THE TRIUMPH AND EXCESSES OF CAPITALISM

OVERVIEW

The United States became the world's leading industrial power at the turn of the 20th century due to the discovery of immense natural resources, immense creativity, an outburst of entrepreneurship in the Northeast and Midwest and the arrival of millions of immigrant workers and farmers from Europe.

The national railroad network was completed with the work of Chinese immigrants and large-scale mining and factories industrialized the Northeast and Midwest.

The great development of the US and the great wealth generated led to what was called “The Gilded Age.” However, beneath the glitter serious problems existed.

Mass dissatisfaction with corruption, inefficiency and traditional politics stimulated the Progressive movement, from the 1890s to 1920s, which led to many social and political reforms.

THE WEST AND THE GILDED AGE

The latter half of the nineteenth century was marked by the rapid development and settlement of the far West, first by wagon trains and riverboats and then aided by the completion of the transcontinental railroad.

Large numbers of European immigrants (especially from Germany and Scandinavia) took up low-cost or free farms in the Prairie States.

Mining for silver and copper opened up the Mountain West. The United States Army fought frequent small-scale wars with Native

Americans as settlers encroached on their traditional lands. Gradually the US purchased the Native American tribal lands and extinguished their claims, forcing most tribes onto subsidized reservations.

The "Gilded Age" was a term that Mark Twain used to describe the period of the late 19th century when there had been a dramatic expansion of American wealth and prosperity.

MANIFEST DESTINY

Manifest Destiny is a term for the attitude prevalent during the 19th century period of American expansion that the United States not only could, but was destined to, stretch from coast to coast.

This attitude helped fuel western settlement, Native American removal and war with Mexico.

The phrase was first employed by John L. O’Sullivan in an article on the annexation of Texas published in the July-August 1845 edition of the United States Magazine and Democratic Review, which he edited.

It was, O’Sullivan claimed, “our manifest destiny to overspread the continent allotted by Providence for the free development of our yearly multiplying millions.”

By the end of the century, expansionists were employing quasi-Darwinist reasoning to argue that because its ‘Anglo-Saxon heritage’ made America supremely fit, it had become the nation’s ‘manifest destiny’ to extend its influence beyond its continental boundaries into the Pacific and Caribbean basins.

FIRST TRANSCONTINENTAL RAILROAD

Built by three private companies, it was a 1,907-mile (3,069 km) contiguous railroad line constructed in the United States between 1863 and 1869 to connect San Francisco with the existing eastern U.S. rail network at Council Bluffs, Iowa.

Funded by government land grants, government bonds, and private railroad bonds. Total value of lands distributed to the railroads in 1880: $391,804,610. The construction cost was $124,548,691. In 2014 dollars = $856 billion.

Opened on May 10, 1869, the railroad revolutionized the settlement and economy of the American West by bringing the western states and territories firmly and profitably into the "Union" and making goods and transportation much quicker, cheaper, and more flexible from coast to coast.

IMMIGRATION

Between 1850 and 1930, about 5 million Germans migrated to the United States with a peak in the years between 1881 and 1885, when a million Germans left Germany and settled mostly in the Midwest. Between 1820 and 1930, 3.5 million British and 4.5 million Irish entered America. Before 1845 most Irish immigrants were Protestants. After 1845, Irish Catholics began arriving in large numbers, largely driven by the Great Famine.

Immigrants settled in areas where they knew fellow countrymen settled, in areas that had environments like home, or in areas where they believed the greatest opportunity existed.

The Oklahoma Land Rush of 1889 was the first land rush into the Unassigned Lands. The land run started at high noon on April 22, 1889, with an estimated 50,000 people lined up for their piece of the available two million acres (8,000 km²).

Immigrants boarding a ship to NY from Germany Oklahoma Land Rush of 1889

MINING

From 1859 to 1864, gold was discovered in Colorado, Idaho, and Montana, sparking several gold rushes bringing thousands of prospectors and miners to explore every mountain and canyon and to create the Rocky Mountains' first major industry.

The Comstock Lode is a lode of silver ore located under the eastern slope of Mount Davidson, a peak in Nevada. It was the first major discovery of silver ore in the United States. After the discovery was made public in 1859, it sparked a silver rush of prospectors to the area, scrambling to stake their claims.

Rock Mountain Mining Camps became the urban frontier.

OIL

Pennsylvania and Ohio were the Middle East of their day

The Pennsylvania oil rush was a boom in petroleum production which occurred in northwestern Pennsylvania from 1859 to the early 1870s

Pennsylvania produced 31 million barrels of oil in 1891 (1 barrel = 42 US gallons or 159 liters)

Ohio produced 24 million barrels of oil in 1896

The Appalachian Basin was also a major source of oil adding 7 million barrels of oil in 1895

At the end of the 19th century, these three areas accounted for two-thirds of the world’s oil production.

INVENTORS

Inventors were the initiators of American capitalism. They drove the US economy by creating new jobs and companies.

“The best way to predict the future is to invent it.”

- Alan Kay

THOMAS EDISON

Thomas Alva Edison (February 11, 1847 – October 18, 1931) was an American inventor and businessman. He developed many devices that greatly influenced life around the world, including the phonograph, the motion picture theater, the battery and the electric light bulb. He was one of the first inventors to apply the principles of mass production and large-scale teamwork to the process of invention, and because of that, he is often credited with the creation of the first industrial research laboratory.

ALEXANDER GRAHAM BELL

Alexander Graham Bell (March 3, 1847 – August 2, 1922) was a Scottish-born scientist, inventor, engineer and innovator who is credited with patenting the first practical telephone.

Bell's father, grandfather, and brother had all been associated with work on elocution and speech, and both his mother and wife were deaf, profoundly influencing Bell's life's work. His research on hearing and speech further led him to experiment with hearing devices which eventually culminated in Bell being awarded the first U.S. patent for the telephone in 1876.

NIKOLA TESLA

Nikola Tesla (10 July 1856 – 7 January 1943) was a Serbian American physicist, inventor, electrical engineer, mechanical engineer and futurist best known for his contributions to the design of the modern alternating current (AC) electricity supply system. He was the first to capture X-rays, conceive wireless communication and create radio-controlled boats.

GEORGE EASTMAN

George Eastman (July 12, 1854 – March 14, 1932) was an American innovator and entrepreneur who founded the Eastman Kodak Company and popularized the use of roll film, helping to bring photography to the mainstream. Roll film was also the basis for the invention of motion picture film in 1888.

GEORGE WASHINGTON CARVER

George Washington Carver (c. 1860 – 5 January 1943), was an American botanist and inventor. He was born into slavery in Missouri, either in 1861, or January 1864.

Carver's reputation is based on his research into and promotion of alternative crops to cotton, such as peanuts, soybeans, and sweet potatoes, which also aided nutrition for farm families.

He wanted poor farmers to grow alternative crops both as a source of their own food and as a source of other products to improve their quality of life.

He developed and promoted about 100 products made from peanuts that were useful for the house and farm, including cosmetics, dyes, paints, plastics, gasoline, and nitroglycerin.

GEORGE WESTINGHOUSE, JR.

George Westinghouse, Jr. (October 6, 1846 – March 12, 1914) was an American entrepreneur and engineer who invented the railway air brake and was a pioneer of the electrical industry. Westinghouse was one of Thomas Edison's main rivals in the early implementation of the American electricity system. Westinghouse's electricity distribution system, based on alternating current, ultimately prevailed over Edison's insistence on direct current.

ORVILLE AND WILBUR WRIGHT

The Wright brothers, Orville (August 19, 1871 – January 30, 1948) and Wilbur (April 16, 1867 – May 30, 1912), were two American brothers, inventors, and aviation pioneers who are credited with inventing and building the world's first successful airplane and making the first controlled, powered and sustained heavier-than-air human flight, on December 17, 1903 four miles south of Kitty Hawk, North Carolina.

The brothers' fundamental breakthrough was their invention of three-axis control, which enabled the pilot to steer the aircraft effectively and to maintain its equilibrium. This method became and remains standard on fixed-wing aircraft of all kinds.

ROBBER BARONS

Cornelius Vanderbilt, John D. Rockefeller, Andrew Carnegie, J.P. Morgan and Henry Ford are names synonymous with innovation and big business in America.

They all built empires and created advances in technology. They helped shape the country in its early days by doing things

such as developing the models for modern railroads, creating the modern financial system and making cars accessible to the masses.

The men came from meager beginnings to build their respective empires, which helped formulate the concept of the American Dream.

CORNELIUS VANDERBILT

Cornelius Vanderbilt (May 27, 1794 – January 4, 1877 was an American business magnate and philanthropist who built his wealth in railroads and shipping.

Born poor and with but a mediocre education, his luck, perseverance and intelligence led into leadership positions in the inland water trade, and the rapidly growing railroad industry.

He purchased a majority stake in a rival steamship company, but kept it secret from the public. Controlling his only competition, he effectively had a monopoly and raised prices.

He is best known for building the New York Central Railroad. In later life, he turned to philanthropy. He endowed what would

become Vanderbilt University giving it $1 million, the largest charitable gift in American history to that date. Vanderbilt would be worth $143 billion in 2007 United States dollars.

JOHN D. ROCKEFELLER

John Davison Rockefeller Sr. (July 8, 1839 – May 23, 1937) was an American business magnate and philanthropist. He was a co-founder of the Standard Oil Company, which dominated the oil industry and was the first great U.S. business trust. Rockefeller revolutionized the petroleum industry, and defined the structure of modern philanthropy.

Rockefeller founded Standard Oil Company in 1870, and actively ran it until he officially retired in 1897. The company grew by increasing sales and also through acquisitions. After purchasing competing firms, Rockefeller shut down those he believed to be inefficient. He brought great efficiencies of scale to oil refineries, and used it to destroy his competition. He also revolutionized corporate governance to thwart state regulation. As kerosene and gasoline grew in importance, Rockefeller's wealth soared and he became the world's richest man, controlling 90% of all oil in the United States at his peak.

He was also one of the greatest philanthropists to have ever lived. Rockefeller was also the founder of the University of Chicago, Rockefeller University, Central Philippine University and Spelman College. He donated extensively to medical research and was instrumental in the eradication of hookworm and yellow fever.

Adjusting for inflation, his fortune upon his death in 1937 stood at $336 billion, accounting for more than 1.5% of the national economy.

ANDREW CARNEGIE

Andrew Carnegie (November 25, 1835 – August 11, 1919) was a Scottish-American industrialist who led the enormous expansion of the American steel industry in the late 19th century. He built a leadership role as a philanthropist for the United States and the British Empire.

Carnegie made his fortune in the steel industry, controlling the most extensive integrated iron and steel operations ever owned by an individual in the United States. One of his two great innovations was in the cheap and efficient mass production of steel by adopting and adapting the Bessemer process for steel making. The second was in his vertical integration of all suppliers of raw materials. One of his sales techniques was to give shares to potential large customers to incentivize their purchases from him.

Scandals- Carnegie was one of more than 50 members of the South Fork Fishing and Hunting Club, which has been blamed for the Johnstown Flood that killed 2,209 people in 1889. The Homestead Strike was a bloody labor confrontation lasting 143 days in 1892, one of the most serious in U.S. history. 10 men—seven strikers and three Pinkertons—were killed and hundreds were injured.

During the last 18 years of his life, he gave away to charities, foundations, and universities about $350 million (in 2015 share of GDP, $78.6 billion) –almost 90 percent of his fortune.

J.P. MORGAN

John Pierpont "J.P." Morgan (April 17, 1837 – March 31, 1913) was an American financier and banker who dominated corporate finance and industrial consolidation during his time. In 1892, Morgan arranged the merger of Edison General Electric and Thomson-Houston Electric Company to form General Electric. He was also instrumental in the creation of the United States Steel Corporation.

He bought out Carnegie and created US Steel. Through mergers, he created unprecedented economies of scale. In 1901, U.S. Steel was the first billion-dollar company in the world, having an authorized capitalization of $1.4 billion. (= $1.08 trillion in 2014). Morgan created General Electric by, in part, crushing Westinghouse.

At the height of his career during the early 1900s, he and his partners had significant influence over the nation's high finance and United States Congress members. His dedication to efficiency and modernization helped transform American business.

HENRY FORD

Henry Ford (July 30, 1863 – April 7, 1947) was an American industrialist, the founder of the Ford Motor Company, and the sponsor of the development of the assembly line technique of mass production.

He developed and manufactured the first automobile that many middle class Americans could afford. Ford invented modern public relations to ensure every newspaper carried stories and ads about his products. He created a network of local dealers that made the car ubiquitous in almost every city in North America. He also encouraged local motor clubs to help new drivers and to encourage exploring the countryside.

Ford was a pioneer of "welfare capitalism", designed to improve the lot of his workers and especially to reduce the heavy turnover that had many departments hiring 300 men per year to fill 100 slots. Efficiency meant hiring and keeping the best workers. Ford astonished the world in 1914 by offering a $5 per day wage ($120 today), which more than doubled the rate of most of his workers.

Ford was the first car company to internationalize. By 1947, the Ford Foundation owned 90% of the non-voting shares of the Ford

Motor Company. Today, it has a $12.4 billion endowment.

EXCESSES

Disparity of Wealth - Until around 1900 or so, the distribution of wealth and income in the U.S. had been less concentrated than in Europe, reflecting mainly relatively easier access to land ownership in the US—but this ended around 1900. Nowhere else was the spread between the rich and the poor so great.

Political Corruption – Wealth bought politicians, and greed among politicians brought graft

Monopolies and Unfair business practices

THE GOOD OLD DAYS – THEY WERE TERRIBLE!

PROGRESSIVE ERA

The Progressive Era was a period of widespread social activism and political reform across the United States, from the 1890s to 1920s .

The main objective of the Progressive movement was eliminating corruption in government. The movement primarily targeted political machines and their bosses. By taking down these corrupt representatives in office a further means of direct democracy would be established.

They also sought regulation of monopolies (Trust Busting) and corporations through antitrust laws. These antitrust laws were seen as a way to promote equal competition for the advantage of legitimate competitors.

EXPOSING CORRUPTION

Muckrakers were journalists who exposed waste, corruption, and scandal in the highly influential new medium of national magazines.

Lincoln Steffens exposed political corruption in many large cities; Ida Tarbell went after John D. Rockefeller's Standard Oil Company. Samuel Hopkins Adams showed the fraud involved in many patent medicines, Upton Sinclair's 1906 novel The Jungle gave a horrid portrayal of how meat was packed.

FOOD SECURITY

The purity of food, milk and drinking water became a high priority in the cities.

At the state and national levels new food and drug laws strengthened urban efforts to guarantee the safety of the food system.

The 1906 federal Pure Food and Drug Act, which was pushed by drug companies and providers of medical services, removed from the market patent medicines that had never been scientifically tested.

ECONOMIC POLICY

Congress enacted a law regulating railroads in 1887 (the Interstate Commerce Act), and one preventing large firms from controlling a single industry in 1890 (the Sherman Antitrust Act).

Many of today's U.S. regulatory agencies were created during these years, including the Interstate Commerce Commission and the Federal Trade Commission.

Upton Sinclair's The Jungle (1906) was influential and persuaded America about the supposed horrors of the Chicago Union Stock Yards a giant complex of meat processing that developed in the 1870s. The federal government responded with the new regulatory Food and Drug Administration.

Ida M. Tarbell wrote a series of articles against Standard Oil, which was perceived to be a monopoly. Attacks by Tarbell and others helped pave the way for public acceptance of the breakup of the company by the Supreme Court in 1911.

In 1913, the Sixteenth Amendment was ratified, and a small income tax was imposed on high incomes.

The Clayton Antitrust Act of 1914 helped bust trusts. In1913, the Federal Reserve System was created to check the power of Wall

Street.

PHILANTHROPY

The number of rich families climbed exponentially, from 100 or so millionaires in the 1870s, to 4000 in 1892 and 16,000 in 1916. Many paid heed to Andrew Carnegie's Gospel of Wealth that said they owed a duty to society that called for philanthropic giving to colleges, hospitals, medical research, libraries, museums, religion and social betterment.

In the early 20th century, American philanthropy matured, with the development of very large, highly visible private foundations created by Rockefeller, and Carnegie. The largest foundations fostered modern, efficient, business-oriented operations (as opposed to "charity") designed to better society rather than merely enhance the status of the giver.