The Emergence of Industrial America



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The Emergence of Industrial America


  • During the first half of the 19th century, acquiring and developing new territories occupied most of the nation’s energies.

    • After the Civil War, Americans built on foundations of industrialization laid by Alexander Hamilton’s financial program, Henry Clay’s American System, and Abraham Lincoln’s efforts to transform the minority Republican Party into a major political force.

    • A new nationwide economic system soon replaced local markets, and, by 1900, the United States had become the world’s foremost industrial giant with all the possibilities and problems such status implies.

      • It manufacturing output exceeded that of its three largest rivals, Great Britain, France, and Germany

  • Industrialism soon permeated every aspect of American life.

    • The country – or at least its wealthier citizens – came to enjoy a standard of living unimaginable a few years earlier.

    • At times, change did not seem to constitute progress.

    • Turmoil seemed constant as the nation grappled with problems of materialism, urbanization, social conflict, impersonalization, corruption in business and government, and a new position in the world.

    • Efforts continue today to resolve issues stemming from this rise of industrialism.


American Industrial Growth


  • Hamilton

    • Through his funding program, established the credit of the federal government and increased its credibility.

    • His national bank provided for a stable currency, and his proposed protective tariff would have cushioned new manufacturers from foreign competition.

  • Clay’s American System

    • Furthered the government’s active role in fostering economic enterprise by enacting the protective tariff Hamilton had envisioned, re-chartering the bank, and funding internal improvements to bind the sections of the country through roads and canals.

  • Lincoln

    • Lincoln’s election platform, which was designed to broaden his base of political support, was enacted during the war years when Southern Democrats were not represented in Congress.

    • The high Morrill Tariff provision for a transcontinental railroad, Contract labor law, National Banking Act, and Homestead Act helped lay a strong foundation for industrialism by reducing foreign competition, connecting the East and West, allowing for the importation of cheap foreign labor, providing for a sound national currency and building a wider national market for American industrial products


The Emergence of Industrial America

  • The rapid growth of the U.S. economy, averaging 4 percent a year, was the result of a combination of factors

  • Capital

    • European with surplus wealth recognized a good investment and joined well-to-do Americans in funding the economic expansion

  • Western mining

    • Miners discovered a wealth of natural resources necessary for industrial production

      • Coal, iron ore, copper, lead, timber, oil

  • Immigration

    • Immigrants, particularly those from southern and eastern Europe, provide a large labor force eager to take unskilled jobs in industry

  • Government subsidies and tax concessions to railroads

    • The government pushed rapid construction of railroads to transport raw materials and finished products, as well as settlers to create national markets

  • Advances in communication

    • The use of the telegraph, telephone, typewriter, and mail service vastly improved communication essential for business growth

      • Advanced transportation network

  • Corporation charters

    • The corporate form of business organization gave business owners greater access to investment capital and the protection of limited liability and perpetual life status to the business

  • Laissez faire attitude of government

    • To the extent that it was reality, it afforded businesses considerable latitude in determining their policies and procedures without regulation

  • Bessemer process

    • The new process allowed for the less expensive conversion of iron to steel, a stronger and less brittle material which was necessary for construction of railroads and heavy duty equipment

  • New sources of power

    • Widespread deposits of coal and oil provided inexpensive sources of fuel for factories

  • High tariffs

    • Republican administrations, in particular, sought high import taxes to lessen foreign competition for American industries

  • Yankee ingenuity

    • American inventors, protected by government patents, created numerous inventions, including electric lights, vulcanized rubber, telephone, typewriter, steel plow, and the modern press, among others, to spur industry and commercial agriculture

  • Entrepreneurs

    • A number of industrial giants contributed enormous amounts of capital and introduced new policies and techniques that spurred America’s industrial growth

  • Vertical and horizontal integration

    • While these attempts to create monopolies in many cases hurt consumers, they did help businessmen take advantage of economics of scale

  • National markets

    • They helped create a huge demand for the products of industry and make large-scale investment in machinery and advanced techniques profitable

  • Civil War profits and foreign investment

    • Both helped to create the large amounts of capital necessary for large scale industrialization

  • Laborsaving technologies

    • Increased productivity

    • Over 440,000 new patents were granted by the federal government from 1860 to 1890


Iron Colt Becomes an Iron Horse

  1. After the Civil War, railroad production grew enormously

    1. 1865 – 35,000 miles

    2. 1900 – 192,556 miles

  2. Congress gave land to railroad companies totaling 155,504,994 acres

  3. Railroads gave land their value

    1. Towns where railroads ran became sprawling cities while those skipped by railroads sank into ghost towns

  4. The development of nationwide railroad network had the greatest impact on American economic life

  5. American Railroad Association divided the country into four time zones in 1883, railroad time became standard time for all Americans

  6. Railroads stitched the nation together, generated a huge market and lots of jobs, helped the rapid industrialization of American, and stimulated mining and agriculture in the West by bringing people and supplies to and from the areas were such work occurred

  7. Railroads were also the makers of millionaires and the millionaire class

  8. The most important innovations of the railroads may have been the creation of the modern stockholder corporation and the development of complex structures in finance, business management, and the regulation of competition


Spanning the Continent with Rails

      1. Deadlock over where to build a transcontinental railroad was broken after the South seceded

      2. 1862, Congress commissioned the Union Pacific Railroad to begin westward from Omaha, Nebraska, to gold-rich California

    1. across the Great Plains

    2. The company received huge sums of money and land to build its tracks

    3. Corruption plagued the company, as the insiders of the Credit Mobilier reaped $23 million in profits

    4. Many Irishmen, who might lay as much as 10 miles a day, laid the railroads

    5. When the Indians attacked, trying to save their land, the Irish dropped their picks and seized their rifles, and scores of workers and Indians died during construction

      1. In California, the Central Pacific Railroad was in charge of extending the railroad eastward from Sacramento, California

1) Across the mountain passes in the Sierras

    1. Chinese blasted tunnels through the mountains

      1. In 1869, the transcontinental rail line was completed at Promontory Point, Utah – one of the greatest engineering feats of the 1800s

    1. The Union Pacific built 1086 miles of track

    2. The Central Pacific built 689 miles


Binding the Country with Railroad Ties

  1. Before 1900, four other transcontinental railroads were built

    1. Northern Pacific Railroad stretched from Lake Superior to the Puget Sound and was finished in 1883

    2. Atchison, Topeka, and Santa Fe stretched through the Southwest deserts and was completed the following year, in 1884

    3. The Southern Pacific (completed in 1884) went from New Orleans to San Francisco

    4. The Great Northern ran from Duluth to Seattle and was the creation of James J. Hill, probably the greatest railroad builder of all

  1. Many pioneers over-invested on land, and the banks that supported them often failed and went bankrupt when land was not worth as much as initially thought


Railroad Consolidation and Mechanization

  1. Older eastern railroads, like the New York Central, headed by Cornelius Vanderbilt, often financed the successful western railroads

  2. Advancements in railroad building included:

    1. The steel rail, which was stronger and more enduring than the iron rail

    2. The Westinghouse air brake, which increased safety

    3. The Pullman Palace Cars, which were luxurious

    4. Telegraphs, double-racking, and block signals

  1. Nevertheless, train accidents were common, as well as death


Wrongdoing in Railroading

  1. Railroads were not without corruption, as shown by the Credit Mobilier

  2. Jay Gould made millions embezzling stocks from the Erie, Kansas Pacific, the Union Pacific, and the Texas and Pacific railroad companies

  3. One method of cheap moneymaking was called “stock watering”

    1. Railroad companies grossly over-inflated the worth of their stock and sold them at huge profits

  4. Railroad owners abused the public, bribed judges and legislatures, employed arm-twisting lobbyists, elected their own to political office, and used free passes to gain favor in the press

  5. As time passed, railroad giants entered into defensive alliances to show profits, and began the first of what would be called trusts, although at the time they were called “pools”


Government Bridles the Iron Horse

  1. People were aware of such injustices, but were slow to combat it

  2. The Grange was formed by farmers to combat such corruption, and many state efforts to stop the railroad monopoly occurred

    1. They were stopped when the Supreme Court issued its ruling in the Wabash Case, in which it ruled that states could not regulate interstate commerce

  1. The Interstate Commerce Act, passed in 1887, banned rebates and pools and required the railroads to publish their rates openly (so as not to cheat customers), and also forbade unfair discrimination against shippers and banned charging more for a short haul than for a long one

    1. It also set up the Interstate Commerce Commission (ICC) to enforce this

  2. The act was not a victory against corporate wealth, as people like Richard Olney, a shrewd corporate lawyer, noted that they could use the act to their advantage

    1. It did represent the first attempt by Congress to regulate business for society’s interest



Competition and Consolidation

  • New technologies and industries tend to be overbuilt

    • This was the case with the railroads built in the 1870s and 1880s, many of which were unprofitable

    • The railroads frequently suffered from mismanagement and outright fraud

    • Speculators like Jay Gould went into the railroad business for quick profits and made their millions by selling off assets and watering down stock (inflating the value of a corporation’s assets and profits before selling its stock to the public)

  • In a ruthless scramble to survive, railroads competed by offering rebates (discounts) and kickbacks to favored shippers while charging exorbitant freight rates to smaller customers such as farmers

  • They also attempted to increase profits by forming pools, in which competing companies agreed secretly and informally to fix rates and share traffic

  • A financial panic in 1893 forced a quarter of all railroads into bankruptcy

  • J. Pierpont Morgan and other bankers quickly moved in to take control of the bankrupt railroads and consolidate them

    • With competition eliminated, they could stabilize rates and reduce debts

  • By 1900, seven giant companies controlled nearly two-thirds of the nation’s railroads

    • A positive result was a more efficient rail system

    • On the negative side, the system was controlled by a few powerful men like Morgan, who dominated the boards of competing railroad corporations through interlocking directorates (the same directors ran competing companies)

    • In effect, they created regional railroad monopolies

  • Railroads captured the imagination of late 19th century America, as the public, local communities, states, and the federal government invested in their development

    • At the same time, customers and small investors often felt that they were the victims of slick financial schemes and ruthless practices

  • Railroad moguls seemed to affirm this ruthlessness

    • William Vanderbilt, who had inherited his father Cornelius Vanderbilt’s transportation empire, reportedly responded to his critics, “The public be damned”

  • Early attempts to regulate the railroads by law did little good

    • The Granger laws passed by Midwestern states in the 1870s were overturned by the courts, and the federal Interstate Commerce Act of 1887 was at first ineffective

      • It was not until the Progressive era in the early 20th century that the Interstate Commerce Commission was given expanded powers to protect the public interest


Steel Industry

  • The technological breakthrough that launched the rise of heavy industry was the discovery of a new process for making large quantities of steel (more durable metal than iron)

  • In the 1850s, both Henry Bessemer in England and William Kelly in the United States discovered that blasting air through molten iron produced high-quality steel

  • The Great Lakes region, with its abundant coal reserves and access to iron ore of Minnesota’s Mesabi Region, soon emerged as the leading steel producer


Andrew Carnegie

  • Leadership of the fast-growing steel industry passed to a shrewd business genius, Andrew Carnegie, who in the 1850s had worked his way up from being a poor Scottish immigrant to becoming the superintendent of a Pennsylvania railroad

  • In the 1870s, he started manufacturing steel in Pittsburgh and soon outdistanced his competitors by a combination of salesmanship and the use of the latest technology

  • Carnegie employed a business strategy known as vertical integration, by which a company would control every state of the industrial process from mining to raw materials to transporting the finished products

  • By 1900, Carnegie Steel had climbed to the top of the steel industry

  • It employed 20,000 workers and produced more steel than all the steel mills in Britain

  • Deciding to retire from business to devote himself to philanthropy, Carnegie sold his company in 1900 for over $400 million to a new steel combination headed by J.P. Morgan

  • The new corporation, United States Steel, was the first billion-dollar company and also the largest enterprise in the world, employing 168,000 people and controlling over three-fifths of the nation’s steel business


The Oil Industry

  • The first U.S. oil well was drilled by Edwin Drake in 1859 in Pennsylvania

  • Only four years later, in 1863, a youthful businessman, John D. Rockefeller, founded a company that would come to control most of the nation’s oil refineries by eliminating its competition

Rockefeller and the Standard Oil Trust

  • Rockefeller took charge of the chaotic oil refinery business by applying the latest technologies and efficient practices

  • At the same time, as his company grew, he was able to extort rebates from railroad companies and temporarily cut prices for Standard Oil kerosene to force rival companies to sell out

    • By 1881 his company – now known as the Standard Oil Trust – control 90 percent of the oil refinery business

  • The trust that Rockefeller put together consisted of the various companies that he had acquired, all managed by a board of trustees that Rockefeller and Standard Oil controlled

    • Such a combination represented horizontal integration of an industry, in which former competitors were brought under a single corporate umbrella

  • By controlling the supply and prices of oil products, Standard Oil’s profits soared and so did Rockefeller’s fortune, which at the time of his retirement amounted to $900 million

  • By eliminating waste in the production of kerosene, the Standard Oil monopoly was able to keep prices low for consumers

  • Emulating Rockefeller’s success, dominant companies in other industries (sugar, tobacco, leather, meat) also organized trusts


Antitrust Movement

  • The trusts came under widespread scrutiny and attack in the 1880s

  • Middle-class citizens feared the trusts’ unchecked power, and urban elites (old wealth) resented the increasing influence of the new rich

  • After failing to curb trusts on the state level, reformers finally moved Congress to pass the Sherman Antitrust Act in 1890, which prohibited any “contact, combination, in the form of trust or otherwise, or conspiracy in restraint of trade or commerce”

  • Although a federal law against monopolies was now on the books, it was too vaguely worded to stop the development of trusts in the 1890s

  • The Supreme Court in United States v. E.C. Knight Co. (1895) ruled that the Sherman Antitrust Act could be applied only to commerce, not to manufacturing

  • As a result, the U.S. Department of Justice secured few convictions until the law was strengthened during the Progressive era

Conservative Economic Theories

  • 1776, economist Adam Smith argued in The Wealth of Nations that business should be regulated, not by government, but by the “invisible hand” (impersonal economic forces) of the law of supply and demand

    • origin of the concept of laissez-faire

  • If government kept hands off, businesses would be motivated by their own self-interest to offer improved goods and services at low prices

  • American industrialists appealed to laissez-faire theory to justify their methods of doing business – even while they readily accepted the protection of high tariffs and federal subsidies

  • The rise of monopolistic trusts in the late 1880s seemed to undercut the very competition needed for natural regulation


The Philosophy of Industrialists

  • Social Darwinism soon proved to be a philosophy for economic chaos

  • In the laissez-faire climate of the time, suppliers had to seek a monopoly to avoid being wrecked by competition

  • In their view, the government should protect individuals, businesses, and their property and promote the economic interests of business when they ask for help, particularly in raising tariffs

    • American social Darwinist, Professor William Graham Sumner of Yale, argued that help for the poor was misguided because it interfered with the laws of nature and would only weaken the evolution of the species by preserving the unfit

  • A number of Americans found religion more convincing than social Darwinism in justifying the wealth of successful industrialists and bankers

    • John D. Rockefeller applied the Protestant work ethic (that hard work and material success are signs of God’s favor) to both his business and personal life

      • “God gave me my riches.”

    • In a popular lecture, “Acres of Diamonds,” Reverend Russell Conwell preached that everyone had a duty to become rich

    • Andrew Carnegie’s article “Gospel of Wealth” argued that the wealthy had a God-given responsibility to carry out projects of civic philanthropy for the benefit of society

      • Carnegie distributed over $350 million of his fortune to support the building of libraries, universities, and various public institutions

  • However, none of these doctrines endured for long without government modification because people soon demanded that big business be regulated, controlled, or dismantled in order to achieve social justice for the masses




    1. Philosophy:

      1. Laissez-faire is an economic philosophy which suggests business should be permitted to run without government regulation or control

      2. Social Darwinism is an economic philosophy which states that companies, like organisms, struggle for survival, and government should not interfere with the natural process

      3. The Gospel of Wealth is a socioeconomic philosophy which justifies earning great wealth but carries with it a social responsibility to the community

    2. Social Darwinism buttresses the concept of laissez-faire by implying an ordained process of natural selection

    3. The Gospel of Wealth does not interfere with the doctrine of Social Darwinism but lends it an air of responsibility by assuming social responsibilities

    4. He might have in mind rebates, drawbacks, price-cutting in certain geographic areas while inflating prices in other areas, driving competition out of business and influencing legislatures to act in his behalf

    5. The cartoonist stresses the sacrifice of the competition necessary for Rockefeller’s business to reach full bloom

    6. King Monopoly:

      1. He used tariffs and trusts to exploit the American economy

      2. He lists, among others, the textile, iron, machinery, steel, flour, and hemp trusts

      3. It symbolizes the excess profit the monopolist takes from the rest of society

      4. Their expressions suggest unhappiness, anger, and pain

      5. King Monopoly had used tariffs and trusts to create a noncompetitive market to which enables him to exploit the masses

      6. King Monopoly suggests the doctrine of Social Darwinism because he has taken advantage of government benefits but had not apparently adopted any sense of social responsibility. The cartoon implies that his sole concern is accumulating excessive profits

    7. It produced concentrated wealth and used the masses for the benefit of the few

    8. Andrew Carnegie returned some of his accumulated wealth to society by contributions for schools and libraries throughout the country

    9. Numerous corporate mergers which reduce competition and result in a dominant corporation capable of limiting or reducing the role of the worker. On the other hand, many corporations demonstrate the Gospel of Wealth philosophy by contributing generously to a variety of educational, charitable, and civic projects


Impact of Industrialization

  • By the 1890s, the richest 10 percent of the U.S. population controlled nine-tenths of the nation’s wealth

  • Industrialization created a new class of millionaires, most of whom flaunted their wealth by living in ostentatious mansions, sailing enormous yachts, and throwing lavish parties

  • The Vanderbilt’s graced the waterfront of Newport, Rhode Island, with summer homes that rivaled the villas of European royalty

    • Guests at one of their dinner parties were invited to hunt for their party favors by using small silver shovels to seek out the precious gems hiding in the sand on long silver trays


Horatio Alger Myth

  • At first, Americans tended to ignore the widening gap between the rich and the poor by finding comfort in the highly publicized examples of the “self-made men” in business (Andrew Carnegie, Thomas Edison)

  • They also thought there might be some truth in the popular novels by Horatio Alger, Jr., which sold more than a million copies

  • Every Alger novel portrayed a young man of modest means who became rich and successful through honesty, hard work, and a little luck

  • In reality, opportunities for upward mobility did exist, but the rags-to-riches career of an Andrew Carnegie was unusual

  • Statistical studies demonstrate that the typical wealthy businessperson of the day was a white, Anglo-Saxon, Protestant male who came from an upper-or middle-class background and whose father was in business or banking

Labor Unions – The Failure to Gain Public Acceptance

  • The introduction of the factory system in America ended the personal relationship between employer and worker that had earlier characterized small cottage industries

    • Industrial workers were assigned just one step in the manufacturing or a product, performing semiskilled tasks that were repetitive and monotonous

  • As factory owners cut corners to maximize profits, their workers, dependent on them for work, faced a long list of trials:

    • long hours, low pay, rigid timetables, strict discipline, monotonous work, frequent layoffs, efforts to pit ethnic groups against each other, reduced rates for women and children, automation replacing workers, and unsafe, unsanitary, and badly lighted factories

  • The workplace was unstable and highly mobile

    • Industrial workers changed jobs on the average of every three years

  • Workers soon recognized that organization to solve their common problems would do more than individuals bargaining to improve their lot

  • Earlier, but unsuccessful, attempts to organize in the 1830s had taught them valuable lessons and gained court recognition in Massachusetts that unions are not illegal conspiracies (Commonwealth v. Hunt, 1842)

    • But unions still faced opposition from the American public and all three branches of the national government

  • In an age when Horatio Alger success stories inspired millions, Americans embraced “rugged individualism” and associated unions with anarchists, socialists, and other foreign radicalism


The Struggle of Organized Labor

  • The late 19th century witnessed the most violent labor conflicts in the nation’s history

  • So common were the reports of striking workers battling police and state militia that many feared the country was heading toward open class warfare between capital and labor


Industrial Warfare

  • With a surplus of cheap labor, management held most of the power in its struggles with organized labor

  • Strikers could easily be replaced by bringing in strikebreakers, or scabs – unemployed persons, desperate for jobs

  • Employers also used all of the following tactics for defeating unions:

    • The lockout – closing the factory to break a labor movement before it could get organized

    • Blacklists – names of pro-union workers circulated among employers

    • Yellow-dog contracts – workers being told, as a condition for employment, that they must sing an agreement not to join a union

    • Calling in private guards and state militia to put down strikes

    • Obtaining court injunctions against strikes

  • Before 1900, management won most of its battles with organized labor because, if violence developed, employers could almost always count on the support of the federal and state governments

  • Labor itself was often divided on the best methods for fighting management

    • Some union leaders advocated political action

    • Others favored direct confrontation: strikes, picketing, boycotts, and slowdowns to achieve recognition and collective bargaining


Attempts to Organize National Unions

  • National Labor Union

    • Included both skilled and unskilled, both agricultural workers and industrial workers

    • Goals of higher wages and the eight-hour workday; equal rights for women and blacks; monetary reform; worker cooperatives

    • Chief victory was winning the eight-hour day for workers employed by the federal government

    • Lost support after a depression in 1873 and unsuccessful strikes of 1877

  • Knights of Labor

    • Began in 1869 went public in 1881

    • Terrence Powderly

    • Anyone, including women, blacks, professionals, laborers, skilled workers, anarchists, socialists, and farmers could join

    • They aimed to get rid of capitalism by creating worker-owned businesses based on the concept of cooperatives; abolition of child labor; abolition of trusts and monopolies

    • They used boycotts, strikes, and mass meetings but Powderly favored arbitration

    • They public abhorred their use of violence and were suspicious of their anti-capitalist philosophies

      • Because the Knights were loosely organized, Powderly could not control local units that decided to strike

    • It declined after the violence of the Haymarket riot in Chicago in 1886




  • American Federation of Labor (AFL)

    • Samuel Gompers, led the union from 1886 to 1924

    • It enrolled only skilled workers in craft unions

    • Concentrated on attaining practical economic goals

      • Members strived for higher wages, shorter hours, and improved working conditions

    • Local unions of skilled workers walked out until the employer agreed to negotiate a new contract through collective bargaining

    • The public generally disapproved of their collective actions but found them less threatening that the anti-capitalist Knight of Labor

    • The AF of L restricted its membership to those with similar interests, its members had skills that made them hard to replace in strikes and they chose to work for realizable goals

    • They would not achieve major successes until the early decades of the 20th century


Strikebreaking in the 1890s

  • Two massive strikes in the last decade of the 19th century demonstrated both the growing discontent of labor and the continued power of management to prevail in industrial disputes


Great Railroad Strike of 1877

  • One of the worst outbreaks of labor violence in the century erupted in 1877, during an economic depression, when the railroad companies cut wages in order to reduce costs

  • A strike on the Baltimore and Ohio Railroad quickly spread across 11 states and shut down two-thirds of the country’s rail tracks

  • Railroad workers were joined by an estimated 500,000 workers from other industries in an escalating strike that was quickly becoming national in scale

  • For the first time since the 1830s, a president (Rutherford B. Hayes) used federal troops to end labor violence

  • The strike and the violence finally ended, but not before more than a hundred people had been killed

  • After the strike, some employers addressed the workers’ grievances by improving wages and working conditions, while others took a hard line by busting workers’ organizations


Haymarket Bombing

  • Chicago, with about 80,000 Knights in 1886, was the site of the first May Day labor movement

    • Also living in Chicago were about 200 anarchists who advocated the violent overthrow of all government

  • In response to the May Day movement calling for a general strike to achieve an eight-hour day, labor violence broke out in Chicago’s McCormick Harvester plant

  • On May 4, workers held a public meeting in Haymarket Square, and as police attempted to break up the meeting, someone threw a bomb, which killed seven police officers

    • The bomb thrower was never found

  • Even so, eight anarchist leaders were tried for the crime an seven were sentenced to death

  • Horrified by the bomb incident, many Americans concluded that the union movement was radical and violent

  • The Knights of Labor, as the most visible union at the time, lost popularity and membership


Homestead Strike

  • Henry Clay Frick, the manager of Andrew Carnegie’s Homestead Steel plant near Pittsburgh, precipitated a strike in 1892 by cutting wages by nearly 20 percent

  • Frick used the weapons of lockout, private guards, and strikebreakers to defeat the steelworkers’ walkout after five months

  • The failure of the Homestead strike set back the union movement in the steel industry until the New Deal in the 1930s


Pullman Strike

  • Pullman manufactured the famous railroad sleeping cars that bore his name

  • In 1894, he announced a general cut in wages and fired the leaders of the workers’ delegation that came to bargain with him

  • The workers at Pullman laid down their tools and appealed for help from the American Railroad Union whose leader, Eugene V. Debs, directed railroad workers not to handle any trains with Pullman cars

    • The union’s boycott tied up rail transportation across the country

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

    • They then appealed to President Grover Cleveland, persuading him to use the army to keep the mail trains running

  • A federal court issued an injunction forbidding interference with the operation of the mails and ordering railroad workers to abandon the boycott and strike

  • For failing to respond to the injunction, Debs and other union leaders were arrested and jailed

    • The jailing of Debs, and others effectively ended the strike

  • In the case of In re Debs (1895), the Supreme Court approved the use of court injunctions against strikes, which gave employers a very powerful weapon to break unions

  • After serving a six-month jail sentence, Debs concluded that more radical solutions were needed to cure labor’s problems

    • He turned to socialism and the American Socialist party, which he helped to found in 1900

  • By 1900, only 3 percent of American workers belonged to unions

  • Management held the upper hand in labor disputes, with government generally taking its side

  • Some of the public were beginning to recognize the need for a better balance between the demands of the employers and the employees to avoid the numerous strikes and violence that characterized the late 19th century


Questions based on Documents

  1. What evidence can you find in the documents of the biases of the following persons or groups:

    1. Capitalists: they believed in “rugged individualism”

    2. Nativists: they opposed foreigners, Catholics, radicals, Southern and Eastern Europeans

    3. Horatio Alger: he preached “rugged individualism” and the idea that hard work is the path to wealth

    4. Anarchists: they were anti-capitalist

    5. Socialists: they, too, were anti-capitalist

    6. American Public: they opposed labor unions, anarchists, socialists, and violence

  2. In what ways did these biases strengthen American capitalism?

    1. In attacking anti-capitalist groups, they, in effect, defended capitalism

  3. In what ways did these biases weaken the American labor movement?

    1. Most Americans associated these anti-capitalist groups with violence, revolution, and foreign ideas

  4. According to Judge Jenkin, does the right of the property owner or the laborer take precedence? Explain his decision.

    1. Judge Jenkin put the right of property above the rights of laborers, as he explained in Farmer’s Loan and Trust vs. Northern Pacific

  5. In what way does the cartoon reflect Judge Jenkin’s decision?

    1. The government had called out the militia to control the strikers and protect private property

  6. Use your textbook to determine how government actions in the Homestead and Pullman strikes also reflected Judge Jenkin’s decision.

    1. In the Homestead strike, the governor of Pennsylvania used state troops to break up the strike and allowed strikebreakers to enter the mill. In the Pullman strike of 1894, the federal government issued an injunction to force the railroad workers back to their jobs. When that failed, the President called out the National Guard to end the strike

  7. How do the documents in the lesion help to explain why Samuel Gompers believed socialists were wrong economically, socially, and industrially?

    1. Gompers believed socialists were economically unsound because eliminating private enterprise seemed an unrealistic goal for the workers; socialists were wrong because they used foreign and radical doctrines and they were an industrial impossibility because there was no motive for workers to produce

  8. Between 1873 and 1878, nine percent of the work force, or 300,000 persons, belonged to unions. After the depression of the 1870s, the number dropped to fewer than 50,000 members. By 1900, union membership of 900,000 persons constituted only 8.74% of the work force. How do the documents in this lesson help you to understand the small and indeed declining percentage of union members among the work force?

    1. The public generally found them suspicious and foreign in origin; the government always supported employers; unions, except the AF of L, had accomplished little for their members


Growing Economic Crisis of the Late Nineteenth Century


  • As large scale business evolved in the post-Civil War years, various strategies were used to minimize ruinous competition, among them:

    • Agreements, pools, and interlocking directorates proved cumbersome

    • Legislation made trusts illegal

    • J.P. Morgan introduced the holding company in an effort to stabilize whole industries




    1. He wanted to create a monopoly to stabilize the industry

    2. Methods of stabilizing industry:

      1. Agreements were easily broken

      2. Pools, too, were easily broken when one member saw a chance to gain an edge over a competitor

      3. Interlocking directorates were cumbersome

    1. As a written agreement, a trust would have greater force and accomplish the same objectives as less formal agreements

    2. Business tends to repeat in endless cycles periods of prosperity and decline

    3. Declining wages between 1873 and 1879 reflect the depression illustrated on the graph

    4. Prices of coal, steel, rails, and copper also declines during the course of the depression of the 1870s

    5. Disastrous effects of the business cycle:

        1. Corporations saw prices decline during depressions

        2. Wages declined during depressions

        3. Depressions hurt both employers and workers

    6. Union membership was rising in the late 1800s, and groups such as the Knights of Labor had advocated just the sort of socialist tendencies that Morgan feared most

    7. Widely fluctuating profits made some form of rationalization of industry appear necessary for businessmen to plan intelligently for the future

    8. At first they hoped to use their political influence to control regulatory agencies set up by the government to control their activities

    9. Boards of Directors in a holding company own stock; trustees do not

    10. A holding company had a corporate charter and was treated as an artificial person with rights to guarantees under the Fourteenth Amendment

    11. J.P. Morgan was concerned only about the needs of business, not those of the public

    12. In this century, government has acted to protect the welfare of workers and consumers as well as businesses

        1. Morgan’s narrow concern for the welfare of businesses at the expense of workers and consumers is no longer acceptable to the American public


Iron Colt Becomes an Iron Horse

  1. After the Civil War, railroad production grew enormously

    1. 1865 – 35,000 miles

    2. 1900 – 192,556 miles

  2. Congress gave land to railroad companies totaling 155,504,994 acres

  3. Railroads gave land their value

    1. Towns where railroads ran became sprawling cities while those skipped by railroads sank into ghost towns

  4. The development of nationwide railroad network had the greatest impact on American economic life

  5. American Railroad Association divided the country into four time zones in 1883, railroad time became standard time for all Americans

  6. Railroads stitched the nation together, generated a huge market and lots of jobs, helped the rapid industrialization of American, and stimulated mining and agriculture in the West by bringing people and supplies to and from the areas were such work occurred

  7. Railroads were also the makers of millionaires and the millionaire class

  8. The most important innovations of the railroads may have been the creation of the modern stockholder corporation and the development of complex structures in finance, business management, and the regulation of competition



Spanning the Continent with Rails

      1. Deadlock over where to build a transcontinental railroad was broken after the South seceded

      2. 1862, Congress commissioned the Union Pacific Railroad to begin westward from Omaha, Nebraska, to gold-rich California

    1. across the Great Plains

    2. The company received huge sums of money and land to build its tracks

    3. Corruption plagued the company, as the insiders of the Credit Mobilier reaped $23 million in profits

    4. Many Irishmen, who might lay as much as 10 miles a day, laid the railroads

    5. When the Indians attacked, trying to save their land, the Irish dropped their picks and seized their rifles, and scores of workers and Indians died during construction

      1. In California, the Central Pacific Railroad was in charge of extending the railroad eastward from Sacramento, California

1) Across the mountain passes in the Sierras

    1. Chinese blasted tunnels through the mountains

      1. In 1869, the transcontinental rail line was completed at Promontory Point, Utah – one of the greatest engineering feats of the 1800s

    1. The Union Pacific built 1086 miles of track

    2. The Central Pacific built 689 miles


Binding the Country with Railroad Ties

  1. Before 1900, four other transcontinental railroads were built

    1. Northern Pacific Railroad stretched from Lake Superior to the Puget Sound and was finished in 1883

    2. Atchison, Topeka, and Santa Fe stretched through the Southwest deserts and was completed the following year, in 1884

    3. The Southern Pacific (completed in 1884) went from New Orleans to San Francisco

    4. The Great Northern ran from Duluth to Seattle and was the creation of James J. Hill, probably the greatest railroad builder of all

  1. Many pioneers over-invested on land, and the banks that supported them often failed and went bankrupt when land was not worth as much as initially thought


Railroad Consolidation and Mechanization

  1. Older eastern railroads, like the New York Central, headed by Cornelius Vanderbilt, often financed the successful western railroads

  2. Advancements in railroad building included:

    1. The steel rail, which was stronger and more enduring than the iron rail

    2. The Westinghouse air brake, which increased safety

    3. The Pullman Palace Cars, which were luxurious

    4. Telegraphs, double-racking, and block signals

  1. Nevertheless, train accidents were common, as well as death


Wrongdoing in Railroading

  1. Railroads were not without corruption, as shown by the Credit Mobilier

  2. Jay Gould made millions embezzling stocks from the Erie, Kansas Pacific, the Union Pacific, and the Texas and Pacific railroad companies

  3. One method of cheap moneymaking was called “stock watering”

    1. Railroad companies grossly over-inflated the worth of their stock and sold them at huge profits

  4. Railroad owners abused the public, bribed judges and legislatures, employed arm-twisting lobbyists, elected their own to political office, and used free passes to gain favor in the press

  5. As time passed, railroad giants entered into defensive alliances to show profits, and began the first of what would be called trusts, although at the time they were called “pools”


Government Bridles the Iron Horse

  1. People were aware of such injustices, but were slow to combat it

  2. The Grange was formed by farmers to combat such corruption, and many state efforts to stop the railroad monopoly occurred

    1. They were stopped when the Supreme Court issued its ruling in the Wabash Case, in which it ruled that states could not regulate interstate commerce

  1. The Interstate Commerce Act, passed in 1887, banned rebates and pools and required the railroads to publish their rates openly (so as not to cheat customers), and also forbade unfair discrimination against shippers and banned charging more for a short haul than for a long one

    1. It also set up the Interstate Commerce Commission (ICC) to enforce this

  2. The act was not a victory against corporate wealth, as people like Richard Olney, a shrewd corporate lawyer, noted that they could use the act to their advantage

    1. It did represent the first attempt by Congress to regulate business for society’s interest

The Industrial Society
Industrial Development


  • By their centennial of 1876, Americans were rapidly developing their own unique society.



  • Several factors contributed to the rapid economic transformation of the era: resources for materials, population for labor and markets, railroads for transportation, tariffs for protection from competition, confident investors for capital, and technology for cutting-edge production.



  • The government provided grants, stability, and freedom from regulation.

An Empire on Rails

  • Revolutionary changes in transportation and communication, especially the railroads, transformed American technology.



  • By ending rural isolation, encouraging economic specialization, creating a national market, and capturing the nation’s imagination, the railroads transformed production, distribution, and business practices.



  • By the end of the century, Americans, with substantial aid and land grants from federal and state governments, had built almost 200,000 miles of track.



  • Despite much waste and corruption, the railroads probably did more good than harm; for example, they saved the federal government $1 billion from 1850-1945.



  • Before the Civil War, railroad construction served local markets; after 1865 the railroads tied the nation together with a system of trunk lines.



  • The exception was the South, where railroads were not consolidated and integrated into the national railroad system until the 1880s.



  • Congress voted to allow two companies, the Union Pacific, working westward, and the Central Pacific, working eastward, to compete in the construction of the first transcontinental railroad. They completed the tracks in May 1869 at Promontory Point, Utah.



  • By 1893, four more railroad lines reached the West Coast.



  • Overbuilding generated vigorous rate wars, but financiers like J.P. Morgan constructed regional monopolies to reduce or eliminate competition.

An Industrial Empire

  • The Bessemer process made possible an industrial empire and transportation system based on purified steel.



  • The process for manufactured steel required much capital, so new companies grew very large until Morgan combined a number of them, including Carnegie’s, into the country’s first billion-dollar corporation, U.S. Steel.



  • John D. Rockefeller ordered the chaotic oil business into a third national economic giant; his Standard Oil trust of the 1880s, reorganized as a holding company in the 1890s, came to control over 90 percent of oil refining in America and typified the notion of vertical integration in economics.



  • The business of invention boomed – from 2,000 patents per year to over 21,000 per year – and transformed the communication, food, and power industries.

The Sellers

  • Brand names, advertising, chain stores, and mail-order houses brought the new goods to households and initiated a new community of consumers.



  • The increased output of the industrial age alone was not enough to ensure huge profits. The products still had to be sold, and that gave rise to a new science of marketing.



  • Women, children, African Americans, Catholics, Jews, and immigrants carried the additional burden of discrimination within advertising and fledging media.

The Wage Earners

  • Although entrepreneurs were important, it was the labor of millions of men and women that built the new industrial society. In their individual stories, nearly all unrecorded, lay much of the achievement, drama, and pain of these years.



  • Workers suffered grueling, dangerous jobs, although their lives improved in some respects because of new goods. Although immigrants were an important part of the work force, native-born workers were paid more on average. In 1882, Chinese workers were prohibited from immigrating for ten years by the Chinese Exclusion Act.



  • Before 1900, most wage earners worked at least ten hours a day, six days a week.



  • All found that the new factory system required difficult and often demeaning adaptations in age-old patterns of work. But most workers accepted the system because it offered substantial social mobility.



  • National Unions approached the problems in different ways: The Knights of Labor, for example, organized like a fraternal order and sought broad social reforms, while the American Federation of Labor organized craft unions of skilled workers and sought practical, immediate, and tangible improvements for its members.



  • Workers also organized social and fraternal groups to offer members companionship, insurance, job listings, and even food for the sick.



  • Employees tried to humanize the factory while employers tried to determine wages and conditions on the basis of supply and demand rather than the welfare of the workers.



  • The conflict of purposes sometimes led to violent strikes such as the Haymarket Riot (1886) and the Homestead Strike (1892).


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