Pearson Education, Inc., publishing as Longman © 2008 CHAPTER 17 AN INDUSTRIAL GIANT The American Nation: A History of the United States, 13th edition Carnes/Garraty
Dec 25, 2015
Pearson Education, Inc., publishing as Longman © 2008
CHAPTER 17 AN INDUSTRIAL GIANT
The American Nation: A History of the United States, 13th edition
Carnes/Garraty
Pearson Education, Inc., publishing as Longman © 2008
ESSENTIALS OF INDUSTRIAL GROWTH Value of manufactured products grew from $1.8
billion in 1859 to over $13 billion in 1899 American manufacturing flourished because:
New natural resources were discovered and exploited thereby increasing opportunities
Opportunities attracted the brightest and most energetic of an expanding population
Growth of the country added to the size of the national market
Protective tariffs shielded the market from foreign competition though foreign capital entered freely
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ESSENTIALS OF INDUSTRIAL GROWTH Search for wealth led to corrupt business practices:
stock manipulation, bribery, cutthroat competition, “combinations in restraint of trade”
European immigrants provided needed labor 2.5 million arrived in 1870s Twice as many arrived in 1880s
Period of rapid advance in basic science leading to new machines, processes and power sources that increased industrial and agricultural productivity Displaced some people Made farmers dependent on vagaries of distant
markets and powerful economic forces beyond their control
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ESSENTIALS OF INDUSTRIAL GROWTH Improved milling of grain led to packaged cereals Commercial canning of food expanded rapidly Cigarette rolling machine created a new industry George B. Eastman developed mass-produced,
roll photographic film and simple but efficient Kodak camera
Remington company perfected the typewriter in the 1880s, revolutionizing the way office work was performed
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RAILROADS: The First Big Business 1865: 35,000 miles of track 1875: 74,000 miles of track 1900: 193,000 miles of track 1890: mature but growing
system took in over $1 billion in passenger and freight revenues (federal income was only $403 million) Value of railroad property
was more than $8.7 billion National railroad debt was
$5.1 billion (five times national debt)
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RAILROADS: The First Big Business Emphasis in railroad construction after 1865
was on organizing integrated systems Lines had high fixed costs—taxes, interest
on bonds, maintenance of track and rolling stock, salaries of office personnel—so to earn profits had to carry as much traffic as possible Spread out feeder lines to draw business
into main lines
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RAILROADS: The First Big Business Cornelius Vanderbilt built one of first interregional
railroad networks with his combination of lines in New York with those in the Midwest in 1870s
At the same time, Thomas Scott was building connections from Pennsylvania to Midwest
By 1869, Erie extended from New York to Cleveland, Cincinnati, and St. Louis and soon extended to Chicago
1874: Baltimore & Ohio also reached Chicago
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RAILROADS: The First Big Business Jay Gould was dominant system
builder of Southwest Consolidated Kansas Pacific
(Kansas City to Denver) with Union Pacific and Missouri Pacific (Kansas City to St. Louis)
Henry Villard constructed another great complex in Northwest based on control of Northern Pacific
James J. Hill controlled another large network, the Great Northern
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RAILROADS: The First Big Business Civil War highlighted need for railroad connections to South
Chesapeake and Ohio opened a direct route from Norfolk, Virginia, to Cincinnati
By 1880s: Richmond and West Point Terminal Company controlled 8,558 mile network
Most of lines were controlled by northern capitalists Trunk lines connected, which created need to standardize
many of their activities 1883: railroads developed present system of time zones 1886: standard track gauge developed Standardized car coupling and braking systems, even
standard methods of accounting were essential
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RAILROADS: The First Big Business Lines sought to work out fixed rates for carrying
different types of freight, charging more for valuable than for bulky freight and agreeing to permit rate concessions to shippers to avoid hauling empty cars
By 1880s a professionalized railroad management saw the advantages of cooperating with one another to avoid “senseless” competition
Railroads in sparsely settled regions and in areas with underdeveloped resources devoted money and effort to stimulating local economic growth
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RAILROADS: The First Big Business To speed settlement of new
regions, railroads: Sold land cheaply and on
easy terms Offered reduced rates to
travelers interested in buying farms and set up “bureaus of immigration” that distributed brochures describing the wonders of the new country
Sent agents to eastern ports and to Europe to encourage immigrants
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RAILROADS: The First Big Business Technological advances accelerated economic
development 1869: George Westinghouse invented air brake, which made
possible increase in size of trains and speed at which they could be operated
1864: George Pullman invented sleeping car To pull heavier trains, more powerful locomotives were
needed In turn led to call for more durable rails which was supplied
by steel that had become cheaper due to technological innovations
Railroads had close ties with Western Union Telegraph, which they let string wires along their rights of way in exchange for free telegraph service
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IRON, OIL, AND ELECTRICITY Iron industry
Output rose from 920,000 tons in 1860 to 10.3 million tons in 1900 Big break in production of steel which combines hardness of cast
iron with toughness of wrought iron Problem: too expensive Solution: 1850s Bessemer Process developed by Henry Bessemer
of England and perfected by William Kelly of Kentucky Bessemer process and open-hearth method introduced
commercially in 1860s 1870: 77,000 tons of steel produced 1890: 5 million tons
Made possible by enormous iron concentrations of the Mesabi region
Pittsburgh became iron and steel capital of country (separate complex developed around Birmingham, Alabama)
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IRON, OIL, AND ELECTRICITYPetroleum Industry 1859 first successful well drilled by Edwin Drake in Pennsylvania Production ranged between 2 and 3 million barrels a year during
Civil War but had reached 50 million barrels by 1890 Prior to auto and gasoline engine, major use was kerosene for
lamps By early 1870s refiners developed process to obtain more kerosene
and to use the byproducts Increase in supply of crude oil drove prices down Put a premium on refining efficiency which meant larger plants
using more expensive machinery and employing skilled technicians became more important In mid-1860s only three refineries could process 2,000 barrels
a week By 1870s plants capable of handling 1,000 barrels a day were
common
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IRON, OIL, AND ELECTRICITYTelephone and Electric Light Industry Telephone invented in 1876 by Alexander Graham Bell
By 1900: almost 800,000 telephones in U.S. (twice total for all Europe)
Dominated by American Telephone and Telegraph Thomas Edison built prototype of modern research
laboratory at Menlo Park in New Jersey, where he developed the electric light in 1879 1882: opened power station in New York City By 1898 there were 3,000 stations in the country
Electricity replaced steam power in factories and by early 20th century 6 billion kilowatt hours of electricity were produced annually
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COMPETITION AND MONOPOLY: The Railroads Expansion combined with concentration, which was driven
by economies of scale and by downward trend in prices after 1873 Deflation result of failure of money supply to keep pace with
rapid increase in volume of goods produced (lasted until 1896-97)
To deal with loss of profits from competition, railroads: Issued rebates and drawbacks Gave passes to favored shippers Built sidings at the plants of important companies without
charge Gave freely of their landholdings to attract businesses to their
territory Charged higher rates at waypoints where no competition
existed
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COMPETITION AND MONOPOLY: The Railroads Cheap transportation stimulated economy but
cutthroat competition hurt it Small shippers, and anyone located where there
was no competition, suffered Railroad discrimination speeded concentration of
industry in large corporations located in major centers
Instability of rates hampered planning Loss of revenue from rate cutting combined with
inflated debts put most railroads in trouble when economic downturn came
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COMPETITION AND MONOPOLY: The Railroads 1880s: major roads responded to problems by
building or buying lines to create interregional systems—the first giant corporations, capitalized in the hundreds of millions of dollars Led to another wave of bankruptcies when true
depression hit in 1890s Reorganization put most railroads under control of
financiers such as J. Pierpont Morgan Opposed rate wars, rebating and other competitive
practices Because representatives of bankers sat on the board
of every railroad they saved, control of railroad network became centralized
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COMPETITION AND MONOPOLY: Steel Iron and steel industry intensely competitive
Demand varied erratically New technology put emphasis on efficiency Improved transportation let widely separated
manufacturers compete with one another Andrew Carnegie (born in Scotland) was the kingpin
of the industry 1890: Carnegie Steel Company dominated the industry Output increased tenfold in next decade
1901: Morgan put together United States Steel—world’s first billion dollar corporation Included all Carnegie properties (wanted to retire and
do social good), Federal Steel Company (Carnegie’s largest competitor), American Steel and Wire Company, the American Tin Plate Company, and National Tube Company
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COMPETITION AND MONOPOLY: Oil
Output surged ahead of demand 1870s: chief refining areas were
Cleveland, Pittsburgh, Baltimore, and New York City 1870: Standard Oil Company of
Cleveland founded by John D. Rockefeller
By 1879: controlled 90% of nation’s oil refining capacity along with a network of oil pipelines and large reserves of petroleum in the ground
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COMPETITION AND MONOPOLY: Oil Won control of market
Obtained 10% rebate and drawbacks on competitors’ shipments from railroads
Cut prices locally to force small independents to sell out or face ruin Kerosene was sold in grocery stores so Standard supplied its
outlets with meat, sugar, and other supplies at artificially low prices in order to crush outlets that sold other brands
Employed spies to track down customers of other brands and offer them cheap prices
Bribery Rockefeller sought not so much to crush competition as to get
them to join him To stabilize monopoly, Rockefeller created the trust (1879,
perfected 1882)—stock from companies acquired was turned over to “trustees” who were empowered to exercise general supervision and in exchange stock holders received trust certificates on which dividends were paid
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COMPETITION AND MONOPOLY: Retailing & Utilities In early stages of electric light and telephone industry, Edison and
Bell spent a large amount of time in court protecting their patents 1892: Edison and Thomson-Houston Electric merged to form
General Electric, a $35 million corporation whose only major competition was Westinghouse
Life insurance industry expanded after Civil War due to the “tontine” group policy which led to cutthroat competition By 1900: three giants dominated industry: Equitable, New York Life,
and Mutual Life In retail, the period saw growth of department stores
1862: Alexander Stewart had an 8-story emporium in New York City By 1880s John Wanamaker in Philadelphia and Marshall Field in
Chicago had similar establishments Advertised heavily, stressing low prices, efficient service, and
money-back guarantees High volume made for large profits
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AMERICAN AMBIVALENCE TO BIG BUSINESS Americans believed in laissez-faire government non-
interference Encouraged by belief in Darwinian theories
By the 1870s his theory was influencing opinion in U.S. Nature had ordained a kind of inevitable progress,
governed by natural selection of individual organisms best adapted to survive in a particular environment
Complemented reasoning of classical economists and concept of “invisible hand”
William Graham Sumner took these ideas and applied to social relations—social Darwinism
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AMERICAN AMBIVALENCE TO BIG BUSINESS
Yet while Americans disliked powerful governments in general and strict regulation of the economy in particular, they never meant they objected to all government activity in the economic sphere Banking laws, tariffs, internal improvement legislation, and the granting
of public land to railroads Americans saw such laws as intended to release human energy and
increase the area in which freedom could operate Americans concerned by new corporate enterprises Also concerned about monopoly
Worried about rise in prices (in fact prices fell and consumer bonanza resulted)
Worried they were destroying economic opportunity and threatening democratic institutions
Businessmen responded that concentration was necessary to create stability, economy, efficiency, and benefit the community
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REFORMERS: George, Bellamy, Lloyd 1879: Henry George published Progress and Poverty, an attack
on uneven distribution of wealth and proposed a property tax to take profit landowners earned just by holding land—single tax
1888: Edward Bellamy wrote utopia novel Looking Backward, 2000-1887 Sold over a million copies in first few years Described a future America that was completely socialized
1894: Henry Demarest Lloyd wrote Wealth Against Commonwealth which attacked Standard Oil and application of Darwin’s survival of the fittest to economic and social affairs and condemned laissez-faire policies
None questioned underlying values of middle class majority Insisted reform could be accomplished without inconvenience to
any class or individual
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REFORMERS: The Marxists
1877: Socialist Labor party formed 1884: Lawrence Gronlund attempted to explain Marx’s
ideas to the American public Capitalism contained the seeds of its own destruction State ought to own all means of production Expected millennium to arrive peacefully
Daniel De Leon, main voice of Socialist Labor Party, was a doctrinaire revolutionary who excoriated labor unions while ignoring the practical needs or opinions of rank-and-file working people
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THE GOVERNMENT REACTS TO BIG BUSINESS: Railroad Legislation Political action regarding business regulation began on state
level with railroads By end of century 28 states had railroad commissions to
supervise lines in their states National Grange of the Patrons of Husbandry, founded in
1867 by Oliver H. Kelley, was created to provide social and cultural benefits for isolated rural communities 14 states had Granges by 1872 1874: Membership reached 800,000 Became political—candidates won seats in Southern and
Western state legislatures Grange-controlled legislatures established “reasonable”
maximum rates and outlawed “unjust” discrimination
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THE GOVERNMENT REACTS TO BIG BUSINESS: Railroad Legislation
Munn v. Illinois (1877): grain elevator operator refused to comply with a state warehouse act but Supreme Court ruled that a business that served a public interest was subject to state control Legislatures might fix maximum charges and if they
seemed unreasonable then businesses should complain to legislatures or voters and not courts
Wabash, St. Louis & Pacific Railroad v. Illinois (1886): declared unconstitutional an Illinois regulation outlawing the long-run-short-haul evil—essentially stating that Illinois could not regulate interstate shipments
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THE GOVERNMENT REACTS TO BIG BUSINESS: Railroad Legislation Congress filled the gaps created by Wabash decision by
passing the Interstate Commerce Act (1887) States all charges made by railroads shall be “reasonable
and just” Rebates, drawbacks, the long-and-short-haul evil and other
competitive practices were deemed illegal as were monopolistic counterparts—pools and traffic-sharing
Railroads were required to publish schedules of rates and forbidden to change them without due public notice
Established Interstate Commerce Commission (ICC), first federal regulatory board, to supervise the affairs of railroads, investigate complaints and issue cease and desist orders when railroads acted illegally
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THE GOVERNMENT REACTS TO BIG BUSINESS: The Sherman Antitrust Act
First anti-trust laws originated in southern and western states—were vaguely worded and ill-enforced
1890: federal passage of Sherman Antitrust Act Any combination “in the form of trust or otherwise” that
was “in restraint of trade or commerce among the several states, or with foreign nations” was declared illegal
Persons forming such combinations were subject to fines of $5,000 and a year in jail
Individuals and businesses who suffered losses as result of illegal combinations could sue in federal court for triple damages
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THE GOVERNMENT REACTS TO BIG BUSINESS: The Sherman Antitrust Act
Supreme Court quickly emasculated act: United States v. E.C. Knight Company (1895) held that the American Sugar Refining Company had not violated the law by taking over a number of important competitors even though now controlled 98 percent of sugar refining in U.S.
Supreme Court did rule in 1898 and 1899 that several agreements to fix prices or divide the market violated the Sherman Act Led to outright mergers in which a handful of large
companies swallowed hundreds of smaller companies
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THE LABOR UNION MOVEMENT Aside from ironworkers, railroad workers, and miners,
few industrial laborers belonged to unions The growth of national craft unions was stimulated by
labor dissatisfaction during the Civil War 1866: National Labor Union was founded By early 1870s: many new trades had been unionized Most of leaders were visionaries who were out of touch
with practical needs of workers Opposed the wage system, strikes, and anything that
increased the workers’ sense of being members of the working class
Major objective was formation of worker-owned cooperatives
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THE LABOR UNION MOVEMENT 1869: Knights of Labor founded by Uriah S. Stephens
and headed by Terence V. Powderly Supported political objectives that had no direct
connection with working conditions such as currency reform and curbing of land speculation
Rejected idea that workers must remain part of working class, believing instead that workers could pool their resources and advance up the economic ladder and enter the capitalist class
Attacked wage system and frowned on strikes Tended to be more industrial rather than craft oriented Welcomed blacks, women, unskilled workers and
immigrants Demanded 8-hour day
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THE LABOR UNION MOVEMENT Originally Knights were a secret organization that had
about 10,000 members by 1879 Under Powderly, secrecy was abandoned and
successful strikes in 1882 and 1886 brought new recruits 1882: 42,000 members 1885: 110,000 members 1886: 700,000 members
National leadership unable to control locals who engaged in poorly planned and unsuccessful strikes while public became alienated by sporadic acts of violence and intimidation
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THE LABOR UNION MOVEMENT 1886: several hundred thousand workers were
on strike in various parts of the country by May in support of the 8-hour day In Chicago, 80,000 were involved
When a striker was killed at the McCormick Harvesting Machine Company, anarchists called a protest meeting on May 4 in Haymarket Square Police intervened to break up the meeting and
someone hurled a bomb into their ranks killing seven police officers and injuring a number of others
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THE AMERICAN FEDERATION OF LABOR In response to Haymarket, 7 anarchists were
condemned to death and 4 were executed Knights of Labor, while not actually involved, was
believed to be by the public and soon ceased to exist as a force in the labor movement
American Federation of Labor (AFL), a combination of craft unions formed in 1886, took its place Concentrated on “bread and butter” issues such
as higher wages and shorter hours
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THE AMERICAN FEDERATION OF LABOR AFL accepted that most workers would remain wage
earners all their lives and tried to develop in them a sense of common purpose and pride in their skills and station Unions were a club as well as a way of defending and
advancing rights Chief weapon was the strike Federation worked for 8 hour days, employers’ liability,
and mine safety laws but stayed out of politics AFL grew
1886: 150,000 members 1892: 250,000 members 1901: passed the million mark
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LABOR MILITANCY REBUFFED AFL stress on strikes reflected increasing labor militancy,
especially since average employer acted as a tyrant toward workers and refused to bargain collectively with unions
1877—Great Railroad Strike Began on Baltimore and Ohio system in response to wage
cut and spread through other eastern lines and then throughout West until about two thirds of railroad mileage in country was shut down
Violence broke out, railroad yards were torched, businessmen formed militia companies to patrol streets of Chicago
Eventually President Hayes sent federal troops to restore order
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LABOR MILITANCY REBUFFED Twice as many strikes occurred in 1886 as in any previous
year 1892: violent strike by silver miners at Coeur d’Alene, Idaho Homestead Strike at Carnegie’s steel plant near Pittsburgh—
strikers attacked 300 private guards brought in to protect strikebreakers 7 guards killed and the rest forced to “surrender” Steel producers insisted the workers were holding back
progress by resisting technological advances while workers believed company was refusing to share the fruits of more efficient operation fairly
Strike started when company decided to crush union Defeated after 5 months, destroyed Amalgamated Association
of Iron and Steel Workers and eliminated unionism in steel industry
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LABOR MILITANCY REBUFFED1894—Pullman Strike Workers at Pullman Company outside Chicago walked out
in protest of wage cuts and failure of Pullman to reduce rents in the company town accordingly
Some workers belonged to American Railway Union headed by Eugene Debs
After strike had dragged on, union voted not to handle any trains with Pullman cars attached
Railroad owners appealed to President Cleveland who, on the pretext of ensuring the movement of the mail, sent soldiers
Debs defied an injunction to end the strike and was jailed The strike was broken
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WHITHER AMERICA, WHITHER DEMOCRACY? Each year, more of the nation’s wealth was in fewer hands
By 1913: Morgan and the Rockefeller National City Bank group between them could name 341 directors to 112 corporations worth over $22.2 billion
Centralization increased efficiency in industries that used a great deal of expensive machinery to turn out goods for the mass market and in those where close coordination of output, distribution and sales was important Living standards rose
Courts seemed only concerned with protecting the rich and powerful Eugene Debs, in prison for contempt, became a socialist in
1897
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WEBSITES
Alexander Graham Bell Family Papers at the Library of Congress
http://memory.loc.gov/ammem/bellhtml/bellhome.html Anarchist Archives at Pitzer University
http://dwardmac.pitzer.edu/Anarchist_Archives/archivehome.html John D. Rockefeller and the Standard Oil Company
http://www.micheloud.com/FXM/SO National Refinery Company
http://www.enarco.com Labor-Management Conflict in American History
http://ehistory.osu.edu/osu/mmh/LaborConflict/default.cfm Samuel Gompers Papers at the University of Maryland
http://www.history.umd.edu/Gompers/index.html