America’s Gilded Age (1870-1890)

1. America’s Gilded Age (1870-1890) Rise of Industrialization in America “Second Industrial Revolution”

2. Introduction 1.) What brought about prodigious industrial growth and the rise of giant corporations in the period of 1865-1900? 2.) How did some business leaders, such as Andrew Carnegie and John D. Rockefeller, overwhelm competitors and dominate their industries?

3. Introduction (cont.) 3.) How and why did southern industrialization patterns differ from northern ones? 4.) How did workers respond to the changes resulting form rapid industrialization and the growth of big business? 5.) In the labor-management clashes of the period, why did management almost always win?

4. October 28, 1886

5. “Second Industrial Revolution” • End of the Civil War to the Early 20th Century • Causes • Natural Resources • Growing Supply of Labor • Expanded market for manufactured goods • Availability of capital • Government support • **Railroads**

6. Railroads • Number of railroad track miles tripled between 1860 and 1880 and tripled again by 1920 • Allowed for mass produced goods to moved easily • Also allowed for mass marketing of goods

7. Railroad Innovations • By 1900, the United States had more rail miles tying the country together than did all of Europe • Building this extensive railroad system opened a vast internal market to American industry • The railroad companies also led the way in developing accounting, financial, and managerial practices that made large-scale corporate enterprise possible • Sale of stocks and bonds to raise needed capital

8. Railroad Innovations (cont.) Railroad management innovations became the model for other businesses trying to sell products in a national market

9. Consolidating the Railroad Industry • A group of innovative and unscrupulous railroad entrepreneurs bought out their smaller competitors one by one • Collis P. Huntington • Central Pacific Railroad • Jay Gould • Financier, developer, speculator • James J. Hill • Great Northern Railway

10. Consolidating the Railroad Industry (cont.) • By the 1890’s, they had established great trunk lines that controlled most of the track • These integrated lines carried goods all over the country efficiently • Standardized equipment and track gauge

11. Consolidating the Railroad Industry (cont.) • However, the railroad companies abused their powers • Bribed politicians • Free passes and other favors • Gave rebates and kickbacks to big shippers • Overcharged small businesses and farmers

12. Consolidating the Railroad Industry (cont.) • Small shippers demanded legislation to curb the unfair practices • In the 1870’s, many Midwestern states outlawed rate discrimination • These laws were ruled unconstitutional when the Supreme Court said states could not regulate interstate commerce

13. Consolidating the Railroad Industry (cont.) • Interstate Commerce Act • Passed Congress in 1887 • Forbade pools, rebated, and other monopolistic practices • Established the Interstate Commerce Commission (ICC) • Investigate complaints and unreasonable rates • Interstate Commerce Act short summary

14. Consolidating the Railroad Industry (cont.) • The Interstate Commerce Act was ineffective for several reasons: • Federal courts decisions almost always sided with the railroads • ICC’s lack of power to set railroad rates • Presidents appointing pro-railroad commissioners

15. Consolidating the Railroad Industry (cont.) • In the early 20th century, under the guidance of investment bankers railroad consolidation proceeded still further • J.P. Morgan • By 1906, 7 giant corporations controlled 2/3’s of all the track

16. Applying the Lessons of the Railroads to Steel • Andrew Carnegie’s career illustrates the close connection between railroad expansion and the growth of heavy industry

17. Applying the Lessons of the Railroads to Steel (cont.) Carnegie’s best customers were the railroad companies From his early experiences working in the railroad industry, he learned the organizational, accounting, and managerial innovations that he later applied to his steel business

18. Applying the Lessons of the Railroads to Steel (cont.) He also copied the railroad practice of consolidating small enterprises into fewer and fewer huge companies Carnegie integrated his business both vertically and horizontally

19. Applying the Lessons of the Railroads to Steel (cont.) • U.S. Steel • 1901 • Carnegie Steel and J.P. Morgan’s Federal Steel combined • The world’s first corporation capitalized over $1 billion • Contained 200 member companies

20. Pools and Trusts • Business competition was often ruthless and cutthroat • Pools-Companies work together to fix prices • Trusts-Several companies managed by a single director

21. The Trust: Creating New Forms of Corporate Organization By 1900, the consolidation process that had placed the railroad and steel businesses in the hands of a few corporate giants had also taken place in oil, sugar, meatpacking, and many other industries

22. The Trust: Creating New Forms of Corporate Organization (cont.) • Standard Oil Company • John D. Rockefeller • Oil-refining • Adopted the latest technology • Made deals with the railroads to get special shipping discounts • Engaged in deception and aggression to ruin competitors • Created the 1st trust and later holding company to extinguish all competition in oil refining

23. The Trust: Creating New Forms of Corporate Organization (cont.) • The growth of trusts, oligopolies, and monopolies in one industry after another led to public pressure for govt. intervention • In 1890, Congress passed the Sherman Anti-Trust Act • Outlawed all contracts and combinations that were in restraint of trade in interstate commerce • Sherman Anti-Trust Act

24. The Trust: Creating New Forms of Corporate Organization (cont.) • The Sherman Anti-Trust Act was ineffective in stopping the growth of trusts: • Vaguely worded • Presidents rarely brought suits against companies under it • Supreme Court in the E.C. Knight case (1895) interpreted the meaning of interstate commerce so narrowly as to prevent the law’s use against manufacturing corporations • PBS summary • E. C. Knight case short summary • Large-scale consolidations in industry accelerated after the E.C. Knight case

25. Advertising and Marketing • Aggressive advertising and marketing were effective in expanding sales and beating out competitors in the late 19th century • Procter and Gamble • American Tobacco • Eastman-Kodak

28. Inventors/Innovations • Atlantic Cable • Telephone • Typewriter • Handheld camera • Thomas Edison • Phonograph • Light Bulb • Motion Picture • Electric Power

29. Factories and the Work Force • From Workshop to Factory • The number of industrial workers in the United States climbed from 885,000 to 3.2 million by 1900 • The trend toward large-scale, increasingly mechanized production accelerated • the nature of work changed markedly • Fewer artisans • Remaining skilled workers had less control over their work and derived less satisfaction from it

30. From Workshop to Factory (cont.) Factories hired more low-skilled, low-paid women and children Jobs became simple, machine-paced, repetitive, and boring

31. The Hardships of Industrial Labor • Already by the 1880’s, almost 1/3 of the labor force in steel and railroad industries were unskilled workers • Common laborers drifted from city to city and from industry to industry • Worked for wages that were 1/3 of those paid to skilled artisans • In the expanding factories and on railroads, workers were exposed to a variety of industrially induced diseases • Black lung (exposure to coal dust) • Brown lung (inhaling cotton dust)

32. The Hardships of Industrial Labor (cont.) They also had appallingly accidents Employers rarely paid compensation to injured workers and opposed passage of state health and safety codes

33. Hard Work and the Gospel of Success Newspapers and magazines preached the gospel that, for male workers, America was the land of opportunity and hard work led to success The papers were filled with rags-to-riches stories Poor immigrant boys who rose to become heads of major corporations (Andrew Carnegie) In fact, Carnegie was the exception

34. Hard Work and the Gospel of Success (cont.) 95% of executives of big corporations came from middle-and upper-class families There was some opportunity for skilled workers to move into ownership and management of small businesses

35. Hard Work and the Gospel of Success (cont.) • For unskilled immigrant workers there was less mobility • At best they moved from unskilled to semiskilled or skilled industrial jobs • They remained in the working class

36. Hard Work and the Gospel of Success (cont.) A huge gulf existed between the rich and poor By 1890, America’s richest families (top 10%) owned 73% of the country’s wealth At the other extreme, better than 50% of all industrial laborers earned incomes that placed them below the poverty line

37. To avoid competition, many corporations battled to control entire industries • U.S. Steel-J.P. Morgan • Standard Oil-John D. Rockefeller • Carnegie Steel-Andrew Carnegie • No personal or corporate income taxes allow individuals to make a massive fortune

38. “Captains of Industry” or “Robber Barons” • Definition- Captain of industry-people like Carnegie and Rockefeller greatly improved the economy • Robber Baron-people who wielded power without any accountability in an unregulated marketplace

39. Andrew Carnegie • Born in Scotland • Came to the US at age 13 • Worked for many years as a private telegraph operator • Rose up through the ranks of the company • In 1873, Carnegie moved to the steel industry • Wanted to control all aspects of the company- “Vertically integrated” • By the 1890’s, Carnegie was worth hundreds of millions of dollars

40. John D. Rockefeller • Started his career as a clerk for a Cleveland merchant • Drove his rivals out of the oil business • By the 1880’s, Standard Oil controlled 90% of the nation’s oil industry

41. Captains of Industry or Robber Barons?

43. What did Carnegie and Rockefeller have in Common? • Both men started small and rose up through the ranks • Both donated a lot of their money to philanthropic causes-libraries, schools, universities, medical research • Both ran their companies in a dictatorial fashion • Both suppressed efforts for their workers to unionize

44. How the Other Half Lives-by Jacob Riis

49. Social Darwinism • Charles Darwin- “Survival of the fittest” • By 1900, half of the nation’s cities offered no public relief (welfare) • William Graham Sumner (Yale Professor)- What Do Social Classes Owe Each Other? • Answer-Nothing. “In a free state, no one was entitled to claim help from and cannot be charged to offer help to another.” • Government’s job was protect the property of men and women

50. The Rise of Organized Labor in the late 19th Century What were the working conditions like for workers that caused them to unionize? How were the first national unions organized? Who were included? Who were excluded? What were the goals of the first national unions? Why were strikes used? How did companies, local, and national governments react to strikes? What is the collective bargaining process? Using current events, how are public employees and their unions viewed in certain states today? Why?