Important Questions to Ponder

• What factors contributed to the rise of American industry?

• How did government policy on business lend itself to abuse?

• In what ways did the entrepreneurs help to shape the American industrial revolution?

• How did Labor address the abuses of the industrial revolution?

Report on Manufacturers1791

Factors Encouraging Industrial Growth

• 1791 – Alexander Hamilton issues the Report on Manufacturers

• Hamilton believed wealth of America’s natural resources assured development of industry

• America’s natural resources not fully developed before Civil War

Constitution and Government Policy

• the Constitution assisted the growth of America industry and business in the following ways:– coining of money by Federal Government

provided stable currency for business transactions– regulating interstate trade made possible

“national laws” for industry and transportation

Constitution and Government Policy

– tariffs protected against foreign competition– an established system of patents protected

and encouraged inventors–5th and 14th Amendments provided that no

person could be deprived property without due process of law

Corporations & Monopolies

Corporations

• a business arrangement whereby capital is raised by selling shares of stock in return for profit and partial ownership in a company– profit and ownership based on amount of shares

purchased by each individual investor– losses limited to amount of the individual

investment

Monopolies• huge corporations formed in last half of the

19th Century–by 1900 less than 2% of manufacturing

companies produced 50% of all manufactured goods

• some companies became monopolies:– gained complete control over the price and

production of a particular item (oil, steel, flour, etc.)– all serious competition eliminated

Regroup

• What did Hamilton believe assured the development of American industry?

• Whose responsibility of interstate commerce?• What is the purpose of a patent?• What is a corporation?• What is a monopoly?

The Entrepreneurs

• Entrepreneur: a person who organizes, manages and assumes the risk of creating and running a business. They also claim the lion’s share of the profits.

• Can you provide a modern example of an entrepreneur?

EXAMPLE

• 1900 – J.P. Morgan formed the United States Steel Corporation:–merged a number of steel corporations–U.S. Steel became the world’s largest

corporation (monopoly)

Corporate Monopoly

Entrepreneurs

• business leaders in post – Civil War period referred to as either of the following:– Organize and manage risks of business & take

lion’s share of the profits– Buy & sell companies– Known as “robber barons” for negative action– Known as captains of industry for the positives

Robber Barons/Captains of Industry

John D. Rockefeller

• developed the Standard Oil Company into enormous corporate monopoly:– controlled 95% of America’s refined oil business– used horizontal integration• horizontal integration – a business practice

whereby a corporation buys up rival companies for the purpose of eliminating competition

Refined Oil

Standard OilCompany

HorizontalIntegration

Shipping & Railroads

Andrew Carnegie

• Carnegie Steel Company produced over one – half of the nation’s steel– used vertical integration to develop his

corporation– vertical integration – a form of business

organization where a corporation acquires businesses that contribute to the completion of a finished product

Steel

Carnegie SteelCompany

VerticalIntegration

Henry Ford

• produced the Model T Ford– assembly line and mass production techniques

made car affordable for average person– used vertical integration techniques– paid high wages– refused to recognize labor unions

Automobiles

Ford MotorCompany

Model T Ford

Assembly Line

“Competition is the keen cutting edge of business, always shaving away at costs”. Henry Ford

Regroup

• What is an entrepreneur? Examples?• What is horizontal integration?• What is vertical integration?• How did the assembly line dramatically

change industrial production? What was the benefit for the consumer? The Producer?

Laissez – faire

• a “hands off” policy, whereby government interferes with business as little as possible– believed government should not regulate business

beyond providing an atmosphere allowing business development, such as the following:• stable currency• protective tariffs

Competition and Absorption• large corporations merged and combined to

do the following:– eliminate competition– increase profits– Increase business efficiency

• many Americans opposed monopolies:– feared lack of competition– called for laws to regulate big business abuses

(especially railroads)

Competition &Absorption

Social Darwinism

• Used to justify imperialism and industrialism– Based on writing of Charles Darwin– Origin of the Species– plants and animals evolved over time– through “natural selection” certain species lived

while others died out “survival of the fittest”

• Darwin’s theory dealt only with plant and animal kingdoms, not human society

“While the law of competition may sometimes be hard… it ensures the survival of the fittest”. Andrew Carnegie

Charles Darwin

“Origin of Species”

Herbert Spencer

• Applied theory of evolution to human society• Social Statics (book title):

– human society evolves through competition– certain people advance over others through hard

work, intelligence or strength (survival of the fittest)

– human progress is natural and can not be stopped– all progress in the result of competition– Coined term “survival of the fittest”

Herbert Spencer

“Social Statics”

Herbert Spencer

• Spencer’s theory called “Social Darwinism– embraced by most Americans

• What should the role of government be?– How much should the government be involved in

our economy?– Should the market determine prices, conditions

and so on?

“All socialism involves slavery”. Herbert Spencer

Andrew Carnegie

• Believed in Social Darwinism• Carnegie put forth his social philosophy in a

series of magazine articles entitled, “The Gospel of Wealth”

Andrew Carnegie• Gospel of Wealth (1889) stated the following:– poverty the result of a character flaw– hard work and thrift would lead to success– government should not interfere with competitive

struggle between individuals– government’s only function is to maintain order

and protect property– laissez – faire the most efficient economic policy– the rich are obligated to help society through

philanthropy

Andrew Carnegie

“Gospel of Wealth”

“I resolved to stop accumulating and begin the infinitely more serious and difficult task of wise distribution”. Andrew Carnegie

Carnegie & The“Gospel of Wealth”

Carnegie & Philanthropy

Henry George

• disagreed with the “Gospel of Wealth”– angered at a society of poverty amidst great

wealth– social philosophy put forth in book entitled,

“Progress and Poverty”

Henry George

• Progress and Poverty stated the following:– rich do not have higher moral character than the

poor– rich were lucky in grabbing the best land and

other sources of wealth first– rich should therefore be heavily taxed

• ideas of Henry George rejected by most Americans– ideas considered too radical

Henry George

“Progress and Poverty”

“What has destroyed every previous civilization has been…the unequal distribution of wealth and power”.

Henry George

“The tragedy of the poor is the poverty of their aspirations”.

Adam Smith

Regroup

• What argument was used to justify imperialism and industrialism?

• What is “Social Darwinism”?• What arguments did Carnegie make in the

Gospel of Wealth?• What is philanthropy?

The Gilded Age(1877 – 1900)

• an era of great wealth and industrialization– noted for conspicuous consumption

• conspicuous consumption – the habit of those who had money to spend it in ways that made their wealth most obvious (enormous mansions, yachts, elaborate balls and parties)

The Gilded Age(1877 – 1900)

• upper classes also considered philanthropy a social responsibility to help the less fortunate– Rockefeller and Carnegie gave away hundreds of

millions of dollars

• many workers poor and believed they were exploited during the Gilded Age– factory and mine workers received very low wages– called “wage slavery” by workers and labor unions

Philanthropists

The Gilded Age(1877 – 1900)

• many Americans demanded government action against the power and perceived abuses of big business–OWS, anyone?– “It’s not fair”!!

“God gave me my money. I believe the power to make money is a gift from God…Having been endowed with the gift…it is my duty to

make money and still more money and use the money… for the good of my fellow man according to the dictates of my own conscience”. John D. Rockefeller

Sherman Anti-Trust Act (1890)

• passed by the U.S. Congress to do the following:– outlaw any monopoly or conspiracy in “restraint

of trade”– aimed at preventing monopolies from controlling

the market– Create more competition which would have the

effect of lowering prices on consumer goods

Regroup

• What was the Gilded Age and what made it gilded?

• What is conspicuous consumption?• What was the Sherman Antitrust Act and

why was it perceived as necessary by many Americans?

Labor Movement Begins

• union membership and activity developed rapidly in industrial era– working conditions improved through collective

bargaining

• collective bargaining – the process whereby union leaders represent union members in negotiations with management over the issues of wages, hours, conditions etc.

Collective Bargaining

Knights of Labor

Knights of Labor

• organized by Uriah Stephens in 1869– accepted skilled and unskilled workers– all meetings kept secret

• In 1879 the K of L– ends secrecy of union meetings– membership grows into nation’s largest union

Uriah Stephens

Knights of Labor

• the K of L had the following major goals:– an eight hour workday– no child labor– equal pay for men and women– the formation of cooperatives so workers could

work for themselves

Knights of Labor

• Haymarket Riot (1886):– a violent strike in Chicago’s Haymarket Square– seven policemen killed by a bomb– Knights blamed and accused of being anarchists– membership in the K of L therefore declined

American Federation of Labor

• Founded by Samuel Gompers in 1886– larger membership than the Knights

• AFL favored the following “bread and butter” goals:– eight hour work days– safer working conditions– higher wages– workers compensation insurance– reduced immigration

American Federation of Labor• AFL had the following membership policies:– only accepted skilled members– believed unskilled workers easily replaceable– skilled workers therefore had more bargaining power

• AFL used the following methods to achieve their goals:– favored cooperation with management– lobbied for pro – labor legislation on state and

national levels– reluctant but willing to strike

Samuel Gompers

“Show me a country that has no strikes and I’ll show you a country in which there is no liberty”. Samuel Gompers

President, AFL

Homestead Strike (1892)

• Unionized iron and steel workers opposed pay cuts– Amalgamated Association of Iron and Steel

Workers

• Homestead Strike failed for the following reasons:– state militia used to put down violence– union bankrupted– union lost public sympathy and support

Pullman Strike (1894)

• Pullman Company built a company town (Pullman, Illinois)– provided housing and stores for employees– 1894 – company cut wages 25 – 40%– rents and company store prices not cut– company refused to negotiate with workers

Pullman Strike (1894)

• American Railway Union:– led by Eugene V. Debs– organized nationwide boycott against Pullman– boycott prevented delivery of federal mail– Debs jailed for disobeying court injunction

• injunction – a court order prohibiting a certain action (strike,boycott, protest march, etc.)

Eugene V. Debs

American Railway Union

Debs Calls For Nationwide Boycott Against Pullman

Pullman Strike (1894)

• The Pullman Strike had the following results:– army used to crush the strike– 12 people killed– 2000 railway cars destroyed– a court injunction successfully broke strike

Results of Labor Strikes• violent strikes lost unions public support and

sympathy:– viewed as anarchist and too radical– especially after Russian Revolution (fear of

communism)

• union leadership hoped to reach agreement through the following techniques:– collective bargaining– Mediation– arbitration

“The most heroic word in all languages is revolution”.

Eugene V. Debs

“It is impossible for capitalists and laborers to have common goals”.

Samuel Gompers President, AFL

Results of Labor Strikes• collective bargaining – negotiation between

management and labor:– should negotiations break down a third party is

sought

• mediation – a neutral third party seeks a solution between labor and management– mediator’s is solution “non – binding”

• arbitration – labor and management agree to abide by the decision of a neutral third party

Regroup

• What is collective bargaining?• What is the result/product of collective

bargaining?• What were the “bread and butter” goals of

the AFL?• What two major strikes took place during this

time? What were the causes/results?

Important Questions to Ponder

• What factors contributed to the rise of American industry?

• How did government policy on business lend itself to abuse?

• In what ways did the entrepreneurs help to shape the American industrial revolution?

• How did Labor address the abuses of the industrial revolution?