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Big Business and Organized Labor

Chapter 6

Bethlehem Steel Works, 1896 Library of Congress

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Industrialization: Introduction What made America in the 1880s so different

from the 1860s was a new industrial order. The process of industrialization had begun at

least three decades before the Civil War. Small factories had produced light consumer

goods like clothing, shoes, and furniture. They catered to local markets in an economy of farmers and merchants.

They could not meet the demands of the rapidly growing national market.

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Industrialization: Introduction

After the 1850s the industrial economy matured, with large factories, more machines, greater efficiency, and national markets.

Entrepreneurs developed systems of mass production and distribution. Huge corporations came to dominate the economy.

Ordinary Americans scrambled to adjust and an organized labor movement would emerge.

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The Second Industrial Revolution

The first had occurred in Britain during the late 18th century.

Coal-powered steam engine ;Textile machines for spinning thread and weaving cloth; Blast furnaces to produce iron

The second occurred in the the U.S. and Germany during the second half of the 19th century.

National transportation and communication network that created a national and even international market.

The use of electric power. The application of scientific research to the industrial

process. Example: the production of steel and chemicals. Also inventions.

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Natural Resources and Industrial Technology

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National Markets and the Expansion of the Railroad

Railroads helped tie the nation together by lowering transportation costs railroads.

Allowed manufacturers to reduce prices, attract more buyers, and increase business.

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Railroads:America’s First Big Business

Railroads stimulated economic growth simply because they required so many resources to build – coal, wood, glass, rubber, brass, and steel.

As America’s first big business they devised new techniques of management that would soon be adopted by other companies.

Railroads establish standard time zones (1883)

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Railroads: America’s First Big Business

Financing the railroads Built by private companies. Raised money for construction by selling

bonds to American and foreign investors. Also received federal land grants, as well

as loans and tax breaks from federal, state, and local governments.

Cornelius “Commodore” Vanderbilt and others made fortunes on the railroad.

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Manufacturing and Inventions: Electricity

Thomas Edison invented the first successful incandescent light bulb, making electric light available. (1879)

His company, General Electric, created a unified electrical power system.

By 1898 he had setup 3000 power stations lighting more than 2 million bulbs as well as powering trolley cars, subways, and factory machinery.

Factories no longer had to cluster around waterfalls and coal supplies.

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Manufacturing and Inventions Edison also patented the phonograph,

the motion picture, and hundreds of other devices.

Alexander Graham Bell invented the telephone in 1876, vastly improving communication.

Even small inventions such as typewriter (1867), mimeograph machines (1892), and carbon paper (1872) helped ease business transaction.

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Improvements in Industrial Technologies Steel could be refined from iron (cheaply)

(Bessemer process developed in 1850s)Allowed for the production of

telephones, typewriters, adding machines, sewing machines, cameras, elevators, and farm machinery – and lowered consumer prices.

New distilling methods allowed kerosene and gasoline to be refined from crude oil.

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The Corporation The growing scale of enterprise led to the use of the corporation, which was a form of ownership.

A corporation could raise large sums quickly by selling “stock certificates” or shares in its business.

It could also outlive its owners. It limited liability – owners were no longer responsible

for corporate debts. Professional managers now operated complex

businesses because owners were no longer responsible for day-to-day management of the company.

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Finance Capital As national wealth increased, people

began to save and invest more of their money.

The New York Stock Exchange (around since 1792) linked eager investors with money-hungry firms.

By the end of the 19th century the stock market had established itself as the basic means of making capital available to industry.

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Entrepreneurs(Robber Barons)

John D. Rockefeller –Standard Oil (oil refiner who took advantage of the Pennsylvania oil rush of the 1860s) By 1879, he controlled 90 to 95 percent of oil

refined throughout the country (Horizontal growth)

Used vertical integration so that he would not have to depend on the middlemen.Made its own barrels, cans, and whatever

else it needed. “Pay nobody a profit” Rockefeller made a fortune, but also became

a leading philanthropist donating more than $500 million during his 98 year-life.

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Entrepreneurs(Robber Barons) Andrew Carnegie

Made his fortune in the steel industry. Used economic depressions to buyout his

competitors and expand. Carnegie Integrates Steel

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The Growth of Big Business J.P. Morgan – financier (investment

banker) – bought up railroads during the Panic of 1893

Merger movement - bought out Carnegie’s steel holdings for $500 million and created United States Steel Corporation (1st billion-dollar corporation)

Richard Sears and Alvah Roebuck dominated the mail-order industry and helped create a truly national market (1890s) The catalog (6 million distributed per year) became second most read book in the nation (Bible was 1st)

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The Growth of Big BusinessCorporate Defenders

The Gospel of Wealth - “super wealthy demonstrated the superiority of the free enterprise system”

Social Darwinism and “survival of fittest” Rising standard of living for most

Corporate Critics - Working conditions Average workweek: 59 hours. (6 – 10 hour

workdays). Many worked 12 hours a day, 7 days a week.

Poor health and safety conditions in factories.

1913 – 25,000 factory fatalities & 700,000 injuries that required at least a month’s disability.

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Labor

1860 – 4.3 million industrial workers 1900 – 20 million industrial workers The pool of labor came from a huge influx of

European immigrants as well as a massive migration of rural Americans.

Also, growing number of women and children.

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Labor Unrest It was difficult for workers to organize.

Property rights were respected more than labor rights.

Workers were a diverse group that resisted forming unions.

Disorganized Protest Even without unions, workers staged

spontaneous protests over long working hours and wage cuts.

Often became violent.

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The American Federation of Labor (AFL) Crafts unions (skilled workers) organized

the AFL in 1886. A federation of independent crafts unions.

Samuel Gompers served as president until his death in 1924.

Focused on concrete aims rather than politics.

Worked with management for agreements on union recognition.

Closed shops could hire only union members. 1900 – 500,000 members; 1920 – 2 million.