Chapter 16Big Business and Organized Labor: 1860-1900

Questions to Consider1. What were the primary factors that stimulated

unprecedented industrial and agricultural growth in the late 19th century?

Major Catalysts of the 2nd Industrial Revolution Creation of interconnected transportation and

communication networks RR and Telephone/Telegraph Steamships

By 1880 widespread application of electrical power Industrial machinery Trolleys and subways Production of steel and chemicals

Systematic application of scientific research to industrial processes Refining of crude oil into kerosene and gasoline Inventions of new products

Advances in Agriculture

By 1870 US was the world leader in production of wheat and corn

Commercial cattle industry Slaughter and Meat packing

Bonanza Farms Developed by corporations North & South Dakota & Minnesota Latest machinery and scientific techniques International markets for wheat and corn

What is “Big Business”?

Big Business Refers to size

Before the civil war, most businesses were small, mostly family-owned with few outside workers by the 1870’s large single businesses with multiple locations, employing thousands of workers and stockholders.

Refers to Power & Interconnected relationships With each other through social clubs and joint business ventures Creating subsidiary businesses With politicians from local city councils and mayors to governors,

congressmen and presidents

Refers to markets From local, to state, to region, to intra continental; to international

The Rise of Big Business

Railroads First industries to represent big business

Building the Transcontinentals Central Pacific RR: East from Sacramento

Hired between 12,00-14,000 Chinese laborers who came to US in search of gold

Union Pacific RR: West from Omaha 1865 Promontory Utah

May 10th 1889

Central Pacific Railroad workers

The Rise of Big Business

Financing the Railroads Railroads constructed by private companies who

raised the funds by selling bonds. By 1850’s: Congress approved legislation to provide

federal land to the RR companies

Inventions Spurred Manufacturing Barbed wire, refrigerated box cars The telephone

The Rise of Big Business

Route of Transcontinental RR

Questions to consider

Why was the transcontinental RR not in the South ?

Why should government get involved in helping private businesses?

The Great Depression of 1873-1879

Black Thursday: September 18, 1873 Banking House of Jay Cooke & Company failed over the Northern Pacific

Railway Northern Pacific acquired 40 million acres of public land in the West Cooke sought to raise $100,000,000 in capital through a bond issue ,the

bond issue tanked; Cooke failed and several other banks failed as well. Stock Market closed for 10 days due to the panic selling US monetary policy: take greenbacks out of circulation until paper money

is fully backed by gold & silver in US Treasury Railway bubble: investment in real estate and unsecured loans to railroads Thousands of businesses failed defaulting on more than $1,000,000,000

in debt; 1 in 4 workers were unemployed;

The Depression of 1882-1884

Business profits declined steeply in 1882 Manufacturing collapsed (production of durable goods fell by

¼) Foreign-owned securities sold because of fear that the US

would abandon the gold standard for its paper currency 11 New York banks failed as did more than 100 state banks Unemployment rose from 2.5% to 7.5% and to 13% in the

northeast Kansas farmers burned their own corn because the price was

so low Recovery did not begin until 1885

Questions to Consider2. Who pioneered the growth of Big Business? What were the

goals they aimed to achieve and what were the strategies they used to dominate their industries?

Capitalism & Free Markets

1. How does the free market lend itself to creation of monopolies?

2. What is a monopoly? 3. How does a monopoly stifle competition? 4. What happens to the free market when there are too many

monopolies?

Corporations and the 2nd Industrial RevolutionBusinesses grew as a result of rapid

expansion of technology, population, government incentives and subsidies. Business owners sought to integrate all the

processes of production and distribution of goods into single companies to minimize competition.

Mergers with competitors: intended to dominate entire industries and limit competition

What is a Corporation? A legal entity that separates the ownership of an enterprise from

the management of its operations. Corporations raise money for operations by selling shares of stock

which represent partial ownership but not management authority. Stockholders elect a board of directors who appoint and evaluate

the corporation’s executive management and can replace them. Stockholders share in the profits of a corporation but they cannot

be held personally liable for the debts of a corporation if it fails. Executive management and the board of directors cannot be held

personally liable for negligence or misconduct by the corporation unless it can be proved that they acted with criminal or gross negligence.

Who were these people?

Protestant work ethic Hard work is virtuous and will be rewarded

either in this life or the life to come. “To secure wealth is an honorable ambition”

Russell Conwell, prominent Baptist Minister in 1870’s.

In the process of forming huge companies and eliminating competition, business leaders cut ethical corners, bribed politicians, exploited workers, broke laws.

William Henry Vanderbilt, “The public be dammed!”

Railroad & Business Entrepreneurs

aka “Robber Barons” Jay Gould: involved in a number of businesses and

the Boss Tweed ring in New York City. Owned the Erie Railroad with Jay Fiske and put Boss Tweed on the board of directors. Posted 1 million bail for boss Tweed after he was arrested for corruption. 9th richest man in U.S. history. Controlled over 10,000 miles of railroads. Attempted to corner the gold market.

Jay Gould Boss Tweed

Entrepreneurs

Andrew Carnegie

Entrepreneurs

J. P. Morgan

Businesses Financed by Morgan• A T & T• Edison Illuminating CO./General Electric• International Harvester• J.I Case• U.S. Steel • All the Railroads

Entrepreneurs

J. P. Morgan, Financier: investment banker

Sears and Roebuck: Richard Sears and Alvah Roebuck—mail order

Sears mail-order homes

Trusts

A trust is an arrangement that gives a person or corporation (the trustee) the legal power to manage another person’s money or another company they own.

Standard Oil and other big businesses controlled companies by having their stockholders transfer their shares “in trust” to trustees who included the big business barons like John D. Rockefeller.

The purpose: to avoid anti-monopoly laws that limited the number of businesses that could be owned by one company.

The Working Class1. What were the efforts of workers to organize unions to

promote their interests during this era?

The Working Class

The Working Class

Toward Permanent Unions 1866 National Labor Union Contract Labor Act

Employers to import employees by paying passage

The Knights of Labor Secret Protect workers from retaliation Hundreds of thousands of workers were members

The Working Class

The Working Class

The Railroad Strike of 1877 1st Interstate Strike Financial panic of 1873 Federal troops stopped the strike

The Sand-Lot Incident Meeting to show support for RR strike turned into an attack on

Chinese immigrants

Anti-Chinese Agitation Chinese worked for less and perceived to steal American jobs Dennis Kearney and “foreign peril” 1882: Congress prohibited Chinese immigration for 10 years

Great RR strike of 1877

Began in Martinsburg, West VA on July 14No labor unions were involvedSpontaneous strikes by workers for better working

conditions and pay

Blockade of engines at Martinsburg, West Virginia, 16 July 1877

Maryland National Guard Sixth Regiment fighting its way through Baltimore, Maryland, 20 July 1877

Burning of Union Depot, Pittsburgh, Pennsylvania, 21–22 July 1877

Who was Blamed?

German and Bohemian immigrants Idle Hands: Illinois Governor Shelby Cullum, “the

vagrant, the willfully idle, was the chief element in all these disturbances.”

Communism: "the hands of men dominated by the devilish spirit of Communism.“

The 1876 Election Deal: Thomas Scott, of the Pennsylvania Railroad, delivered disputed congressional votes to Hayes in exchange for a federal bailout of failing investments in the Texas and Pacific railroad

The Working Class

Anarchism Any form of government limits individual freedom and

is abusive

The Haymarket Affair 1886 Knights of Labor rally in Chicago

Bomb thrown into a group of police officers Undermined the Knights of Labor though no one found

guilty of incident Defendants became martyrs to union cause because

convictions based on questionable evidence.

The Working Class:The Haymarket Affair

Illustration of the Haymarket AffairThe injured man is a police officer.

The Working Class

Gompers and the AFL 1886 25 skilled workers organizations created the American

Federation of Labor Samuel Gompers

The Homestead Strike June 30- July 6, 1892 Amalgamated Association of Iron and Steel

Workers went on strike at Carnegie’s Homestead Works near Pittsburgh

An attempt to break the strike ended in bloodshed when Pinkerton Detectives and Strikers engaged in a firefight. Pinkerton Men outnumbered and surrounded, surrendered and were allowed to leave on July 7

State militias sent in to protect workers “not involved in the strike (strike breakers/scabs). Mill was reopened and managers returned. Martial law declared in town.

July 23: Anarchist with no connections to the strike attempted to assassinate the Manager of Homestead Steelworks. Public support for strike evaporated.

Panic of 1893 1893 Wheat Prices crashed 1893 Failure of Argentine bank caused international investors to fear that problems might spread, causing a

run on US treasury gold Panic in Europe caused investors to sell American stocks for dollars backed by gold Sherman Silver Purchase Act of 1890 required US to purchase silver using notes backed by silver or gold. 500 Banks and four major RRs failed Unemployment: National 17-19%

25% - Pennsylvania 35% New York 43% Michigan

Populist Movement Texas, Alabama, North Carolina: poor white farmers Colorado, Idaho, Kansas, Nebraska & North Dakota: wheat farmers Hostility to: elites, cities, banks, railroads and gold Free silver movement: back paper money with silver not gold Racism: Jews control monetary policy & the banks

US Gold Reserves fell to dangerously low levels. President Cleveland had to borrow 65 million in gold JP Morgan and Rothschild family Cleveland and Democrats blamed for the panic. Republicans won largest majority ever in elections of

1894 Recovery began in 1897

The Working Class

The Pullman Strike 1893 Panic: Pullman laid off 3,000 of 5,800 employees and cut pay by 30-

40% but did not lower rents on homes or prices for food in company towns 1894: American RR Worker’s Union refused to handle Pullman cars 27 states affected Entire RR lines brought to halt President Grover Cleveland ordered federal troops to protect mail delivery

by protecting strikebreakers from strikers

Mother Jones (1837-1930) Self-declared mother of the labor movement

Higher wages Shorter hours, safer workplaces Child labor restrictions

The Working Class

Eugene V. Debs & Socialism

Debs founded the American Railway Union in 1893. He was jailed for violating a federal injunction against the Pullman Strike.

In re Debs (1895): “The strong arm of the national government may be put forth to brush away all obstructions to the freedom of interstate commerce or the transportation of the mails.”

Debs emerged from prison a committed democratic socialist

Debs ran for President 5 times

Founding member of International Workers of the World

Soaring ProductivityFew Worker Protections

US produced 1/3 of the world’s goods by 1900.By 1900 the majority of Americans worked in

factories and mines rather than on farmsThomas Jefferson’s warning: Problems of unregulated Capitalism and reforms

In 1900 in some U.S. cities, up to 30% of infants died before reaching their first birthday

U.S. Mine-worker safety well below other industrialized countries Railway worker safety well below other industrialized countries Child labor laws still did not exist in 1900