Chapter 24

Industry Comes of Age



The Iron Colt Becomes an Iron Horse

The country's railroad network significantly expanded in the late 1800s. Because of the high costs and risks associated with building railroads, Congress subsidized the cost of many railroad construction projects. Congress also gave a lot of unused public land to the railroad companies.


Spanning the Continent with Rails

In 1862, Congress selected the Union Pacific Railroad company to build a transcontinental railroad starting in Omaha, Nebraska.

The Central Pacific Railroad company was responsible to laying track on the California-side of the transcontinental railroad.  The 4 chief financial backers of the Central Pacific Railroad (the Big Four) included Leland Stanford and Collis P. Huntington.

The Union Pacific Railroad and the Central Pacific Railroad companies both received financial aid from the government.

The transcontinental railroad was completed in 1869, allowing for increased trade with Asia and opening up the West for expansion. 


Binding the Continent with Railroad Ties

There were 5 transcontinental railroads built:  The Northern Pacific Railroad, running from Lake Superior to Puget Sound, was completed in 1883; the Atchison, Topeka, and Santa Fe, running from Topeka to California, was completed in 1884; the Southern Pacific, stretching from New Orleans to San Francisco, was completed in 1884; and the Great Northern, running from Duluth to Seattle, was completed in 1893 by James J. Hill.


Railroad Consolidation and Mechanization

Cornelius Vanderbilt made lot of money improving the Eastern railroads.

2 advancements helped the development of the railroads: the steel rail and a standard gauge of track width.


Revolution by Railways

The railroad stimulated the industrialization of the country in the post-Civil War years.  It created an enormous domestic market for American raw materials and manufactured goods.  Railroad companies also stimulated immigration. 

Until the 1880s, every town in America had its own local time.  To keep schedules and avoid wrecks, the major rail lines proposed, on November 18, 1883, dividing America into 4 times zones - most towns accepted the new time method.


Wrongdoing in Railroading

Some people selling bonds for railroad companies inflated claims about the company's assets and profits, enabling them to sell stocks and bonds in excess of the railroad's actual value ("stock watering").

Many railroad titans felt they were above the law, and they abused the public by bribing judges and legislatures.

Railroad kings were manipulators of a huge natural monopoly and exercised too much direct control over the lives of people.

Railroad companies colluded with each other to protect their profits.  "Pools" were agreements to divide the business in a given area and share the profits. Small farmers often paid the highest railroad transportation rates, while big customers paid low rates.


Government Bridles the Iron Horse

During the depression of the 1870s, farmers protested against railroaders who ran the farmers into bankruptcy. 

Many Midwestern legislatures tried to regulate the railroad monopoly, but in 1886, the Supreme Court ruled in Wabash, St. Louis & Pacific Railroad Company vs. Illinois that individual states could not regulate interstate commerce.

In 1887, Congress passed the Interstate Commerce Act.  It prohibited rebates and pools, required the railroads to publish their rates openly, forbade unfair discrimination against shippers, and outlawed charging more for a short trip than for a long trip over the same line.  It also created the Interstate Commerce Commission (ICC) to administer and enforce the new legislation.  The new laws provided a forum where competing businesses could resolve their conflicts in peaceful ways (instead of engaging in price wars).


Miracles of Mechanization

The telephone was created in 1876 by Alexander Graham Bell.  This invention revolutionized the way Americans communicated.  Thomas Alva Edison invented numerous devices; the most well-known is the electric light bulb in 1879.


The Trust Titan Emerges

Tycoons like Andrew Carnegie (steel king), John D. Rockefeller (oil baron), and J. Pierpont Morgan (bankers' banker), circumvented their competition.  Carnegie used the tactic of "vertical integration" to combine all phases of manufacturing into one organization.  He and his business controlled every aspect of production, from mining to marketing.  His goal was to improve efficiency.

"Horizontal integration" meant allying with competitors to monopolize a given market.  This tactic of creating trusts was used by Rockefeller.

Morgan used the tactic of interlocking directorates when he put his people on the boards of directors of rival companies


The Supremacy of Steel

Steel was "king" during the industrialization era; nearly every aspect of society used it. 

By the late 1800s, the United States was producing 1/3 of the world's steel supply.  The Bessemer process simplified the steel production process and reduced the price of steel. The process involved blowing cold air on red-hot iron to ignite the carbon and eliminate impurities.


Carnegie and Other Sultans of Steel

Andrew Carnegie was not a monopolist and disliked monopolistic trusts. By 1900, he was producing of the nation's Bessemer steel. 

J. P. Morgan financed the reorganization of railroads, insurance companies, and banks.

In 1900, Carnegie wanted to sell his holdings of his steel companies. He threatened to ruin Morgan's steel pipe production business if Morgan did not buy him out.  Morgan bought out Carnegie for $400 million

Morgan created the United States Steel Corporation in 1901.  It was America's first billion-dollar corporation.

Carnegie dedicated the rest of his life to donating his money to charities.

Rockefeller Grows an American Beauty Rose

Kerosene was the first major product of the oil industry.  The invention of the electric light bulb made kerosene obsolete.

By 1900, the gasoline-burning internal combustion engine became the primary means of automobile propulsion.  The birth of the automobile gave a great lift to the oil industry.

John D. Rockefeller created the Standard Oil Company of Ohio in 1870, attempting to eliminate the middlemen and knock out his competitors.  By 1877, he controlled 95% of all the oil refineries in the nation. Rockefeller expanded his company by eliminating his competitors.

Other trusts came about in America. These included the sugar trust, the tobacco trust, the leather trust, and the harvester trust.

The Gospel of Wealth

The wealthy used "survival of the fittest" to explain why they were financially successful and why poor people were poor.

Plutocracy: when a government is controlled by the wealthy. The Constitution gave Congress sole jurisdiction over interstate commerce. This enabled monopolists to use their lawyers to thwart controls by state legislatures. Large trusts also sought safety behind the 14th Amendment, arguing that corporations were actually legal "people."


Government Tackles the Evil Trust

Congress passed the Sherman Anti-Trust Act of 1890, which forbade business activities that the government deemed as anti-competitive. It also required the government to investigate trusts. The law was ineffective because it contained legal loopholes and it made all large trusts suffer, not just the bad ones.


The South in the Age of Industry

As late as 1900, the South still produced fewer goods than it had before the Civil War. Southern agriculture received a boost in the 1880s when machine-made cigarettes replaced hand-made cigarettes.  This increased tobacco consumption.

James Buchanan Duke created the American Tobacco Company in 1890.

Many obstacles slowed southern industrialization.  Northern-dominated railroad companies charged lower rates on manufactured goods moving southward from the North, but higher rates when raw materials were shipped from the South to the North.

The "Pittsburgh plus" pricing system was economic discrimination against the South in the steel industry.  Deposits of coal and iron ore were discovered in Birmingham, Alabama. This should have helped Southern steel manufacturers, but Northern steel companies put pressure on the railroads to increase their shipping rates. This removed Birmingham's economic advantage.

The South excelled in manufacturing cotton textiles.  Cotton mills were eventually created in the South, but they paid workers extremely low wages.


The Impact of the New Industrial Revolution on America

Economic developments after the Civil War increased the standard of living in the United States.  The agriculture industry was replaced by manufacturing.

Women were most affected by the new industrial age.  Women found jobs as inventions arose; the typewriter and the telephone switchboard gave women new economic and social opportunities. 

The nation of farmers and independent producers was becoming a nation of wage earners.  By the beginning of the 1900s, the vast majority of the nation's population earned wages.


In Unions There Is Strength

New machines displaced employees, but more jobs were created than destroyed in the long run.

Low wages conditions caused some factory workers to go on strike. Corporations sometimes forced their workers to sign "ironclad oaths" or "yellow-dog contracts," stating that the workers would not join a labor union.

Some companies owned the "company town," increasing the prices of basic living expenses so that the company could make more money (grocery stores, banks, etc).

Strikes became commonplace and the middle-class public started to get annoyed by them.


Labor Limps Along

The Civil War gave a boost to labor unions. 

The National Labor Union, organized in 1866, lasted 6 years and attracted 600,000 members. The purpose of the union was to organize workers across different trades and challenge companies for better working conditions. Black workers formed their own Colored National Labor Union.  The Colored National Labor Union could not work with the National Labor Union because the latter supported the Republican Party and it was supported by racist white unionists.

After the National Labor Union died out in 1877, the Knights of Labor took over. It was led by Terence V. Powderly, and it was started as a secret society. It sought to include all workers, while campaigning for economic and social reform, including and codes for safety and health. 


Unhorsing the Knights of Labor

On May 4, 1886 in Haymarket Square, Chicago police tried to break up a protest against alleged police brutalities. Someone threw a dynamite bomb, killing several people.  8 anarchists were convicted; 5 were sentenced to death while the other 3 were sent to jail.  In 1892, the governor of Illinois, John P. Altgeld, pardoned the 3 who were in prison.

The Knights of Labor was blamed for the incident at Haymarket Square and as a result, it lost public support.  Another problem with the Knights of Labor was that it included both skilled and unskilled workers. When unskilled workers went on strike, they were just replaced.

The American Federation of Labor's inclusion of only skilled worked drained the Knights of Labor of its members.


The AF of L to the Fore

The American Federation of Labor was founded in 1886 and was led by Samuel Gompers.  The federation was an association of self-governing unions, each of which kept its own independence.  It sought for better wages, hours, and working conditions.  The federation's main weapons were the walkout and the boycott. It supported the idea of closed shop, in which an employer could only hire union employees and all of the employees had to be in a union.

The greatest weakness of organized labor was that it was accepted by a small minority of working people.

Labor Day was created by Congress in 1894.


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