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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.
Inventors
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
benefit.
*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
process.
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,
important
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
watering.
*Corporation capitalized at $1.4 billion making it America’s
first
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
West.
*Gutted their railroads by stock watering and pocketing profits rather than
reinvest.
- 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
capitalism.
- Herbert Spencer -- advocated idea of Social Darwinism
*Applied Darwin’s theory of natural selection to human
competition
*"Millionaires a product of natural selection": William Graham
Sumner
- Some argued that Divine Providence was responsible for winners and losers in
society
- Identify of interest idea held that existing hierarchy was just and decreed by
God.
- 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
want
*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
squalor.
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
needs.
- 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
poverty.
- 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
and
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
*Corporations could also ask states to call in troops.
*Employers could lock-out rebellious workers & starve them into
submission.
- 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
conservatives.
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
1873.
*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
intervention.
*The strike inspired support for the Greenback-Labor party in 1878 and
Workingmen’s
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
paralyzed.
*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
crime
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
sentences
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.
*Background
i. Led by Terence Powderly – a moderate; not a radical
ii. Founded in 1869 as a secret society (like the Masons and
others)
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
currency
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
anarchists.
-- 8-hr movement suffered and subsequent strikes met with many
failures.
ii. Inclusion of both skilled and unskilled workers proved a
fatal handicap.
- Unskilled labor could easily be replaced with "scabs,” while
High-class
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;
non-political
i. Accepted existence of two conflicting classes: workers and
employers.
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
candidates
*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
blacks.