The Rise of Big Business & Industry

1. The Rise of Big Business & Industry • Postwar industrial expansion: • 1860—U.S. ranked fourth in world • 1894—U.S. ranked first • Why sudden upsurge? • Liquid capital ($), once scarce, now abundant • Civil War profiteering created huge fortunes which combined with massive investments from foreign capitalists

2. The Rise of Big Business & Industry • Abundant Resources: • oil, iron, and coal • Shipping through Great Lakes carried rich iron deposits of Mesabi Range in Minnesota to Chicago, Cleveland, and then to Pittsburg for refining • Government support • Contracts for building transcontinental railroad lines • Laissez-Faire, or hands-off governing, led to little desire to regulate business and markets • Money of powerful industrialists helped buy support • Expanding markets • Of natural resources, to supply labor, and purchase finished products

3. VIII. Miracles of Mechanization(cont.) • Sheer size of American market encouraged innovators to invent mass-production methods: • Anyone, who could make appealing new product in large quantities and figure how to market it, thrived • Industrialists continued to refine pre-Civil War “American System”—use specialized machinery to make interchangeable parts • Captains of industry had major incentive to invent machines: • Replaced expensive skilled labor with cheap unskilled workers • Unskilled workers plentiful because of massive immigration

4. KEY INVENTIONS • Refrigerated train car---1851 • Elevator---1852 • Sewing Machine---1853 • Dynamite---1867 • Typewriter---1868 • Levi Blue Jeans/Basketball---1873 • Barbed wire---1874 • Telephone---1876 • Phonograph---1878 • Light bulb and cash register---1879 • Zipper---1883 • Gasoline automobile, skyscraper, combine reaper/thresher---1885 • New York City---first city to have electricity--1890 • Radio, motion picture---1895 • Subway---1897 • X-ray---1900 Between 1800 to 1900, US Govt. issued 500,000 patents

5. VIII. Miracles of Mechanization(cont.) • Brilliant ideas gave rise to whole new businesses: • Between 1860-1890, some 440,000 patents issued • Refrigerator car, electric dynamo, and electric railway speeded urbanization • One of most ingenious inventions was telephone—Alexander Graham Bell, 1876: • Created gigantic communication network • Social impact when lure of “number please” took women away from stove to switchboard

6. VIII. Miracles of Mechanization(cont.) • Most versatile inventor—Thomas Alva Edison (1847-1931): • Severe deafness enabled him to concentrate without distraction • Gifted tinkerer and tireless worker, not a pure scientist • Wondrous devices poured out of his “invention factory” in New Jersey—phonograph, mimeograph, dictaphone, and moving picture • Best known for his perfection in 1879 of electric lightbulb • Turned night into day and transformed human habits • People who slept average of 9 hours a night now slept just a bit more than 7

7. p520

10. NEW SOUTH

12. US GOVERNMENT ASSISTS INDUSTRY • MORRILL TARIFF ACT, 1862 • To protect and encourage American industry • passed after the South seceded from the Union. • NATIONAL BANKING SYSTEM, 1863 • To stimulate the economy and set up a banking system • significant step towards a unified, national banking system • MORRILL ACT, 1862 • To promote education; provided grants of public lands to the states for support of education. “Land-grant colleges” • LAND GRANTS TO RAILROADS • US Govt. donated land to railroad companies to encourage growth of this mode of transportation. US Govt. donated approx. 160 million acres of land…….

13. Expansion of Railroads • 1869, 30,000 miles of track • 1900, 200,000 miles of track • Distribution System to the marketplace • Symbol of growth

14. 1st TRANSCONTINENTAL RAILROAD • May 10, 1869 at Promontory Point, Utah • “The Wedding of the Rails” • Central Pacific and Union Pacific

15. Railroad Construction Promontory, Utah

16. 1st LAWS TO REGULATE BIG BUSINESS State representatives voted into office by members of the Grange who in turn represented the interests of farmers and passed state laws regulating railroad prices in 18 states. Granger State Laws Munn v. Illinois(1876) Supreme Court decision stating that states had the ability to regulate private property if it affected public interest. Declared that it was unconstitutional for states to regulate interstate commerce. Showed need for Federal regulation of interstate commerce. Wabash Case(1886)

17. RAILROAD INDUSTRY • What helped the railroad industry prosper? • Bessemer Process • Westinghouse Air Brakes • Steel Rails • Standard Gauge

18. BESSEMER PROCESS • 1856 Henry Bessemer devised a way of converting iron into steel on a large scale. • His invention involved blowing air through molten iron in a converter, or furnace, in order to burn off the excess carbon. • His invention revolutionized the Industrial Age. • New Uses for Steel • Steel used in railroads, barbed wire, farm machines • Changes construction: Brooklyn Bridge; steel-framed skyscrapers

19. Advantages of Vertical Integration • You are always in control of supply of the products you need • In control of labor cost, land/resources • Always in control of the cost • Schedule your production of autos because you are in control of all factors

20. Coke fields Coke fields Coke fields Coke fields Coke fields purchased by Carnegie purchased by Carnegie purchased by Carnegie purchased by Carnegie purchased by Carnegie Iron ore deposits Iron ore deposits Iron ore deposits Iron ore deposits purchased by Carnegie purchased by Carnegie purchased by Carnegie purchased by Carnegie Steel mills Steel mills Steel mills purchased by Carnegie purchased by Carnegie purchased by Carnegie Ships Ships purchased by Carnegie purchased by Carnegie Railroads purchased by Carnegie VERTICAL AND HORIZONTAL INTEGRATION Vertical Integration You control all phases of production and distribution Horizontal IntegrationBuy out your competition until you have control of a single area of industry MONOPOLY

21. ANDREW CARNEGIE • Rags to riches story---came from Scotland, very poor. • Used scientific ideas (Bessemer Process) to develop a better way to produce steel and sell a quality product for an inexpensive price. • Used Vertical Integration • Monopolized the steel industry

22. Cartoon Rockefeller JOHN ROCKEFELLER • Came from a wealthy family • Bought a substitute during the Civil War. • Formed the first modern corporation in the oil industry: Standard Oil • Used Horizontal Integration to gain a monopoly in the oil business.

23. CORNELIUS VANDERBILT • Formed a steamship company in 1829 • Dominated shipping along the Atlantic • 1849 established steamship that carried people from New York to San Francisco in Gold Rush days • Leading U.S. steamship owner, nicknamed “The Commodore” • Gained control of the Hudson River Railroad • After Civil War Vanderbilt bought most railroad lines from New York to Chicago • 1877, controlled 4,500 miles of railroads • Worth over $100 million • Philanthropist--donated $1 million to Vanderbilt University

24. Conglomerate A group of unrelated business owned by a single corporation. Still used today by companies that merge. Pool Competing companies that agree to fix prices and divide regions among members so that only one company  operates in each area. Outlawed today. Trust (Monopoly) Companies in related fields agree to combine under the direction of a single board of trustees, which meant that shareholders had no say. Outlawed today. Holding Company A company that buys controlling amounts of stock in related companies, thus becoming the majority shareholder, and holding considerable say over each company's business operations. Outlawed today. BUSINESS ORGANIZATIONS

25. “History repeats itself-----The Robber Barons of the Middle Ages and the Robber Barons of Today…..”

26. Rockefeller/Control Govt Rockefeller was so wealthy, he dictated to the U.S. Government to protect big business---- laissez faire

27. Rockefeller would be hated by many because he had too much control over the oil industry and the government as viewed by the common man-----Some believed he was corrupt because he took away the right to compete---free enterprise

28. Social Darwinism • British economist, Herbert Spencer. • Advocate of laissez-faire. • Adapted Darwin’s ideas from the “Origin of Species” to humans. • Belief that there was a natural upper class and lower class. “The growth of a large business is merely a survival of the fittest.” -J. Rockefeller

29. Social Darwinism • Social Darwinists believed that companies struggled for survival in the economic world and the government should not tamper with this natural process. • The fittest business leaders would survive and would improve society. • Belief that hard work and wealth showed God’s approval and those that were poor were lazy and naturally a lower class.

30. The American Beauty Rose • “The American Beauty Rose can be produced in the splendor and fragrance which bring cheer to its beholder only by sacrificing the early buds which grow up around it. This is not an evil tendency in business. It is merely the working-out of a law of nature and a law of God.”―John D. Rockefeller, Jr.

31. 1st LAWS TO REGULATE BIG BUSINESS These are the first laws to regulate industry and big business. • Congress passed Interstate Commerce Commission (ICC). • U.S. government regulated interstate trade within the country. • End railroad corruption of charging high prices to ship goods and Rockefeller’s illegal deals. • Rebates/kickbacks/drawbacks were illegal. • In 1890, Congress passed a law which made trusts/monopolies illegal or any business that prevented fair competition. Interstate Commerce Act(1887) ShermanAntitrust Act(1890)

32. 14th AMENDMENT Rights of Citizens “All persons born in the U.S. are citizens of this country and the state they reside in. No state shall make or enforce any law which deprives any person of life, liberty, or property, without due process of law, nor deny to any person with its jurisdiction to the equal protection of the laws.” Industrialists would use the 14th Amendment as a way to defend a corporation from the Sherman Anti-Trust Act.

33. “Robber Barons” Business leaders built their fortunes by stealing from the public. They drained the country of its natural resources. They persuaded public officials to interpret laws in their favor. They ruthlessly drove their competitors to ruin. They paid their workers meager wages and forced them to toil under dangerous and unhealthful conditions. “Captains of Industry” The business leaders served their nation in a positive way. They increased the supply of goods by building factories. They raised productivity and expanded markets. They created jobs that enabled many Americans to buy new goods and raise their standard of living. They also created museums, libraries, and universities, many of which still serve the public today. CAPTAINS OF INDUSTRY OR ROBBER BARONS

34. THE WORK ENVIRONMENT Division of Labor • Some owners viewed workers as parts of the machinery. • Unlike smaller and older businesses, most owners never interacted with workers. • impersonalization Work Environment • Factory workers worked by the clock. • Workers could be fired for being late, talking, or refusing to do a task. • Workplaces were not safe. • Children performed unsafe work and worked in dangerously unhealthy conditions. • In the 1890s and early 1900s states began legislating child labor.

35. LABOR UNIONS Workers who organize against their employers to seek better wages and working conditions for wage earners. Labor Union The unions' method for having their demands met. Workers stop working until the conditions are met. It is a very effective form of attack. Labor Strike People refuse to buy a company's product until the company meets demands. Boycott New immigrants who would replace strikers and work for less pay. Often violence would erupt between strikers and scabs who were trying to cross picket lines to work. Scab Worker

36. A working establishment where only people belonging to the union are hired. It was done by the unions to protect their workers from cheap labor. LABOR UNIONS Closed Shop List of people disliked by business owners because they were leaders in the Union. Often would loose their jobs, beaten up or even killed. Black List or Black Balled Type of negotiation between an employer and labor union where they sit down face to face and discuss better wages, etc. Collective Bargaining A written contract between employers and employees in which the employees sign an agreement that they will not join a union while working for the company Yellow Dog Contracts

37. Lock Out Owner of industry would “lock out” workers who were trying to form a union and replace them with “scabs”. LABOR UNIONS Industry or business organization owned by and operated for the benefit of those using its services—non-profit Cooperatives

38. LABOR UNIONS • National Labor Union • William Sylvis, 1866 • Skilled, unskilled, farmers but excluded Chinese… • Cooperatives, 8 hr. work day, against labor strikes • Founded a political party in 1872 • Involved in the Chinese Exclusion Act. • Lost election, faded away • Replaced by Knights of Labor. • Knights of Labor • Terrence Powderly • All workers except Chinese • 8 hr. day, cooperatives, prohibition, end child labor • Several strikes won some wage gains 1885 to 1886 • Unrealistic and vague goals • Loss of important strikes and failure of cooperatives • Haymarket Riot—1886 • American Federation of Labor or AFL • Samuel Gompers, 1881 • Skilled workers in separate unions. • Work within political system for change. • Closed shop and collective bargaining • Over 1 million workers joined and won several strikes • Small part of work force eligible to join.

39. Railroad Workers Organize • The Great Railroad Strike of 1877 • Railway workers protested unfair wage cuts and unsafe working conditions. • The strike was violent and unorganized. • President Hayes sent federal troops to put down the strikes. • From then on, employers relied on federal and state troops to repress labor unrest.

40. Railroad Workers Organize • Debs and the American Railway Union • At the time of the 1877 strike, railroad workers mainly organized into various “brotherhoods,” which were basically craft unions. • Eugene V. Debs proposed a new industrial union for all railway workers called the American Railway Union (A.R.U.). • The A.R.U. would replace all of the brotherhoods and unite all railroad workers, skilled and unskilled.

42. HAYMARKET RIOT • May 3, 1886, joining a nation wide strike for an 8 hrwork day, Chicago workers protested against the McCormick Reaper plant. • A riot broke out and Chicago police officers killed several protesters • To protest the killing, protesters planned a rally for May 4 • 3,000 gather at Chicago’s Haymarket Square • During the protest, a bomb exploded • 7 police officers were killed and civilians killed and injured • Chicago police hunt down murderers • 8 anarchists were convicted of conspiracy to murder

43. HAYMARKET RIOT • 4 were hanged and 1 committed suicide • This caused the public to look down on labor unions especially the Knights of Labor • Gov. Altgeld of Illinois later issued pardons for the remaining accused anarchists.

44. LABOR UNIONS HaymarketRiot • Americans were suspicious of labor unions because they tended to go against laissez faire and capitalism. Labor strikes were often violent.

45. HOMESTEAD STRIKE • 1892, Carnegie Steel workers strike over pay cuts • Management locks out workers and hires scab workers. • Violence erupted between strikers and scab workers. • Pinkerton Security called in to settle violence • Strikers ambush them and forced Pinkerton’s to walk the gauntlet between striking families. • Some killed and many injured • National Guard was called in by the governor of Pennsylvania to stop violence and reopen plant

46. Strikes Rock the Nation • Pullman, 1894 • Eugene Debs instructed strikers not to interfere with the nation’s mail. • Railway owners turned to the government for help. The judge cited the Sherman Antitrust Act and won a court order forbidding all union activity that halted railroad traffic. • Court orders against unions continued, limiting union gains for the next 30 years.