XVII.

Industrial Supremacy
I. Sources of Industrial Growth
- abundant raw materials, large labor supply, tech. innovations, much entrepreneurship,
strong federal gov’t, & expanding domestic market
1. Industrial Technologies
a) new iron and steel production techniques -- Henry Bessemer and William Kelly
invented process to turn iron to steel,
b) Abram Hewitt made possible to produce large quantities and dimensions for
construction
c) steel industry emerged in Pennsylvania and Ohio (Pittsburgh notably)
d) RR industry revolutionized by industry (R.J. Hackett – significant freighter)
2. The Airplane and the Automobile
a) creation of gasoline and “internal combustion engine” vital to invention of
automobile
b) first gas-powered car built by Duryea bros (1903)
 Henry Ford began production in 1906
 c)1st flight (1903) by Wright Bros
c) US created National Advisory Committee on Aeronautics (1915)
 match European r/d
3. Research and Development
a) new technology led to a need for sponsorship for r/d
 General Electric creates 1st corporate lab in 1900
b) growth of private sponsor leads to decline of gov’t centered r/d
c) some scientists avoided “commercialization” but eventually warmed up to the idea of
supporting the nation
4. The Science of Production
a) “Taylorism” develops to speed up production and reduce the need for highly skilled
workers
b) most important change – mass production/assembly line
 1st used by Henry Ford (1914)
 cut time/prices dramatically
5. Railroad Expansion
a) America was very based around the development of RR (agri./industry based around
 how RR developed)
 Also led to the creation of time zones in America
b) Industry development helped by expansion of RR
 gave industrialists access to new markets/raw materials
c) Cornelius Vanderbilt, Hill, Huntington – significant ‘tycoons’ of RR world
(represented economic power of individuals)
6. The Corporation
a) Modern concept of corporation began to emerge after Civil War
 industrialists realized no person or small group would be able to finance great
ventures
b) Americans began to buy and sell stock
 appealing because “limited liability” prevented the loss of anything greater than
what was invested
c) Andrew Carnegie (center of steel industry) – made deals with RR, bought up rivals,
purchased coal mines (eventually controlled his steel process “from mine to market”)
d) Eventually bought out by JP Morgan who then turned it to the US Steel Co. ($1.4
billion enterprise – controlled 2/3 of industry)
 I. M. Singer made similar move with a sewing company
e) Modern business created – hierarchy of control that relied on division of
responsibilities
 “middle manager” created to bridge the gap btwn workers and owners
7. Consolidating Corporate America
a) Consolidation occurred through:
 “horizontal integration” – combination of corporations into one enterprise
 “vertical integration” – control of production all the way through the process
(much like Carnegie)
b) John D. Rockefeller – Standard Oil – through horizontal/vertical integration came to
control 90% of refined oil in US (virtual monopoly of oil)
c) Consolidation was used because many feared too much competition would lead to
instability
 they felt it was best to eliminate/absorb competition
d) “pool arrangements” - used mostly by RR to stabilize rates and divide markets
(failed mostly)
 8. The Trust and the Holding Company
a) “trust” developed through major corporations as a form of organization in which
stockholders gave their stocks to a small group of “trustees” in exchange for shares in
the “trust” itself
b) “holding companies” (1889) – new form of consolidation emerged as laws now
allowed companies to buy up others
c) By the end of the 19th century 1% of corporations controlled 33% of manufacturing
d) Economic boom from new concepts: costs cut, industrial infrastructure formed, new
markets, new unskilled jobs, and mass production
II. Capitalism and Its Critics
1. The “Self-Made Man”
a) Self-made men – became successful and wealthy because of hard work and
individual advancement
b) Most came to be wealthy, however, as a result of ruthlessness, arrogance, corruption
c) Most industrialists were modest entrepreneurs simply trying to stay afloat in
changing times
2. Survival of the Fittest
a) Social Darwinism applicable in the world of business
b) Herbert Spencer (English philosopher) said that society benefited from the weak
being destroyed and the strong conquering
c) In America, William Graham Sumner (1870-80’s) promoted similar ideas of the
freedom to struggle, compete, succeed, and fail
d) Appealed to businessmen because it legitimized their success
e) Social Darwinism coincided with Adam Smith’s supply and demand theory that “the
invisible hand” of the market forces would create a constant reliance on all parts of
an economy (manufacturers/consumers)
f) Attempts at monopoly were still being made by tycoons (worked against the concept
as it only increased competition)
3. The Gospel of Wealth
a) Gospel of Wealth (1901 - Andrew Carnegie) enforces the idea that with great wealth
comes great responsibility – it was their duty to use their riches to advance social
progress
b) Horatio Alger wrote stories of individual success showing that anybody could
become rich through hard work (romanticized the concept of perseverance)
 4. Alternative Visions
a) Lester Ward Dynamic Sociology (1883) argued against Social Darwinism and for the
idea of human intelligence shaping society
 Also said that an active gov’t was important
b) Skeptical of laissez-faire (a concept based around that idea of letting private
companies ‘do their own thing’), some dissenters moved to the Socialist Labor Party
(est. 1870’s) to enforce reform
 Henry George (Progress and Poverty - 1879) argued that poverty came out of the
wealth of monopolists and their rising land values
 Edward Bellamy (Looking Backward - 1888) discussed “nationalism” and a
socialist society where the gov’t distributed wealth equally
5. The Problems of Monopoly
a) Monopolies/economic concentrations were seen as corrupt, creating artificially high
prices and an unstable economy.
b) Caused recessions starting in 1873 reoccurring every 5-6 yrs until 1893 where it his
the ultimate low
c) Resentment increased because of a new class of “conspicuously wealthy people” –
flagrant wealth in face of the 4/5 of people who lived modestly
d) Standard of living rising for everyone, but gap btwn rich/poor growing
III. Industrial Workers in the New Economy
1. The Immigrant Work Force
a) Industrial work force grew late 19th century because of both migration to industrial
cities from rural areas and foreign immigration
 Much European immigration
b) Immigrants came to escape poverty – lured by opportunity and advertisements by
companies
c) Ethnic tensions increased because of job displacement/competition
2. Wages and Working Conditions
a) Many hardships:
 average standard of living rose but wages still low, little job security because of
the boom-bust cycle, monotonous tasks that required little skill, long hours in
unsafe conditions
b) Loss of control over work conditions seen as worst part of factory labor as corporate
efficiency and managers centralized workplace (too much care on efficiency)
3. Women and Children at Work
a) Decreasing need for skilled labor led to an increased use of women and children who
could be paid lower than men (approx. 17% by 1900)
b) Most women were young immigrants – concentrated in textile industry and domestic
service
 some were single others added to husband’s earnings
c) Useless child labor laws were passed in attempt to regulate conditions
 Children were employed in agriculture and factories with little regulation
4. The Struggle to Unionize
a) Unions created to attempt to fight conditions but had little success
b) First attempt to combine separate unions came with the National labor Union (1866)
which disintegrated after the Panic of 1873
c) Unions faced difficulty during 1870s recessions b/c of high unemployment, hostility
of middle class (“Molly Maguires” used fear/intimidation to get their way in the job
market)
5. The Great Railroad Strike
a) The Great Railroad Strike of 1877 began after 10% wage cut announced – strikers
disrupted rail service
b) State militia called out by President Hayes to calm the riot
 eventually completely disembodied after many deaths
 showed that disputes could no longer be localized in national economy, the depth
of resentment toward employers, and the weakness of the labor movement
6. The Knights of Labor
a) First effort at national labor organization (1869) – Noble Order of the Knights of
Labor under Uriah Stephens
 local “assemblies” championed for an 8-hour workday, and an end to child labor
but were truly worried about a long range reform on the economy
b) During 1870s under Terence Powderly rapid expansion, but by 1890 Knights had
collapsed due to failure of strikes in the Gould railway system
7. The AFL
a) American Federation of Labor created (1880’s) – became most important/enduring
national labor group
 Consisted of a collection of autonomous craft unions of skilled workers
b) Led by Samuel Gompers whose goal was to secure a greater share of capitalism’s
 material rewards to workers
 opposed fundamental economic reform and women in the work place as their
lack of good pay affected everyone
 did however, fight for women having equal pay
c) Wanted creation of national 8-hour work day – led to national strike on May 1, 1886
to achieve goal
 In Chicago violence broke out btwn strikers and police after deaths in Haymarket
Square bombing
d) “anarchism” became widely feared by middle class – associated with radical labor
8. The Homestead Strike
a) The Amalgamated Association of Iron and Steel Workers (craft union of AFL) held
large power in steel industry because of its reliance on skilled workers
b) By 1880s the Carnegie process led management to want more control over labor/need
for fewer skilled workers
c) Carnegie and Henry Frick began to cut wages at Homestead plant in Pittsburgh to
break union
 1892 strike called after company stopped consulting the Amalgamated
(Homestead Strike)
 Pinkerton Detective Agency security guards brought in as strikebreakers and
were attacked  National Guard of PA called in
 Eventually protected strikebreakers ended strike, by 1900 Amalgamated had
lost nearly every major steel plant
d) AFL unions become useless in many changes to industry
9. The Pullman Strike
a) Strike at Pullman Palace Car Company in 1894 after Pullman cut wages
 eventually began to strike with the American Railway Union of Eugene V. Debs
 Within few days thousands of railway workers struck and transportation
nationwide frozen
b) General Manager’s Association asked President Grover Cleveland to send in federal
troops b/c passage of mail being blocked
 Cleveland complied and sent 2,000 troops to protect strikebreakers – strike
collapsed
10. Sources of Labor Weakness
a) Late 19th century labor suffered many losses – wages rose slowly and any progress
 made was not enforced
b) Many reasons for failures included:
1) leading labor organizations represented only small percentage of industrial
work force
2) ethnic tensions
3) many immigrant workers planned to stay in country for only a short while
4) couldn’t match efforts of powerful/wealthy corporations
c) Women’s Trade Union League (WTUL) (1903) – only female attempt at forming
their own organization