TJ WAS WRONG

1. TJ WAS WRONG • Thomas Jefferson dreamed that America would eventually become “a great agrarian democracy, a nation of small farmers” • Didn’t happen • The U.S. instead became a major industrial country

2. BASIC CAUSE • By 1910, the U.S. had become the leading industrial country in the world • A relatively poor, underpopulated, and primarily agricultural country was transformed into the premier industrial nation in the world • The basic reason was the creation of a unified national market, made possible by the spread of a railroad network which linked the country’s farms to cities

3. IMPACT OF INDUSTRIALIZATION • Raised standard of living • Produced cycles of prosperity and recession • Accelerated the growth of cities • Stimulated immigration from abroad • Dramatically increased population growth • Altered such social institutions as the family • Pushed U.S. to the forefront of world affairs • Made U.S. the wealthiest state in the historyof the world

4. UNPREPARED GOVERNMENT • Founding Fathers never anticipated the phenomenal industrial growth that U.S. experienced after the Civil War • Many had even viewed industrialization as something to be avoided at all costs • U.S. government was therefore caught unprepared when industrialization did occur • The system survived but is was nonetheless a rough process and it left our system dramatically altered

5. PRE-CIVIL WAR SITUATION • Up until the end of the Civil War, most manufacturing companies were small, family-owned forms with a limited amount of capital and who usually obtained their raw materials locally and sold their products in a small, regional market • The rise of the transcontinental railroads in the late 1860s changed this situation

6. RAILROAD NEEDS • Railroads had to raise huge amounts of capital to finance the construction and maintenance of their cross-country networks • Also needed an efficient form of organization to manage their far-flung operations • Small-scale, family owned type of company simply could not meet the financial and organizational requirements of these railroads

7. CORPORATE ORGANIZATION • Railroads adopted a corporate form of organization • In which numerous investors bought shares of stock in a company, thus allowing it to raise huge amounts of capital

8. BIRTH OF MODERN BUSINESS • Railroads also adopted a complex administrative structure in which the day-to-day operation of the company was entrusted to hired experts • Not the stockholders • Hired experts organized into separate departments, each specializing in a different function of the business • Ownership was thus separated from management • Unlike the old family firm in which the owner also managed the company

9. RAPID EXPANSION • Many small manufacturing firms experienced an enormous expansion in their marketing opportunities after the railroad corporations tied the country together into one huge national market • In response, many converted to a corporate structure in order to raise the necessary capital for expansion • Also borrowed management techniques from railroads to handle their increasingly complex and far-flung businesses

10. BIRTH OF TRUSTS • Some firms expanded their manufacturing capacities too quickly • Causing production to become greater than demand • Resulting in growing surpluses and falling prices • To protect themselves from bankruptcy, competing firms within a particular sector combined together in “trusts” • Which controlled competition, set prices, and controlled how much was produced within their sector

11. HOW TRUSTS WORKED • A number of companies in the same sector would form an informal alliance, usually under the leadership of the major manufacturer in the sector • They would agree to produce within certain pre-agreed upon limits and charge the same price for their products • This eliminated the cut-throat competition and unlimited production which drove down prices and caused many companies to fail • Brought stability and order to the marketplace • But the downside was that, over time, the leading manufacturer within the alliance tended to absorb its small partners, resulting in the creation of gigantic corporations which completely dominated its particular sector of the economy

12. MONOPOLIES • John D. Rockefeller’s Standard Oil Company • Controlled 90% of the refining capacity in the U.S. by 1880 • Andrew Carnegie’s United States Steel • Controlled 60% of American steel manufacturing • General Electric • Held all of Thomas Edison’s patents and specialized in consumer electrical products • Westinghouse • Specialized in industrial electrical equipment • Swift Meatpacking Company • National Biscuit Company

13. TRANSFORMATION • By 1900, the process of combination and trust building had transformed landscape of American business • 5500 separate companies had combined into approx. 30 large corporations since 1865 • Most possessed a degree of monopoly control over their particular sector • All developed complex bureaucratic structures to administer their expanding domains

14. GOVERNMENT AND BUSINESS • In Germany, the government worked closely with business to encourage expansion • By guaranteeing stock issues to attract investors • Establishing trade and technical schools to train future industrial employees • By regulating competition so that German corporations did not destroy each other • In the U.S., government tended to leave business alone • Meant that American companies were not bothered by health and safety laws, labor relations laws, taxes, and could do pretty well what they wanted to do • But close partnership between business and government that existed in Germany didn’t exist

15. INVESTMENT HOUSES • Given lack of government intervention in terms of regulating competition and raising capital, the so-called investment houses assumed a critical role in the development of big business • Foremost investment house was Drexel, Morgan, and Company • Headed by J. Pierpont Morgan

16. PRIVATE INTERVENTION • Morgan started out selling railroad stocks and bonds • Believed that price wars and destructive competition within the rail industry scared off potential investors • Therefore he often personally intervened to bring stability to the rail industry by reducing the level of cut-throat competition • And when a railroad got itself in trouble anyway, he would step in and bail it out • In exchange for management control of the troubled railroad • U.S. business at this time more-or-less regulated itself through the intervention of investment bankers like Morgan

17. BRANCHING OUT • By 1900, Morgan had branched out to play a key role in financing the organization of a number of important industrial combinations • Organized and financed creation of United States Steel, International Harvester, and General Electric • Motivated by his desire to impose order and stability by creating huge, monopolistic corporations that virtually eliminated competition within their particular sector • Was thereby able to stabilize prices and create an attractive environment for investors • By 1913, his investment house controlled 112 major corporations with a total value of $22 billion

18. QUESTIONS REMAIN • In absence of government regulation, private enterprise in U.S. developed its own system to bring stability to the economy • System in which powerful investment houses reduced destructive competition by financing huge monopolistic corporations • However, serious recession hit in 1907 • Forced many firms to go under and raised serious questions about long-term ability of private enterprise system to maintain stability and prosperity

19. GOLDEN AGE • Businessmen paid no taxes on their huge fortunes until 1917 • Built huge mansions in Newport (RI), New York, Chicago, and San Francisco • Became American versions of European royalty • With armies of servants, mansions, and lavish lifestyle

20. POWERFUL AND RICH • Controlled the press, owned scores of politicians at the local and national level, bought themselves favorable legislation and judicial decisions • Morgan even kept presidents waiting in his reception room for hours until he was ready to meet with them • Some, such as Rockefeller and Carnegie, gave millions to charities • Carnegie left his entire fortune of over $700 million to charity when he died

21. SOCIAL DARWINISM • Businessmen had their own philosophy to justify their wealth, power, and greed • Social Darwinism • Strange mixture of history, economics, religion, and Charles Darwin’s biological theories of natural selection • Put together by a few academics, such as Karl Pearson, in the U.S. and England

22. MAJOR COMPONENTS (1) • Deep belief that a government which governed least, governed best • Government should not regulate business • Deep belief in sanctity of private property • Which included their own corporations • Belief that wealth was a sign of divine favor • Being rich meant that God liked you better than others • Also meant that those favored by God had the right to run the U.S. and the duty to get richer (thereby pleasing God even more)

23. MAJOR COMPONENTS (2) • Belief in the doctrine of the “survival of the fittest” • The poor deserved to be poor because they had failed in the struggle to be successful • And since they deserved to be poor, it was a waste of time to help them • American was great because of business and the country should therefore by run by and for those who had made it great--businessmen

24. PREINDUSTRIAL WORK • Manufacturing before the Civil War was usually performed by groups of skilled workers in small workshops • they used their indispensability to leverage a great deal of independence in respect to working hours, pace of work, and the quality of the products they produced • They had a great deal of say in how long they worked, how fast they worked, and in determining the standards of production

25. INDUSTRIAL DISCIPLINE • Preindustrial way of working did not fit into the plans of new industrialists • Could not let workers come to work when they felt like it or only produce as much as they were in a mood to produce • Industrialists had to discipline their workers to what they wanted, not what the worker felt like doing • Had to make them come to work every day, on time, and they had to make them work at a pace set by the industrialist

26. TENSION • Industrialists had huge arsenal of weapons at their disposal to discipline workers • Fines, docking pay, suspensions, and even outright dismissal • But they were often surprised at the tenacity with which workers clung to their old traditions of working • Result was that tension, often violent, developed within new factories between new industrial work culture and the older, traditional way of working

27. ONGOING STRUGGLE • Once managers had whipped Anglo-Saxon workers into line, new workers would arrive from Ireland with their own preindustrial culture that had to be broken in turn • And once Irish workers were broken, new immigrants from other preindustrial societies (such as Italy, Eastern Europe, Russia, etc.) would arrive with their own traditional work cultures, which also had to be broken • Conflict between preindustrial values and the industrial factory system was an ongoing battle that began around the end of the Civil War and which would continue down to this very day

28. IMMIGRATION • After 1865, a combination of economic, political, and social problems in Europe send over 25 million people to the U.S. • From England, Germany, Scandinavia, southern and eastern Europe, and Russia • Arrived with little money and therefore took whatever job they could find • Coal mines, steel mills, oil refineries, railroads, meat-packing plants, etc.

29. BIGOTRY • Before Civil War, 75% of immigrants came from the British Isles, Ireland, or Germany • Often did not have an easy time when they first arrived but they usually eventually assimilated • By 1900, most immigrants were Russian Jews, Poles, Hungarians, Italians, Greeks, Syrians, Chinese, etc • Americans did not understand their “strange” languages, customs, food, clothing, and religions • Generated fear that they would make America less “American” by destroying older social and cultural values

30. JOB INSECURITY • Ethnic groups who had been in the U.S. a longer time lived in fear that newer ethnic groups would take their jobs • Since newer groups were always willing to work longer for less pay—willing to do anything to get and keep a job • Employers exploited this situations • Used new immigrants as strikebreakers to defeat labor unions that had been created by established workers to protect themselves

31. REASONS FOR GROWTH OF UNIONS (1) • Labor unions had existed before Civil War but they tended to be small and scattered • Situation changed after 1865 for 2 reasons • Workers were under increasing attack by the mechanization of production • Production savings realized by machines went into the pockets of industrialists and were not passed on to workers in terms of better wage • Machines also represented a huge fixed investment which could not be reduced • Therefore when a company had to cut costs, it was done at labor’s expense • Easier to cut wages and lengthen work day than it was to reduce amount spent of buying and maintaining a machine

32. REASONS FOR THE GROWTH OF UNIONS (2) • Giant corporations were impersonal organizations • An individual businessman was responsible to his conscience for his actions • Corporations don’t have a conscience; their sole purpose was to make money for their investors • As corporate officers, managers had to make a profit for their stockholders—even if it was at labor’s expense • Workers’ bargaining power greatly diminished in a corporation • Workers were just cogs in a gigantic industrial machine • If they complained about wages or hours, they would be replaced by some other cog from the vast pool of people who would do anything for a job • Only way a worker could make himself heard in this situation was to organize collectively with his fellow workers and form a union in order to create a large and unified voice that their corporate employer had to listen to

33. NOBLE ORDER OF THE KNIGHTS OF LABOR • Founded in 1869 • Prime goal was to unite all workers in America into one big union and the fight the spread of the factory system and bring back the old preindustrial society where independent skilled craftsmen dominated

34. RAPID GROWTH • Membership in KOL was open to men and women, whites and blacks, skilled and unskilled workers, and farmers • Only occupations banned from membership were liquor dealers, professional gamblers, lawyers, and bankers • By 1885, KOL had almost 700,000 members

35. REASONS FOR DECLINE • Poor management • Bad publicity • Organization was unfairly blamed for the Haymarket Square Riot in Chicago in 1886 • 7 persons killed and over 60 wounded when someone threw a bomb at police attempting to break up a demonstration in favor of a 8-hour workday • Unrealistic goals • Industrialization was too deeply-rooted to return to a preindustrial society of independent craftsmen • Membership declined rapidly after 1885 and the union completely disappeared by the early 1890s

36. AMERICAN FEDERATION OF LABOR (AFofL) • Founded by Samuel Gompers • Foreign-born cigar maker • Would dominate labor scene until at least the 1930s because of pragmatic philosophy • Accepted industrial capitalism and tried to work within it • Rejected radicalism and concentrated on pragmatic objectives like better wages and working conditions • Was not out to change the world; just wanted to improve its members’ position within that world • Over 2 million members by 1914

37. INTERNATIONAL WORKERS OF THE WORLD (“WOBBLIES”) • Until 1930s, the only union for unskilled factory workers • Socialist inspired • Created in 1905, when a group of small unions from the mining camps of Colorado, Wyoming, and Montana joined together • Led by “Big Bill” Haywood • First union in the U.S. to be dedicated to the overthrow of capitalism and the establishment of a socialist society

38. RISE AND FALL OF IWW • Enjoyed a degree of initial success • Organized migrant farm workers in California, lumber jacks in Pacific Northwest, copper miners in the West, dock workers, and textile workers in Massachusetts • And led several successful strikes • When U.S. entered World War I, government arrested all IWW leaders and deported all members who were foreign born • On the grounds that the union was sabotaging the American war effort

39. THE STRIKE • Major weapon for all unions was the strike • Most strikes of the period were over hours or wages, not political issues • Strikes could assume gigantic proportions • Great Railroad Strike of 1877 • Carnegie Steel Strike of 1892 • Pullman Strike of 1894 • Pennsylvania Coal Strike of 1902

40. COLORADO COAL STRIKE OF 1914 • Strikes in the coal industry were particularly chronic • In 1904, a violent strike erupted in Rockefeller-owned coal fields of Colorado • Put down only after federal troops were sent it • Ten years later, the newly formed United Mine Workers Union tried to organize these same workers • Resulting in another strike when company refused to let its employees join the union • Miners left work, moved out of company-owned towns, and set up a tent camp with their families

41. LUDLOW MASSACRE • Colorado state militiamen machine-gunned one tent camp and then burnt it to the ground • 2 women and 11 children killed • The ensuing battle between outraged miners and state militiamen plunged parts of Colorado into a virtual civil war • Growing national sympathy for miners finally brought strike to an end

42. ANTI-UNION WEAPONS • Most strikes of the period failed • Because of formidable weapons that employers could use against strikers • Bring in strikebreakers to replace striking workers • Hire Pinkerton thugs to beat up and intimidate strikers • Buy the press to print untrue and distorted stories about strikers • Could take unions to court with an army of high-priced lawyers • Most courts at the time were hostile to any sort of union activity

43. MIXED SUCCESS • Progress of labor movement during this period was mixedUnions did provide workers with a means to protect themselves from arbitrary actions of large corporations • But their success in doing so fluctuated and permanent success eluded them • For every union victory, numerous defeats would follow • And even victories were rarely secure • Real success of American unionism would have to wait until the 1930s • When the government finally saw the value of supporting the labor movement

44. CONCLUSION • Period between 1865 and 1917 provided the foundation for the eventual victory of unions by pioneering the tools and organization that American workers would use to carve out a respectable place for themselves in American society and guarantee themselves a decent standard of living • But they would have to fight for these goals • Until the New Deal of the 1930s, neither the government nor big business would grant workers recognition as human beings and valued members of society out the goodness of their hearts