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Big Business & Labor. Carnegie, Social Darwinism, and Unions. Carnegie’s Innovations. Andrew Carnegie was a self-made millionaire who was originally from Scotland. Carnegie Steel Company became the leading steel producer in the world by 1899.
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Big Business & Labor Carnegie, Social Darwinism, and Unions
Carnegie’s Innovations Andrew Carnegie was a self-made millionaire who was originally from Scotland. Carnegie Steel Company became the leading steel producer in the world by 1899. Carnegie’s business strategies led to his rise in fortune. He found cheaper ways to produce goods with new technology, and he brought in talented workers with stock as incentive. Carnegie also took control of all the markets connected with steel. Vertical integration bought out the raw materials and distribution processes, while he also bought out the competition with horizontal integration.
Social Darwinism & Business The theory of Social Darwinism was the idea that the business world was based on “survival of the fittest” This led many to argue against regulation of big business by the government, since success and failure were governed by natural law and none should intervene. This notion supported individual responsibility and blame, therefore it was inferred that being rich meant God had blessed while being poor was the fault of the poor. Do you believe this to be a fair, or true statement? Why or why not?
Growth & Consolidation Many smaller companies began to merge in order to remain in competition. Firms would buy out the stock of competing industries, and once all were owned, you had a monopoly. Holding companies were a way of gaining a monopoly, and there sole job was to buy stock. One such company was headed by J.P. Morgan– US Steel, which became the world’s largest business in 1901 after buying Carnegie Steel. Another way to establish a monopoly was through trusts. Standard Oil Company, established by John D. Rockefeller, was a trust in which companies pool their stock to create one large company. Companies earned dividends on the profit made through trusts, but these were not legal mergers.
Rockefeller & The “Robber Barons” Rockefeller’s Standard Oil jumped from producing 2-3% of the nations crude oil in 1870, to producing 90% by 1880. He made huge profit by underpaying employees, having lower prices then the competition, and hiking up the prices once the competition was gone. These tactics labeled these captains of industry as the “Robber Barons,” but this was not entirely true. Both Rockefeller and Carnegie were avid philanthropists. Rockefeller gave away $500 million and Carnegie gave away 90% of his wealth.
Sherman Anti-Trust Act The government became alarmed by the formation of trusts and monopolies, and felt that free competition was becoming extinct. In 1890, the Sherman Anti-Trust Act made it illegal to form a trust that interfered with free competition and trade. This was ineffective … why? “Trusts” were not clearly defined in this act, which made it difficult to prosecute companies. Also, companies like Standard Oil could reorganize themselves into one company to evade governmental interference.
Business Boom Bypasses The South • The South was still recovering from the Civil War. • They were without capital, and no one wanted to invest in their industries. • The North owned 90% of stock in their most profitable enterprises. • Farmers were at the mercy of railroads and entrepreneurs paid high tariffs on raw materials and imports. • The South was stuck in a position of poverty.
Labor Unions Emerge Laborers of the late 19th century did not enjoy the benefits of today. Some worked 7 day weeks or 14 hour days, and there were no sick days, workers compensation, unemployment pay, or even vacation time. Injury rates were very high (i.e. 675 deaths/week in 1882) and everyone in the household needed to work. Some children at the age of 5 had full time jobs in sweatshops where pay could be as low as $0.27 for a 14hr day. Early labor unions included the National Labor Union (NLU) which successfully persuaded Congress to legalize an 8hr day for government workers in 1868. The Noble Order of the Knights of Labor was another group that formed, and like the NLU they sought to get better rights for laborers. They did not see strikes as the primary way to get their demands, but rather through negotiation.
Union Movements Diverge Two major types of unions emerged in the late 19th century: Craft and Industrial Unionism Craft unionism was the combining of several skilled trades, as seen with Samuel Gompers and the American Federation of Labor (AFL) The AFL used strikes as its major tactic and with success. Pay rose from $17.50 to $24.00 while the work week hours fell form 54.5 to 49hrs between 1890 and 1915. Eugene V. Debs targeted both skilled and unskilled laborers to form the American Railway Union (ARU) as an industrial union. Through strikes the ARU won higher wages in 1894, but declined after a strike went badly. Chinese, Japanese, and Mexican farmers and miners also joined these efforts in the west with some success.
Socialism & The IWW Eugene V. Debs and other activists began to look at socialism as a way to combat abusive labor systems. They felt that government control over business and wealth would end capitalism. Most were not extreme though, and sought only to make reforms in industries. The Industrial Workers of the World (IWW) was a group of radical unionists and socialists in Chicago, also known as Wobblies. Although the IWW saw little success, it displayed solidarity among the lower class workers, and added to the reform fervor of the era.
Strikes Turn Violent Unfortunately, industry and the government responded forcefully to union activity and this gave rise to violence and unrest in the late 1800’s. The Great Strike of 1877 (pictured right) took place when B&O Railroad workers struck in protest of wage cuts. Railroads stopped for a week before Pres. Hayes intervened with federal troops.
The Haymarket Affair The Haymarket Affair turned the public against unions due to the violence it produced when a bomb was thrown into a crowd leading to violence and the death of 7 police, several workers and those hanged for inciting treason.
The Homestead Strike At Carnegies Steel Plant in Homestead, PA workers struck and were attacked by Pinkerton detectives hired by Henry Frick. 3 detectives and 9 strikers were killed, leading to the National Guard being called in to end the strike.
The Pullman Company Strike After laying off 3,000 workers and cutting wages by 25-50% and not lowering rent, the Pullman strike began and were helped by the ARU. The arrival of scabs led to violence which needed Pres. Cleveland’s aid to put down with troops.
Women Organize Many unions barred women from joining, but they still organized for better working conditions, equal pay, and ending child labor. Mary Harris Jones was the most prominent voice and was nicknamed Mother Jones by coal miners she supported in their strike. She led 80 mill working children to Pres. Roosevelt’s home on a march in an effort to expose the cruelties of child labor. The Triangle Shirtwaist Factory in NYC exposed the conditions women had to work in for the garment industry when a fire broke out and women were trapped inside due to locked doors. 146 women perished in the blaze and the factory owners were acquitted, but this led to a task force to investigate conditions afterwards.
Management & Government Pressure Unions As unions gained power, employers feared them more. Employers responded by forbidding union meetings, firing union members, and forcing new employees to sign “yellow-dog” contracts. Businesses also used the Sherman Anti-trust Acts against unions by arguing that their activities interfered with interstate trade. Even with these limitations, unions still flourished into the 20th century. The AFL had 1.7 million members by 1904, and 2 million by 1919.
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