W I L L I A M H E N R Y J A C K S O N

An Industrial Giant

I. Industrialization A. Rapid Growth in late 19th C

1. By 1900 – Dwarf GB & Germany 2. Value of American manufactured products

1859 - $1.8 Billion 1899 - $13 Billion

B. Reasons 1. New resources 2. Protective tariffs 3. Foreign Capital 4. Cheap Labor

2.5M immigrants in 1870s 5M in 1880s

5. New Inventions

C. Railroads 1. Incredible growth

a. Railroad mileage • 35,000 – End of Civil War• 74,000 - 1875• 193,000 – 1900

b. Revenue - $1 Billion in 1890 c. Debt - $5.1B (US - $1.1B)

2. Organization Issues a. Huge fixed costs b. Need high traffic – encouraged settlement c. Standardization

3. Technological Advances a. George Westinghouse – Air Brake (1869) b. George Pullman – Sleeping Car (1864) c. Steel Advancements d. Telegraph / RR relationship

D. Iron, Oil & Electricity 1. Transformation of Iron Manufacturing – Affordability

a. Bessemer Process–Henry Bessemer (GB)/William Kelly (KY)• 1870 – 77,000 tons • 1890 – 5M tons

b. Iron Ore deposits near Lake Superior c. Pittsburgh, PA, OH & Birmingham Benefit

E. Petroleum 1. New uses – 1870s 2. Greater Supply – Herman Frasch 3. More refinery plants

F. Telephone & Electric Light 1. Telephone – 1876 by Alexander Graham Bell

a. By 1900 – 800,000 telephones b. American Telephone & Telegraph Company

2. Thomas Edison “Wizard of Menlo Park” a. 1879 – Carbonized Filament b. 1882 – First power station c. Revolutionized cities, factories, life

II. Competition & Monopoly A. Causes

1. Economies of Scale – Large Scale Production 2. Importance of expensive machinery 3. Deflation – Downward Prices

B. Consequences - Railroads 1. Intense Competition 2. Rebating 3. Varying Rates 4. Increased Concentration of Industry 5. Debt, Default & Foreclosure 6. Reorganization & Centralization

C. Consequences - Steel 1. Intense Competition 2. Inconsistent Demand 3. Andrew Carnegie

a. Carnegie Steel• 1. Expanded in “down times” • 2. J. Edgar Thompson Steel

Works (1875) b. US Steel (1901)

D. Consequences - Oil 1. Intense Competition Among

Refineries 2. Output > Demand 3. Standard Oil Company – John

D. Rockefeller (CLE) a. Rebates/Predatory

Pricing/Spies/Bribery b. 1879 – Controlled 90% of

oil refining/pipelines/reserves c. Trust

• 1a. Samuel C.T. Dodd (1879)• 2a. Stock turned over 9

trustees to “exercise general supervision”

• 2a. Ordered Petroleum Industry

D. Consequences – Retailing & Utilities 1. Beginning of “natural monopolies” 2. Edison & Bell fought for control in court 3. 1892 – General Electric arises from Edison & Thomson-

Houston 4. Consolidation in life insurance & retail

III. American Ambivalence A. Attraction to laissez-faire

1. Darwin’s The Origin of Species (1859) – Social Darwinism 2. Adam Smith’s Wealth of Nations (177) – Invisible Hand 3. William Graham Sumner “It’s root, hog, or die” 4. But what about… banking laws, internal-improvement,

tariffs, subsidies

B. Turning Tide 1. Worry over higher prices 2. Worry over influence of robber barons

1a. Seemingly undemocratic 2a. Could the Republic survive large income inequality gap?

3. Worry over lack of future economic opportunity

C. Reformers 1. Henry George – Progress and Poverty (1879)

a. “Single tax” on property b. Labor the only true source of capital

2. Edward Bellamy – Looking Backward, 2000-1887 (1888) a. Complete socialization inevitable b. A single trust was end result of American competition

3. Henry Demarest Lloyd – Wealth Against Commonwealth (1894) a. Scathing attack on Standard Oil b. Rebuke Social Darwinism & Laissez-faire policies

4. Marxists a. 1877 – Social Labor party founded b. State should control of means of production

D. The Government Reacts 1. Railroad Regulation

a. National Grange of the Patrons of Husbandry • Provide social & cultural benefits for rural communities • “Reasonable” maximum rates & outlawed “unjust”

discrimination b. Munn v. Illinois (1877)

• Grain Elevator – Public Interest • Subject to state control

c. Wabash, St. Louis & Pacific Railroad v. Illinois (1886) • Declared unconstitutional an Illinois regulation outlawing long &

short haul evil• Illinois cannot regulate interstate shipments

d. Congress reacts with Interstate Commerce Act (1887)• All charges shall be “reasonable and just”

d. Congress reacts with Interstate Commerce Act (1887)• All charges shall be “reasonable and just” • RR forced to publish set prices • Established Interstate Commerce Commission (ICC)

2. Sherman Antitrust Act (1890) a. Any combination “in the form of trust or otherwise” that

was “in restraint of trade or commerce among the several states, or with foreign nations” was declared illegal

b. Meant to restore competition c. United States v. E.C. Knight Company (1895) “Sugar

Trust Case”• Question: "could the Sherman Antitrust Act suppress a monopoly

in the manufacture of a good, as well as its distribution?" d. However, SCOTUS ruled price fixing did violate Sherman

D. Labor Union Movement 1. Workers’ reaction to big corporation

a. Early leaders were visionaries but not practical b. Mostly organized by craft b. Sought end of wage system & formation of cooperatives

2. Knights of Labor – 1869 a. Founded by Ulrich Stephens b. Workers can aspire to more by pooling resources c. Welcomed blacks, women, immigrants, unskilled workers

& artisans. d. Called for 8 hour workday e. 1886 – Haymarket bombing

3. American Federation of Labor (AFL) – 1886 a. Founded by Adolph Strasser and Samuel Gompers b. Accepted workers remaining wage earners c. Goal: dues paying members committed to improving

situation

4. Increasing Violence & Strikes – A Broken System? a. Homestead Steel (1892) PA

• Carnegie & Henry Clay Frick • "Workers believed because they had worked in the mill, they had

mixed their labor with the property in the mill," explains historian Paul Krause. "They believed that in some way the property had become theirs. Not that it wasn't Andrew Carnegie's, not that they were the sole proprietors of the mill, but that they had an entitlement in the mill. And I think in a fundamental way the conflict at Homestead in 1892 was about these two conflicting views of property."

b. Pullman Strike (1894)