HIST - 121- Chapter 18

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HIST 121 - Chapter 18 18.1 inventors of age. How ideas/products in late 19 th century inventors contributed to the rise of big business. How inventions changed everyday America life  Entrepreneurial spirit  Americans wanted efficiency and comfort. People working on big ideas.  US patent office in 1790 recorded only 276 inventions. And by 1860, they had issued 60,000 patents. And between 1860-1890 … 450,000 patents were issued.  New inventions fuel the industrial revolution (sewing machines, refrigerated train cars, roller for grinding wheat into flour, typewriter, cash register, vacuum cleaner, toilet, tin cans to store food, frozen food, etc)  In 1880 – ½ of all Americans lived and worked on farms and only 1 in 7 worked in factories.  From 1880-1920 the number in industrial workers quadrupled from 2.5 million to over 10 million, urban populations doubled and was now ½ the US population.  Cooking became easier and less time-intensive with modern inventions like preserved/canned and frozen foods and laid the groundwork for the women’s movement.  Steel is the most important advancement in the era. Henry Bessemer changed the way steel was produced with furnaces and then steel became easier to product and more quickly available and cheaper. In 1860 … 13,000 tons of steel were produced. In 1879 over 1 million tons were produced per year … and in 1900, 10 million tons produced. Steel became cheap and readily available and used by all other industries like construction, automotive and was the primary indicator of growth through the end of WW II.  Alexander graham bell and the telephone – 1859 laid the first transatlantic cable lines. So you can communicate from the US to Europe. Over 100,000 miles of cable Criss-crossed the ocean floor across all the continents. Western Union controlled and owed most of these lines in the US from coast to coast over 200,000 lines.  Telephone was patented in 1876 by Bell. Bell was not the first to invent but was the first to capitalize on it and patent it. Thomas Edison’s version is most like our modern telephone today. Western Union sold Edison’s idea/version to Bell because he had a patent. Then it started a telecom company called the Bell Company, then American Telephone & Telegraph company which still exists today called AT&T.  By 1880 – 50,000 phones were used in the US. By 1900, 1.35 million phones used  Thomas Edison and electric lighting – beyond the light bulb.was likely the greatest inventor of the time. Registers over 1093 patents over his lifetime and ran a lab in Menlo Park with 25 scientist. He hoped to have a small invention every 10 days and a big one every month. He invented the phonograph, the mimeograph machine, the motion picture projector, the Dictaphone, and the storage battery. The incandescent light bulb is what he is most known for in 1879. He was financially backed by JP Morgan and created the Edison Electric Illuminating company. Edison used DC (direct current) power.  George Westinghouse in 1886 and made AC (alternating current) power which could deliver power longer distance and power factories etc., 18.2 from invention to industrial growth - how inventions of the late nineteenth century contributed directly to industrial growth in America. Contributions of Andrew Carnegie, John Rockefeller, and J. P. Morgan to the new industrial order emerging in the late nineteenth century. visions, philosophies, and business methods of the leaders of the new industrial order  RAILROADS AND ROBBER BARONS . the first transcontinental railroad paved the way for rapid railway growth, and growth in the iron, wood, coal.

 Railroad industry became the nation's first “big business”. By 1890 railroad lines covered every corner of the US and could bring raw materials to factories and finish goods to consumers anywhere. Railroad track grew from 35,000 miles to over 200,000 miles by 1900. Financing for the growth came through private capital and government loans and grants. Federal and state loans of cash and land totaled $150 million and 185 million acres of public land. Railroads listed stock on the New York Stock exchange. People that invested became the wealthiest Americans the country had ever seen.  Midwest farmers were angry at these railroad owners and called them “robber barons”. Because they felt their business practices were shady and exploitative with questionable tactics.  Jay Gould (first to be called a robber baron) was perhaps the first prominent railroad magnate. He bought small rundown railroads and then capitalized on factory owners needs to ship their goods at a lower cost. He worked for the Erie railroad. He drove the company to almost ruin. His model worked better on the American West were railroads were still widely scattered forcing farmers and businesses to pay whatever price he demanded. He also owned the Union Pacific Railroad. He controlled over 10,000 miles of tracks in the US which was about 15% of all the railroad transportation. He died in 1892 and had a personal worth of over $100 million although he was very unpopular.  Commodore Cornelius Vanderbilt was a “robber baron” who truly cared about the success of his railroad enterprise and its positive impact on the American economy. Vanderbilt consolidated several smaller railroad lines, called trunk lines, to create the powerful New York Central Railroad Company, one of the largest corporations in the United States. The consolidation made connections from Midwest suppliers to eastern markets more efficient. By 19107 railroad tycoons controlled over 70% of all operating lines. Vanderbilt's net worth at his death was over $100 million in 1877. He was one of the top three wealthiest individuals in American history.  Steel magnate Andrew Carnegie, oil tycoon John D. Rockefeller, and business financier J. P. Morgan were all businessmen who grew their businesses to a scale and scope that were unprecedented. Their companies changed how Americans lived and worked, and they themselves greatly influenced the growth of the country.  Andrew Carnegie (Steel) - rags-to-riches story. Born in Scotland. Immigrated to Pennsylvania in 1848. He became a telegram messenger boy. Spent a lot of time around the railroad office. Worked his way up into a position of management for the Pennsylvania railroad company. Invested in the company. That investment resulted in him earning over $1,000,000. He used this money to grow the iron and steel industries. He served in the civil war as Superintendent of military railways and Telegraph coordinator for the union forces. His first company was called Jay Edgar Thompson steel works then he bought out homestead steel works from the Pittsburgh Bessemer steel company. He had an annual profit of over $40 million. He was always thrifty with the profits he earned. He used those profits to buy out steel companies at low prices when the economy was bad. He always wanted to increase production and reduce cost. Always had up-to- date machinery and equipment. His famous essay called the gospel of wealth was based upon Herbert Spencer's theory of social Darwinism. Survival of the fittest. Carnegie 's coming from poor roots believed that if you worked hard you could be successful. Rags to riches.  John D. Rockefeller (Oil) - born in 1839 with modest means. His dad sold medicinal elixirs. He helped his mom with lots of chores to earn extra money. Mainly through the sale of family farm products. Then he moved to Cleveland in 1853. He took accounting courses in high school. He learned about Colonel Edwin Drake who had struck “black gold” .. oil . Rockefeller focused on refining crude oil into kerosene which was a good use of energy for heating and lamps. In 1870 he created Standard Oil company of Ohio which was worth $1 million. Rockefeller was a ruthless businessman. Found ways to crush his competitors and create a monopoly in the oil refining

industry. He forged agreements with several large railroad companies to get discounted rates for shipping his product. He used the railroad companies to gather information on his competitors. He could now deliver kerosene at lower prices and drove his competition out of business. Usually bought out their businesses for pennies on the dollar. Through this method of growth by acquiring other companies, called horizontal integration , Standard Oil grew to include almost all the refineries. In 1879 Standard Oil company controlled 95% of oil refining in the country. He wanted to grow even bigger and began to grow his company through quote vertical integration where his company would handle all aspects of the products life cycle from raw materials through the production process to the delivery of the final product. His monopoly he reduced kerosene prices by as much as 80% by the end of the century. Other industrialists quickly followed suit, including Gustavus Swift , who used vertical integration to dominate the U.S. meatpacking industry in the late nineteenth century.  Rockefeller created a new legal entity called a trust . Set up a small group of trustees to possess legal ownership. In 1882, 37 stockholders of Standard Oil gave their stock to 9 trustees who could control and direct all the companies business from this trust. The Ohio Supreme Court ruled that Standard Oil company had to dissolve because it had monopoly control over all oil production and refining. Then Rockefeller created another legal entity called a holding company. This holding company created a central corporate entity that controlled operations of multiple companies. It was not technically a trust and then not beholden to anti-monopoly laws. A lot of other business tycoons followed suit and by 1905 / 300 business mergers had occurred in the US impacting over 80% of all industries. The government passed the Sherman antitrust act in 1890 however by that time 1% of the country's businesses controlled over 40% of the nation's economy  J. P Morgan (Finance/investment) - was born wealthy and became much wealthier as an investment banker. His dad was a London banker and he moved to New York in 1857. He then created the JP Morgan and company financial firm. They bought and sold stock. In return for his investments in industries such as Carnegie’s and Rockefeller’s, Morgan demanded seats on the company's board which gave him more control and power. Ultimately, Morgan’s most notable investment, and greatest consolidation, was in the steel industry , when he bought out Andrew Carnegie in 1901. Carnegie named his price: an outrageously inflated sum of $500 million. Morgan agreed without hesitation, and then consolidated Carnegie’s holdings with several smaller steel firms to create the U.S. Steel Corporation. U.S. Steel was subsequently capitalized at $1.4 billion. It was the country’s first billion-dollar firm. Morgan was blamed his efforts for contributing to the artificial bubble of prosperity that eventually burst in the Great Depression of the 1930s. in 1912, his firm held 341 directorships in 112 corporations that controlled over $22 billion in assets. 18.3 Building Industrial America on the Backs of Labor - qualities of industrial working-class life in the late nineteenth century.Analyze both workers’ desire for labor unions and the reasons for unions’ inability to achieve their goals  The standard of living for many American workers increased. What were the luxuries have become the necessaries of life.  For some Americans, there were also increased opportunities for upward mobility. For the multitudes in the working class, however, conditions in the factories and at home remained deplorable.

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 Working-class life - In 1865, nearly 60 percent of Americans still lived and worked on farms; by the early 1900s, that number had reversed itself, and only 40 percent still lived in rural areas, with the remainder living and working in urban areas, working in factories .  Factory wages were low. 20 cents and hour. Annual salary of $600. Below poverty level. Average workers work 60 hours a week. Factory owners were not concerned about worker safety. In 19/13/25 thousand Americans lost their lives on the job and another 700,000 workers were injured. Factory workers did a lot of repetitive tasks for long hours. They primarily worked alone. “Scientific management” also known as stopwatch management where managers used stopwatch studies to divide manufacturing tasks into short repetitive segments.  By breaking down work processes factory owners were able to hire women and children to perform many of these tests period from 1870 through 1900 the number of women working in factories tripled. By 1900 / 5 million women were wage earners with one quarter of them working factory jobs. Women's factory work tended to be in clothing or textile factories or clerical positions like bookkeepers and secretaries. Women were paid less than men. Factory owners also underpaid children. They were small and could fit easily among the machines and be hired for simple work at a fraction of an adult man's pay. From 1870 to 1900 child labor in factories tripled. Several states passed laws to ensure a safe workplace.  Workers protest and violence - workers knew there were wage discrepancies between them and the wealthy. Business owners had anti union sentiments. Workers face lots of obstacles and organizing but the greatest obstacle against unionization was everybody's continued belief in a strong work ethic and that an individual work ethic would reap its own rewards. It was considered unamerican to unionize. In 1870 Irish coal miners in Pennsylvania formed a secret organization called “Molly maguires” named after an Irish patriot. They use scare tests sticks including kidnappings beatings and murder to bring attention to the coal miners work conditions. Owners paid attention but not the way protesters hoped. They hired detectives to pose as minors and get the names of those that had joined the Molly Maguires. By 1875 they acquired the names of 24 Maguires. they were then convicted of murder and 10 of them were hanged in 1877 at a public “day of the rope”. Public opinion was not sympathetic towards these violent methods but they didn't like how the government crushed the labor movement. The great railroad strike of 1877 all workers incurred a pay cut and so they chose to strike. Railroad workers across the country joined leaving their jobs and committing acts of vandalism. The most significant violent outbreak of the railroad strike was in Pittsburgh on July 19th. The governor ordered protection from Philadelphia to Pittsburgh to protect the railroad property. They opened fire to disperse the angry protesters and killed 20 people. A riot broke out for 24 hours with looting, fires, et cetera violence erupted in Maryland and Illinois as well. President Hayes eventually sent federal troops to major cities to restore order. The strike lasted 45 days and they gained nothing but a reputation for violence that left people even less sympathetic than ever.  By the 1880s workers tried to organize and form unions. There were three models of unions. SEE NOTES BELOW  In 1866, 77 delegates representing a variety of different occupations met in Baltimore to form the National Labor Union (NLU). The NLU had ambitious ideas about equal rights for African Americans and women , currency reform, and a legally mandated 8-hour workday. The organization was successful in convincing Congress to adopt the 8-hour workday for federal employees.  A combination of factors contributed to the debilitating Panic of 1873 , which triggered what the public referred to at the time as the “Great Depression” of the 1870s. Most notably, the railroad boom that had occurred from 1840 to 1870 was rapidly ending.

 Jay Cooke & Company, a leader in the American banking industry, declared bankruptcy on the eve of their plans to finance the construction of a new transcontinental railroad, the panic truly began. A chain reaction of bank failures culminated with the New York Stock Exchange suspending all trading for 10 days at the end of September 1873.  Within a year, over one hundred railroad enterprises had failed; within two years, nearly twenty thousand businesses had failed. The loss of jobs and wages sent workers throughout the United States seeking solutions and clamoring for scapegoats. Labor Organizations Compared Knight of Labor – Labor Reformers (K of L)  Membership: open to all … lawyer, bankers, gamblers … like a fraternity. Included workers in any industry regardless of their skill. Blacks welcome after 1883. Women welcome after 1881. Leader was Terrence Powderly and Uriah Stephens . 700,000 members at its peak  Goals: “emancipate” labor from wage slavery to full citizenship. “Cooperative commonwealth”. One Big Union.  How do they resist big business/capital: boycotts and arbitration, not strikes.  Attitudes toward capital/big business: wanted a cooperated system where all business was managed through cooperative factories and shops.  In one night, however, the KOL’s popularity plummeted due to an event known as the Haymarket affair , which occurred on May 4, 1886, in Chicago’s Haymarket Square. There, an anarchist group had gathered in response to a death at an earlier nationwide demonstration for the eight-hour workday. At the earlier demonstration, clashes between police and strikers at the International Harvester Company of Chicago led to the death of a striking worker. The anarchist group decided to hold a protest the following night in Haymarket Square, and, although the protest was quiet, the police arrived armed for conflict. Someone in the crowd threw a bomb at the police, killing one officer and injuring another. The seven anarchists speaking at the protest were arrested and charged with murder. They were sentenced to death Pure and Simple Unionism – American Freedom of Labor (AFL)  Membership : represented skilled workers only. Workers who were patient and self-disciplined. No women. No foreigners. No blacks. Leader was Samuel Gompers. Represented only a small amount of workers (minority amount), but still around today.  Goals: labor should focus on short term goals and make better working conditions within the existing order. Do not like reform. “look to your own organization and not the government”.  How do they resist big business/capital : strikes if collective bargaining failed  Attitudes toward capital/big business: accepted the basic premise of capitalism. Against reform. Industrial Unionism – The Industrial workers of the world (IWW)  Membership : all men and women that worked for wages were welcome. All skills. All races. Leader was Eugene Debs and Daniel DeLeon.  Goals: Capitalism must be overthrown because it cannot be reformed. Wanted to organize all workers into one big union to overthrow Capitalism. Fought for better hours, wages and working conditions.  How do they resist big business/capital : sabotage, slowdowns, free-speech fights and strikes  Attitudes toward capital/big business: “the working class and the employing class have NOTHING in common”. Homestead Strike

 Carnegie plant was envy of the world in Pittsburg PA. Homestead Works was the largest steel mill in the world and the most productive.  400 steel workers. Felt ownership of their jobs. Workers identified with the work. Had Job ownership. Not just a job. Workers feel they have a stake in it.  Carnegie in 1882 on vacation in Scotland.  Union wanted increase in wage. Rising wages meant falling profits.  Carnegie planned to break the union at homestead. He had doen this already at his smaller plants. We is not the working man’s friend.  He believed in Herbert Spenser – social Darwinism – survival of the fittest … the fit ones have success and have “it” … good gene, hard work, etc.  Put Frick in charge (he’s really mean) while he was on vacation. Demanded a sizeable wage cut and refused to negotiate.  Steel workers would not be intimidated. Union strikes. Frick closed the plant and refused to make payroll.  July 6 th 1892 – brought in private security to protect the plant and fight the striking workers. Guns. Battle killed 16 and 150 injured in the battle.  Carnegie refused to back down. Told Frick to stand firm and cannot fail now. Took 5 months. The battle was one of the most violent disputes in US labor history and the final result was a major defeat for the union and a setback for their efforts to unionize steelworkers. He did crush the union at Homestead. Federal govt helped support Carnegie with troops. George Pullman and his company town and strike  Pullman created the palace car on trains (pullman Palace Car Company). Very power industrialist. Like a steve jobs for his era. Fancy trains cars for the wealthy to travel in.  Created a new town named after himself. Efficiently run town. Did not think workers would strike. Had parks, businesses, carriage paths, variety of houses. Alternative to the big city. Home were warm, well lit, bathroom inside.  32-page lease when lived in a home in pullman. Lots of rules and dress code. Built a church he rented out  1894 - He cut works wages but did not cut their rents. Workers walked out on strike. Mail was halted. President Truman called for the workers to return to work. This was the first time the federal government used an injunction to break a strike.  Pullman strike quickly spread to other sites and halted the railroad industry. Died of a heart attack 3 years later. 18.4 a new American consumer culture - characteristics of the new consumer culture that emerged at the end of the nineteenth century  the rise of industry in the United States allowed people to access and consume goods as never before. before. The rise of big business had turned America into a culture of consumers desperate for time-saving and leisure commodities,  Gone were the days where the small general store. people could take a train to the city and shop in large department stores like Macy’s in New York, Gimbel’s in Philadelphia, and Marshall Field's in Chicago. Chain stores, like A&P and Woolworth’s, both of which opened in the 1870s, offered options  Aaron Montgomery Ward established the first significant mail-order business in 1872.  Sears, Roebuck & Company followed in 1886. Sears distributed over 300,000 catalogs annually by 1897, and later broke the one million annual mark in 1907. Sear’s catalog was “the consumer’s bible.”

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 Suddenly, instead of a single option for clothing or shoes, customers were faced with dozens, whether ordered by mail, found at the local chain store, or lined up in massive rows at department stores.  By 1900, American businesses were spending almost $100 million annually on advertising. Competitors offered “new and improved” models as frequently as possible in order to generate interest.  Stores allowed people to open accounts and purchase on credit . Americans quickly accepted the notion that they could live a better lifestyle by purchasing the right clothes, the best hair cream, and the shiniest shoes, regardless of their class. For better or worse, American consumerism had begun. For workers earning lower wages, these easy credit terms meant that the middle-class lifestyle was within their reach.  farmers and housewives purchased farm equipment and sewing machines on credit , considering these items investments rather than luxuries. For women, the purchase of a sewing machine meant that a shirt could be made in 1 hour, instead of 14. The Singer Sewing Machine Company was one of the most aggressive at pushing purchase on credit. They advertised widely, and their “Dollar Down, Dollar a Week” campaign made them one of the fastest-growing companies in the country.  The risks of buying on credit led many into debt. As advertising expert Roland Marchand described in his Parable on the Democracy of Goods , in an era when access to products became more important than access to the means of production, Americans quickly accepted the notion that they could live a better lifestyle by purchasing the right clothes, the best hair cream, and the shiniest shoes, regardless of their class. For better or worse, American consumerism had begun. KEY TERMS Haymarket affair the rally and subsequent riot in which several policemen were killed when a bomb was thrown at a peaceful workers rights rally in Chicago in 1886 holding company a central corporate entity that controls the operations of multiple companies by holding the majority of stock for each enterprise horizontal integration method of growth wherein a company grows through mergers and acquisitions of similar companies Molly Maguires a secret organization made up of Pennsylvania coal miners, named for the famous Irish patriot, which worked through a series of scare tactics to bring the plight of the miners to public attention monopoly the ownership or control of all enterprises comprising an entire industry robber baron a negative term for the big businessmen who made their fortunes in the massive railroad boom of the late nineteenth century scientific management mechanical engineer Fredrick Taylor’s management style, also called “stop-watch management,” which divided manufacturing tasks into short, repetitive segments and encouraged factory owners to seek efficiency and profitability over any benefits of personal interaction social Darwinism

Herbert Spencer’s theory, based upon Charles Darwin’s scientific theory, which held that society developed much like plant or animal life through a process of evolution in which the most fit and capable enjoyed the greatest material and social success trust a legal arrangement where a small group of trustees have legal ownership of a business that they operate for the benefit of other investors vertical integration a method of growth where a company acquires other companies that include all aspects of a product’s lifecycle from the creation of the raw materials through the production process to the delivery of the final product