The Gilded Age The Rise of Industrial America, 1865 - 1900.

The Gilded Age

The Rise of Industrial America, 1865 - 1900

U.S. emergence as an Industrial Power

U.S. economy averaged growth rate of 4% a year

Factors that lead to U.S. growth Abundance of natural resources Immigrants supply abundance of labor America becomes largest market in the world for

industrialized goods Inventions of laborsaving technologies improve

productivity Businesses benefited from friendly government

policies that protected private property Talented entrepreneurs emerge with abilities to

build and manage vast enterprises

The Business of Railroads The creation and expansion of the rail system was the

single biggest factor in improving American industrial life Promotes growth of other industries Divides country into four time zones Created modern stock-holder corporation Also helped to create complex structures for finance,

business management and regulation of competition Eastern Trunk lines

Trunk line – major route between large cities; smaller branch lines connected trunk lines with outlying towns

Inefficiencies of Pre-Civil War built railroads reduced through consolidation

“Commodore” Cornelius Vanderbilt used millions earned in steamboat business to merge local rail lines into New York Central Railroad (1867)

The Business of Railroads

Western Railroads Railroads play critical role in trans-Mississippi West

Encouraged settlement of Great Plains Linked west and east to create national market

Federal Land Grants Federal government gave huge subsidies to rail companies in

form of loans and land grants 170 million acres given to railroads – 3x more than given away

under Homestead Act Government expected railroad to sell lands to help subsidize

construction costs Also expected to increase the value of government lands along rail

lines Negative consequences of subsidies

Promoted hasty and poor construction Led to widespread corruption in all levels of government


Transcontinental Railroads Began during Civil War to tie California with rest of Union

Union Pacific built east from Omaha, NE Central Pacific built west from Sacramento, CA Thousands of Irish and Chinese laborers were backbone of

construction crews Met at Promontory Point, UT – driving of “golden spike”

Before 1900, 4 other transcontinental rail lines were finished

Northern Pacific – Duluth, MN – Seattle, WA Atchison, Topeka and Santa Fe – Kansas City, MO – Los

Angeles, CA Southern Pacific – New Orleans, LA – Los Angeles, CA Great Northern – St. Paul, MN – Seattle, WA


Competition and consolidation New technologies tend to be overbuilt

True of railroads built in 1870s – 80s Speculators went into railroad business to make quick profits by

selling off assets and watering down stock Railroads began to offer reduced rates to favored customers

(while getting kickbacks) and charging smaller customers exorbitant freight rates

Panic of 1893 forced a quarter of all railroads into bankruptcy JP Morgan and other bankers quickly bought and consolidated

many bankrupt railroads By 1900, there are 7 giant rail systems that control nearly 2/3 of

nations rail lines Many people invested in railroads but often felt duped in the end Attempts to regulate railroads are ineffective until the creation of

the Interstate Commerce Commission in the early 20th century

Industrial Empires This era is often called the 2nd Industrial Revolution as economy

shifts from textile, clothing and leather production to heavy industry

The Steel Industry Bessemer process – Henry Bessemer and William Kelly discovered

that blasting air through molten iron produced high-quality steel Great Lakes region emerges as leading steel producer Andrew Carnegie – shrewd Scottish immigrant who became a giant

in steel industry Vertical monopoly – controlling every stage of the industrial

process – from mining raw materials to transporting finished products

U.S. Steel Corporation –Carnegie retires and sells to JP Morgan First billion dollar company Employed 168,000 and controlled over 3/5 of world’s steel

production

Industrial Empires

The Oil Industry First oil well drilled by Edwin Drake in 1859 in Pennsylvania Rockefeller and the Standard Oil Trust

John D. Rockefeller founded Standard Oil in 1863 Increased size of company by applying latest technologies in oil

refineries and efficient practices Also used extortion and undercutting competition to force rivals to sell out By 1881, Standard Oil Trust controlled 90% of oil refinery business Horizontal Monopoly – control of one segment of a specific industry Rockefeller created Standard Trust to bring former competitors under his

control Controlled supply and demand to increase profits and make him very wealthy At time of retirement, Rockefeller worth over $900 million

Many industries emulate Rockefeller and create trusts to maximize their profits

Sugar, tobacco, leather, meat

Industrial Empires

Antitrust movement Trusts come under widespread scrutiny and attack

in 1880s Middle class citizens feared trusts’ unchecked powers Old money interests resented increasing influence of the

new rich After failing to curb trusts at the state level,

reformed finally moved Congress to pass Sherman Antitrust Act (1890)

Prohibited an “contract, combination, in the form of trust or otherwise, or conspiracy in restrain to trade or commerce”

Too vaguely worded to stop development of trusts United States v. E.C. Knight Co. – Sherman Antitrust Act

only applies to commerce not manufacturing

Laissez-Faire Capitalism

Conservative economic theories Government economic intervention was a foreign

idea in the late 19th century Adam Smith – government should not regulate

business; it should be regulated by the “invisible hand” of laws of supply and demand

Businesses would be motivated by their own self-interests to offer improved goods and services at low prices

Laissez-faire used by industrialists to justify their methods of doing business

Rise of monopolistic trusts seemed to undercut the competition needed for regulation; however still used to justify a lack of government involvement


Social Darwinism Darwin’s theory of natural selection played a role in

economics English social philosopher Herbert Spencer was

most influential social Darwinist Darwin’s ideas should be applied to the marketplace Concentration of wealth in the hands of the “fit” benefited

the future of humanity Professor William Graham Sumner of Yale

Help for the poor was misguided as it interfered with the laws of nature

Help for the poor would only weaken the evolution of the human species


Gospel of wealth Many Americans found religion more convincing

than social Darwinism to justify acquisition of wealth John D. Rockefeller – a diligent application of the

Protestant work ethic gave him wealth Reverend Russell Conwell – everyone had a duty

to become rich Andrew Carnegie – the wealth had a God-given

responsibility to carry out project of civic philanthropy for the benefit of society

Technology and Inventions

InventionsSamuel F.B. Morse – telegraph (1844)Cyrus W. Field’s –Trans-Atlantic cable

(1866)Alexander G. Bell – telephone (1876)George Eastman – camera (1888)Lewis E. Waterman – fountain pen (1884)King Gillette’s safety razor and blade (1995)


Edison and Westinghouse Thomas Edison – greatest inventor of 19th century

Established a laboratory in Menlo Park, NY More than a thousand patented inventions

Phonograph Incandescent lamp Dynamo for generating electricity Mimeograph machine Motion picture camera

George Westinghouse Held more than 400 patents

Air –brakes on railroad cars (1869) Transformer for producing high-voltage alternating current


Marketing Consumer goods Increased factory output called for new methods of selling

goods Department stores

R.H. Macy – New York Marshal Field – Chicago

Mail-order companies Sears-Roebuck Montgomery Ward

Packaged food become a common item Kellogg and Post – breakfast cereals Gustavus Swift – refrigerated railcars

Advertising Promoted a consumer economy “Going shopping” becomes a past time

Impact of Industrialization

The Concentration of Wealth The growth of American industry raised the standard of living for most Also created sharper economic and class divisions 1890 – richest 10% controlled 90% of wealth

The Expanding Middle class Growth of large corporations introduced need for thousands of white collar workers Industrialization created jobs for accountants, clerical workers and salesmen Also increased demand for services from doctors, lawyers, public employees and

storekeepers Wage Earners

1900 – 2/3 of Americans worked for wages – 10 hrs a day, 6 days a week Wages determined by laws of supply and demand Due to large available labor pool, most wages were barely above subsistence level David Ricardo – “iron law of wages”

Raising wages arbitrarily would only increase in the working population Increase of working population would in turn cause wages to fall This would create a

Real wages ( income adjusted for inflation) rose steadily during late 19 th century 11 million of 12.5 million families in the US averages less than $380 a year

Impact of Industrialization

Working Women 20% of workforce in 1900 were female Only 5% of married women were in workforce Traditionally gender roles still very prominent Factory work for women often limited to those

industries that were perceived as an extension of the home

Occupations that became feminized usually lost status and received lower wages and salaries

Labor Discontent Work was often monotonous, dangerous Absenteeism and quitting were most common

forms of protest

The Struggle of Organized Labor

The most violent labor conflicts in the nation’s history took place in late 19th century

Industrial warfare Management holds most cards – cheap, abundant workforce,

strikebreakers Employers used following tactics

Lockouts – closing a factory to break labor movement before it could organize

Blacklists – banes if pro-union workers circulated among employers Yellow-dog contracts – Workers told to sign agreements NOT to join a

union as condition of employment Private guards/state militias – used to put down strikes Court injunctions – used to stop strikes

Management able to create atmosphere of fear regarding labor unions

Labor unions were anarchistic and un-American Federal and state government backed employers


Attempts to organize National Unions National Labor Union

attempted to organize all workers in all state both skilled and unskilled Championed higher wages and 8 hour day Chief victory was federal government adoption of 8 hr day

Knights of Labor Began as secret society in 1869; went public in 1881 Opened membership to all workers including black

Americans and women Advocated a variety of reforms Settled disputes by arbitration rather than strikes Declined after Haymarket bombing


Haymarket bombing Knights of Labor called for a general strike to achieve an 8

hr day Police tried to break up a rally in Haymarket Square and

someone threw a bomb killing 7 police officers 8 anarchist were convicted Many Americans turned away from labor union movement

seeing it as too radical American Federation of Labor

Concentrated on attaining practical economic goals Samuel Gompers went after basics of higher wages and

improved working conditions Only allowed skilled laborers into the union


Strikebreaking in the 1890s Homestead strike

Henry Frick precipitated a strike in 1892 by cutting wages by nearly 20% Used lockout, strike-breakers and private guards to defeat union Set union movement back in steel industry

Pullman strike Pullman announced a general cut in wages and fired leaders of workers

to came to bargain with him Union leader Eugene V. Debs ordered union members not to handle any

trains with Pullman cars Union’s boycott tied up rail transportation across the country President Cleveland ordered army to keep railroads running Federal court ordered railroad workers to return to work Debs and other leaders arrested for failure to comply In re Debs, Court held that injunctions could be used to stop strikes

By 1900, only 3% of American workers belonged to unions

The Gilded Age The Rise of Industrial America, 1865 - 1900.

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