Ch.6 – The Expansion of American Industry

1. Ch.6 – The Expansion of American Industry

2. Life in 1865 -  No indoor lighting Used ice blocks to keep food cool (expensive) Long-Distance Communication Took up to a month to deliver a letter from East to West Coast By 1900 -  Standard of living was one of the highest in the world Why? Increased productivity Patents: 1790-1860: 36,000; 1860-1890: 500,000 Lots of NEW inventions! Changes in Daily Life

3. New Forms of Energy • Oil • In 1858, Edwin Drake struck oil in Titusville, Pennsylvania (boomtown) • Oil business grew rapidly • Oil Refineries transformed crude oil into kerosene • Byproduct – gasoline was seen as a waste product and simply thrown away What were the effects of petroleum on the development of the US?

4. How did the growth of electric power impact the development of the U.S.? Technology gap arises between rural and urban areas

5. Communication Breakthrough • TELEGRAPH • Sending messages over a wire • Early 1700s • Samuel Morse (his patent & code) • Companies form early & merge after CW • Western Union • 100k miles in 1870 • 900k miles in 1900 http://www.legendsofamerica.com/photos-americanhistory/TelegraphOperattor.jpg

6. Communication Breakthrough • TELEPHONE • Alexander Graham Bell- 1871, Scottish immigrant working on “talking telegraph” • 1876, has a patent • Set up telephone business • Expansion through central switchboards • 1.5M lines by 1900

7. Railroads Create a National Network • Transcontinental Railroad: railway extending from coast to coast • Congress believed it would help economic infrastructure • Central Pacific   Union Pacific • Project began in 1862 and finished on May 10, 1869 at Promontory Summit (Utah) • Most workers were immigrants from Ireland and China

8. Railroad Developments • Problems • Noisy, dirty, and uncomfortable for travelers • Improvements • Steel rails replaced iron rails; track gauges and signals were standardized • Safety: Air brakes; telegraph system for moving trains to communicate w/each other (reduced the risk of collisions) • Introduction of time zones (scheduling)

9. Railroads & Industry • Faster and more practical means of transporting goods • Lower costs of production: shipping costs dropped thus, more goods could be sent at lower prices • Creation of national markets: businesses could market products nationally and locally • Model for big business • Stimulation of other industries (ex. Steel)

10. The Bessemer Process • In 1856, Henry Bessemer received the patent on the process • Process made it much easier and cheaper to remove the impurities from iron • Process: Melt iron, add carbon, and remove impurities • Steel is lighter, stronger, and more flexible • Steel was now mass produced • Led to innovations in architecture (skyscrapers, bridges) Brooklyn Bridge • Chicago Reliance Building

11. Big Business The railroads showed the US just how massive business could get and how much money could be had by just a few individuals. There is a group of these guys, industrialists from this era, that amassed huge fortunes through various means. They are known by 2 different names: • Robber Barons • Captains of Industry (*Note that these 2 names refer to the same group of people.) http://www.icsd.k12.ny.us/legacy/acs/library/ushistory/laborwebquest/images/robber_barons.jpg

12. Term #1: Robber Baron • Background… German nobles in 1200s that controlled the Rhine River who used strategic positioning to take advantage of passersby • Demanded tolls from everyone • Ships must pay or they can’t pass • Got RICH simply because of their strategic location • In the Gilded Age, this was a negativeterm for rich industrialists. • Built their fortunes by stealing from the public (strategic locations in business world) • Drained natural resources • Drove competitors out of business • Paid workers minimally • Forced employees to work in dangerous & unhealthy conditions

13. Term #2: Captain of Industry • This was a positiveterm for rich industrialists. • Captains • Leading us into a new era of commerce • Increasing the supply of goods by building factories • Raising productivity • Expanding markets • Creating jobs (raising standard of living for many) • Philanthropists • Billions $ in donations–museums, libraries, colleges http://willvideoforfood.com/wp-content/uploads/2008/03/captain-crunch.jpg

14. Social Darwinism • Applied Darwin’s theory of natural selection to the business & social sectors • “Survival of the fittest” • JUST DON’T INTERFERE WITH COMPETITION! • The government would largely stay out of business’s way during this time.

15. BIG Business • Why is called BIG business? • Large pools of capital: • invest your own money or borrow $$$ • Wider geographic span • Broader range of operations: combined multiple operations in one place

16. Business on a Larger Scale • Therefore, business grew. • No longer cottage industries (mom/pop shops) • Start-up costs were high, therefore, only a few companies could compete • Difficult to enter

17. BIG Business • Revised role of ownership: • owners had less connection of operations • New methods of management: • Not knowing all employees or aspects of operation • “Professional manager” John D. Rockefeller   Andrew Carnegie

18. New BIG Industries • Oil • John D. Rockefeller • Steel • Andrew Carnegie • Railroads • Jay Gould • We’ll get to him in later Chapters…

19. John D. Rockefeller • Formed Standard Oil Company • Controlled up to 91% of oil industry • Richest man ever $323.4 billion • Numerous enormous donations • Over $500 million http://www.ohiohistorycentral.org/images/John_D._Rockefeller.jpg

20. Andrew Carnegie’s “Gospel” • Made money in steel industry • “Gospel of Wealth” • Businessmen should accumulate as much wealth as they can & redistribute to society • 80% of wealth to education • Flip side: Keep moneyaway from ill-equipped people & organizations • To benefit society as a whole

21. Gaining a Competitive Edge • Monopoly: companies that gain complete control of a product or service • Drove small competitors out of business • Free to raise its prices when there are no competitors

22. Gaining a Competitive Edge • Oligopoly: a market dominated by only a few large, profitable firms • Examples: Breakfast cereals, cars, and household appliances • Nationwide businesses because of transportation & communication advances • Cartel: loose association of businesses that make the same product • Limit supply of product & can keep prices high • Example: Diamond Industry, OPEC • Economies of Scale: as production increases, the cost of each item produced is lower • This put small companies at a disadvantage http://www.swcollege.com/bef/cebula/images/F02_movie.gif

24. 2 distinct ways to create monopolies… • Vertical consolidation • Andrew Carnegie’s steel company controlled every aspect of the supply chain (production to delivery). Horizontal consolidation John Rockefeller acquired all but 10% of the oil industry; if you wanted oil, you had to go thru him. Coke fields Ships Iron ore deposits Steel mills Railroads ALL purchased by Carnegie Carnegie Steel Company Standard Oil Company Purchased by Rockefeller Independent Oil Refineries

25. More on Rockefeller... • He often dropped prices to below cost to drive out competitors. • When the government cracked down on monopolies, they formed trusts instead. • Merging companies under a board of trustees that acts as 1 accord but are technically not 1. Gov’t response = Sherman Antitrust Act 1890 • Outlawed any combination of companies that restrained interstate trade or commerce • Poorly enforced; vague wording made it ineffective • Pro-business courts ruled in favor of business • Helped businesses against trade unions

26. I’d rather own the company… http://www.dwd.state.wi.us/dwd/DWDHistory/images/women_in_factory_big.jpg • Ruled by the clock • Work week= 12 hours a day, six days a week • Strict rules • no tardiness, no talking • Dangerous • Very loud, dark, dirty, hot, poorly ventilated, w/ frequent fires & accidents • No workers’ comp or insurance • Many young children had to work • No help provided • Against “Social Darwinism” • Would only encourage idleness

27. What was work like? • Piecework: those who worked the fastest and produced the most pieces earned the most money • Sweatshop: a shop where employees worked long hours at low wages and in poor working conditions http://faculty.citadel.edu/hutchisson/Images/sweatshop.jpg

28. Increasing Efficiency • Frederick Winslow Taylor’s Time & Motion Studies: • Goal to increase worker productivity and thereby increase profits • Broke down each task into a number or steps and determined how long each step should take. • Some employers simply increased the speed of machines and gave employees more work http://imagecache2.allposters.com/images/adc/10098908A.jpg

29. Division of Labor • Factory Workers • Perform one small task repeatedly • Division of Labor • More efficient • Boring • Artisans • Make product from start to finish • Performed a variety of tasks http://www.rootsweb.ancestry.com/~nytigs/LinenCollarFactoryWorkers.jpg

30. Child Labor & Working Families • By the late 1800’s nearly 1 in 5 children between the ages of 10 and 16 were employed • Everyone had to work to survive • Kids dropped out of school to help the family • Children’s wages meant the difference between going hungry or having food on the table • Social Darwinism taught against government aid http://historyplace.com

31. Gulf Between Rich & Poor • In 1890, the richest 9% of Americans held nearly 75% of the national wealth! • Example: On average, 3 out of a class of 30 students would have 75% of the national wealth.

32. What this quote tell you about the relationship between workers and business owners? • “You have endured the pangs of want and hunger; your children you have sacrificed to the factory-lords. • In short, you have been miserable and obedient slaves all these years. Why? • To satisfy the insatiable greed, to fill the coffers of your lazy thieving master!” • - August Spies, Newspaper Editor • Anarchist- radicals who oppose all government

33. Socialism http://libcom.org/files/images/library/BarrowShipYardWorkers1900%5B1%5D.jpg • Some workers became politically active. A few were drawn to the idea of socialism- an economic and political philosophy that favors public instead of private control of property and income • Society at large, not just private individuals, should control a nation’s wealth. • Wealth should be distributed equally to everyone.

34. Early Unions • Became strong after the Civil War • Provided help to members in bad times • Soon became the means for expressing workers’ demands to employers • Shorter workdays • Higher wages • Better working conditions • Scab- negative term for a strike breaker https://wiki.brown.edu/confluence/download/attachments/16612/200px-Debs.jpg

35. National Unions • Knights of Labor • Recruited skilled and unskilled workers, women, and African Americans • Emphasized education and social reform • Equal pay for equal work • 8-hour work day • End to child labor • Strikes were largely unsuccessful (one successful strike forced Jay Gould to give up wage cut) http://photobucket.com/albums/f53/midtowng/KoL.jpg

36. National Unions • American Federation of Labor (AFL) • Created by Samuel Gompers • Craft union- organize skilled workers • Collective Bargaining- workers negotiate as a group with employers • Industrial Workers of the World (IWW, Wobblies) • Unskilled workers • Many Socialists, with violent strikes http://img54.imageshack.us/img54/1360/usaiww3dc.jpg

37. Reaction • Many employers disliked and feared unions. • They forbade union meetings. • They fired union organizers. • They forced yellow dog contracts (workers promised never to join a union or strike). • They refused to bargain collectively. • They refused to recognize unions.

38. STRIKE! http://www.ohiohistorycentral.org/images/1240.jpg • Great Railroad Strike of 1877 • 10% wage cut during a depression • Clashes between federal troops/militia and workers • Led to creation of the American Railway Union under Eugene Debs • Industrial Union- workers from all crafts in a given industry • Began violent era of labor relations • About 24,000 strikes occurred across the nation from 1881-1900 • Haymarket (1886)- 8hr work day, ended violently • Homestead (1892)- Carnegie Steel-tried to cut wages, brought in Pinkertons, anarchist not connected with union failed in attempt to assassinate Henry Frick, but public associated his act with strike violence. • Pullman (1894)- Factory town- cut wages but kept rent and food prices the same. Union went on strike, and Pullman closed the factory. American Railway Union boycotted Pullman cars, and impeded mail distribution. Govt. ruled against ARU citing the Sherman Anti-Trust act.

39. Conclusion Labor unions had only limited success at this time. They brought many of labor’s pressing issues to light, but they were often met with violence and government opposition during strikes. http://www.canadiandimension.com/issues/v40n3/mayday2.jpg