Download Chapter 8: The Rise of American Business, Labor, and Agriculture

Chapter 8: The Rise of American Business, Labor, and Agriculture
Objectives:

To understand how industrialization in the United States was part of a worldwide
economic revolution.

To know the ways in which American business changed from 1865 to 1920.

To understand the response of the federal government to industrialization and
business growth.

To recognize the struggle of labor and labor organizations to achieve improved
working conditions.

To explain the causes of farmers’ discontent and evaluate their political program.
Economic Transformation of the United States
Manufacture- To make something by hand (before the Industrial Revolution), now
means to process raw materials into finished goods, usually on a large scale (mass
production)
Mass production- making large quantities of a product quickly and cheaply.
Industrial Revolution- extended period of economic change, starting in Great Britain
around 1750 and continuing today, in which people invented new machines and
processes to mass produce products in large factories for mass markets, fundamentally
changing the way we think and live by creating national and international markets.
United States Advantages for Industrial Growth (late 1800s – Present)
1. Raw materials (land, natural resources)
2. Labor (human energy, skill, talent)
3. Capital (money for investment) and capital goods (tools, machinery, and
factories)
4. Capitalist System- private citizens own and manage businesses, (not the
government) and they compete with other businesses.
5. Businesses who profit invest in risky new ventures, perpetuating more business
growth.
6. The U.S. Constitution provides patents to inventors, enabling them to create new
machines and gadgets to further the Industrial Revolution.
Patent- Government document allowing the creator of a new object the exclusive right to
make and sell that object for profit for a set amount of time
Henry Ford- introduced the assembly line, which greatly reduced the time needed to
build a car, and allowed for the mass production of cars, which dropped the prices of a
car and allowed more Americans to be able to afford them.
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Assembly line- method of production in which workers add parts to a product as it
moves along on a conveyor belt, increasing productivity.
Productivity- the ability to produce more in a given amount of time.
Proprietorship- single owner of a business who shoulders the financial risks and profits
of that business, even privately-held property.
Partnership- business set up by two or more people who put capital into the business
and share the financial risks and profits, even privately-held property.
Corporation- Business that is chartered by state law and that is owned by investors who
buy the corporation’s stock, sharing in the financial risks and profits. If the corporation
goes bankrupt, the individual stockholders are only responsible for the amount they
invested in the corporation’s stock, not their privately-held property.
Laissez-faire- principle or policy created by Adam Smith that means “leave alone” in
French, referring to the absence of government regulations or laws that would restrict
business.
Argument for laissez-faire
Any government attempt to regulate business will only reduce the economic benefits to
be gained from competition.
Arguments against laissez-faire
The final result of unrestricted competition would be a monopoly
Monopoly- Company that controls all or nearly all the business of an industry.
Changes Brought About in the United States Due to the Industrial Revolution
1) National Market Expands
a) Railroads provide transportation for products and moving population
b) Telegraph and later the telephone enable quicker communication and
orders
c) Cities grew due to demand for products, immigration, rural population
migration
d) Rapid growth of new regions in the West due to the ease of transportation
2) International Markets Expand
a) Competition with European nations and Japan to sell textiles, steel,
machinery, and ships provides for jobs and immigration on a massive
scale.
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b) Imperialism led to an increase in demand for finished products and raw
materials around the world, increasing U.S. exports.
c) New inventions turned consumer goods created an international demand
for U.S. products, and further increased U.S. exports.
3) Merchandising is Born
a) Department stores- middle class customers could now window shop for
items in huge stores in major cities, starting with A.T. Stewart in new
York City in 1862
b) Mail-order catalogs- Montgomery Ward reached out to rural customers
with a catalog he mailed to them that pictured his merchandise. Customers
then mailed back orders starting in 1871. Richard Sears and Alvah
Roebuck did the same in the 1890s.
4) Railroads Grew
a) United the nation with a huge network of standardized tracks, from 35,000
miles of track in 1865 to 260,000 miles in 1900
b) Small towns were linked or created due to the growth of railroads.
c) The U.S. had more miles of railroad tracks in 1900 than all of Europe and
Russia combined
5) Steel Industry is Born
a) Iron was less costly and easier to make than steel until Henry Bessemer
developed a process to blow cold air into molten iron, removing the
impurities.
b) Andrew Carnegie brought the Bessemer process for making steel to the
U.S. from Great Britain in 1867.
c) By 1901, the U.S. was the world’s leader in steel production, with 13.5
million tons produced that year.
6) Sources of Energy Harnessed
a) Coal was used for fuel as well as energy, replacing wood to power trains
in the early 1800s. It was mined from Pennsylvania to Alabama, growing
from 30 million tons in 1870 to more than 200 million tons by 1900.
b) Oil replaced whale and vegetable oil in lamps with the refining of
kerosene in the 1850s and Edwin Drake’s strike of oil in Titusville,
Pennsylvania in 1859.
c) Electricity was utilized after Thomas Edison invented the light bulb in
1879, starting in the cities and spreading into the countryside over the
following decades.
7) Communication Improve
a) Electricity was used to send messages by telegraph in the mid-1800s.
b) The invention of the telephone by Alexander Graham Bell in 1874-1876
led to the use of 1.3 million phones by 1900.
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Thomas Edison- inventor who opened a research laboratory in 1876 in Menlo Park, New
Jersey to create a minor invention every 10 days and one big invention every 6 months,
inventing the light bulb (1879), the phonograph (1877), moving pictures (1893), and the
electric power plant (1882)
Alexander Graham Bell- Scottish immigrant who invented the telephone in 1874-1876,
which allowed people to talk with each other long distances and greatly sped up the
exchange of news and business.
Questions (p 207 #1-3)
1) Define Industrial Revolution, capital, corporation, and laissez faire.
2) What advantages did the United States have in its ability to industrialize?
3) What were effects of railroads on the United States industrial growth?
Railroads used large amounts of steel for new tracks and engines, lumber for wooden
railroad ties, and coal to fuel the engines. They expanded and united the nation due to the
creation of networks, which standardized track gauges and created standard time zones.
4) What inventions improved communication in the 1800s?
The telegraph and the telephone allowed for instant communication over great distances,
the telephone by voice. This greatly sped up the exchange of news and business.
5) Why was Menlo Park called an “invention factory?”
Menlo Park was called an “invention factory” because Edison turned inventing into a
system. He had his team of 15 experts refine his ideas and translate them into practical
inventions.
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Captains of Industry or Robber Barons?
John D. Rockefeller (1839-1937) – Cleveland, Ohio native who bought an oil refining
company in 1865, then organized the Standard Oil Company in 1870 to compete against
200 other oil companies.
Standard Oil Company- Monopoly created by 1880 that accounted for over 90 percent
of the oil refined in the United States.
Methods of Monopoly Used by Rockefeller
1) Railroad rebated enabled him to undercut his competitor’s oil prices to force them
out of business
2) Rockefeller used the hostile takeover method by offering to buy out his
competitors when they were struggling
3) If railroads did not offer him large enough rebates, he built oil pipelines to ship
his oil more cheaply
Rebate- Returning a portion of the railroad freight charges to a customer.
Andrew Carnegie (1835-1919)- Scottish-born businessman who started out as cotton
mill worker, railroad engineer, and later steel company owner in the 1870’s who sold his
steel monopoly to J.P. Morgan and a group of bankers in 1901 for almost $500 million.
Origins of the Work Ethic in the United States
Work Ethic- belief in the moral value of hard work
Cotton Mather- Boston minister in the late 17th and early 18th centuries who, among
others, preached and wrote about the Pilgrim and Puritan beliefs of predestination and the
importance of good behavior and a strong work ethic.
Predestination- Belief held by John Calvin and later the Pilgrims and Puritans of New
England that the afterlife of each individual was predetermined before a person’s birth,
and that their hard work and material success in life was a sign that they were predestined
for a good afterlife.
Horatio Alger- wrote popular books in the post-Civil War era that were “rags to riches”
stories about poor boys who became successful through hard work and luck
Public Good or Private Gain?
The public good was advanced by Carnegie and Rockefeller because:
1) they provided many jobs
2) their respective industries grew
3) their respective industries became more productive
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4) they risked their own money with no guarantee of success
5) they became philanthropists who donated large amounts of money to build
libraries, schools, hospitals, and other institutions from their profits
Private gain made Carnegie and Rockefeller:
1) unfair in how they conducted business
2) pay their workers low wages
3) not tolerate strikes or negotiate with their workers or unions
4) put competitors out of business with unfair tactics, such as rebates or prices cuts
Fourteenth Amendment Applied to Laissez-Faire
The Supreme Court interpreted the Fourteenth Amendment as favoring business during
this era instead of simply providing citizenship to the freed slaves after the Civil War.
They used the phrase that no state could “deprive any person of life, liberty, or property
without due process of law” to broaden the protections offered to individuals and extend
those same protections to corporations. Many corporations received favorable court
decisions because they were offered the same protections as individuals through this
interpretation.
Pooling- secret agreement between rival railroad companies to charge the same high
fares as their competitors (also known as prices-fixing)
Other Methods Railroads Used to Reduce Competition
1) Divided the total market for their transportation services evenly between each
other
2) Charged more for shorter hauls than they charged for long hauls where there were
no other competitors.
Consolidate- join together
From Competition to Monopoly
Merger- the joining of two or more businesses into a single, larger business
Trust certificate- offered in trade by monopolists to their weaker competitors in order to
gain a majority of the weaker competitor’s stock certificates, usually through hostile
threat of driving them out of business. The trust certificate created a super-corporation
called a trust controlled by the monopolist
Trust- group of corporations run by a single board of directors who had a lot of influence
over representatives in both the federal government and state governments
Holding Company- Corporation that existed solely to hold the stocks of several
companies in the same industry, controlling a majority of company’s stock and having
the power to dictate a common policy for all
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Government Attempts to Break Trusts
Sherman Antitrust Act (1890) - poorly and vaguely written law which stated “every
contract, combination in the form of a trust or otherwise, conspiracy, in restraint of trade
or commerce… is hereby declared to be illegal.” Since terms such as trust, conspiracy,
and restraint were not defined by law, attempts to prosecute trusts were unsuccessful in
the 1890s, but the precedent for the government to work to break up monopolies and
trusts was established.
United States v. E.C. Knight (1895) - Supreme Court ruling in a case against the sugar
trust that was led by the E.C. Knight and Company, who controlled over 95 percent of the
sugar-refining industry in the United States. The ruling said that the United States federal
government had no right to break up the sugar monopoly, stating interstate commerce
was not applicable because the activities of the refinery were within one state’s borders
and therefore not interstate commerce but the Tenth Amendment that applied to the
situation.
Questions (pg 213 #1-3)
1) Define pooling, mergers, trusts, holding companies.
2) What methods did John D. Rockefeller use to maximize profits, reduce costs,
and eliminate competition?
3) How did Supreme Court rulings affect efforts to regulate business?
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Problems for Industrial Workers and the Reason for the Growth of Labor Unions
1) Low wages
2) 60 or 70 hour work week
3) Cold winter and hot summer conditions in the factories
4) Poor ventilation
5) Few safeguards on machinery to prevent accidents
6) If an accident injured or killed a worker, they were the one blamed, not the
employer
Knights of Labor- First union to become a major economic force that was formed in
1869, eventually included both skilled and unskilled workers of all backgrounds, and who
met in secret because employers fired workers who joined unions. Their main goal was
to win the consent of employers to giving their workers an eight-hour workday.
Skilled Workers- craft workers who are specialized with some training
Unskilled Workers- industrial workers without specialization
Terence Powderly- chosen president by Knights of Labor members in 1879, he
strengthened the union by allowing immigrants, African Americans, women, and
unskilled workers to become members and by using arbitration to settle labor disputes
until 1885, when he abandoned his antistrike policy.
Arbitration- the judging of a dispute by an impartial person
Haymarket Riot- Bombing and violence that broke out in the crowded Haymarket
Square during a strike at the McCormick Harvester Company in Chicago on may 4, 1886,
where strikers were protesting the previous say’s violence with strikebreakers, police, and
anarchists. Because one of the bomb throwers was a member of the Knights of Labor, the
union was unfairly blamed for the violence, causing the public to distrust the union and
membership dwindled as a result.
Anarchist- person who opposes organized government and capitalism, saying it cannot
be reformed and advocating the use of violence to end both institutions.
Strikebreaker- worker hired as a replacement for a striking worker, often African
Americans.
Reasons for the Demise of the Knights of Labor
1) Prejudices amongst members (skilled versus unskilled workers, whites versus
blacks, men versus women.)
2) Leaders of the union focused too much on political goals (graduated income tax)
instead of the workers’ goals (bread-and-butter economic issues such as higher
wages and better working conditions.
3) The Haymarket Riot
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American Federation of Labor (A.F. of L.)- Columbus, Ohio based union which was
open to skilled workers only and headed by Samuel Gompers. One had to join a trade
union for a specific trade, and that trade union joined other unions in the larger AFL
organization. By 1900, over half a million workers belonged to the trade unions that were
a part of the A.F. of L. In altered form it still exists today.
Federation- loose association
Samuel Gompers- teenage British immigrant to New York City who became the leader
of a cigar maker union and later organizer of the federation of unions known as the AFL
in 1886
Bread and Butter Goals of the A.F. of L.
1) Higher wages
2) Shorter working hours
3) Better working conditions
African Americans and women were both routinely discriminated against, segregated, or
denied membership to the A.F. of L. Racial discrimination grew between white A.F.L.
members and African Americans because oftentimes employers would use African
Americans as strikebreakers against the A.F. of L.
Sweatshop- workplace where people labor long hours in poor conditions for low pay.
Mary Kenney O’Sullivan- energetic Irish American woman who encouraged women
garment workers to join local unions in New York City and Troy NY and later founded
the national organization for women known as the National Women’s Trade Union
League (NWTUL) to help working and middle class women get improved wages and
working conditions in industries where women were employed in large numbers.
International Ladies’ Garment Workers union (ILGWU) - trade union of women
garment workers that formed in 1900 to protest low pay, long hours, and unsafe working
conditions. They went on strike in 1909 with over 20,000 members and won a pay raise
and a reduction of hours, then launched another successful strike in 1910 with over
50,000 members for better pay, shorter working hours, and paid holidays. They later
became a key member of the AFL.
Triangle Fire- sweatshop fire in New York City in 1911 at the Triangle Shirtwaist
Factory in which 146 people died after being locked in their factory to keep them at their
jobs. The tragedy led to new safety laws to help protect factory workers in New York
State.
Collective Bargaining- Right of unions to negotiate with management for workers as a
group.
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Major Strikes by Unions against Corporations
Homestead Strike (1892)
1) One of the most violent strikes in U.S. history
2) Amalgamated Association of Iron and Steel versus the Homestead, PA steel plant
owned by Andrew Carnegie
3) Union refused to accept a wage reduction
4) Henry Clay Frick, chairman of Carnegie Steel, called in guards from the
Pinkerton National Detective Agency to break up the strike and protect the plant
and the strikebreakers
5) Fighting broke out between the two groups, and many on both sides were killed
6) Pennsylvania’s governor called out the state militia and broke up the strike
7) Workers returned to work at the reduced wage, and their steel workers’ union was
weak until the 1930s
Pullman Strike (1894)
1) George Pullman invented and manufactured sleeping cars for railroad travel
2) He announced a 25 percent reduction in wages in 1894, but did not lower the rents
or grocery prices in the company town
3) Workers went on strike and were supported by their union, the American Railway
Union led by Eugene V. Debs
4) The workers not only picketed the Chicago railways to prevent the use of the
Pullman cars, but they also called for a nationwide boycott of all Pullman cars
5) Many railway workers took part, and effectively stopped interstate commerce
6) Some of the cars carried U.S. mail
7) Pullman was granted an injunction by a federal court against the union picketing
8) President Grover Cleveland sent federal troops to end the strike
9) When Debs and the union refused the court order, he and other officers of the
union were convicted and jailed, ending the strike.
10) An 1895 Supreme Court decision, known as In Re Debs, upheld the injunction by
ruling that the federal government could prevent “all obstructions to the freedom
of interstate commerce or the transportation of the mails.”
Company Town- community established by a corporation that provides most or all its
workers and their families needs, such as housing, employment, and stores.
Injunction- court order to do or not to do something
Lawrence Strike (1912)
1) One of the largest woolen textile centers in the U.S. during the second half of the
1800s
2) The Industrial Workers of the World (IWW) went on strike against the American
Woolen Company
3) The IWW was founded as a radical labor union in 1905, and advocated the end of
capitalism and the promotion of socialism, saying the national government should
own and operate all major industries
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4) Low wages were being opposed, and the effort was led by Joseph Ettor, “Big
Bill” Haywood, and Elizabeth Gurley Flynn
5) Massachusetts’ governor called in the state militia to protect strikebreakers and
keep order
6) The American Woolen Company ended the strike by offered raises and no
punishment to those who had been on strike.
Socialism- economic and political system whose adherents believe that the national
government should own and operate all major industries
Most Americans at the time generally were against strikes, and supported the
government’s use of federal troops to break up strikes because they considered strikers
revolutionaries who were challenging capitalism, democracy, and freedom
A growing minority of Americans, however, sympathized with workers and the unions
they belonged to because of the long hours, low wages, and unsafe or unsanitary working
conditions they worked in.
Questions (pg. 218 #1-3)
1) Explain how the growth of labor unions was a response to the growth of
business
2) How did the Knights of Labor and the American Federation of Labor differ?
3) For the following three strikes, prepare a chart listing the (a) conditions that
led to the strike, (b) tactics used by both sides (c) union leadership, (d) role of
state or federal government, and (e) outcome of the strike: (1) Homestead, (2)
Pullman, and (3) Lawrence.
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4) How did the role of the worker change in the new industrial age?
Workers had a new role in which they were less valued than in the previously small
factories before the Civil War. Their working conditions were dangerous and filthy, often
leading to many printable deaths and diseases.
5) What were the goals of early unions?
Early unions sought to end child labor, shorten the workday, gain higher wages, improve
working conditions, and receive equal pay for both men and women.
6) Why was progress slow for labor?
Most Americans believed that hard work was rewarded. They felt that workers who went
on strike were often times foreign radicals who were not interested in improving the
working man’s situation, but rather in destroying the United States and its government.
They feared that strikes only led to violence.
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