Birth of

Modern

America

Chapter 3

Industrialization

I. Introduction to Industrialization

A. Industrial Revolution

1. Definition: the movement from small-scale

manufacturing to the production of heavy

industry, using machines to replace

human laborers

2. In the US, this occurred 1865-1901

3. By end of 1800s, US was the most

industrialized nation in the world

II. Rise of Industry

B. Factors that contributed to rapid

industrialization

1. Natural Resources

a. Western Minerals (access to these thanks to

settlement of West!), iron, coal, timber,

copper, water power, etc.

b. Could be obtained cheaply

c. Little need for imports

2. Innovations in transportation and

communication - Infrastructure

a. Telegraph, Telephone: allowed biz to be

conducted quickly across long distance

b. Roads, Canals, RRs: allowed mass

distribution of raw materials, farm produce

and products of manufacture

3. New Energy Sources

a. Steam Engine

- drove textile mill spindles, sewing etc. Steam came from burning coal

b. Petroleum power

1) initially in demand as Kerosene, for lanterns and stoves (replacing whale oil), and machine lubrication

2) oil fields opened from PA to TX

3) Internal Combustion Engine (late 1800s): used gasoline refined from oil to run cars and the 1st airplane

4) growth of oil industry led to expansion of the economy

c. Electricity:

1) Used initially for communication across

long distances: telegraph, telephone

2) Edison’s electric light bulb

3) drove machinery in factories

4) by 1900: powered streetcars and

subway trains

5) by 1920: electric refrigerators

4. Economic Stimuli

a. Lots of investment Capital ($) – from Europe, Americans, Western minerals

b. Increased immigration (20m btwn1870-1910) + high birth rate and large families ( thanks to advances in medical technology, better nutrition, infrastructure = lower infant mortality rate) = A Population boom that stimulated the economy by providing industry with…

1) Large workforce/cheap labor

2) created demand (lots of customers!) for consumer goods produced by factories

c. New ways of selling/organizing

1) 1st dept store: Macy’s in NY

• lots of products in huge, elegant

building

• Made shopping glamorous

2) 1st chain store: A & P

• a group of similar stores owned by

the same company

• Focused on thrift & low prices

instead of elaborate service or

decor

A & P

3) 1st mail order catalog: Ward’s

• Attractive to rural shoppers who

lived far from chain or dept stores

• Used enticing illustrations and

descriptions to advertise items for

sale

4) advertising/packaging to attract

consumers

• Lots of new products forced

retailers to look for new ways to

market and sell goods

5. New Technologies - you name it, somebody invented it!

a. Textile Industry:

1) Factory System = Samuel Slater

- built the 1st successful water-powered textile mill in America

2) Sewing Machine = Elias Howe & Isaac Singer (competed for patent)

- switch from home-made to machine-made clothes

- sold on installment plan (a form of credit)

Rise of the Sewing

Machine Industry

b. Railroads:

1) Standardized Gauges = John Stevens- width btwn rails = 56 ½ “ contributes to

completion of Transcontinental RR

2) Air Brakes = George Westinghouse

- more precise stopping of trains

3) Sleeping Car = George Pullman

- comfortable, luxurious travel

Pullman

Car

• Beveled mirrors,

ornate carvings, and

polished brass were

the hallmarks of travel

in a Pullman parlor car,

such as the one

depicted here from

1893.

• First-class passengers

enjoyed plush swivel

seats and could eat

their meals in equaling

lavish dining cars.

• The wealthiest owned

their own luxuriously

appointed private cars.

c. Steel:

1) Bessemer Process = Henry Bessemer,

(William Kelly)

- mass production of steel: heat iron ore to

liquid state, blast w/ hot air to burn out

impurities, end product = steel

- Iron RR tracks replaced by steel tracks

- Birth of Skyscrapers

Bessemer Process

2) Elevator = Elisha Otis

- Skyscrapers made practical

3) Suspension Bridge = John Roebling

- uses steel cables

- London Bridge 1st

- Brooklyn Bridge 1st in US

4) Trolley Car = Frank Sprague

- early mass transit

- runs on steel cables

Thomas Edison

d. Oil:

- Oil Well & Pump = Edwin Drake

- launched an oil boom nationwide

- cheap source of fuel for autos (future)

e. Thomas Edison

1) Light Bulb

- uses a dynamo (primitive electric

generator)

- factories can be built away from

natural source of power

- can work longer hrs

2) Menlo Park Research Lab

- model for current research labs

f. Business Industry:1)Telegraph = Samuel Morse

- Morse code

- allows biz to communicate quickly across long distances

2)Telephone = Alexander Graham

Bell- communication revolution

- allows biz to communicate quickly across long distances

3) Transatlantic Cable = Cyrus

Fields - uses telegraph to send impulses- communicate with Europe

4) Typewriter = Christopher Sholes

5) Cash Register = James Ritty

g. Food Industry

1) Mechanical Reaper = Cyrus McCormick

- harvest grain quickly using machines

2) Steel Plow = John Deere

3) Evaporated Milk = Gail Borden

4) Food Preservation (w/o canning) = HJ

Heinz

5) Refrigerated RR Car = Gustavus Swift

- can ship slaughtered meat across long

distances safely

- leads to growth of meatpacking industry

in Chicago

6) Dried Flake Cereal = John Kellogg

- More cereal = CW Post

- leads to cereal wars and use of gimmicks

to sell products

h. Miscellaneous Inventions

1) Kodak Camera = George Eastman

2) Airplane = Orville & Wilbur Wright

- revolution in transportation

- revolution in warfare

First flight at

Kitty Hawk, NC

on December

17, 1903

6. A Business-Friendly Government

a. Mini Economics Lesson: Economic Systems

- every society must answer three basic

economic questions to determine how to

use its limited resources:

What to make?

How much to make?

Who to make it for?

1. Traditional Economy

a. Decisions made by: head of family or tribe

b. Survival drives economic decisions

c. Prices and Wages undetermined as very little surplus or trade

d. Found in developing countries, mostly in rural areas

e. Also known as a subsistence economy

f. Most goods & services produced & consumed by the family/for family

2. Market Economya. Decisions made by Individual or

Privately owned businesses

b. Desire for Profit drives economic decisions

c. Prices and Wages determined by the laws of supply and demand

d. This type of economy is found in the USA!

e. It is also known as Free Enterprise and Capitalism

f. Competition is valued to provide consumers with the best quality product at the best possible price

g. Gov’t role in a market economy: to provide some services and impose certain regulations

3. Command Economya. Decisions made by the

Government b. Social goals drive economic

decisionsc. Prices and Wages determined

by the Gov’td. Found in countries like Cuba

and North Korea today + the former USSR

e. Also known as COMMUNISM – gov’t owns, operates all major farms, factories, utilities, stores

f. Production doesn’t necessarily reflect consumer demand

D. Mixed Economy – Combo of

Market and Command Economya. Gov’t owns/operates some basic

industries while allowing private enterprise in other parts of economy

b. Decisions driven by Profit and Social Goals

c. Prices and Wages determined by Supply and Demand and the Gov’t

d. Found in many European countries (UK, France etc)

e. Also known as Socialism

f. characterized by HIGH TAXES (to pay for the many social svcs like housing, health care, child care, pensions)

g. Belief that wealth should be distributed more equally through

entitlements

Mixed Economy (Socialism)

Government Private Enterprise

Operates somebusinesses

Owns somebusinesses

Laws of Supply & Demand

Determine price & production

Determine price & production

b. Biz-Friendly Gov’t was Republican Dominated

1) supported many Laissez-Faire principles

2) supported the free enterprise system by

letting privately owned business firms

operate with minimal gov’t control

3) became known as Party of Big Business

c. Biz-Friendly Gov’t largely supported Laissez-Faire Capitalism: policy that the gov’t should interfere as little as possiblein the nation’s economy

Laissez-Faire Principles

1) role of gov’t : protect private property + keep the peace

2) prices and wages determined by the laws of supply

& demand – not the gov’t

3) gov’t should limit costly regulations that lead to increased prices

- regulation: gov’t imposed rule or law

4) gov’t should keep taxes and spending low

5) gov’t should keep debt to minimum: (if gov’t borrows from banks, then $ not available for individuals for their own use)

d. Costs and Benefits of Laissez-Faire

1) Benefits:• Free market makes the most of efficient use

of resources (without government interventions, how resources are used is decided by the way people choose to spend their money, thus increasing efficiency overall)

• Avoids people becoming reliant on the gov’t (because individuals are forced to become more productive or make better decisions in order to do well financially)

• Encourages creativity and growth (the need for people to be economically self-reliant will give added incentive to come up with creative ideas and processes that wind up benefiting everyone)

• Competition determines which industries succeed or fail – and society prospers if the economy is left in the hands of those who can compete

d. Costs and Benefits of Laissez-Faire

1) Costs:• If a person falls on hard times under laissez-

faire there is no government programs

ensuring a minimum standard of living

• Firms may ignore issues such as pollution,

unsafe working conditions, without

regulations from gov’t

• Firms may form monopolies where they can

effect the market price and cause a welfare

loss for consumers

• Businesses that may be essential (like the

financial giants) may fail causing commerce

to be affected.

e. Gov’t intervention that promoted growth of

business and industry (against Laissez-Faire

principles)

1) Protective Tariffs

tariff: tax on imported goods

- due to fear that new US industries

could not compete with established

European industries

2) Subsidies in land and money (land grants

to RRs etc)

subsidy: monetary assistance granted by a

gov’t to a person or group in support of an

enterprise thought to be in the public interest

3) provided a system of laws to protect

competition, property and enforce

contracts – this encouraged

entrepreneurship

entrepreneur: one who organizes, manages,

and assumes the risks of a business or

enterprise

4) established a system of patents which

encouraged new inventions

patent: an official document that gives a person

or company the right to be the only one that

makes or sells a product for a certain period of

time

III. Railroads A. Linking the Nation

1. Pacific Railway Act (1862) – authorized

construction of Transcontinental RR

2. 1st Transcontinental RR – completed 1869 by 2

RR companies

a. Central Pacific: built from CA east using many

Chinese laborers

b. Union Pacific: built from Omaha, NE west using

Irish immigrants, ex-cons, veterans

Transcontinental

RR

B. RRs contribution to Industrial Growth

1. Development of a National Market

a. TC RRs increased market for many products

by linking the nation (along with canals,

telegraphs and telephones – now biz can be

done quickly across long distances)

b. Manufacturers could sell the same goods

throughout the country (recall the news ways

of selling goods + role advertising)

c. United Americans from different regions

2. RRs Impact on the Economy

a. stimulated economy by spending lots of $ on

steel, coal, timber etc.

b. shipping raw materials and finished goods

became less expensive

3. Challenges to creating a National RR System

a. problem: lots of unconnected RR lines

- solution: RR consolidation. Large RRs

take over small – eventually 7 main

systems with terminals in major cities with

branches into the country

- Cornelius Vanderbilt: successful RR

consolidator. Merged NY RRs and

opened the 1st service from NYC to

Chicago

Consolidate:

unite

Railroad Consolidation

b. problem: scheduling and passenger safety issues

because clocks set by sun’s position in the sky at

high noon (ex. at 12:00 noon in Chicago, already

12:50 in DC). 2 trains on same track could collide

from scheduling errors caused by time variations

- solution: Time Zones

- made rail travel safer and more reliable

Time Zones

C. Land Grant System

1. Land Grants given to RRs by gov’t to

encourage RR construction

2. RR companies able to cover their construction

costs by selling land to settlers, real estate

agencies & other biz

Gov’t Land Grants to

RRs

D. Robber Barons

1. Some RR entrepreneurs engaged in corrupt

practices that led to the acquisition of

great wealth. They were called Robber

Barons

Robber Barons: a wealthy person who tries to get

land, businesses, or more money in a way that is

dishonest or wrong

- often used ruthless tactics to drive

out the competition

- often exploited workers and kept

wages low to enrich themselves

- sometimes bribed public officials

2. Credit Mobilier Scandal – 1872

a. Stockholders from Union Pacific RR set up

Credit Mobilier – a construction co.

b. Credit Mobilier overcharged Union Pacific

c. Since same investors controlled both,

Union Pacific RR paid bills

d. Investors made millions, RR almost

bankrupt

3. More corruption: RR investors realized they

could make more money selling land than

operating a RR

- bribed Congressmen to vote for more land

grants to RRs

IV. Big BusinessA. Shift from individually owned businesses to

Large Corporations

1. Corporation: an organization owned by many people but treated by law as if it were a single persona. people who own the corporation are known as

stockholders

b. Stockholders own shares of the company called stock

- the more stock a person owns, the larger their share of the corporation

c. Why incorporate?

1) can raise $ from sale of stock; invest in new tech, hire workforce, buy machines to increase efficiency

2) limit liability – spread out financial risk

d. Role of Big Corporations

1) people pool $ together to raise vast sums of

money – enough to build RRs, steel mills etc –

made modern industrial production possible

2) produce goods cheaply & efficiently thanks to

economies of scale: the reduction in the cost of a

good brought about by increased production at large

manufacturing facilities

3) could negotiate deals/rebates to lower operating

costs further

e. Effect on Small Biz?

- some couldn’t complete against big biz – forced

out of biz

B. Consolidation of Industry

consolidation = the uniting of separate companies into a

single one

1. The Panic of 1873 (an economic depression)

a. companies suffered loss of sales and falling

prices

b. some large producers began driving smaller

companies out of business or purchasing

them

c. Some hoped to eliminate the competition by

establishing a monopoly

monopoly: total control of a type of industry

by a single person or one company

1) The problem with monopolies: free to charge

whatever they wanted! Quality not

guaranteed!

2) leads to gov’t intervention and laws to prevent

anti-competitive practices of business

2. Still some businesses sought to better

consolidate industries to bring efficiency and

reduce “cutthroat” competition – tried to get

around anti-monopoly laws

a. some companies organized Pools.

Pools: agreements between companies

to maintain prices at a certain level

- Usually broke apart when 1 member

would try to lower prices to steal biz

away from another

b. some companies formed Trusts

Trust: a group of companies whose stock is

controlled by a central board of directors

1) instead of buying another co. outright, company

gives stock to board of trustees. These

stockholders receive a portion of trust’s profits.

2) Since they just managed the stock, didn’t own it,

they were not violating the law

c. Some companies formed Holding

Companies

Holding Company: a company whose

primary business is owning a controlling

share of stock in other companies

1) they don’t produce anything; they own the

stock of companies that do

2) by controlling the stock, it is sort of merging

them into one large company

d. some companies Vertically Integrated

Vertical Integration: the combining of

companies that supply equipment and services

needed for a particular industry

1) owns all stages of productionthe different businesses on

which a company depends for its

operation

2) allows businesses to save $

3) allows big business to get bigger

4) Andrew Carnegie and Steel

- idea to make $ by investing in

companies that served the RRs

- invested in iron mills, sleeping cars, RR

bridges

- Opened a Steel company ( US

Steel) and customized his mills to use

the new Bessemer process

Just visitin’ Andy

at the Sleepy Hollow Cemetery

e. Some companies Horizontally Integrated

Horizontal Integration: the combining of

competing firms into one corporation 1) eliminates the competition

2) allows big businesses to get bigger

3) John D Rockefeller and Standard Oil

- Standard Oil controlled 26 similar

companies and gained control of

90% of the world oil refining

industry

Standard Oil:

A cartoonists view

C. The Pros and Cons of Big Business

1. The Pros a. large companies are efficient, leading to

lower prices

b. they can hire large # of workers

c. can produce goods in large quantities

d. Have resources to support expensive

research and invent new items

1. The Consa. unfair competitive advantage against smaller

businesses

b. They sometimes exploit workers

c. They are less concerned with where they do

business and pollute the area

d. They have an unfair influence over

government policies affecting them

Gov’t Corruption in the

Industrialization Era

Corruption Today??

V. Unions (aka Labor Unions, or just Labor)

A. Working in the US in the Industrial Era

1. Problems faced by workers:

a. unhealthy & dangerous working conditions (lint, dust, toxic fumes in the air; lack of safety devices)

b. low pay, repetitive tasks

c. lack of job security- workers easily replaced by new immigrants

d. child labor

2. While there was a rise in standard of living for allAmericans (thanks to all of the new technology in ag and industry) – there was a growing division of income between wealthy & working class

standard of living: a person’s or group’s level of material well-being, as measured by education, housing, health care and nutrition

3. Deflation (1865-1897) – a rise in value of $

a. Caused prices to fall – so companies

cut wages (that were already low)

b. This results in a call for Unionization

Union: An organization of workers formed for

the purpose of advancing its members’ interests

in respect to wages, benefits, and working

conditions

1) historically unions fight for:

- higher wages

- shorter hours

- better working conditions

2) today unions fight for all of the above

+ more benefits

B. Early Unions

1. Type of industrial workers in 1800s: skilled

(craft) workers vs. unskilled (common) labor

a. skilled workers = special skills & training.

- higher wages

- control of time

- formed trade unions.

trade union: an organization of workers with

the same trade or skill

b. unskilled labor = few skills

- lower wages

2. Industry owners and management oppose

unions…

a. regard them as conspiracies that interfered w/

property rights

b. Actions taken to prevent unions from forming:

1) sign oath/contract promising not to join union

2) undercover agents identify union organizers

3) workers blacklisted – list of troublemakers,

made it difficult to get another job

4) lockouts: locked union members out of

property – refused to pay them

5) if strike? Hired strikebreakers (replacement

workers

3. Political & Social Opposition to Unions

a. Courts often ruled against them and sided

with business owners in legal battles

b. Many Americans saw them as threats to our

institutions - seen as MARXIST

- Marxism: belief that the basic force

shaping capitalist society was the class

struggle between workers & owners

- Marx believed workers would eventually

revolt, take over factories, seize the

gov’t, seize private property, divide

wealth evenly.

- result? A classless society

Marxism

c. some workers advocate anarchism

anarchism: belief that there should be no gov’t

d. Marxism/Anarchism spreading in Europe. At

same time, Europeans immigrating to US

- American workers are uniting in Unions,

and Marxism calls for workers to unite…

so Unions are SCARY!

C. Struggle to Organize

1. Great Railroad Strike of 1877

a. Panic of 1873 – led to wage cuts followed by NATIONWIDE labor protest – biggest in the US to date

b. RR workers across country walked off jobs

- involved 80,000 workers in 11 states & affected 2/3 of US RRs

c. Workers smashed equip., tore up tracks, blocked rail svc

d. States send militias. Gun battles erupted

e. President Hayes sent Army. Restored order, but 100 people dead & property destroyed

The Great Railroad Strike of 1877

July 21- 22, 1877, rioters destruction in

Pittsburgh, PA

2. The Knights of Labor

a. 1st nationwide industrial unionIndustrial Union: an organization (union) of skilled AND unskilled workers

b. demands:

- 8 hr workday

- equal pay for women

- abolition of child labor

- creation of worker-owned factories

c. Supported arbitration (impartial 3rd party workers and mgmt reach agreement

d. Began using strikes by 1880

- successful at first

- membership rose

3. The Haymarket Riot – Chicago, Haymarket Square May 1886

a. demanded 8 hr workday – organizers called strike to show support for it on May Day

b. strikers & police clash – 1 striker killed

c. Anarchists organize meeting, 3000 people. Police come, bomb is thrown, police fire, workers fire,

- 7 police dead

- 4 workers dead

d. 8 arrested. 7 are German immigrants who support anarchism

e. All 8 convicted, 4 executed

f. 1 convicted was Knights of Labor member –reputation ruined

Haymarket Riot

4. The Pullman Strike

a. American Railway Union (ARU) organized in

1893

b. Pullman Co – made Pullman RR cars –

forced workers to live in Pullman, IL and buy

goods from company stores

c. Depression of 1893. Pullman slashed wages.

Workers had trouble paying rent & paying

high prices at the company stores

Pullman, IL (George Pullman’s company town)

d. workers who complained were fired. Strike

began

e. ARU members nationwide stopped handling

Pullman cars. Threatened to paralyze US

economy

f. US Mail cars attached to Pullmans: to

interfere w/ mail is violation of federal law

g. Court ordered halt to boycott. Strike & ARU

collapsed

The Pullman Strike

• In 1898, the

Illinois Supreme

Court ordered

Pullman Town

sold off, ruling

that a company

town was

incompatible

with the spirit of

America.

Violence in Chicago escalated when federal troops came to break the 1894 Pullman factory strike, as illustrated in this drawing from Harper's Weekly. More than one thousand rail cars were destroyed, and 13 people were killed. (Photo Courtesy of Chicago Historical Society)

D. American Federation of Labor

1. organized 20 + trade unions (skilled workersonly), led by Samuel Gompers

a. believed unions should stay out of politics

b. rejected socialist/communist ideasc. Fought for higher wages/better working

conditions

d. Strikes ok, negotiate better

2. Goals:

a. recognize unions/agree to collective bargaining

b. push for closed shops – companies hire only union workers

c. 8 hr workday

American

Federation of

Labor

Samuel Gompers

Just visitin’ Sam

at the Sleepy Hollow Cemetery

E. Working Women

1. by 1900, women = 18% of labor force

a. 1/3 = domestic servants; 1/3 = nurses,

teachers; 1/3 = industrial (garment/food

processing)

b. wages less than men for same job (men had

to support the family)

2. Women’s Trade Union League (WTUL)

organized to promote women’s labor issues

a. 8 hr day

b. Create minimum wage

c. No evening work for women

d. Abolish child labor

F. Early Labor Unions Fail

1. Too many strikes

2. Too much violence associated with strikes

3. Early unions were disorganized

4. Gov’t/Courts usually sided with Biz leaders.

5. Effectiveness of blacklisting, lockouts etc.

6. Associated with Radicalism: Marxism/Anarchy