1)Sources of Industrial Growth
a)Industrial Technologies
i)Most impt tech development was new iron + steel production techniques- Henry Bessemer and William Kelly invented process to turn iron to steel, possible to produce large quantities and dimensions for construction, RRs
ii)Steel industry emerged in Pennsylvania and Ohio (Pittsburgh notably)- iron industry existed, fuel could be found in PA coal
iii)New transportation systems emerged to serve steel industry- freighters for the Great Lakes, RRs used steel to grow + transported it (sometimes merged w/ one another). Oil industry also grew b/c of need to lubricate mill machinery
b)The Airplane and the Automobile
i)Development of automobile dependent upon growth of two technologies: creation of gasoline from crude oil extraction, and 1870s Eur development of “internal combustion engine”. By 1910 car industry major role in economy
ii)First gas-car built by Duryea brothers 1903, Henry For began production 1906
iii)Search for flight by Wright Bros lead to famous 1903 flight. US govt created National Advisory Committee on Aeronautics 1915 to match Eur research
c)Research and Development
i)New industrial technologies lead companies to sponsor own research- General Electric established first corp lab 1900, marked decentralization of govt-sponsored research. At same time cnxn began btwn university research + needs of industrial economy- partnership btwn academic + commercial
d)The Science of Production
i)Principles of “scientific management” began to be employed- fathered by Frederick Taylor who argued employers subdivide tasks to decrease need for highly skilled workers, increase efficiency by doing simple tasks w/ machines
ii)Emphasis on industrial research led to corporate labs (e.g. Edison’s Menlo Park)
iii)Most impt change in production was mass production + assembly line. First used by Henry Ford in automobile plant 1914- cut production time, prices
e)Railroad Expansion
i)Industrial development b/c of RR expansion- gave industrialists access to new markets + raw materials, spent large sums on construction and equipment
ii)Possible b/c of govt subsidies, investment capital from abroad, and combinations of RRs by Cornelius Vanderbilt, James Hill, Collis Huntington
f)The Corporation
i)Modern corp emerged after Civil War when industrialists realized no person or group of limited partners able to finance great ventures
ii)Businesses began to sell stock, appealing b/c “limited liability” meant lost only amt of investment + not liable for debts- allowed vast capital to be raised
iii)Began in RR industry, spread to others- in steel industry Andrew Carnegie struck deals with RRs, bought up rivals, purchased coal mines w/ partner Henry Clay Frick controlled steel process from mine to market
iv)Financed undertaking by selling stock. Bought out 1901 by JP Morgan who formed United States Steel- controlled 2/3 of nation’s steel production
v)Corporate organizations developed new management techniques- division of responsibilities, control hierarchy, cost-accounting procedures, and “middle manager” btwn owners and labor introduced. Consolidation now a possibility
g)Consolidating Corporate America
i)Consolidation occurred thru “horizontal integration” (forming competing firms into single corporation) and “vertical integration” (control production from raw materials to distribution). Also thru pool arrangements (most failed)
ii)Most famous corp empire John D Rockefeller’s Standard Oil- thru horizontal & vertical integration came to control 90% of refined oil in US
iii)Consolidation used to cope w/ “cutthroat competition”- feared too much competition lead to instability, best was to eliminate/absorb competition
h)The Trust and the Holding Company
i)Failure of pools (informal agreements to stabilize rates, divide markets) led to less cooperation and more centralized control- “trust” emerged (stock transferred to group of trustees who made all decisions but shared profits)
ii)Beginning w/ NJ 1889 states changed laws to allow companies to buy other companies, trust unnecessary—“holding companies” emerged as corporate body to buy up stock and establish formal ownership of corporations in trust
iii)End of 19th cent 1% of corps controlled 33% of manufacturing, system where power in hands of a few men- NY bankers (JP Morgan), industrialists (Rockefeller), ect.
iv)Substantial economic growth ultimately from this arrangement- costs cut, industrial infrastructure formed, new markets stimulated, new unskilled jobs
2)Capitalism and Its Critics
a)The “Self-Made Man”
i)Defenders argued capitalist economy expanding opportunities for individual advancement, and some tycoons were self-made men. But most came to be wealthy as a result of ruthlessness, arrogance, corruption (financial contributions to political, parties)
ii)Many industrialists were modest entrepreneurs trying to carve role for their business in an unstable economy & fragmented, highly competitive industries
b)Survival of the Fittest
i)Assumptions that wealth earned thru hard work and thrift and that those who failed earned their failure became basis of Social Darwinism- only fittest individuals survived and flourished in the marketplace
ii)English philosopher Herbert Spencer championed theory, in America William Graham Sumner promoted similar ideas- absolute freedom to struggle, compete, succeed, and fail
iii)Appealed to businessmen b/c justified their tactics- efforts to raise wages by labor thru unions or govt regulation would fail, laws of supply and demand and “invisible hand” or market forces would determine wages and prices
iv)Yet tycoons themselves thru monopolies tried to eliminate competition
c)The Gospel of Wealth
i)Gospel of Wealth (1901) by Andrew Carnegie advocated idea that w/ great wealth came great responsibility to use riches to advance social progress
ii)Author Horatio Alger promoted stories of individual success in his works- anybody could become rich thru work, perseverance, and luck
d)Alternative Visions
i)Groups emerged challenging corporate and capitalistic ethos
ii)Sociologist Lester Ward in Dynamic Sociology (1883) argued natural selection didn’t shape society, and active govt in positive planning best for society. Skeptical of laissez-fire, ppl should intervene to serve their needs
iii)Famous dissidents emerged to challenge ideas: Socialist Labor Party founded 1870s by Daniel De Leon; Henry George and his Progress and Poverty (1879) argued poverty due to wealth of monopolists and their high land values; Edward Bellamy and his Looking Backward (1888) spoke of “fraternal cooperation” and of future society where govt distributed wealth equally
e)The Problems of Monopoly
i)Few questioned capitalism itself but movement grew in opposition to monopolies + economic concentrations- seen as creating artificially high prices, unstable economy. Recessions and havoc 1873 every 5-6 yrs
ii)Resentment increased b/c of new class of conspicuously wealthy ppl who lived opulent lifestyle- flagrant wealth in face of 4/5 who lived modestly
iii)Standard of living rising for everyone, but gap btwn rich + poor growing
3)Industrial Workers in the New Economy
a)The Immigrant Work Force
i)Industrial work force grew late 19th century b/c of migration to industrial cities from both rural areas and foreign immigration- late century most migrants from England, Ireland, N Eur, by end shit toward S and E Europeans
ii)Immigrants came to escape poverty, lured by opportunity and advertisements by companies. Ethnic tensions increased b/c of job displacement, competition
b)Wages and Working Conditions
i)Average standard of living rose but wages low, little job security b/c boom-bust cycle, monotonous tasks that required little skill, long hours in unsafe conditions- loss of control over work conditions seen as worst part of factory labor as corporate efficiency and managers centralized workplace
c)Women and Children at Work
i)Decreasing need for skilled labor led to increase use of women and children who could be paid lower than men
ii)Most women were young immigrants, concentrated in textile industry and domestic service. Some single, others supplemented husband’s earnings
iii)Children employed in agriculture and factories w/ little regulation, dangerous
d)The Struggle to Unionize
i)Labor attempted to fight conditions by creating large combinations (unions) but had little success by century’s end. Fist attempt to federate separate unions came 1866 w/ National labor Union (disintegrated after Panic of 1873)
ii)Unions faced difficulty during 1870s recessions b/c of high unemployment, hostility of middle class
e)The Great Railroad Strike
i)Railroad Strike of 1877 began after 10% wage cut announced. Strikers disrupted rail service, state militia mobilized and in July President Hayes ordered some federal troops. Strike collapsed eventually after many deaths
ii)Showed disputes could no longer be localized in national economy, depth of resentment toward employers, frailty of labor movement
f)The Knights of Labor
i)First effort at national labor organization 1869 Noble Order of the Knights of Labor under Uriah Stephens- lacked strong central direction but local “assemblies” championed 8-hour workday, end to child labor, but also interested in long-range reform of economy. Allowed women to join
ii)During 1870s under Terence Powderly rapid expansion, but by 1890 Knights had collapsed due to failure of strikes in the Gould railway system
g)The AFL
i)1880s American Federation of Labor created, became most impt +enduring national labor group- collection of autonomous craft unions of skilled workers
ii)Led by Samuel Gompers- goal to secure greater share of capitalism’s material rewards to workers, opposed fundamental economic reform
iii)Wanted creation of national 8-hour work day, national strike May 1, 1886 to achieve goal- in Chicago violence broke out btwn strikers and police after deaths in Haymarket Square bombing- “anarchism” became widely feared by middle class, associated it with radical labor
h)The Homestead Strike
i)The Amalgamated Association of Iron and Steel Workers (craft union in AFL) held large amt of power in steel industry b/c of reliance on skilled workers
ii)By 1880s Efficient Carnegie process led management to want more control over labor + needed fewer skilled workers
iii)Carnegie and Henry Frick began to cut wages at Homestead plant in Pittsburgh to break union. 1892 strike called after company stopped consulting the Amalgamated, Pinkerton Detective Agency security guards brought in as strikebreakers- were attacked, National Guard of PA called in
iv)Eventually protected strikebreakers ended strike, by 1900 Amalgamated had lost nearly every major steel plant
i)The Pullman Strike
i)Strike at Pullman Palace Car Company in 1894 after Pullman cut wages. Workers began to strike w/ the American Railway Union of Eugene V. Debs
ii)Within few days thousands of railway workers struck and transportation nationwide frozen. General Manager’s Association asked Pres Grover Cleveland to send in federal troops b/c passage of mail being blocked
iii)Pres complied and sent 2,000 troops to protect strikebreakers. Strike collapsed
j)Sources of Labor Weakness
i)Late 19th century labor suffered many losses- wages rose slowly, whatever progress made not enforced
ii)Reasons for failures included: leading labor organizations represented only small percentage of industrial work force; ethnic tensions; many immigrant workers planned to stay in country for short while and moved very often- eroded willingness to organize, believed not part of permanent working class; couldn’t match efforts of powerful + wealthy corporations
