Industry Comes of Age The Iron Colt Becomes an Iron Horse 1st big business monopoly transcontinental railroad because Pacific Railroad Act subsidize

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1 Chapter 24: Industry Comes of Age The wealthy class is becoming more wealthy; but the poorer class is becoming more dependent. Henry George 1879 Industry Comes of Age Great men aren t politicians Great men are lured to big business America is now an industrial giant in the world wide market The Iron Colt Becomes an Iron Horse RR s explode after ACW Very 1st big business became a monopoly. Govt wanted to build transcontinental railroad because: For security of U.S. - transport military quickly in war time. Tie nation together economically wealthy manufacturing east with goldrich CA Move products from east to west Traded goods with Asia could make it to the east Postal mail transportation Move natural resources iron, ore, coal, produce Move people to populate the west spurring growth To spur railroad building, Federal govt passed Pacific Railroad Act - to subsidize the transportation system without raising taxes, and a way to use land as enticement to get businessmen to profit from building the railroad Issued large tracts of land to 2 railroad companies Union Pacific and Central Pacific. For each mile of track built companies granted: 1). builders receive 20 square miles of land 2). a federal loan $16,000 for flat land & up to $48,000 for mountainous land 155 million acres in total People upset by giveaways but RR s hook up government with preferential rates for postal service and military traffic. Union Pacific Railroad Began in Omaha, Nebraska and moved west Credit Mobilier pocketed 73 million: bribed congressmen to continue supporting the Pacific Railroad Act. Irish Paddies were the workers (Irish who had fought in the Union Army) Hell on wheels : tented towns sprang up at rail s end drinking and debauchery. Central Pacific Railroad Began in Sacramento, CA and moved east Chinese built the railroad high death rate due to explosions on mts. Transcontinental Railroad completed 1869 Met at Promontory Point, UT No other railroads received loans, but they did receive large land grants. Effects of Transcontinental Railroad Linked entire continent via railroad and by telegraph, paved way for westward movement Created huge domestic market for U.S. raw materials and manufactured goods. Stimulated creation of new industries of mining, agriculture and ranching Facilitated large influx of immigrants. Led to great exodus to urban areas. Spurred investment from abroad. Creation of distinct time zones. Native Americans displaced and herded onto reservations Binding the Country with RR ties Four other Transcontinental lines were built. None received cash grants, but three received land grants Many other RR went bankrupt and fleeced investors.

2 Towns competed with bribes to RR promoters to get the RR to come to their town. Many of these RR took the money and ran. Railroad Consolidation & Mechanization Cornelius Vanderbilt: owned NY Central Railroad; popularized steel rail - stronger and could carry heavier loads than iron tracks. Jay Gould And Russell Sage: controlled most of Western railroads - hurt other railroads by stock watering and keeping profits rather than reinvesting. Pools created agreement to divide the business in a given area and share the profits. Government Bridles the Iron Horse Midwestern farmers (small) hate RR But society embraces free enterprise Depression in 1870 s groups farmers (Grange) to try to regulate RR Wabash Case 1886 Wabash, St. Louis & Pacific Railroad Company v. Illinois: Supreme Court declared invalid an Illinois railroad law because it was an infringement on the exclusive powers of Congress granted by the commerce clause of the Constitution. Result: denial of state power to regulate interstate rates for railroads- led to creation of the Interstate Commerce Commission Interstate Commerce Act Prohibited rebates and pools. Required railroads to publish rates. Forbid unfair discrimination against shippers. Outlawed charging more for short hauls than for a long haul. Set up the Interstate Commerce Commission (ICC) to administer and enforce the Act. The first large scale attempt of the federal govt. to regulate business in the interest of society. Miracles of Mechanization saw a huge industrial boom. Reasons: Much more liquid capital Natural resources started to be exploited Massive immigration provided cheap unskilled labor American inventions made businesses and factories more efficient. Telegraph, mass production, cash register, stock ticker. Alexander Graham Bell: telephone giant communications network was built. Women took jobs as switchboard operators. Thomas Edison: dictaphone, phonograph, moving picture, electric light bulb The Trust Titans Emerges Businesses, left alone, hate competition. Ways to avoid competition 1. Vertical Integration-combining into one organization all phases of manufacturing from mining to marketing -Andrew Carnegie s Steel operations. 2.Horizontal Integration-allying with competitors to monopolize a given market - Rockefeller and Standard Oil 3.Trusts-consolidate operations of all rivals Rockefeller 4. Interlocking Directorates- consolidate rival enterprises and to ensure future harmony by placing officers of his own banking syndicate on their various boards of directors J.P. Morgan Supremacy of Steel Steel became King after the Civil War. Foundation for much of the industrial expansion America biggest Steel producer by Produced 1/3 of the world s steel. Bessemer Process method of making cheap steel (use cold air to eliminate impurities) Carnegie And Other Sultans Of Steel Andrew Carnegie-US Steel

3 King of American Steel Napoleon of the Smoke Stacks Produced ¼ of nation s steel Carnegie- worried about dying with too much wealth, spends rest of life in philanthropy Rockefeller and Standard Oil 1859 First Oil Well- in Penn. Drake s Folly pours out black gold Automobile industry drives oil industry Rockefeller and Standard Oil (1870, trusts formed in 1882) controlled 95% of all oil refineries in US Rockefeller and Standard Oil Reckafeller big believer in commercial Darwinism. Ruthless business man Trusts = profits J P Morgan: Banker and Financier Financed the reorganization of railroads, insurance companies, and banks. Morgan bought out Carnegie for over $400 million. (Philanthropist: Carnegie donated millions) 1901 launched the larger U.S. Steel Corporation = America s 1 st billion dollar corporation. Social Darwinists Some business leaders equate success to god ( divine right of kings) Others Social Darwinists (Herbert Spencer and William Graham Sumner) are that people won their stations in life by competing on basis of natural talent. Later applied to countries Russell Conwell- Acres of Diamonds There is not a poor person in the US who was not made poor by his own shortcomings Gospel of Wealth Carnegie Gospel of Wealth Inequality is inevitable and good. Wealthy should act as trustees for their poorer brethren. Wealthy had to prove they deserved their wealth. Give back to the community as a whole, not to individuals Government Tackles the Trust Evil Sherman Anti Trust Act of 1890 Forbids combinations in restraint of trade. Did not prove very effective because went after bigness and not badness. Not very effective because penalties weak and loopholes Biggest effect was unintended--was used against unions. Importance of the law was not its immediate effect but the shift in thinking that it represented. The South In The Age Of Industry Smaller production Most area is sharecropping James Duke - American Tobacco Company New South Henry Grady editor of Atlanta Constitution Become Georgia Yankees Major barrier to South development- RR regional rates- RR give better rates to manufactured goods moving from the North 1880 s Bring the mills to the cotton Why Cheap labor Less unions Tax benefits Most blacks excluded from mill jobs Entire poor white families worked hillbillies and lintheads Paid half as much as northern workers Often times paid in credit

4 The Impact Of Industrialization Ø Standard of living rose sharply Ø Workers enjoyed many more physical comforts Ø Urban centers mushroomed Ø Jeffersonian Ideal of nation of small farmers died Ø Concept of time changed. Ø Many more women in the workforce Ø Delayed marriages and smaller families Ø New class system Ø Workers becoming more dependent and more vulnerable. In Unions There is Strength New technology means less skilled workers Individual workers were powerless to bargain Companies- use lawyers, buy local press, pressure politicians, scabs, or hire thugs Court injunctions- make strikes illegal Companies can request federal troops Lockouts Yellow dog contracts Black lists Company towns Unions strengthened after the Civil War. National Labor Union organized in 1866 and did well, 600,000 members, both skilled and unskilled Did not recruit women or blacks (there was a Colored National Labor Union) Goals: arbitration of industrial disputes, 8-hour day damaged by the depression in the 1870s Labor Limps Along Knights of Labor (1881 becomes public) took over where the National Labor Union had left off. Sought to include all labor in one big Union. They stayed out of politics, but campaigned hard for economic and social reform. Their biggest issue was the 8-hour work day. Won that fight from a number of industries and their ranks swelled. Chinese prohibited from joining Unhorsing The Knights Of Labor ½ of May day strikes fail Haymarket Square Incident (Chicago 1886) 1886 Haymarket Square Riot: A rally to support striking workers at Haymarket Square in Chicago. Dynamite bomb thrown at police. Bomb blast/gunfire caused deaths of 8 police officers and civilians. 8 anarchists tried for murder; 5 convicted, 4 executed and 1 committed suicide in prison. (none of the defendants had thrown the bomb) Why does the Knights of Labor die? 1. KofL now wrongfully linked with anarchism 2. Fusion of skilled and unskilled workers AFL: American Federation of Labor Began Samuel Gompers served as Pres from (except for 1 year) Broke away from Knights of Labor - An association of self-governing national unions, each with its independence, but with AF of L unifying the strategy. Major goal: trade agreement authorizing the closed shop = employer agrees to hire union members only, so have only all-union labor. Sought better wages, hrs, working conditions. Used walkouts, boycotts, and we don t patronize signs. Dominated and composed of skilled craftsman (carpenters, bricklayers, etc.)

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