborer.Another view of the industrialist is that of "captain of industry."

The term captain views these men as viewed ingenious and industrious leaders who transformed the American economy with

their business skills. They were praised for their skills as well as for their philanthropy (charity).

In reality the debate over robber barons and captains of industry mirrors views of industrialism itself. Just as their were both positives and negatives to industrialism there were positives and negatives to

the leaders of industrialism

`Industrialization

Railroads Steel Oil Unions

Rockefeller

Technology

Vanderbuilt Carnegie Edison Gompers

Banking

Morgan

Andrew Carnegie

John D. Rockefeller

Samuel GompersCornelius

Vanderbilt

Thomas Edison

J. P. Morgan

Big Business• Corporation

– Produces more goods cheaper

– Continue to operate in poor economic times

– Can negotiate rebates from RR – lowers operating costs

– Drives out smaller competitors

- Economies of ScaleEconomies of Scale – large corporations to produce goods cheaper & quicker than small manufacturers could

Pools– Companies agree to maintain

prices of certain products

CARNEGIE’S VERTICAL INTEGRATION

• Carnegie attempted to control as much of the steel industry as possible

• How? Vertical integration; he bought out his suppliers (coal fields, iron mines, ore freighters, and rail lines) in order to control materials and transportation

HORIZONTAL INTEGRATION

• Additionally, Carnegie bought up the competition through friendly and hostile takeovers

• This is known as Horizontal Integration; buying companies that produce similar products – in this case other steel companies

MERGERS

Business PracticesBusiness Practices• MonopolyMonopoly

– Single company Single company achieves control of an achieves control of an entire marketentire market

– Many states begin Many states begin outlawingoutlawing

• TrustsTrusts– Legal maneuver Legal maneuver

allowing trustee to allowing trustee to manage another manage another person’s property person’s property (trustee)(trustee)

• Holding CompaniesHolding Companies– Produce no productProduce no product– Controls stock Controls stock

several companies, several companies, merging into one merging into one large enterpriselarge enterprise

BUSINESS GROWTH & CONSOLIDATION

• Mergers could result in a monopoly (Trust)

• An example of consolidation: In 1870, Rockefeller Standard Oil Company owned 2% of the country’s crude oil

• By 1880 – controlled 90% of U.S. crude oil

CHICAGO’S STANDARD OIL BUILDING IS ONE OF THE WORLD’S TALLEST

SHERMAN ANTI-TRUST ACT

• In 1890, the Sherman Anti-Trust Act made it illegal to form a monopoly (Trust)

• Prosecuting companies under the Act was not easy – a business would simply reorganize into single companies to avoid prosecution

• Seven of eight cases brought before the Supreme Court were thrown out

• Advertising– New ways to market– 1900 - $90 million in ads

• Department Stores– Shopping becomes a past time (fun)– Everything under one roof (Macy’s)

• Chain Stores– Group of similar stores owned by same company– Lower prices instead of elaborate service

(Woolworth’s)• Mail Order

– Catalogue buying (Sears)(Sears)

Working in the U.S.

• Workers

– Machines replacing skilled labor

– Working conditions were unhealthy Working conditions were unhealthy && dangerous…breathing in dust and dangerous…breathing in dust and

– toxic fumestoxic fumes– $.22 per hour, 59 hours per week

– Skilled craft workers – higher wages

– Laborers – few skills, lower wages

– To improve conditions – organize into Unions

WORKERS HAD POOR CONDITIONS

• Workers routinely worked 6 or 7 days a week, had no vacations, no sick leave, and no no compensation for compensation for injuriesinjuries

• Injuries were Injuries were commoncommon – In 1882, an average of 675 workers were killed PER WEEK on the job

Early Unions

• Trade Unions– Limited to workers with skills

• Industrial Unions– United craft workers & common laborers in a particular industry

• Anti-Union Methods– Contracts to not join a union– Blacklist – not hire suspected Union organizers– Lockout – locked workers out & refused to pay them– Strikebreakers – replace workers during strikes (Scab)

Union ProblemsUnion Problems

• No laws protecting the right to organizeNo laws protecting the right to organize

• Courts ruled strikes were “conspiracies Courts ruled strikes were “conspiracies that interfered with trade”that interfered with trade”

• Perception that unions threatened Perception that unions threatened American Institutions (Nativism)American Institutions (Nativism)

• Marxist, Anarchists, or RevolutionariesMarxist, Anarchists, or Revolutionaries

• Rarely successfulRarely successful

STRIKES TURN VIOLENT

• Several strikes turned deadly in the late 19th century as workers and owners clashed

• The Great Strike of 1877: Workers for the Baltimore and Ohio Railroad struck to protest wage cuts

The Great Railroad Strike of 1877The Great Railroad Strike of 1877• Cut wagesCut wages• Nation’s Nation’s

11stst labor protest labor protest• 80,000 workers, 11 80,000 workers, 11

statesstates

• President Hayes President Hayes sends troops to regain ordersends troops to regain order– 100 killed, millions in damages100 killed, millions in damages

• Failure led to organization of Knights of LaborFailure led to organization of Knights of Labor

Knights of LaborKnights of Labor

• 11stst nationwide industrial union nationwide industrial union– 8 hr. work day8 hr. work day– Govt. bureau of labor statsGovt. bureau of labor stats– Equal pay for womenEqual pay for women– Abolition of child laborAbolition of child labor– Creation of Creation of worker owned factoriesworker owned factories– Use of Use of arbitrationarbitration – – 33rdrd party negotiators party negotiators-membership 100,00 to 700,000 in 1886-membership 100,00 to 700,000 in 1886

The Great Railroad Strike of 1877The Great Railroad Strike of 1877

Haymarket Riot of Haymarket Riot of 18861886

-8 hr. day-8 hr. day• Clash between police & workers – Clash between police & workers –

one striker killedone striker killed• Anarchists set off bomb in Anarchists set off bomb in

Haymarket Square– police open Haymarket Square– police open firefire

– 7 cops, 4 workers die7 cops, 4 workers die– 8 arrested, 4 executed (only 1 a 8 arrested, 4 executed (only 1 a

Knight)Knight)

• Knights of Labor membership Knights of Labor membership declinesdeclines

• American Railway Union (ARU)– Eugene V. Debs – unionized the

Pullman Palace Car Co.

• Cut wages (depression)• Workers complained-

got fired = strike• ARU stopped handling

Pullman cars• Paralyzed U.S. economy• Attached mail cars

– Detach Pullman cars = detach mail cars– Violation of federal law, interfering with U.S. mail

George Pullman

• 1881, Samuel Gompers• Politics

– Reject socialist/communistic ideas

– Fight for small gains– Strike only if negotiations fail

• Goals– Companies to recognize unions & collective

bargaining– Closed shops – hire only union workers– 8 hr. work day

Working Women

• Domestic servants, teachers, nurses, secretaries

• Paid less for same job

• Excluded from unions

• Women’s Trade Union League (WTUL)– 8 hr. work day– No evening work– No child labor– Minimum wage

A.Movement to the suburbs

B. Financing railroad construction

C.Overcrowded housing

D.Development of city parks