Chapter 14: Industrialization

Chapter 14: IndustrializationAmerican HistoryThe U.S. as an industrial powerSeveral factors contributed to the increase in the nations gross domestic product, or the value of all goods and services produced by a countryAbundance of raw materials (oil, timber, coal, iron, copperLarge workforce (population tripled between 1860 and 1910)stemmed from large families and immigration

Free Enterprise systemAnother factor in the growth of industry was the free enterprise systemLaissez-fair-calls for government not to interfere with the economy unless to protect individual property rightscalls for supply and demand and competitionsupports low taxes to ensure individuals make the decisions on how the nations wealth is spentsupports limiting nations debt, since money borrowed from banks is not available to individuals for their usesThe concept of free enterprise attracted many entrepreneurs, or people who risk investing in organizing and running a businessU.S. involvement in economicsThe government not only adopted laissez-faire economics, but incorporated their own ruleskept taxes and spending lowdid not negotiate wages and pricesStruggle existed in regards to tariffsNortherners wanted high tariffs to protect industry from foreign competition and to subsidize internal improvementsSoutherners opposed subsidizing internal improvements and promoted low tariffs to improve tradeWhen the Civil War ended, Congress passed the Morrill Tariff, increasing tariffsHigh tariffs contradicted laissez-faire economics because it raised the prices of foreign goods, which raised the prices on American goods New inventionsNew inventions began to come up during this time period:The telephone-Alexander Graham BellThe phonograph, lightbulb, electric generator, battery, dictaphone, and motion picture-Thomas EdisonThe ice machine-Thaddeus LoweThe refrigerated rail car-Gustavus SwiftThe Transcontinental Telegraph Line-Cyrus FieldImprovements to the textile and shoemaking industry also occured

Linking the U.S. via railroadRailroad boom began in 1862, when Lincoln signed the Pacific Railway Act, calling for the construction of a transcontinental rail lineThe rail line was built by two companies: the Union Pacific and the Central PacificCentral Pacific would sell its stock to four merchants, creating the Big Four

Consolidation and TimingLarge railways began to consolidate with smaller rail lines in an ability to reach every portion of the United StatesTo prevent confusion and tragedy (ex. Trains colliding because of confusion), the American Railway Association divided the country into four time zoneswere able to switch cars according to weather and to speed long distance travel

Land Grants and Robber BaronsTo encourage railway building, the government gave land grants to railway companiesthe railways would settle the land with settlers, real estate companies, and other businesses to raise money for the railroadIndividual states would eventually get the land grants and disperse them to the railway companiesMany company owners were accused of swindling investors, bribing government officials, and cheated on their contractsRobber barons: people who took from the land and gave nothing backBribery was frequent because the government was already so entangled in funding the railroadsSome companies were exceptions: James Hill and the Great NorthernerThe Credit Mobilier ScandalCredit Mobilier was a construction company set up by several stockholders in the Union Pacificgreatly overcharged the Union Pacific, and the investors agreed to pay the inflated billsInvestors were rich, but railway used all their grantsbribed Congress to give them more grants in exchange for investmentsScandal ruined railway company and several politiciansMany railroads went into bankruptcy for their briber, except for one: The Great Northern CorporationsCorporations begin to evolve during the 1830sorganization owned by stockholders, or individuals who own stock, or a piece of the companyowned by many people, but treated by law like a single personThrough investing in new technologies, hiring a large workforce, and purchasing machines, corporations could achieve economics of scalegoods are produced cheaply because they produce more quickly

Economics of a CorporationCorporations pay two types of costs:Fixed cost: costs a company has to paytaxes, mortgage, etcOperating cost: costs a company pays to run itselfwages, buying raw materials, etc.If an operating cost is low, which was common during this time, it would allow the corporation to produce goods cheaply and effincientlyHowever, when prices fell, this became a problem because it cut into profitsto prevent this, corporations organized pools, or agreements to maintain prices at a certain levelnot trusted by the government, so those in pools had no legal protection: method did not last longAndrew CarnegiePhilanthropist and Innovator of the steel industryUsed the Bessemer process in making steel efficiently and cheaplyBegan the vertical integration methodCompany owns all different businesses on which it depends its operations onAlso used horizontal integration methodCombining many firms engaging in the same type of business into one large corporation

Monopoly!Monopoly is when a corporation gains control of an entire marketsome feared them because they could charge whatever they wanted for their goodssome supported them because keeping prices low would keep competitors outTo keep from breaking laws, corporations formed trusts, or a legal concept that allows one person (trustee) to manage another persons propertyEx. Standard Oil Company

Chain storesA law in New Jersey allowed corporations chartered in New Jersey to own stocks to other businessesCompanies used this law to form holding companies, or companies that dont produce goods, but instead hold stocks in companies that doDepartment and chain stores were created using this formatsold array of different products in large, elegant buildingsshipped mail-order catalogs to those who could not make it to the stores

Wealthy vs. workersSeveral factors contributed to poor relationships between wealthy and workersworkers performing repetitive tasksworking in poor conditionsdeflation, or a rise in the value of money, caused wages to be cutWorkers came to believe that the only way to improve their conditions was to form unions

UnionsUnions began with craft workers and common laborerscraft workers began to form trade unions, limited to specific skillsCorporations regarded unions as illegitimate conspiraciesopposed industrial unions, or unions with craft workers and laborers from one industryCorporations made several changes to eliminate unionsmade workers sign contracts to not join a unionhired detectives to go undercover to identify union organizersfired organizers and placed them on a blacklist that went to other employersIf a union formed, companies issued a lockout, refusing entry onto the property and refusing to pay workersOpposition towards unionsSeveral problems occurred for workers trying to organize unionsNo laws giving workers the right to form unionsCourts regarded them as conspiracies towards tradeWas percieved to be related to Marxism, which threatened capitalismBasic force shaping capitalism was a class struggle between workers and ownersCalled for revolt and seizure of control from workers

The Great Railroad Strike of 1877From the Panic of 1873 came wage cutsRailroad workers began to walk away from their jobsinvolved 80,000 workers in 11 statesThe strike began to turn violentmilitia was called in several cities to stop the violencePresident Hayes called for the railroad from Philadelphia and Pittsburgh to be open to transport troops to Chicagorestored order, but left 100 dead

The Knights of LaborFirst nation-wide industrial union, formed after the Railroad Strikecalled for 8 hour days, government of labor statistics, equal pay for women, abolition of child labor, and creation of worker-owned factoriessupported boycotts and arbitration, a process in which a third party comes in and negotiates with workers and owners

Haymarket RiotMovement for 8 hour workday took supportOn May 1st, 1886, workers in many cities went on strikeOn May 3rd, a clash between workers and police left one striker deadThe next evening, 3,000 protestors gathered in Haymarket Square in ChicagoPolice fired, workers fired back, and a bomb exploded, killing seven officers and four protestorsEight men were arrest, four were executed, and the reputation of the Knights of Labor dwindled

Pullman StrikePullman Company, a railway car company, cut wages due to a depression in 1893workers could not pay rent or other goodsAfter three men were fired for complaining, the men went on strikePullman company sent mail cars to be used in place of Pullman cars, and if the strikers blocked the shipment of mail, it was against federal lawPresident Cleveland sent troops and issued an injunction, or formal court order, to disperse the strike and let the mail be sentstrike collapsed

American Federation of LaborIn 1886, delegates from 20 trade unions organized the American Federation of Labor, led by Samuel Gompersapproach to labor relations was to stay out of politics, rejection of socialism and communism, and should fight for small gainshad three goalsget companies to recognize unionspushed for closed shops, or companies hiring union members onlypromoted an 8 hour workday

Women in laborWomen workers increased after the Civil WarWomen workers did the followingDomestic servitudeTeaching, nursing, sales, and administrative tasksLight industrial work, such as textilesWomen were paid less than men and were excluded from unionsTwo women labor organizers and 2 founders of settlement houses, organized the Womens Trade Union Leaguepushed for 8 hour workday, creation of minimum wage, end to evening work, and abolition of child labor