The Gilded Age/American Industrial Revolution (6.5-6.7)

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inventions leading to new business opportunities

• Telegraph 1844

• Trans-Atlantic Cable 1866

  • 1900 all continents are linked

  • International markets

• Telephone

• Typewriter

• Camera

• Fountain pen

Thomas Edison

• Invented first research lab in New Jersey

• Mechanics and engineers working together

• Over 1,000 patents (light bulb [revolutionized everyday life], dynamo [machine that rates electric power on small scale], motion picture)

George Westinghouse

• Copied Edison’s research labs

• 400 patents

• High voltage current

  • powered electric streetcars, subways, electric machinery & appliances

impact of electricity

• Electricity important for inventions bc

  • Powering machines (more efficient than humans)

  • Allows you to be more productive at diff hours of day (factories can operate 24/7)

• electric light & pwr quickly became one of nation’s largest and fastest growing industries

marketing consumer goods

• Department and Chain Stores

  • Macy’s and Woolworth’s

• Mail Order Catalogues

  • Sears and Roebuck and Montgomery Ward

  • “Wish books”

    • Fill out form w/ $, package comes in 6-ish weeks

• Packaged Food 

  • Kellogg’s and Post (cereals & dry goods)

• Refrigerated rail cars, canning and mass production

  • Canned foods created to prevent foods from spoiling while being delivered

impact of marketing & advertising

• Creation of New Industries

  • Advertising

  • Sales

  • Public relations

  • Print ads

• Consumer Culture

  • Keep up with the Joneses (I want this bc my neighbor/ad showed me I should)

  • Shopping became a hobby for the wealthy

benefits of railroads

• nation’s first big business

• gov’t donated a ton of land for building of railroads

• encouraged mass production, mass consumption, & economic specialization

  • created national market for goods

  • esp promoted steel & coal industries

• created modern stockholder corporation

consolidation

• in early decades of railroading, building of dozens of separate local lines resulted in diff gauges (distance btwn tracks) & incompatible equipment

• these probs reduced after Civil War thu consolidation of competing railroads into integrated trunk lines

• trunk line → major route btwn large cities

  • smaller branch lines connected trunk line w/ outlying towns

• used by Cornelius Vanderbilt

Cornelius Vanderbilt

• used his millions earned from steamboat business to merge local railroads into NY central railroad

  • connected seaports to midwest

corruption in railroad business

• Railroads = overbuilt and mismanaged

• Watered down stock (Jay Gould)

• in scramble to survive, railroads competed by offering rebates (discounts) & kickbacks to favored shippers while charging exorbitant freight rates to smaller customers (ex. farmers)

watered down stock

• inflating value of corporation’s assets & profits before selling its stock to the public

• Jay Gould would trick ppl to buy stock in bankrupt railroad

concentration of railroad ownership

• Panic of 1893 → 25% of railroad companies go bankrupt

• JP Morgan quickly moved in to take control of bankrupt railroads & consolidate them

• w/ competition eliminated, they could stabilize rates & reduce debts

• consolidation made rail system more efficient

  • hwvr, system controlled by few pwrful men (ex. Morgan) who dominated boards of competing railroad corporations thru interlocking directorates

• in effect → created regional railroad monopolies

interlocking directorates

the same directors ran competing companies

failed resistance to monopolies in railroad companies

• customers & small investors felt they were victims of slick financial schemes & ruthless practices

• early attempts to regulate railroads by law did little good

• Granger laws passed by Midwestern states in 1870s → overturned by Supreme Court & Interstate Commerce Act of 1887 was at first ineffective

factors for rapid growth of economy

• Natural resources

• Labor supply

  • Freedmen

  • Immigrants (Chinese & mex on West Coast, Irish on East Coast) 

• Market for industrial goods

• Capital

• Productivity

• Government policies

• Entrepreneurs

1st industrial revolution v.s. 2nd

• Pre Civil War

  • 1st Industrial Rev after war of 1812

  • Textiles, clothing, leather

• Post Civil War

  • Second Industrial Revolution

  • Steel, oil, electric, machinery

Andrew Carnegie

• rose from poverty by manufacturing steel in Pittsburgh

  • soon surpassed all competitors in the world

• used vertical integration

• sold company to JP Morgan —> became “United States Steel”

  • 1st billion dollar company

  • largest enterprise in the world (over 168k workers & controlled 3/5 of nation’s steel business)

vertical integration

• company would control every stage of industrial process, from mining raw materials to transporting finished product

• ex. Carnegie Steel controlled coal mines, ore ships, steel mills, & distribution systems for steel company to reduce costs, improve efficiency, & inc profits

John D. Rockefeller

• founded oil company “Standard Oil Trust” that quickly eliminated competitors & took control of nation’s oil refineries (MONOPOLY)

• as company grew, used predatory pricing

  • extorted rebates from railroad companies & temporarily cut prices in order to force rival companies to sell out

ways dominant companies organized themselves

• trust

• horizontal integration

• vertical integration

• holding company

trust

• organization or board that manages assets of other companies

• under Rockefeller, Standard Oil became a trust in which one board of trustees managed combo of once-competing oil companies

horizontal integration

• process thru which one company takes control of all its former competitors in specific industry

  • ex. oil refining or coal mining

holding company

• created to own & control diverse companies

• JP Morgan managed holding company that orchestrated management of companies it had acquired in various industries (banking, railroad transportation, steel)

laissez-faire capitalism in late 19th cent

• fed, state, & local gov’t all supported businesses & economic growth w/ actions like:

  • passing high tariffs

  • building infrastructure

  • operating public schools/unis

• hwvr, prevailing economic, scientific, & religious beliefs led ppl to reject gov’t regulation of business → laissez-faire capitalism

Adam Smith’s Wealth of Nations (1776)

• mercantilism (which included extensive gov’t regulation of trade), was less efficient than allowing businesses to be guided by impersonal economic forces of supply/demand

• improved goods & services at fair prices

  • only true if there’s competition, but rise of monopolistic trusts seemed to undercut need for competition for natural regulation

• American industrialists appealed to this belief to ward off any threat of gov’t regulation

social darwinism

• survival of the fittest can be applied to marketplace

• concentrated all wealth in hands of “fit” benefited everyone

• William Graham Sumner

  • helping poor would weakened evolution by preserving unfit

  • provided “scientific” sanction for racial intolerance

Protestant work ethic

• Hard work and success are signs of God’s love

  • JD Rockefeller “God made me rich”

  • Prots like this bc makes them richer (ppl become more religious & donate more to church)

western railroads

• Promoted settlement on the Great Plains

• Federal land grants and loans

• Sell land to pay for construction

• Government got good rates for mail and troops

BUT

• Poor construction

• Kickbacks and corruption

Transcontinental Railroad

• Gov’t gives subsidies to 2 companies to cont building transcontinental railroad from Omaha, Nebraska to CA:

  • Union Pacific 

  • Central Pacific

• 1869 → Transcontinental Railroad opens

• 1883 → 3 others are in business

• → Market becomes saturated

public sentiment of unions

• Public was Anti-Union

• saw them as anarchists, socialist, upsetting economy of US, violent, ungrateful/greedy/selfish

union tactics

• Strikes

• Picketing

  • Intended for keeping scabs out of factory, not like what they’re intended for now which is to gain attention 

• Boycotts

• Slowdowns

  • We’ll go to work but we won’t be productive

tactics used against unions

• Scabs

  • Replacement worker

  • Only works if it’s low skill job

• Lockouts

  • closing factory to break labor mvmt before it arises

• Blacklists

  • roster of pro-union ppl spread so they couldn’t find work

• Yellow-dog contracts

  • contract that included condition of employment that works couldn’t join union

• Private guards and militias

• Court injunctions

goals of unions

• some wanted political action

• some wanted recognition & collective bargaining

  • ability of workers to negotiate as grp w/ employer over wages & working conditions

National Labor Union (est 1866)

• Wanted…

  • Higher wages

  • 8 hour workday

  • Equal rights for women and blacks

    • By including blacks → loses Southern support

    • By including women → loses Northeast support

  • Monetary reform

  • Worker cooperatives

• Lost support due to depression of 1873 and failed strikes of 1877

Great Railroad Strike (1877)

• Railroad companies cut wages to reduce costs during depression

• Baltimore & Ohio Railroads went on strike

  • Spread to 11 states

  • ⅔ of rail passages shutdown

• Workers from other industries joined in

• President Hayes sent in federal troops

  • 100+ were killed

  • Union was blamed

• some employers addressed workers’ grievances by improving wages & working conditions, while others took harder line by busting workers’ orgs

Knights of Labor

• Out of ashes of Great Union Strike → growth of Knights of Labor 

  • 1869 secret society led by Uriah Stephens

  • 1881 goes public/spreads nationwide under Terence Powderly

• Skilled and unskilled workers of all races and genders

  • Difficult to unite, some ppl think they deserve more than others

• Wanted…

  • Higher wages, 8 hour workday

  • Abolition of child labor, trusts, and monopolies

  • Worker cooperatives to “make each man his own employer”

• lost support after Haymarket bombing

Haymarket Bombing

• General strike

  • Ppl not going to work that day

• Rather peaceful but ownership says “okay you made your point now go back to work”

• Police violently broke it up

• Bomb thrown into the crowd

• 7 cops killed

• Knights of Labor lost popularity & membership

American Federation of Labor (AFL)

• Samuel Gompers 1886

  • Simple unionism

    • Says national unions have failed bc too large in scope

    • Don’t care abt child labor, money supply etc…

  • Only wanted higher wages & better conditions

  • Collective bargaining

  • Skilled white men only

  • 1901...2 million members

  • Lasting legacy of labor movement

Homestead Strike

• Fick (Carnegie hired him as manager while on vacation) → Fired negotiators...did not recognize the union

• → strike starts; 5 months long

• Defeated by guards, strike breakers, cutting wages, and a lockout

  • Thousands killed during strike

• Workers forced to go back to work, only 20% got their jobs back

• Victory for ownership

• Steel industry doesn’t have a union mvmt again until right before WWI

Pullman Strike

• Pullman Car Co. → wage cuts, layoffs, delegates fired

• Eugene Debs → “I’ll absorb your union & help” (American Railroad Union/ARU) → strike and boycott

  • Debs tells railroad workers not to handle any trains w/ Pullman cars

• railroad owners supported Pullman by linking Pullman cars to mail trains

  • then they appeal to prez to use army to keep mail trains running

• Federal Court issued an injunction

  • “This is interfering w/ business, you guys need to go back to work”

• Debs and other leaders were jailed

• Union membership goes down, their support is gone

  • Power stays w/ ownership for few decades; even if strikes happen it doesn’t turn out well for laborers

antitrust movement

• People feared that trusts controlled too much of the market 

• 1890 Sherman Antitrust Act

  • Prohibited any contract or combination to restrain trade

  • Too vaguely worded and ineffective

• US v. EC Knight 1895

  • Sherman Antitrust Act applied only to commerce, not manufacturing (few convictions)

Conspicuous consumption

the spending of money on and the acquiring of luxury goods and services to publicly display economic power — either the buyer's income or the buyer's accumulated wealth.