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Railroads and the
Industrialization of
America in the
Gilded Age
Causes of Rapid
Industrialization
Steam Revolution of the 1830s-1850s.
The Railroad fueled the growing US
economy:
 First big business in the US.
 A magnet for financial investment.
 The key to opening the West.
 Aided the development of other
industries.
Causes of Rapid
Industrialization
Unskilled & semi-skilled
labor in abundance.
Abundant financial capital ($$$).
New, talented group of businessmen [entrepreneurs]
and advisors.
Market growing as US population increased.
Government willing to help at all levels to stimulate
economic growth.
Abundant natural resources.
Causes of Rapid
Industrialization
Technological innovations.
 Bessemer and open


hearth process
Refrigerated cars
Edison
o “Wizard of Menlo Park”
o light bulb, phonograph,
motion pictures.
Thomas Alva Edison
“Wizard of Menlo Park”
The Phonograph (1877)
The light bulb
Moving
Pictures
Stuff Edison Invented
Alexander Graham Bell
Telephone (1876) First words on
the phone: “Yes, I have Dr.
Pepper in a can. Why?!”
Model T Automobile
Henry Ford
I want to pay my workers so that they
can afford my product!
“Model T” Prices & Sales
New Business Culture
Laissez Faire  the ideology of the
Industrial Age.
 Individual as a moral and
economic ideal.
 Individuals should compete freely
in the marketplace.
 The market was not man-made or
invented.
 No room for government in the
market!
The Building of the Railroads
Paid by the government with land grants;
several square miles per mile of track laid
The Building of the Railroads
Use of immigrant labor
Irish in the Midwest
Chinese in California
The Building of the Railroads
Impact upon American economy:
Steel production
The Building of the Railroads
Impact upon American economy:
Communications
The Building of the Railroads
Impact upon American economy:
transportation of people/goods
The Building of the Railroads
Impact upon American economy:
Related industries
manufacturing
lumber
mining
The Building of the Railroads
The emergence of the Railroad Barons:
James J. Hill
“The Commodore”
Cornelius Vanderbilt
Leland Stanford
William Vanderbilt
Jay Gould
The Power of the Railroads
Cornelius [“Commodore”]
Vanderbilt
Can’t I do what I want with my money?
The Power of the Railroads
More powerful than the government
$ The public be
d****d!
$ What do I care
about the law?
H’aint I got the
power?
William
Vanderbilt
The Power of the Railroads
Economic Exploitation of America:
the “pool”: the division of railroad traffic
among various “competitors”
Led to higher rates for farmers and lower
wages for workers
The Transcontinental Railroad
Obstacles: Dangerous
conditions, Indian attacks,
mountain ranges, labor
troubles, weather
The Trans-Continental Railroad
May, 10, 1869: meeting
of the Union and
Central Pacific RRs.
THE ROBBER BARONS!
The ‘Robber Barons’ of the Past
John D. Rockefeller
America’s first billionaire:
Creator of Standard Oil Trust,
controlled 95% of oil refining
by 1885; drove or bought out
competitors
The Trust (“Horizontal Integration”)
Holding company that owns majority stock in
all the businesses in a particular industry
The Standard Oil Trust
“Horizontal Integration”
Standard Oil
Board of
Trustees
Standard Oil of
Ohio
Standard Oil of
New Jersey
Standard Oil of
California
Standard Oil Co.
Andrew Carnegie
Owned largest steel
producer in US by 1890
Creator of “vertical
integration”: ownership
of all the steps involved
in an industrial process,
from raw materials to
delivery of finished
product
Vertical Integration
Carnegie Steel
Unions/Labor/Company Towns
Delivery of Finished Products
Manufacture
Shipping
Raw Materials
J.P. Morgan
“Financier of America”
Owned largest bank;
acted as unofficial Bank
of US
controlled banking in
America
able to create new
industries with massive
financial capital ($$$)
Wall Street – 1867 & 1900
Morgan and the “Interlocking
Directorate”
Member of Morgan’s bank on the
Board of Trustees of the major
industries in America
Goal: to eliminate wasteful
competition from the
marketplace
Coordinated activities of the
various industries
Acted as an arbitrator between
industries
The Interlocking Directorate
JP Morgan and
Company
Oil Trust
Beef Trust
Steel Trust
The Protectors of Our
Industries
Social Darwinism
 British economist.
 Advocate of laissez-
Herbert Spencer
faire.
 Adapted Darwin’s
ideas from the
“Origin of Species”
to humans.
 Notion of “Survival
of the Fittest.”
Social Darwinism in America
William Graham Sumner
Folkways (1906)
$
Individuals must
have absolute
freedom to
struggle, succeed
or fail.
$
Therefore, state
intervention to
reward society and
the economy is
futile!
New Business Culture:
“The American Dream?”
Protestant (Puritan) “Work Ethic”
 Horatio Alger [100+ novels]
“On Wealth”
$ The Anglo-Saxon race
Andrew Carnegie
is superior.
$ “Gospel of Wealth”
(1889).
$ Inequality is inevitable
and good.
$ Wealthy should act as
“trustees” for their
“poorer brethren.”
The Gospel of Wealth:
Religion in the Era of Industrialization
$ Wealth no longer looked
upon as bad.
$ Viewed as a sign of
God’s approval.
$ Christian duty to
accumulate wealth.
$ Should not help the poor
directly. Should provide
means for selfimprovement.
Russell H. Conwell
Unions
Conditions of the
Working Class:
low pay, averaged $1
per day
dangerous work
conditions, no safety
standards
70+ hours weekly, 6
to 7 days a week
no unemployment,
disability, sick leave
Difficulty in Organizing
Unlimited immigration
Skilled vs. unskilled
Government opposition
American opposition to unions;
foreign element and nativist
reactions
Difficulty in Organizing
Children and women in
labor force
Difficulty in Organizing
“company towns”
town owned by
company from
housing to stores
Pullman, Illinois
Homestead, PA
Government Opposition to Unions
Injunctions: court orders banning strikes
“yellow-dog contracts”
Open immigration
Strike-breakers/use of military
First Labor Unions
The National Labor Union:
First labor union to cross
industries
Problems:
skilled vs. unskilled
William Sylvis and Isaac Myers
difficulty in organizing
Panic of 1873
Fell apart after 1878
The Knights of Labor
Largest labor union; crossed
industrial and racial lines
Became powerful force in early 1880s
Haymarket Square
May, 1886 – a riot during a rally results in
several deaths, including police
Knight leaders blamed
Haymarket Square
Charges never proven;
four executed, four jailed
later pardoned
Knights destroyed
Unions tainted
American Federation of Labor
Founded by Samuel Gompers (1890)
Formed along industrial lines, not trade (occupation)
lines
No radicals or anarchists allowed
Use of boycotts rather than strikes
AF of L
Steel Workers
RR Workers
Beef Workers
Similar to Morgan’s interlocking
Directorate format
Based on Industrial lines,
not trade (or occupation)
lines
Regulating the Trusts
1877  Munn. v. IL
1886  Wabash, St. Louis & Pacific
Railroad Company v. IL
1890  Sherman Antitrust Act
 in “restraint of trade”
 “rule of reason” loophole
1895  US v. E. C. Knight Co.