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Chapter 24: Industry Comes of Age (1865-1900)

The Iron Colt Becomes an Iron Horse Between 1865 and 1900, railroad building increased greatly, so that by 1900 America had more miles of railroad than all of Europe Large government subsidies of money and land were needed because transcontinental railroad building was costly and risky; thinly populated areas needed to be built up before lines could be profitably run through them Railroads held onto even more land by holding off on choosing which alternating square miles of land (as in a checkerboard) they would take and which would go to the government; but 1887 President Cleveland ended the practice by making public the unclaimed land Benefits of government grants of land to railroad companies: Gave the government preferential rail service Was cheaper than giving direct cash because avoided taxes The railroads could profit from the land by selling it or using it as collateral for loans Towns crossed by railroads flourished, so competition between towns for lines to be built through them The Union Pacific Railroad: After deadlock, the Southern states seceded so 1862 Congress finally commissioned the Union Pacific Railroad in order to bind the Pacific to the Union The Union Pacific Railroad would build westward from Omaha, Nebraska and would receive generous land and money grants for each mile built Insiders in the Credit Mobilier construction company skimmed a fortune by overcharging for construction and bribing congressmen to turn a blind eye Construction gangs, composed mostly of Irish Union army veterans, worked a breakneck speed Indians would attack the workers to defend their land, resulting in casualties on both sides The workers lived in tented towns (hells on wheels) with thousands of men and a few entertainers and prostitutes The Central Pacific Railroad: The Central Pacific Railroad was responsible for laying rail from Sacramento, CA eastward Was granted the same subsidies as the Union Pacific Railroad The Big Four financial backers, ex. ex-CA governor Leland Stanford and lobbyist Collis P. Huntington, made millions by operating through two construction companies, though did not bribe congressmen Most of the workers were efficient and expendable Chinese Had to inch their way through the Sierra Nevadas, while the Union Pacific barreled through open plains 1869 the two lines met in Ogden, Utah, with the Union Pacific having built almost twice as much line as the Central Pacific Effects of the nation's first transcontinental railroad: Secured the West Coast to the Union Helped strengthen trade with Asia Helped growth in the Great West by penetrating the desert

Spanning the Continent with Rails

Binding the Country with Railroad Ties

Before 1900, four other transcontinental railroads were completed 1883 the Northern Pacific Railroad was completed that ran from Lake Superior to Puget Sound 1884 the Atchison, Topeka, and Santa Fe was completed that ran through the southwestern deserts to CA 1884 the Southern Pacific was completed that ran from New Orleans to San Francisco All the above received generous land grants; the Great Northern did not 1983 the Great Northern was completed that ran from Duluth to Seattle according to the vision of the public-duty-minded James J. Hill But many overoptimistic railroad builders ended up in bankruptcy, mergers, or reorganizations because they built rails that led from nowhere to nothing

Meanwhile, the older eastern railroads were expanded and connected, esp. the New York Railroad Central Consolidation and Commodore Cornelius Vanderbilt, after making his fortune in steamboating, turned to Mechanization railroading and made millions by offering better service at lower rates Technological advancements: Steel rails, popularized by Vanderbilt, were safer and could carry heavier loads than iron Track gauge was standardized, so no more expense and inconvenience from having to change lines 1870s the Westinghouse air brake increased efficiency and safety 1860s the Pullman Palace Cars provided luxurious transport Telegraphs, double-tracking, and the block signal increased safety But still, accidents were commonplace Revolution by Railways (or, Effects of the Railroads) Physically united the nation for the first time Created a domestic market for American goods, the largest of its kind in the world Stimulated industry by transporting raw materials, opening markets for manufactured goods, and generating demand for steel Stimulated mining and agriculture, esp. in the West, because transported farmers, their produce, and the manufactured goods they needed Stimulated growth of cities because could supply large populations with food, raw materials, and access to markets Stimulated immigration by advertising their land grants for sale in Europe The environment was negatively affected; prairies were replaced by cornfields in Illinois, Kansas, and Nebraska, buffalo were replaced by cattle in the Dakotas and Montana, and white pine forests were turned into lumber in Michigan, Wisconsin, and Minnesota November 18, 1883 the major rail lines declared that North America would be divided into four time zones in order to simplify rail schedules; before each town had its own local time determined by the position of the sun at noon A new class of millionaires arose Many financiers made millions through corrupt practices Ex. Jay Gould who manipulated railroad stocks Stock watering was the practice of selling railroad stocks at far above their actual value,

Wrongdoing in Railroading

which forced railroad managers to charge high rates and compete to pay off the exaggerated financial obligations Railroad tycoons, ex. Vanderbilt and son William H. Vanderbilt, often ignored public interest Railroads bribed politicians and judges, employed lobbyists, elected their own kind to office, and showered journalists and politicians with free passes Railroads were extremely powerful because manipulated a huge monopoly and were not limited to a four-year term Railroads methods of maintaining power: Separate companies formed pools to divide business and profits in a given area Granted secret kickbacks to shippers if they promised to use the railroads line Government Bridles the Iron Horse Though the poor farmers, esp. in the Midwest, opposed the new plutocratic system, most Americans supported free enterprise, competition, laissez faire economics, and the American dream that anyone could become a millionaire 1870s economic depression incited farmers, ex. The Grange (Patrons of Husbandry) to push for government regulation of railroads But 1886 Supreme Court Wabash case ruled that individual states did not have jurisdiction over interstate commerce Despite opposition from President Cleveland, 1887 Congress passed the Interstate Commerce Act: Prohibited rebates and pools, discrimination against shippers, and charging more for a short haul than a long haul over the same line Required railroads to openly publish their rates Set up the Interstate Commerce Commission to administer and enforce the Act Effects of the Interstate Commerce Act: Satisfied popular demand for government intervention, but was very loose and did not have much of an effect on the railroads Stabilized the railroad business system by providing an orderly, peaceful forum for competing railroads to resolve their conflicts, instead to resorting to rate wars and attacks on the rails themselves Was the first major attempt by the federal government to regulate business for popular interest, auguring the end of unregulated business

Miracles of From 1860 to 1894, America rose from 4th to 1st in the world in industry Mechanization (or, Liquid capital became abundant with the rise of a new millionaire class Causes of the Natural resources were fully exploited, ex. The iron ore deposits of the Minnesota-Lake Industrial Boom) Superior region Massive immigration provided cheap and plentiful labor, ex. eastern and southern European immigrants in the steel industry Technological advancements: Mass production, introduced by Eli Whitney, was being perfected Inventions such as the cash register, the stock ticker, and the typewriter aided business operations and drew women into the workforce Inventions such as the refrigerator car, the electric dynamo, and the electric rail stimulated urbanization 1876 teacher of the deaf Alexander Graham Bell invented the telephone; would form a giant communication network and employ women as operators Thomas Alva Edison invented the phonograph, the mimeograph, the dictaphone, the

moving picture, and 1879 the light bulb that reduced average sleep time from nine hours to seven hours a night The Trust Titan Emerges Business leaders were looking for ways to circumvent competition Steel tycoon Andrew Carnegie pioneered in vertical integration, or having one organization handle all phases of manufacturing from raw material to finished good to marketing, in order to improve efficiency, ensure quality, and avoid middlemen's fees Oil baron John D. Rockefeller with the 1870 Standard Oil Company was the master of horizontal integration, or allying with competitors to corner the market; created the trust in which stockholders of smaller oil companies assigned their stock to the Standard Oil Company who would then manage the operations of the smaller companies, while companies outside of the trust agreement were forced to the wall Top banker J. Pierpont Morgan introduced interlocking directorates in which he consolidated rival enterprises and placed his own officers on the rivals' boards of directors

The Supremacy of Steel was the new cotton; would build America in skyscrapers and coal scuttles Was a capital good, ex. for rails, not a consumer good, ex. clothes and shoes Steel Just a few decades before, steel was scarce in America and iron was the dominant metal; 1870s when Vanderbilt began using steel rails he had to import them from Britain But by 1900, America was the top steel producer, making 1/3 of the world's steel Causes of the steel boom: The Bessemer process, discovered 1850s by American iron kettle manufacturer William Kelly but named after a British inventor, produced purer steel and iron America was special in that it had in relatively close proximity coal for fuel, iron ore for smelting, labor, and industrial knowledge Carnegie and Other Sultans of Steel Andrew Carnegie started out 1848 as a menial laborer fresh from Scotland, advanced quickly through hard work and making connections Succeeded in steel by partnering with other big guns and eliminating middlemen; disliked monopolistic trusts By 1900, was producing 1/4 of the country's steel and making $25 million a year, untaxed Financier J. Pierpont Morgan established a reputation of integrity by financing the reorganization of of railroads, insurance companies, and banks; believed that money power was only dangerous when held by dangerous people By 1900, Carnegie was looking to sell his steel holdings, while Morgan had delved into the manufacture of steel pipe So Carnegie used the threat of becoming a competitor in the steel pipe industry to lever Morgan into buying his steel operations for $400 million Carnegie would spend the rest of his life and most of his wealth philanthropically, because he feared dying disgraced with such a fortune Morgan expanded his steel holdings, watered their stock, and 1901 launched the $1.4 billion United States Steel Corporation, the first American corporation worth over 1 billion and worth more than the entirety of 1800 America

Rockefeller Grows Before the birth of the oil industry, traces of oil found in streams were used for medicine an American 1859 in PA the first oil well (Drake's Folly) struck black gold, and the oil industry was born Beauty Rose By 1870s, kerosene was the prime petroleum-based product, replacing whale oil in lamps and becoming America's fourth most valuable export; New England whaling suffered But 1880s, kerosene lamps were largely replaced by Edison's electric light bulbs, leaving oil

at risk of remaining a modest industry But by 1900, the gasoline-fueled internal combustion engine of the automobile proved itself superior to steam or electric engines and firmly placed oil on the path to riches The late 1800s were a time of completely free enterprise John D. Rockefeller: Came from a poor family, became a successful businessman at 19, and would come to dominate the oil industry 1870 organized trust the Standard Oil Company in order to eliminate middlemen and squeeze out competitors Operated with low business ethics and was just windward of the law By 1877, controlled 95% of all oil refineries in America Believed that only the fittest businesses would survive and that the time was ripe for aggressive consolidation, so ruthlessly pushed out small oil and enlarged his trust The consolidation of oil resulted in higher quality oil for cheaper and for more profit, because avoided the ruinous price wars More trusts arose, ex. in tobacco, sugar, leather, harvester, and meat (under Gustavus F. Swift and Philip Armour) These trusts made for the rise of a class of new rich that were displacing the old rich class of merchants and professionals The Gospel of Wealth Some of the new rich, ex. Rockefeller and Carnegie, believed that their wealth was divinely given and that they had to prove themselves morally responsible Most defenders of completely free capitalism based their arguments on social Darwinism, ex. Yale professor William Graham Sumner; through natural selection, a few people receive much wealth, and society as a whole receives material progress Many of the nouveau riche, having worked their way from rags to riches, concluded that those who were poor were only poor because they were lazy and lacking in enterprise, ex. Reverend Russell Conwell's lecture Acres of Diamonds Plutocracy found rapport in the Constitution: State legislatures' attempts at controlling trade were thwarted by the clause that gave only Congress jurisdiction over interstate commerce The Fourteenth Amendment was interpreted such that a corporation was a legal person, so a state could not deprive it of property without due process of law; this loophole was possibly intentionally written in Industrialists sought to incorporate in easy states, ex. NJ and KY, which had little to no restrictions on business The people began trying to control monopoly, first (unsuccessfully) through state legislature, and then through Congress 1890 the Sherman Anti-Trust Act was passed that forbade consolidations in restraint of trade regardless of whether they were good or bad, but was ineffective because had little power and contained loopholes; ironically, was used to suppress labor unions The Sherman Act and the Interstate Commerce Act from 1887 established that private interests were subordinate to public interests By 1900, the industrial boom of the North had had little effect on the South; largely, white and black sharecroppers and tenants worked on land belonging to absent landlords But 1880s the advent of machine-made cigarettes caused a sharp rise in tobacco consumption, so James Buchanan Duke began manufacturing them and 1890 absorbed his competitors into

Government Tackles the Trust Evil

The South in the Age of Industry

the American Tobacco Company Some urged the South to industrialize, ex. editor of the Atlanta Constitution Henry W. Grady because wanted to outdo the North, but were not very successful Disadvantages of the South in terms of industry: The North-dominated railroads gave better rates to Northern manufactured goods moving South and to Southern raw materials moving North, so kept the South as a Third World supplier of raw materials to the North Coal and iron mined in Birmingham, Alabama should have helped Southern steel manufacturers, but the Pittsburgh steel lords pressured railroads to charge an additional fee on Birmingham steel as if it had been shipped from Pittsburgh The South did much better in manufacturing cotton textiles: Starting 1880, Northern capital established cotton mills in the South because of tax benefits and cheap, ununionized labor Southern cotton mills would come to produce nearly all of the nation's cotton textiles The textile mills employed poor mountain whites (AKA hillbillies or lint-heads) with wages half that of a Northern worker's But many Southerners liked the mills because provided them with the first steady job and paycheck, and because was sometimes the only way they could keep their family together The Impact of the New Industrial Revolution on America The standard of living rose sharply to higher than any other industrial nation Cities grew rapidly with workers and immigrants as the demand for labor increased The Jeffersonian ideal of free enterprise in agriculture gave way to government overseeing of industry Rural Americans and peasant immigrants had to follow a daily schedule dictated by the factory whistle, whereas before they lived by the natural clock Effects on women: More women in the workforce, ex. typewriters needed stenographers and telephones needed hello girls 1890s artist Charles Dana Gibson created the image of the Gibson Girl, a romantic ideal of a young, independent, healthy woman Middle class women delayed marriages and had smaller families because of their jobs Most women worked out of economic need, but were paid less than their male coworkers Increased class division, with an extravagant class of the new rich; in 1900, 1/10 of the people owned 9/10 of America's wealth From 1860 to 1900, the portion of wage-earners increased from 1/2 to 2/3 of all Americans Though real wages were rising, there was still very little job security Pressure for foreign trade grew as American industry saturated the domestic market

In Unions There is Workers' individuality and creativity were valued less and less, and their relationship with Strength their employers more and more impersonal New machines, though they created more jobs in the long run, displaced workers The labor market was favorable to employers; plenty of cheap labor immigrated in or could be transported in by rail Individual workers had no chance against industry, and even workers' unions struggled to be heard Advantages of the corporation over the worker: The corporation could do without the worker, but the worker could not do without the corporation Its wealth could pay lawyers, the press, politicians, strikebreakers (scabs), and thugs

Federal courts, with well-off and conservative judges, ordered the workers to stop striking; if not, the company could request that state and federal troops be brought in Could lockout their workers to starve them to submission Could have workers sign agreements not to join a labor union (yellow-dog contracts or ironclad oaths) Could circulate a black list of names of agitators Might own the company town and its overpriced stores and easy credit, keeping its employers perpetually in debt The middle class grew to ignore strikes because they saw them as socialistic acts done by relatively well-off workers who couldn't be bothered work their way to the top as Carnegie and Rockefeller had done Labor Limps Along The Civil War got labor unions on their feet, by making labor more valuable by taking up human resources; also the cost of living was rising 1866-1872 the National Labor Union was in existence: Attracted many members, among them skilled, unskilled, and farmers, but few women or blacks; Chinese were excluded from the group Wanted mediation of workplace disputes and an 8-hour workday; succeeded in getting the latter Black workers formed the Colored National Labor Union, but could not work together with the National Labor Union because of racism and the blacks' support of the Republicans 1870s the depression weakened the labor movement, but not completely, ex. 1877 strikes against wage reductions that had to be put down by federal troops The Knights of Labor under Irish-American Terence V. Powderly: 1869 began as a secret organization and would remain secret until 1881 Welcomed nearly all workers regardless of skill, race, and gender; only excluded nonproducers, ex. liquor dealers, professional gamblers, bankers, stockbrokers Refused to get involved in politics Wanted producers' cooperatives, health and safety codes, industrial arbitration (settlement of disagreements by a mediator), and an eight-hour workday Were able to win the 8-hour workday, and multiplied in size after 1885 a successful strike against Jay Gould's Wabash railroad 1886 half of the Knights' May Day strikes failed Chicago was a center of Knight activity and also had many anarchists who wanted violent overthrow of the government May 4, 1886 in Haymarket Square, Chicago: A deadly dynamite bomb was thrown as police tried to break up a meeting to protest alleged police brutality Eight anarchists were charged, though there was no proof that they were directly involved 1892 German-born Democrat John P. Altgeld was elected governor of Illinois and pardoned the three surviving anarchists, despite heavy criticism from conservatives Was damaging to the Knights because caused the public to associate them with anarchy The Knights were further weakened when their skilled members left and formed the American Federation of Labor because did not want to cooperate with the less powerful unskilled workers 1890 onwards, the Knight membership would continue to fall, and remaining Knights would merge with other protest groups

Unhorsing the Knights of Labor

The AF of L to the 1886 English Jew Samuel Gompers founded the American Federation of Labor The Federation was an association of independent national unions with a unified overall Fore strategies Was not a political group, though did encourage its members to vote for supportive politicians Was more interested in the here and now, unlike the somewhat utopian Knights Wanted better wages, hours, and working conditions and all-union labor (closed shop) Used walkouts and boycotts, and had a war chest to get itself through long strikes Tried to represent all workers, but was made up of skilled craftsmen who did not care to include unskilled laborers, women, and blacks Continued to expand through the panic of 1893 AKA the labor trust, according to critics From 1881 to 1900, there were over 23,000 strikes involving 6 million workers; the workers lost half of them and the other half they won or compromised Organized labor's weakness was that it excluded most laborers, ex. 97% of them in 1900 By 1900, the public was starting to support workers' rights to organize, collectively bargain, and strike, ex. 1894 Labor Day was make an official holiday The labor movement remained largely unsuccessful, though there were some industrialists who realized that bargaining with the unions was cheaper than economic warfare

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