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Chapter 17

1. Kelly-Bessemer process:
- 1850s
- Turned iron into steel.
- Steel could now be readily produced for locomotives, steel rails, and the
heavy girders used in building construction.
2. Beginnings of oil Industry:
- First well in PA in 1859 started U.S. petroleum industry overnight.
- Oil would dwarf the wealth generated by all the gold extracted in West.
- Oil used in lubrication of machines.
- George Bissell discovers use of oil in lamps, and begins movement towards oil.
- Oil demand increases as oil is discovered as fuel; new sources for oil are
sought in other areas.
* “Black gold” is found in Texas and Oklahoma; leading producers of oil in the
United States.
i. New discoveries of oil break Standard oil’s monopoly.
3. Marconi and the radio
4. Wright brothers and flight
- Airplane at Kitty Hawk North Carolina
5. Duryea brothers and Ford and the automobile:
-Duryea brothers – First gasoline motor vehicle in America
- Ford – Industrial Line, Manufacture Automobiles
6. Assembly Line
- Changes in techniques of production support growth in production.
- Principles of “Scientific Management”/ “taylorism”: Way to manage human labor
compaitably in the machine age; increases employer’s control of the workplace,
working people are less independent.
- Subdivide tasks to speed production, and make employees interchangeable, less
dependence on skilled workers.
- Manufacturerers emphasize industrial research.
- Ford’s moving assembly line leads to mass production, the most important
change in production.
7. Expansion of Railroad
- Principle agent of industrial development in late 1800s is expansion of RR.
- RR promote economic growth: Main source of transportation, open new markets
and new resources, largest businesses that create new forms of corporate
organization, and greatest investors.
- RR increase significantly every decade of 1800s.
- Government and private investment allows great expansion of RR.
- RR combinations emerge that bring most RR under control of a few men.
- Contributes to the development of the modern corporation.
8. Limited Liability
- Laws of incorporation passed by states in 1830s and 1840s allow business
organizations to raise money by selling stock to members of the public; wealthy
Americans purchase stock in industries they do not participate in.
- Investments are made appealing by “limited liability,”: Investors risk only
the amount they invest; not liable for any debts.
- Ability to sell stock to public allowed entrepreneurs to gather large sums of
capital to pay for projects.
9. Carnegie and steel
- Andrew Carnegie
*Leader in the Steel Industry
- Carnegie exercised direct control over his company, allowing only close
friends to be stock holders, using a system of partnerships to integrate a
production line, which combined coal and ore mines, limestone quarries, coke
ovens, ore-carrying ships and railroads.
- 1901 - Carnegie sold his holdings to a J.P. Morgan (1837-1913) combine who
created US Steel , the first billion dollar corporation.
- Carnegie followed the "Stewardship of Wealth", turning to philanthropy
*"Gospel of Wealth" -- a concentration of wealth was needed if humanity were to
progress, but the rich were obligated to use their wealth for the public's
*He disposed of $350 of $400 million before his death, endowing libraries,
building public buildings and establishing foundations.
- Henry Clay Frick -- his general manager and partner
- Pioneered Vertical integration" -- controlling every aspect of the production
10. Rockefeller and Standard Oil
-In 1870, organized the Standard Oil Co. of Ohio; By 1877, controlled 95% of oil

refineries in U.S.
-Pursued a policy of rule or ruin; ruthless in his business tactics
-Standard Oil produced a quality product at a cheap price which fueled,
economies home and abroad
*Large-scale methods of production and distribution
*Consolidation proved more profitable than ruinous price wars.
- Standard Oil is formed by both horizontal and vertical integration.
- Rockefeller saw consolidation as a way to cope with the curse of “cutthroat
competition”; successful enterprise can eliminate or absorb its competition;
fears too much competition.
11. J.P. Morgan and banking
- Owned a Wall Street banking house which financed the reorganization of
railroads, insurance companies, and banks.
- In 1901, he launched the enlarged United States Steel Corporation
*Combination of Carnegie’s holdings and others, and stock
*Corporation capitalized at $1.4 billion making it America’s
billion dollar corporation.
- Elbert H. Gary, a co-leader of USX
- Perfected the “trust” form of consolidation by centralized control.
*Stockholder transfer stocks to small group of trustees in
exchange for shares in the trust; owners of certificates have little control
over trustee decisions; receive part of business’s profits.
12. Vanderbilt and railroads and shipping
- Popularized the steel rail; replaced the old iron tracks of the NY Central RR;
Steel safer and more economical since it could carry a heavier load.
- Amassed a fortune of $100 million dollars
- Jay Gould and Russell Sage by 1880 controlled much of railroad traffic in
*Gutted their railroads by stock watering and pocketing profits rather than
- Significant improvements in railroad building
a. Steel, standard gauge of track width
b. Pullman Palace Cars afforded luxurious travel.
- He built no new lines, but acquired controlling interest in rundown railroads
combining and selling them as a package.
13. Social Darwinism
- Charles Darwin -- Origin of the Species ("survival of the fittest" theory);
used his theory as the foundation for promoting the virtues of free-market
- Herbert Spencer -- advocated idea of Social Darwinism
*Applied Darwin’s theory of natural selection to human
*"Millionaires a product of natural selection": William Graham
- Some argued that Divine Providence was responsible for winners and losers in
- Identify of interest idea held that existing hierarchy was just and decreed by
- Those who stayed poor must be lazy and lacking in enterprise.
- Many of the new rich had succeeded from modest beginnings (Carnegie)
- Rev. Russell Conwell: "Acres of Diamonds" lectures made him rich.
14. The Gospel of Wealth
- Justified uneven distribution of wealth by industrialists
- Andrew Carnegie: The Gospel of Wealth synthesized prevailing attitudes of
wealth and survival of the fittest.
*Wealth was God’s will
*Stated money should be give away for the public good but not to
individuals in
*Believed in the long run extreme disparities of wealth were
good for the "race," because
the wealthy added to civilization.
*Believed alternative to inequities of wealth was universal
15. Socialism as an alternative
- Lester Frank Ward; Darwinist
*Rejected application of Darwinism to human society.
*Believed civilization was governed by human intelligence.
* Believed active government involved in positive planning was
society’s best hope;
people could intervene in the economy through their government to suit their
- Socialist Labor Party
* Lead by Daniel De Leon.
* Attracted following in industrial cities; did not become a
major political force.
- Henry George; Progress and Poverty
*Social problems are resulting of the ability of a few
monopolists to grow wealth through rising land values; an increase not caused by
the owner but by the growth of society around the land.
* “Unearned Increment” of increasing land values is community’s;
“single tax” replace all taxes, and return the gain to the people to eliminate
- Edward Bellamy – Looking Backward
*Utopian socialist society.
16. Immigration Increase
- The rise of American industry attracted immigrants from a number of
economically depressed areas of the world (especially Russia and Italy), which
provided Big Business with a cheap labor force of unskilled laborers.
- New Immigration: a reference to immigrants coming from less desirable
countries, Eastern and Southeastern Europe, Greek Orthodox, Russian Orthodox,
Jewish Immigrants
*"Native" Americans feared that this influx of immigrants would alter the face
culture of America.
- Reaction by older native-born Americans
*Nativism - Reaction of "native" Americans to the influx of immigrants from
Southeastern Europe and Asia
*Increased immigration led to friction with "older" Americans
*White Anglo Saxon Protestants saw their institutions ethnically, culturally,
legally linked with Britain.
*Other kinds of immigrants were seen as inferior, a threat to the "American" way
of life.
17. Life of Workers
- Conditions for workers in the 2nd industrial revolution were precarious
*Low-skilled jobs make workers expendable as number of workers abundant
*Mechanization created short-term losses of jobs; better in long-run
- Working conditions often dismal and impersonal
- Recourse minimal to face of the vast power of industrialists
*Strikes often nullified by the use of "scab" workers
*Conservative federal courts often ruled in favor of
*Corporations could also ask states to call in troops.
*Employers could lock-out rebellious workers & starve them into
- Corporations sometimes owned a "company town" where high priced grocery
stores, easy credit, and sometimes rent deductions created a cycle debt.
- Public grew tired of frequent strikes; often unsympathetic to the workers’
plight; Strike seemed to many foreign and socialistic and thus, unpatriotic.
- Labor’s goals of curency reform, greenback currency, and opposition to
national banks alarmed conservatives for the rest of the century.
18. Molly Maguires
- Formed in 1875 by Irish anthracite-coal miners in Pennsylvania
- Members were part of an Irish American secret fraternal organization.
- Mollies used intimidation, arson, and violence to protest owners’ denial of
their right to unionize.
- President of Reading Railroad called in Pinkerton detective agency for help.
*Mollies destroyed and twenty of its members hanged in 1877.
- The Mollies became martyrs for labor and a symbol for violence among
19. Strikes (Railroad Strike of 1877; Homestead Strike of 1892; Pullman Strike
of 1894)
- Great Railroad Strike (1877)
*Several railroads informed workers wages to be cut by 10% for 2nd time since
*First nationwide strike; paralyzed railroads throughout the East and Midwest
and idled
some 100,000 workers; 14 states and 10 RR
i. Later, farmers, coal miners, craft workers,
and the unemployed joined in.
*President Hayes sanctioned use of federal troops in PA; set
precedent for future federal
*The strike inspired support for the Greenback-Labor party in 1878 and
parties in the 1880s.
- Homestead Strike
* In Carnegie’s steel plant near Pittsburgh; Frick & Carnegie announced 20% pay
slash for steelworkers.
*Demonstrated a strong employer could break a union if it hired
a mercenary
police force and gained gov’t and court protection.
*Amalgamated Association of Iron, Steel, and Tin Workers went on
strike and Frick
then locked them out.
i. Led to worker uprising – factory surrounded; scabs not
allowed through lines
*Frick called in 300 Pinkerton detectives.
i. Armed strikers forced their assailants to surrender after 9
Pinkertons and 7 workers
were killed and about 150 wounded.
*PA governor brought in 8,000 state militia and scabs replaced workers.
*Union was effectively broken.
- Pullman Strike, 1894
*Pullman Co. responded to the Great Railroad Strike of 1877 by
building a model
company town for his workers near the factory in Chicago.
*Pullman Palace Car Company hit hard by the depression & cut
wages by 1/3 but
maintained rent prices in the company town.
*Eugene V. Debs helped to organize the American Railway Union of
about 150K
i. Workers went on strike; Railway traffic from
Chicago to Pacific Coast
*Attorney General Richard Olney sent federal troops stating
strikers interfering
with transit of U.S. mail.
*President Cleveland supports conservatives.
*Troops sent in over Governor Altgeld’s objections and violence spread to
several states.
i. Strike crushed and 150,000 ARU destroyed.
*First time gov’t used an injunction to break a strike
i. The gov’t made striking, an activity not previously defined as illegal, a
ii. Populists & other debtors concerned as Pullman episode proof of an
alliance between big business and the courts.
20. Haymarket Square bombing 1866
- Chicago
- May 4, 1886, Chicago police advanced on a meeting called to protest alleged;
brutalities by the authorities in May Day strikes.
*Alleged German anarchists present who advocated a violent overthrow of gov't
*A dynamite bomb was thrown in the crowd that killed 8 police; 60 officers
injured by police fire; 7 or 8 civilians killed; 30-40 wounded
*Resulted in the first full-blown red scare in Chicago for 2 months.
i. Five anarchists sentenced to death and three others given stiff prison
although nobody could prove they had anything to do with the bombing.
ii. In 1892, Gov. John P. Altgeld, a German-born Democrat pardoned the 3
survivors after exhaustive study of the Haymarket case.
21. Knights of Labor; American Federation of Labor/attitudes about labor
- Knights of Labor seized the torch of the National Labor Union.
i. Led by Terence Powderly – a moderate; not a radical
ii. Founded in 1869 as a secret society (like the Masons and
iii. Used republican imagry associated with Lincoln that each
man should have a
say in the political and economic issues that affected him.
iv. Much of leadership and membership was Irish.
*Sought to include all workers in "one big union" including blacks & women.
i. Industrial unionism idea was ahead of its time
*Campaigned for economic and social reform
i. Producers’ cooperatives and codes for safety and health; end
to child labor.
ii. Fought for an 8-hr workday through winning a number of strikes;
higher pay
and equal pay for women.
iii. Government regulation of railroads; postal savings banks,
gov’t paper
iv. Sought arbitration rather than industrial warfare;
Discouraged strikes and
violence as a means for change
v. Won major strike in 1885 against Gould’s struggling railroads.
- Victory increased Knight’s membership to more than 700,000 in 1886.
*Demise due to the Great Upheaval (1886) – 1,400 strikes involving 500k workers.

i. Knights of Labor became mistakenly associated with
-- 8-hr movement suffered and subsequent strikes met with many
ii. Inclusion of both skilled and unskilled workers proved a
fatal handicap.
- Unskilled labor could easily be replaced with "scabs,” while
craft unionists enjoyed a superior bargaining position; irritated with giving
up their bargaining advantage due to the failure of unskilled labor strikes.
- American Federation of Labor (AFL)
*Formed in 1886 under the leadership of Samuel Gompers
*Consisted of an association of self-governing national unions
with the AFL unifying
overall strategy.
*Gompers’ path fairly conservative; bitter foe of socialism;
i. Accepted existence of two conflicting classes: workers and
ii. Only wanted labor to win its fair share; better wages and
hours, and improved
working conditions ("bread and butter" issues)
c. Did, however, attempt to persuade members to vote for favorable
*Closed shop -- all workers in a unionized industry had to belong to the union.
i. Provided necessary funds to ride out prolonged strikes.
*Chief strategies of AFL: walk-out and boycott
ii. Shortcomings: did not represent unskilled labor esp. women and