Chapter 16: Survival of the Fittest: Entrepreneurs and Workers in Industrial America, 1865-1900

1. Foundation for Industrialism
   1. Resources, Skills, and Capital
      1. Factors that contributed to rapid U.S. industrial expansion after the Civil War included:
         1. Abundant natural resources: untouched farmland; grasslands; forests; mineral resources.
         2. An experienced work force, with many skilled artisans able to supervise unskilled industrial workers.
         3. Capital accumulated prior to the Civil War from shipping.
         4. Institutions to mobilize capital: banks; stock exchanges; bank branches in England to raise capital there.
   2. The Transformation of Agriculture
      1. Economic expansion was based on a well-developed agricultural sector.
         1. Transportation developed before the Civil War - canals and railroads - moved farm produce over long distances.
         2. Government policy made land available cheaply or even at no cost (under the Homestead Act).
      2. Commercial crops increased markedly because of:
         1. New farming methods: greater use of fertilizer.
         2. New machinery, such as the McCormick reaper.
      3. Agricultural growth stimulated other sectors of the economy, including:
         1. Steel, used in the production of farm machinery.
         2. Shipbuilding, because farm produce was the nation’s greatest export.
         3. Railroads.
   3. The Impact of War and New Government Policies
      1. Republican party policies during the Civil War that set the stage for later economic growth included:
         1. Higher protective tariffs.
         2. Free land for farmers (Homestead Act).
         3. Support for higher education (Land-Grant College Act).
         4. Land grants to railroad companies.
2. Railroads and Economic Growth
   1. Railroad Expansion
      1. A national railroad system developed in the late nineteenth century.
         1. Five transcontintental lines were completed.
         2. Track mileage increased almost fivefold.
         3. Almost all major rivers were bridged.
         4. A standard-gauge track was adopted.
      2. Government aid contributed to railroad expansion.
         1. Between 1862 and 1871, the government awarded approximately seventy land grants to railroad companies.
   2. Railroads: Models for Big Business
      1. The expansion of railroads created the potential for a nationwide market and stimulated the economic development of the West.
      2. Railroad companies also provided an organization model for newly developed industries.
         1. Development of bureaucracy.
         2. Concepts of business administration.
         3. Raising capital on a national and international scale through sale of stocks and bonds.
      3. Excessive competition, including ruinous price wars, led the railroad industry to employ methods to reduce competition and increase profits.
         1. The pool was an agreement to divide up the market.
         2. The rebate was a refund for preferred customers.
         3. Higher rates were charged for short hauls than for long hauls.
      4. Methods used by the railroads in order to prevent government regulation included:
         1. Lobbying.
         2. Free passes for public officials.
         3. Bribery, such as the Crédit Mobilier scandal.
   3. Investment Bankers and "Morganization"
      1. Railroad leaders consolidated their lines in the 1880s to reduce competition and increase efficiency.
         1. The risky (and sometimes unscrupulous) method of watered stock was often used.
      2. They relied on investment bankers, notably J. P. Morgan.
         1. Morgan insisted on consolidation and on membership on the board of directors, in return for raising the capital they needed.
      3. The consolidation movement led to a few large companies, organized in turn in giant networks, and all linked to investment bankers.
3. Entrepreneurs and Industrial Transformation
   1. Andrew Carnegie and the Age of Steel
      1. The trend in American business during the late nineteenth century was from many small businesses to a few giant corporations.
         1. Carnegie led the way in manufacturing, creating the largest and most complex steel company of all.
      2. Carnegie, like many other industrialists, built a giant company on the principle of vertical integration.
   2. Standard Oil: Model for Monopoly
      1. John D. Rockefeller created a monopoly in petroleum refining.
         1. He relied on horizontal integration, absorbing most of his competitors.
         2. He used the device of the trust to circumvent restrictions on a company’s owning the stock of other companies.
         3. Standard Oil Trust became a holding company, once New Jersey law permitted a company to own the stock of other companies.
      2. Standard Oil then turned to vertical integration.
         1. The combination of horizontal and vertical integration led to a near monopoly of the entire oil industry.
         2. New companies later broke the monopoly when oil was discovered in Texas and elsewhere.
   3. Technology and Economic Change
      1. Rockefeller and other entrepreneurs saw advances in technology as giving them a competitive edge.
         1. A host of new inventions resulted, many relying on electricity.
         2. Thomas A. Edison was the foremost electrical inventor; the giant electrical industry was a consequence of his inventions.
   4. Selling to the Nation
      1. The new, large companies turned to advertising.
         1. It was a major way to compete, since products were so similar in content and price.
         2. Trademarks and other logos appeared.
      2. New sales methods emerged, including:
         1. The urban department store.
         2. The mail-order catalog, to reach rural dwellers.
   5. Economic Concentration and the Merger Movement
      1. Large companies emerged during the 1880s in consumer-goods industries, including tobacco, meatpacking, and sugar.
         1. In many cases oligopoly, rather than monopoly, developed.
      2. Mergers swept American industry at the end of the century.
         1. More than one thousand occurred between 1898 and 1902.
         2. The merger movement was partly a response to economic depression between 1893 and 1897.
      3. Investment bankers were central figures in the merger movement.
         1. J. P. Morgan organized United States Steel and International Harvester.
         2. They received seats on boards of directors in return for consolidating companies and selling their stock.
         3. Business now began to rely on sale of stocks (and the promise of dividends) to raise capital, thereby copying what the railroad industry had pioneered.
4. Workers in Industrial America
   1. Labor and Mobility
      1. Workers were rarely able to rise to the middle class.
         1. The Horatio Alger version of upward mobility was beyond the reach of most.
      2. Reasons included:
         1. Low wages.
         2. Layoffs during economic slumps.
         3. Government did not provide unemployment benefits.
   2. Workers for Industry
      1. The labor force came from within the nation and from abroad.
         1. Rural dwellers in New England and the Mid-Atlantic states moved to urban areas.
         2. Immigration skyrocketed between 1865 and 1914.
      2. Children worked in industry.
         1. More worked in textile factories than in any other form of industry.
      3. Industry also employed women.
         1. Single women and black women predominated.
         2. Women predominated as workers in textile factories and in offices.
         3. Women generally received lower wages than men, even for the same work.
   3. The Transformation of Work
      1. Most adult workers were born in rural societies and had to adjust to working in industry.
         1. The rural worker set his own pace, while the industrial laborer’s pace was dictated by a machine whose pace was controlled by a manager.
         2. Efficiency experts determined ideal speeds at which workers were to function, while industrial engineers simplified work by breaking it down to small components.
         3. These techniques reduced the need for skilled labor and permitted greater control of unskilled workers.
5. The Varieties of Labor Organization and Action, 1865 - 1900
   1. Craft Unionism - and Its Limits
      1. Skilled workers formed the first unions, called craft unions or trade unions.
         1. Membership was limited to white males.
         2. The craft union controlled access to apprenticeship training.
         3. The craft union could use strikes effectively because of the employers’ need for skilled labor.
      2. Efforts to form a national organization in 1866 foundered by 1872.
   2. The Great Railway Strike of 1877
      1. Railroad workers in many states went on strike spontaneously in the summer of 1877.
         1. Declining wages between 1873 and 1877, capped by a further reduction of 10 percent, led to their action.
         2. Strikes and demonstrations of support ensued in many states among a cross section of industries.
      2. Employers relied on federal troops, state militias, and urban police to break the strikes, with much loss of life and property damage.
         1. Many Americans feared continuing labor strife and even revolution.
   3. The Knights of Labor
      1. The Knights of Labor offered an alternative to the craft union.
         1. The unskilled as well as the skilled could join, as could women and African Americans.
      2. The national leadership advocated a variety of labor reforms.
         1. These included an end to child labor, the eight-hour day, and safety regulations.
         2. They preferred political action to strikes to achieve these.
      3. The Knights of Labor became the leading U.S. workers’ organization during the 1880s.
   4. 1886: Turning Point for Labor?
      1. The Haymarket violence in Chicago exacerbated anti-union sentiment.
         1. In the aftermath of the Haymarket, employers portrayed labor organizations as radical and terrorist.
   5. Uniting the Craft Unions: The American Federation of Labor
      1. Craft unions formed the American Federation of Labor in 1886.
         1. The organization’s goal was to achieve such reforms as higher wages, reduced hours, and better working conditions.
         2. It relied on strikes, when necessary, to achieve its aim of improving working conditions.
   6. Labor on the Defensive: Homestead and Pullman
      1. The 1892 Homestead steel-plant strike was broken by the use of strikebreakers and the state militia.
         1. The nation’s largest craft union was soundly defeated, underscoring the weakness of organized labor in the new industrial environment.
      2. Attempts to build industrial unions (distinct from craft unions) also failed.
         1. Debs organized the American Railway Union in 1893.
         2. When it backed a Pullman workers’ strike in 1894, the railway companies set out to destroy it.
         3. A U.S. government injunction against the strike and the use of federal troops crushed the strike and destroyed the union.
      3. The Depression of 1893 also undermined the union movement.
6. The Nation Transformed
   1. Celebrating the New Age
      1. Expositions between 1876 and 1915 celebrated modern American society and its economy.
   2. Survival of the Fittest?
      1. Social Darwinism applied Darwinian evolutionary principles to human society.
         1. Social Darwinists identified competition as the best way to ensure the survival of the fittest and to improve civilization.
         2. They portrayed the industrial entrepreneur as the fittest to survive and as one who improved the human condition.
      2. Andrew Carnegie advocated the Gospel of Wealth.
         1. According to Carnegie, entrepreneurs contributed to civilization by returning their wealth to the community.
         2. Carnegie, Rockefeller, and other entrepreneurs accordingly turned to philanthropy, financing cultural and other public institutions.