Chapter 24

•

Industry Comes of Age, 1865–1900

•

II. Spanning the Continent with Rails

1862 Congress began the transcontinental railroad.

– The Union Pacific started in Omaha, Nebraska.

• They received generous loans of $16,000 per mile completed on the prairie and up to 48,000 per mile in the mountains.

• Insiders of the Credit Mobilier construction company were able to pocket $73 million for some $50 million worth of work… Bribing congressmen along the way of course.

• Many Irish “Paddies” worked the line to lay as many as ten miles a day.

• As many as 10,000 men worked on the railroad at any given time.

Map 24-1 p514

• – The Central Pacific pushed east from Sacramento, California.

• It needed to inch through the Sierra Nevada’s receiving the same cash incentives as the U.P. • The C.P. was financed by the Big Four, men such as Leland Stanford (ex-governor w/ political connections) and Collis P. Huntington (effective lobbyist).

– They operated two construction companies and even though they made tens of millions, they were able to keep their hands relatively clean.

• The C.P. was manned by 10,000 Chinese laborers (hundreds of which lost their lives from premature explosions.) The two tracks met in Utah, in 1869. – The U.P. had built 1,086 miles and the C.P. 689 miles.

p517

p516

• • •

IV. Railroad Consolidation and Mechanization

Cornelius Vanderbilt – ill-educated, ruthless and with clear vision he offered superior railway service at lower rates. – He was able to earn $100 million during his time.

Two significant improvements in railroading: – Steel rails and a standard gauge of track.

Other refinements: – The Westinghouse air brake contributed to efficiency and safety.

– The Pullman Palace Cars – advertised as glorious traveling hotels.

V. Revolution by Railways

• • • During the post-Civil War years the railroad tied the country together with tracks from ocean to ocean.

Trains hauled raw materials to factories and then sped back finished goods for sale all over America.

Until the 1880s every town in U.S. had its own “local” time. Operators had to worry about keeping schedules and avoiding wrecks because there wasn’t a standard time.

• November 18, 1883, the major rail lines decreed that the continent would be divided into four “time zones.”

VI. Wrongdoing in Railroading

• Many made huge amounts of money through railroad investments. One of the most adept at playing the game was Jay Gould.

– Gould played the game for nearly 30 years. He boomed and busted the stocks of various railroad companies.

– “Stock watering” was a favorite tactic of railroad moguls.

• Railroad promoters would inflate their claims about the assets and profitability of a company and then sold stocks and bonds far in excess of the railroad’s actual worth.

• Railroad kings manipulated a huge natural monopoly wielding more direct power over the people than the president.

– They stopped the cutthroat tactics they had been using against each other and began to cooperate.

• They formed combination “pools” – an agreement to divide business in a given area and share the profits.

• They also granted secret rebates or kickbacks to powerful shippers in return for steady traffic.

• Small farmers usually paid the highest rates, while corporations got the best deals.

p518

VII. Government Bridles the Iron Horse

• • • The depression on the 1870s led farmers to protest being “railroaded” into bankruptcy. Pressure from the Grange pushed many midwestern legislatures into trying to regulate the railroad monopoly.

Wabash, St. Louis & Pacific Railroad Company

v. Illinois case decreed that no individual state had the right to regulate interstate commerce; only the federal government could do it.

• Congress ignored Cleveland’s distain for federal regulation and passed the Interstate Commerce

Act in 1887.

– The Act prohibited rebates and pools and required the railroads to publish their rates openly.

– It also forbade unfair discrimination against shippers and outlawed charging more for short hauls.

– Finally, it set up the Interstate Commerce Commission (ICC) to administer and enforce new legislation.

– The country could now avoid rate wars among the railroads.

VIII. Miracles of Mechanization

• • Industrialists continued to refine the pre-Civil War “American System” of using specialized machinery to make interchangeable parts.

– As seen by Henry Ford’s moving assembly line for the Model T.

Captains of industry had a major reason for inventing new machines… they made it possible to replace expensive skilled labor with unskilled workers, cheap and plentiful due to massive immigration.

• Between 1860 and 1890, some 400,000 patents were issued.

– Alexander Graham Bell, (1876) introduced the telephone.

– Thomas Edison, the wizard of Menlo Park, New Jersey.

• Phonograph, moving picture, and the electric light bulb in 1879.

p520

IX. The Trust Titan Emerges

• • Andrew Carnegie, steel king; John D. Rockefeller, the oil baron; and J. P. Morgan, the bankers’ banker all focused on circumventing competition.

Vertical integration – combining into one organization all phases of manufacturing from mining to marketing.

– Carnegie took his ore from the ground; floated it along on his ships; moved it on his railroads and delivered it to his blast furnaces in Pittsburgh.

• • Horizontal integration – allying with competitors in an industry to monopolize a given market.

Rockefeller developed the idea of a trust to control rivals.

– Stockholders in smaller oil companies assigned their stock to the board of directors of Rockefeller’s Standard Oil Company (1870). It then consolidated and allied the operations of the previously competing enterprises… “Let us prey,” said Rockefeller.

• Any competitor left out of the trust, were basically forced to go under.

• Standard Oil soon cornered the market all over the world.

p521

• Interlocking directories were J.P. Morgan’s answer to the businesspeople wounded by cutthroat competition.

– He would consolidate rival enterprises and ensure future harmony by placing officers of his own banking syndicate on their various boards of directors.

X. The Supremacy of Steel

• • When Vanderbilt began to use steel rails for his railroad they were so rare that he had to import them from Britain. – Within 20 years America was producing more than Britain and Germany combined thanks to the Bessemer process.

The Bessemer process – it was discovered that blowing cold air on red-hot iron caused the metal to become white-hot, thus eliminating impurities.

XI. Carnegie and Other Sultans of Steel

• • • Andrew Carnegie started as a bobbin boy earning $1.20 a week, but ended up giving away $350 million before he died.

Carnegie was a tight fisted businessman but he disliked the monopolistic trusts.

Carnegie, looking to sell, was approached by J.P. Morgan.

– After 8 hours of haggling, they settled on selling for $400 million dollars.

– J.P. Morgan would eventually bring the company to be worth $1.4 billion.

p522

XII. Rockefeller Grows an American Beauty Rose

• In 1859 the first oil well started pumping out “black gold”.

– Kerosene, was the first major product of the oil industry. • Used in lamps, it burned much bright than whale oil.

– The industry brought in more money than all the gold mined in the west.

– As Kerosene faded away due to the electric light bulb, the combustion engine entered the scene.

• This gave the oil industry a new and hugely profitable lease on life.

• John D. Rockefeller, born into a poor family, pushed forward to become a successful businessman.

– In 1870, he organized the Standard Oil Company.

• He sought to eliminate the middlemen and squeeze out competitiors.

• His policy was to “sell all the oil that is sold in your district.” By 1877 he controlled 95% of all oil refineries in the country.

• Rockefeller looked at business as survival of the fittest. To him it wasn’t personal, he looked at anything that could hurt his business as an enemy that needed to be vanquished immediately.

p523

XIII. The Gospel of Wealth

• • • As some believed that they were given their wealth by God (Gospel of Wealth,) many believed they won theirs based on their natural talents (Social Darwinism.) The idea that the wealthy and powerful simply demonstrated great ability than the poor was the foundation of Social Darwinism.

As William Sumner stated, “what do social classes owe each other?... Nothing.”

XIV. Government Tackles the Trust Evil

• • The masses finally tried to rise up against the Trusts via state legislation, only to fail because of a loop hole in the 14 th amendment.

They then appealed to Congress, and in 1890 the Sherman Anti-Trust Act was signed.

– The law proved to have no teeth however, and more new trusts were formed in the 1890s under McKinley than during any other like period.

– Not until 1914 did the law have any real teeth. Until then the question was whether the government would control the trusts or the trusts would control the government.

XVI. The Impact of the New Industrial Revolution on America

• Probably no single group was more affected by the new industrial age than women.

– New inventions such as the typewriter and the telephone switchboard.

• Millions of stenographers and “hello girls” discovered new economic and social opportunities.

– Most women workers, however, toiled out of economic necessity, and faced the same long hours and deplorable working conditions as the men, yet earned less.

p529

XVII. In Unions There Is Strength

• • Massive unskilled labor pools made the individual worker powerless to battle against giant industries. They were forced to organize and fight for basic rights.

– The corporation could lose the individual worker much easier than the worker could lose the corporation.

– Corporations could retain high-priced lawyers, buy up local press, and put pressure on politicians. They could also import strikebreakers (scabs) and get thugs to beat labor organizers.

• Corporations might even own a “company town,” where employees held a status that resembled serfdom.

– High-priced grocery stores.

– High-priced rent.

– “easy” credit.

XVIII. Labor Limps Along

• • By 1872 there were hundreds of thousands of organized workers and 32 national unions.

The National Labor Union, organized in 1866, aimed to unify workers across trades to challenge their powerful bosses.

– The Union lasted 6 years and boasted 600,000 members.

• • Including skilled, unskilled and farmers Excluded Chinese, women, and blacks

• Knights of Labor – a new organization, sought to include all workers in “one big union.” – The Knights only barred “nonproducers” – lawyers, bankers, stockbrokers, etc.

XIX. Unhorsing the Knights of Labor

• • Haymarket Square Riot – labor disputes had broken out, and on May 4, 1886, the Chicago Police department advanced to break up a protest when a dynamite bomb was thrown into the crowd. – Several dozen were killed or injured, including police.

The Knights of Labor were linked to the Bombing and many associated them (mistakenly) with anarchists.

XX. The AF of L to the Fore

• American Federation of Labor was the brainchild of Samuel Gompers in 1886.

– One of Gompers major goals was the closed shop – or all union labor.

• His most effective weapons were the walkout and boycott.