Unit 3: Birth of Modern America

Chapter 9

Industrialization

Intro to Industrialization

I. Introduction to IndustrializationA. Industrial Revolution

- the movement from small-scale manufacturing to the production of heavy

industry, using machines to replace human laborers

B. Factors that set the stage for Industrialization1. Expansion of the West2. Expansion of Industry – pre Civil War3. Growth of Cities

C. Fun Facts about Industrialization

1. What the Brits did in a century, the US outdid in ½ the time!

2. By end of 1800s, US was the most industrialized nation in the world

3. 1865: $2B in goods produced

1900: $13B in goods produced

4. moved from 4th to 1st in productivity (productivity rose 12 X).

Now time for a little economics

lesson

D. Types of Economic Systems

- 3 basic economic questions

What to make?How much to

make?Who to make it for?

1. Traditional Economy (subsistence economy)

a. all goods & svc produced &

consumed by the family/for familyb. Very little surplus

or exchange of goods

c. Survival drives economic

decisionsd. Found in poor countries, mostly in rural areas

2. Market Economya. People freely choose what to buy & sell

according to the laws of supply & demandb. Individuals or companies make decisions

about production & distribution – competitionc. Capitalism – biz, industries, resources are

privately owned- Competition leads to the best product at the lowest cost!

d. In US, govt provides some svc & imposes some govt regulations

e. Pure capitalism: gov’t plays NO part in economy

f. Profit drives economic decisions

Capitalism

3. Command Economy

a. Central Govt makes decisions about production/distribution - decides what to make, where to make it, how much to make, what price to charge, what to pay workers

b. Production doesn’t necessarily reflect consumer demand

c. Communist economy – govt owns, operates all major farms, factories, utilities, stores

d. Social goals drive economic decisions

D. Mixed Economya. Combo of command & market economiesb. Socialism: state owns/operates some basic

industries while allowing pvt enterprise in other parts of economy

c. Belief that wealth should be distributed more equally – all entitled to certain goods/svcs

d. “welfare states” characterized by HIGH TAXES to pay for the many social svcs like housing, health care, child care, pensions

Mixed Economy (Socialism)

Government Private Enterprise

Operates some businesses

Owns some businesses

Laws of Supply & Demand

Determine price & production

Determine price & production

II. Rise of IndustryA. Factors that contributed to rapid

industrialization

1. Natural Resources

a. Western Minerals (access to these thanks to settlement of West!), iron, coal, timber, copper, water power, etc.

b. Could be obtained cheaply

c. Little need for imports

2. Innovations in transportation and communication - Infrastructure

a. Made for efficient distribution of products and information

b. Telegraph, Telephone: allowed biz to be conducted quickly across long

distance

c. Roads, Canals, RRs: allowed mass distribution of raw materials, farm

produce and products of manufacture

3. New Energy Sources

a. Steam Engine

b. Electric Dynamo

c. Petroleum power (internal combustion engine)

- already in demand as Kerosene

- oil fields opened from PA to TX

- economy expands with production increase

4. Business-Friendly Gov’ta. Republican dominated (became party of

big biz)b. Gov’ts role in Industrialization

- kept taxes/spending low- few costly regs on industry- didn’t control prices/wages- protective tariffs- subsidies in land and money

subsidy = Monetary assistance granted by a gov’t to a person or

group in support of an enterprise regarded as being in the public interest

c. Laissez-Faire Economics –theory that gov’t should not interfere in economic affairs

- gov’t role to protect pvt property & keep the peace

- supply & demand, not gov’t regulates prices & wages

- supports belief that gov’t regs increase price and hurt society in long run

- free market w/ competing co.s leads to efficiency & wealth for all

- low taxes ensure that pvt individuals, not gov’t make decision on how nation’s

wealth is spent- gov’t debt should be kept to minimum: if gov’t

borrows from banks, $ not available for individuals for their own use

- entrepreneurs – people who risk their $ organizing/running a biz should be free to

pursue rewards of bldg a biz &making a profit for themselves

d. Gov’t corruption: often took bribes etc.

5. Economic Stimuli

a. Lots of Capital ($) – from Europe, Americans, Western minerals

b. Population Boom – immigration (20m btwn 1870-1910) + high birth rate, lrg families (adv. in med tech, nutrition, infrastructure = lower infant mortality rate)

- Lrg workforce/cheap labor

- created demand for consumer goods produced by factories

c. New ways of selling/organizing

- 1st dept store: Macy’s

- 1st chain store: A & P

- 1st mail order: Ward’s

- advertising/packaging to attract consumers

Macy’s NY

A & P

6. New Technologies - you name it, somebody invented it!

a. Textile Industry:- Factory System = Samuel Slater

- 1st built the first successful water-powered textile mill in America

- Cotton Gin = Eli Whitney- revived slavery

- Sewing Machine = Elias Howe- switch from home-made to machine-

made clothes - Sewing Machine = Isaac Singer

- challenged Howe for patent - installment plan

The Factory System

Rise of the Sewing Machine Industry

b. Railroads:

- Standardized Gauges = John Stevens- width btwn rails = 56 ½ “ contributes to completion of Transcontinental RR

- Air Brakes = George Westinghouse- more precise stopping of trains

- Sleeping Car = George Pullman- comfortable, luxurious travel

Pullman Car

• Beveled mirrors, ornate carvings, and polished brass were the hallmarks of travel in a Pullman parlor car, such as the one depicted here from 1893.

• First-class passengers enjoyed plush swivel seats and could eat their meals in equaling lavish dining cars.

• The wealthiest owned their own luxuriously appointed private cars.

c. Steel:

- Bessemer Process = Henry Bessemer, William Kelly

- mass production of steel: heat iron ore to liquid state, blast w/ hot air to burn out

impurities, end product = steel

- Iron RR tracks replaced by steel tracks

- Birth of Skyscrapers

Bessemer Process

Bessemer Process

- Elevator = Elisha Otis- Skyscrapers made practical

- Suspension Bridge = John Roebling- uses steel cables- London Bridge 1st

- Brooklyn Bridge 1st in US

- Trolley Car = Frank Sprague - early mass transit- runs on steel cables

- Light Bulb = Thomas Edison- uses a dynamo (primitive electric generator)- factories can be built away from natural source of power - can work longer hrs

Thomas Edison

d. Oil:

- Oil Well & Pump = Edwin Drake- launched an oil boom nationwide

- cheap source of fuel for autos (future)

e. Business Industry:- Telegraph = Samuel Morse

- Morse code- allows biz to communicate

quickly across long distances

- Telephone = Alexander Graham Bell

- communication revolution- allows biz to communicate

quickly across long distances

- Transatlantic Cable = Cyrus Fields

- uses telegraph to send impulses- communicate with Europe

- Typewriter = Christopher Sholes- Cash Register = James Ritty

f. Food Industry

- Mechanical Reaper = Cyrus McCormick- harvest grain quickly using machines

- Steel Plow = John Deere

- Evaporated Milk = Gail Borden

- Food Preservation (w/o canning) = HJ Heinz

- Refrigerated RR Car = Gustavus Swift- can ship slaughtered meat across long

distances safely

- leads to growth of meatpacking industry in Chicago

Chicago Stockyards

- Dried Flake Cereal = John Kellog

- More cereal = CW Post

- leads to cereal wars and use of gimmicks to sell products

g. Miscellaneous Inventions

- Kodak Camera = George Eastman

- Airplane = Orville & Wilbur Wright- revolution in transportation

- revolution in warfare

First flight at Kitty Hawk, NC on December 17, 1903

III. Railroads A. Linking the Nation

1. Expansion after Civil War (by 1900, 200,000 mi of track. Only 30,000 in 1860) 5 Transcontinental RRs built

2. 1st Transcontinental RR – completed 1869a. Pacific Railway Act (1862) b. Transcont. RR built by 2 companies : Central

Pacific – from CA used Chinese labor; Union Pacific – From MW used Irish immigrants, ex-cons, veterans etc.

B. RRs contribution to Industrial Growth 1. Impact on economy

a. increased market for many products by linking nationb. stimulated economy by spending lots of $ on steel, coal, timber etc.

Railroads

Transcontinental RR

2. Linking other lines a. lots of unconnected lines – a challenge to create single rail system b. Large RRs lines take over small. Consolidation. Then 7 main systems with terminals in major cities w/ branches to the country c. Cornelius Vanderbilt: RR consolidator. Merged NY RRs. 1st svc from NYC to Chicago

3. Benefits of a National System a. Time Zones: before 1880, clocks set by sun’s position in sky at high noon (example – at 12:00

pm in Chicago, it was 12:50 pm in DC** problem: with scheduling, pax safety – 2 trains

on same track could collide from scheduling errors caused by time variations

** solution: 1883 – 4 time zones – made RR travel safer and more reliable

Time Zones

b. Large integrated RRs benefit US. - increase in efficiency- decrease in time spent on long distance travel- united Americans from different regions

C. Land Grant System1. Land Grants given to RRs by gov’t to encourage RR construction

2. RR companies able to cover their construction costs by selling land to settlers, real estate agencies & other biz

Gov’t Land Grants to RRs

D. Robber Barons1. Some RR entrepreneurs engaged in corrupt practices that led to the acquisition of great wealth - another way to put it…

Robber Barons: people who loot an industry and don’t give anything back

- used ruthless biz tactics against their competitors

a. Jay Gould – used info to manipulate stock prices to his benefit (insider trading)

b. RR investors realized they could make more $ by selling land grants than by running a RR – bribed Congress to vote for more land grants

2. Credit Mobilier Scandal – 1872

a. Stockholders from UP RR set up CM – a construction co.

b. CM overcharged RR

c. Since same investors controlled both co.s, RR paid bills

d. Investors made millions, RR almost bankrupt

3. More corruption a. RR wanted more land grants

b. Convinced Congress to issue them by giving Congress members shares of UP stock at price below market value

c. Several Congressmen implicated – including

James Garfield (becomes President later)

4. Great Northern a. Success w/o corruption

b. James Hill – built RR from St Paul, MN to Everett, WA w/o any land grants or subsidies

c. Built along good land & passed thru towns

d. Offered low fares to settlers who homesteaded along route

e. Carried products to WA for shipment to Asia – thus, RR earned $ by hauling goods E

& W

f. Most successful TC RR – never bankrupt

IV. Big BusinessA. Rise of Big Biz

1. Role of corporationsa. Corporation: an organization owned by many

people but treated by law as if it were a single person

b. people who own the corporation are known as stockholders

c. Stockholders own shares of the company called stock

d. Advantages of incorporating? - can raise $ from sale of stock; invest in new tech, hire

workforce, buy machines to increase efficiency

- limit liability – spread out financial risk

2. Economies of Scale

a. Corps ability to make goods more cheaply b/c they produce so much so quickly using

lg. manuf. facilities

b. Cost of Biz

1) Fixed Costs = cost a biz pays whether its operating or not (mortgage, loans,

taxes)

2) Operating costs: occur when running company(wages, shipping, raw

materials)

3) Small vs. Large Company:

* small: low fixed, high operating costs. If biz slow, cheaper to shut down and wait

* large: high fixed, lower operating. Keep operating in an economic recession

c. Advantages of Big Corporations

1) produce goods cheaply & efficiently

2) could continue to operate in poor economic times by cutting prices to increase sales

instead of shutting down

3) could negotiate deals/rebates to lower operating costs further

d. Effect on Small Biz?

- some couldn’t complete against big biz – forced out of biz

B. Consolidation of Industry consolidation = the combining of separate companies into

a single one

1. Falling prices benefited consumers, but cut into industry profits

a. To stop falling prices, some companies organized pools. Pools = agreements between companies to maintain prices at a certain level b. problem with pools: interfered with competition and property rights – thus not supported in courts or legislature c. Usually broke apart when 1 member would try to lower prices to steal biz away from another

2. Andrew Carnegie and Steel

a. Idea to make $$ by investing in companies that served the RR industry

1) invested in iron mills, sleeping cars, RR bridges

2) sold RR bonds in Europe

b. Investments in Steel Industry

1) Bessemer Process – process for making steel efficiently and cheaply

2) opened a steel co. & customized his mills to use Bessemer process

3. Vertical & Horizontal Integration

- biz often sought to better consolidate industries, to bring efficiency and to reduce “cutthroat” competition. Found 2 general ways to do this:

a. Vertical integration: ala Andrew Carnegie (US Steel)

owns all stages of production – the diff biz on which a company depends for its operation

- allows biz to save $, & enables big company to get bigger

b. Horizontal Integration: ala Rockefeller (Standard Oil)

combining smaller biz into one, concentrate on the most profitable stage of production

- Standard Oil controlled 26 similar companies – gained control of 90% of world’s oil refining industry

Standard oil..the dangerous monopoly!

Vertical & Horizontal Integration

Carnegie & Rockefeller

c. If a single company controls an entire market, it is a monopoly.

The problem with monopolies: free to charge whatever they wanted! Quality not

guaranteed!

4. Trusts

a. due to fear of monopolies and mistrust of lg corps, laws passed making it illegal for one company to own stock in another w/o permission from state leg.

b. to skirt around these laws, TRUSTS were formed – a group of companies whose stock

is controlled by a central board of directors- a way to merge companies w/o breaking the law

- instead of buying another co. outright, co. gives stock to board of trustees. These

stockholders receive a portion of trust’s profits. Since they just managed the stock, didn’t own it,

they were not violating the law

5. Holding Companies

a. Holding companies do not produce anything – they own the stock of companies that do produce the goods

b. control all companies it owns – sort of merging them into one large company

V. Unions A. Working in the US

1. Repetitive tasks, unhealthy & dangerous working conditionsa. lint, dust, toxic fumes in the airb. lack of safety devices caused injury

2. Rise in standard of living- but growing division of income btwn

wealthy & working class3. Deflation (1865-1897) – a rise in value of $

a. Caused prices to fall – so companies cut wagesb. A call for union organization

So what is a UNION?

an organization of workers formed for the purpose of advancing its members' interests in respect to wages, benefits, and working conditions

Higher WagesShorter Hours,Better Working Conditions

Status of Industrial Workers

With the machine age & the growth of industry, the status of US workers changed from that of artisans owning their own tools to employees running their bosses machines. Problems grew…

Problems• Alienation: personal relationships btwn owners &

employees vanished as corporate execs replaced owner-managers. Concern for workers’ welfare diminished, as did workers’ loyalty to employers

• Job insecurity: technical changes = layoffs/unemployment

• Physical Danger: accident rate high b/c of complicated machinery, noise, dust

• Loss of community:workers with machines only• Low wages: $1.00 - $1.50/day• Long Hrs:10-14 hr/day, 6 days week

Changes in the workforceTotal work force Workers in manufacturing

1870 12,920,000 2,130,000

1900 29,070,000 6,250,000

Agricultural workers Non-agricultural workers

1870 6,207,634 4,325,116

1900 10,911,998 18,161,235

Women Children (<15)

1870 1,900,000 750,000

1900 5,300,000 1,750,000

Sources of Labor:• farmers were main source of industrial labor as farm machines increased production with fewer workers

•Women & children were hired as workers b/c they could be paid less. Most women worked in factories. Most children worked in textile mills, coal mines, meat-packing plants

•Immigrants were the 2nd most important source of industrial labor. Almost 12 m came btwn 1870-1900. By 1880, immigrants = 13% of population & 32% of work force

B. Early Unions1. Type of industrial workers in 1800s: craft

workers vs. common labor

a. craft workers = special skills & training.

- higher wages

- control of time

- formed trade unions. Limited to people w/ specific skills

b. common labor = few skills

- lower wages

2. Industry opposes unions…a. employers regard unions as conspiracies.

- interfered w/ property rightsb. lrg corps opposed Industrial Unions (those that united craft & common laborers in a particular industry)c. Actions taken to prevent unions from forming:

1) sign oath/contract promising not to join union2) undercover agents identify union organizers3) workers blacklisted – list of troublemakers, made it difficult to get another job4) lockouts: locked union members out of property – refused to pay them5) if strike? Hired strikebreakers (replacement workers

3. Political & Social Oppositiona. difficult to organize

- no legal rights- courts ruled against them

b. perceived as a threat to American institutions

- seen as MARXIST- Marxism: belief that basic force

shaping capitalist society was the class struggle btwn workers & owners

- Marx believed workers would eventually revolt, take over factories, seize the gov’t, seize pvt property, divide wealth evenly.

- result? A classless society

Marxism

c. some workers advocate anarchism

- belief that society doesn’t need any gov’t

d. Marxism/Anarchism spreading in Europe. At same time, Europeans immigrating to US

- scared Americans

C. Struggle to Organize1. Great Railroad Strike of 1877

a. Panic of 1873 – led to wage cuts followed by NATIONWIDE labor protest – biggest in the US to date

b. RR workers across country walked off jobs- involved 80,000 workers in 11 states &

affected 2/3 of US RRs

c. Workers smashed equip., tore up tracks, blocked rail svcd. States send militias. Gun battles eruptede. President Hayes sent army. Restored

order, but 100 people dead & property destroyed

The Great Railroad Strike of 1877

July 21- 22, 1877, rioters destruction in Pittsburgh, PA

2. The Knights of Labor

a. 1st nationwide industrial union

b. demands:

- 8 hr workday

- equal pay for women

- abolition of child labor

- creation of worker-owned factories

c. Supported arbitration (impartial 3rd party workers and mgmt reach

agreement

d. Began using strikes by 1880

- successful

- membership rose

3. The Haymarket Riot – Chicago, Haymarket Square May 1886

a. demanded 8 hr workday – organizers called strike to show support for it on May Day

b. strikers & police clash – 1 striker killedc. Anarchists organize meeting, 3000 people.

Police come, bomb is thrown, police fire, workers fire, - 7 police dead- 4 workers dead

d. 8 arrested. 7 are German immigrants who anarchism

e. All 8 convicted, 4 executedf. 1 convicted was Knights of Labor member – reputation ruined

Haymarket Riot

3. The Pullman Strike

a. American Railway Union (ARU) organized in 1893

b. Pullman Co – made Pullman RR cars – forced workers to live in Pullman, IL

and buy goods from company stores

c. Depression of 1893. Pullman slashed wages. Workers had trouble paying rent & paying high prices at the company stores

Pullman, IL (George Pullman’s company town)

Pullman, IL

d. workers who complained were fired. Strike began

e. ARU members nationwide stopped handling Pullman cars. Threatened to paralyze US economy

f. US Mail cars attached to Pullmans: to interfere w/ mail is violation of

federal law

g. Court ordered halt to boycott. Strike & ARU

collapsed

The Pullman Strike

• In 1898, the Illinois Supreme Court ordered Pullman Town sold off, ruling that a company town was incompatible with the spirit of America.

Violence in Chicago escalated when federal troops came to break the 1894 Pullman factory strike, as illustrated in this drawing from Harper's Weekly. More than one thousand rail cars were destroyed, and 13 people were killed. (Photo Courtesy of Chicago Historical Society)

D. American Federation of Labor1. organized 20 + trade unions, led by Samuel

Gompersa. believed unions should stay out of politicsb. rejected socialist/communist ideas

c. Fought for higher wages/better working conditions

d. Strikes ok, negotiate better2. Goals:

a. recognize unions/agree to collective bargainingb. push for closed shops – companies hire

only union workersc. 8 hr workday

American Federation of

Labor

Samuel Gompers

E. Working Women1. by 1900, women = 18% of labor force

a. 1/3 = domestic servants; 1/3 = nurses, teachers; 1/3 = industrial

(garment/food processing)

b. wages less than men for same job (men had to support the family)

2. Women’s Trade Union League (WTUL) organized to promote women’s labor issues

a. 8 hr day

b. Create minimum wage

c. No evening work for women

d. Abolish child labor