Chapter 4

The Industrialization of America

(1860 - 1900)

Following the Civil War, the United States experienced a period of tremendous growth. Despite a rather painful "reconstruction" of the North and South, in the thirty years following the war, the U.S. expanded its borders to the Pacific Ocean physically; economically, the U.S. was transformed from an agricultural to an industrial nation. The Industrial Revolution marked the beginning of "Modern America".

A. Daily Life In 1860 and 1900

• Before the Civil War, America was mainly an agricultural nation.
• In 1860 most Americans lived on farms or in small towns

  Afterward, factories and machines soon became the symbols of American life, with a belief in progress based on material well-being.

  Historians refer to the period as the "Gilded Age" a term coined by Mark Twain.

  Industrialization brought many positive benefits, but at a cost!

B. A Society Transformed

• Industrial Revolution - when a nation develops its simple rural economy into a complex technological urban economy requiring large investments in factories and machines.
  • Great Britain was the first industrial nation and this made it the richest and most powerful country in the world - Fr. #2 - Ger. #3
  • The U.S. began to catch up following the Civil War in 1865.
    • In 1860 the U.S. was #5 in the world with 70% of its pop. involved in farming.
    • By 1890 the U.S. was #1 in production with a diverse and self-sufficient economy.
    • 85% in North out produced #2-#4 combined GNP grew at 4% yr 1865-1914
    • 76% more goods 36% more workers 13% more establishments
    • per capita income increased by 2% a year
      • many people did not win any gains at all
      • uneven distribution of wealth
• Civil War - watershed

  (need for "war toys", etc.; shortage of workers led to widespread use of machines)

  	1860	1900
  capital investment	$1 billion	$10 billion
  gnp	$2 billion	$13 billion ($6+ trillion today)
  workers	1.3 million	5.3 million

  2. U.S. outproducing England and Germany (no. 2 and 3)

• Economic expansion altered our political, economic, and social institutions
• growth was so fast, changes were brought about often without carefully thinking of the consequences

  (negative changes would lead to a "reform movement")

• Three Trends going on in the United States in the late 1800s - all of them interlinked
  • 1. The expansion of American Industry
  • 2. The settling of the West
    • provided new sources for raw materials
      • timber
      • iron ore
    • provided markets
  • 3. The growth of cities
    • depended on industry for growth
    • provided workers
    • provided markets
  • Railroads tied these trends together
• Once the South seceded from the Union in 1861 northern leaders were able to pursue industrialization without Southern opposition
  • government passed laws favoring industry
  • government aided in the settlement of the west

C. Factors that encouraged Industrial Growth or Expansion

(Brainstorm: What things would be necessary for industrial expansion?)

1. Natural Resources (especially the valuable minerals found in the West)

• The size of the U.S. provided an abundance of raw materials
  • coal
  • timber - lumber - early fuel
  • lead
  • copper
  • iron
  • petroleum
  • sulfur
  • zinc
• Fertile soil - for raising foodstuffs and cash crops such as cotton and tobacco.
• Swift running streams provided waterpower and early transportation systems.
• The size of the U.S. also acted as a handicap - distance made raw materials and markets far from industrial centers.

2. Growing Population (30m in 1860; 76m in 1900)

• A large population was necessary to provide cheap labor and a large market for new products.
  • high birth rate - slowing as more people became middle class
  • immigration
• Self-sustaining market
• Abundance of labor
  • the number of factory workers increased 10X
• Cheap Labor (busted farmers, vets, women and children, immigrants)

3. Capital from Europe (speculation), Western minerals, and Corporations

• Money - Capital to pay for changes
• Public sacrificed - saved instead spent

4. New Inventions

• "Age of Invention"
• education systems
• U.S. = home of inventions - US patent office opened in 1790
  • Between 1790 and 1860 - 36,000 patents
  • Between 1860 and 1900 - 640,000 patents
  • 1860-1900 - 1/2 million patents granted!
  • Menlo Park - the Research Lab
  • Thomas Edison came up with the idea to research ideas in many fields.
  • Edison developed 1,093 patents between 1876 and 1900.
• Few of the advances necessary for a rapid industrial development could have been accomplished with the existing technology
  • Inventors were a critical part of the industrial revolution.
  • Technological Unemployment - loss of skilled jobs by the introduction of new machines.
• Efficiency and Practicality
  • Productivity - the rate of output of production increased by 12X
• Economic Stimuli
• Momentum created by Civil War (profits; stability with less Southern opposition, high demand, introduction of large number of machines)

5. Technological Developments

• Steam Engine - James Watt (1769)
• Mass Production -Eli Whitney (interchangeable parts and standardization of parts)
• Assembly Line - Swift and Ford
• Efficiency Engineering - Frederick W. Taylor

6. Improved Transportation

7. Improved Communication

8. New Sources of Power (petroleum and electricity)

9. New Ways of Selling - Advertising

10. Government Policies

11. New Business Practices (ways of doing business)

• Led to the rise of "Big Business"
• Based on "consolidation" (purpose?)

A. The Steel Industry

• Bessemer Process - Henry Bessemer and William Kelley, made for mass quantities and lower prices ($300 a ton to $35 a ton)
  • helped to stimulate the growth in other industries
  • Iron was not strong enough for RR tracks, bridges or tall buildings
  • Henry Bessemer and William Kelly developed the open hearth process which made high grade steel affordable
  • production increased 20X
  • Pennsylvania, Ohio (coal) - Pittsburgh, Cleveland
  • Michigan, Minnesota (iron) - Detroit
  • Birmingham, Alabama

B. The Birth of American Railroads

• 1st commercial RR - England - 1825
• Improved Transportation Systems were required to solve the problem of size - biggest change
• Railroads were the solution to the problem of a large nation.
  • Problems - These RR were regional in concept (35 systems)
    • few ran more than 50 miles
    • Concentrated RR in NE
    • Ignored resources and markets in the S and W
      • those going west had no cities to build to - went nowhere
    • Different lines used different tracks and gauges
      • lack of a standard gauge - distance between the rails
      • requiring inefficient loading and unloading of cargo.
      • cars from one company could not run on the tracks of other companies
    • Iron and wooden tracks were expensive to replace.
    • Steam engines run on wood, it became difficult to get enough.
    • Travel was uncomfortable (smoke) and dangerous.
      • single track - threat of collision
    • Overcompetition led to destructive RR wars.
• First "Tycoons" (Cornelius Vanderbilt - NY Central, from NY to Chicago by 1869)
  • Cornelius Vanderbilt - New York Central - Efficient and ruthless
    • "Law! What do I care about law? Haven't I got the power?"
    • Worth $100 million.
    • ran opponents out of businesses
    • standardized gauge
    • monopolies raised rates
• Subsidies to Railroad (encouraged others)
  • Government grants of land and subsidies to encourage growth.
  • Financing the railroad - $4.5 billion by 1880
  • Pacific Railway Act of 1862
    • Govt. gave away 200 ft. wide right of way and financial aid
    • ($60 million in loans to the Union-Pacific / Central Pacific alone)
    • Govt. gave away 40 mile wide checkerboard pattern of public domain to convince RR to build through unprofitable areas in the Great Plains
    • (176 million acres to 80 RR)
    • Built 8% of RR - got reduced rates for troops, mail, etc.

C. The First Transcontinental Railroad

• The Kansas-Nebraska Act - 1854
  • build to new gold discoveries in California (49ers)
  • spending hampered until South seceded
  • made Chicago the center of the new Transcontinental railroad system
• Subsidies to Railroad (encouraged others)
  • Government grants of land and subsidies to encourage growth.
  • Financing the railroad - $4.5 billion by 1880
  • Pacific Railway Act of 1862
    • Govt. gave away 200 ft. wide right of way and financial aid
    • ($60 million in loans to the Union-Pacific / Central Pacific alone)
    • Govt. gave away 40 mile wide checkerboard pattern of public domain to convince RR to build through unprofitable areas in the Great Plains
    • (176 million acres to 80 RR)
    • Built 8% of RR - got reduced rates for troops, mail, etc.
  • (RR which ran from coast to coast). 4x increase in miles of track
  • Omaha, Nebraska to Sacramento, California
• The Big Four - Leeland Stanford, Charles Crocker, Huntington, and Hopkins
  • Central Pacific RR made them bosses in California
  • Hired 7,000 Chinese immigrants - $1 / day
  • They drove small farmers and ranchers out of business with their methods.
• Union Pacific
  • Grenville Dodge hired Irish immigrants
• As many as 1,200 workers died
• Consolidation
  • Construction
  • Created jobs
  • Moved population west
  • Required increased immigration for labor (Irish and Chinese)
  • Union Pacific and Central Pacific joined at Promontory Point, Utah on May 10, 1869.
  • Bypassed towns often died.
• Model for others (especially steel and oil)

D. An Empire of Rails

• In 1865 the U.S. was the leading nation in terms of miles of track by 1900 had more than Europe
• RR Transportation (created a "National Market") - distribution system
• (135,000 mi. 1860-1890), many improvements
  • (steel rails, luxuries, standard gauge - 4 feet eight 1/2 inches, saved time)
  • George Pullman - sleeping car - 1864.
  • George Westinghouse - air brake - 1868.
  • Elisha Otis - elevator - 1852 - to make loading easier.
    • This devise eventually was used to make living in tall buildings more tolerable
    • thus allowing more people to live in a smaller space.
  • Refrigerator car - 1867
  • Cities began to grow and develop as improved transportation allowed more food to be brought to the city each day allowing more people to live in one place.
  • More people meant a need for more jobs and the RR solved this problem by bringing in raw materials which allowed the creation of more industries.
• Advantages of the RR
  • Direct routes
  • Greater speed - 25x horse and wagon
  • Greater safety and comfort
  • Dependable schedules - time zones
  • Larger volume of traffic
  • Year round use
  • ended isolation of towns and linked nation
  • Increased interdependence and specialization
• Other Transcontinental RR
  • Northern Pacific - 1883 - Minn. to Oregon
  • Santa Fe - 1884 - KC to LA
  • Texas Southern Pacific - 1884 - SF/LA to NO
  • Great Northern - 1893 - Minneapolis to Seattle
• James D. Hill - The Great Northern RR
  • used no land grants or cash subsidies.
  • Provided free transportation west in order to create markets; gave easy credit to get new businesses started; gave agricultural advice to help farmers survive.
• Set an example for other industries
  • Finance
  • Labor relations
  • Management
  • Competition
  • Government regulation
• The Money Power - large amounts of money invested to consolidate
  • (1894-1898) avoid collapse
  • Investment Banking - J.P. Morgan used money deposited in banks as capital to take over businesses.
    • J.P. Morgan and Union Pacific President - Edward H.Harriman took control of every RR except the Great Northern they used interlocking directorates to eliminate competition this led to a gradual reduction in prices.
    • Reduced individual freedom and opportunity.
    • nationalized, centralized, made efficient
• Corruption - Waste
  • Monopolies - lack of competition
  • Used Cartels or Pools - secret agreements to limit production to increase prices.
  • RR charged high prices on wheat, corn, and livestock (long haul vs. short haul)
  • RR also controlled storage facilities - grain elevators often delayed transportation to make a bigger profit.
  • Rebates were given to large industries to get their business secretly and prices were raised for small dependent users to pay for this

E. Energy from Oil

• Oil viewed as a problem until 1859
• Benjamin Silliman (Yale)
  • practical use (1855)
  • discovered that kerosene could be used to replace whale oil in lamps.
  • Biggest uses came after his death - auto, plane
• Edwin Drake - developed drill and pump-drilled first oil well in Titusville, PA (1859)
  • could also be used as a lubricant
  • true value not recognized until the internal combustion engine
    • internal combustion engine - 1876 by Dr. N.A. Otto, a German
  • Automobile - 1908 - Henry Ford began mass production of the Model T

E. Energy from Electricity

• Michael Faraday and Joseph Henry - 1831
  • discovered the principle behind the dynamo - electric generator
  • electricity to run factories
• Lighting provided longer work hours
  • Thomas Edison
    • 1879 - incandescent light bulb
    • 1882 - first electric power plant - NYC
  • George Westinghouse - Alternating Current - able to be used over long distances
• An industrial revolution could not occur as quickly without these new sources of power

F. The Telephone and Telegraph

• Communication
  • Telegraph - Samuel F.B. Morse - 1837
    • Western Union (1844)
    • consolidation by Western Union took time - modeled after RR
    • Transatlantic Cable - Cyrus Fields (1866)
  • Telephone - Alexander Graham Bell - AT&T (1876)
    • It took years to connect the country together, however by 1892 cities in the East and Midwest were connected and this sped up business transactions between industries.
  • Typewriter - Christopher Sholes -1875
    • Remington sped up business transactions.
  • Thomas Edison - the motion picture projector and the phonograph were the beginnings of new industries which would later be used to advertise new products and to create new markets.
    • Radio - Guglielmo Marconi (1896) invented the "Wire-less Telegraph" (could send and receive via electromagnetic, or "radio" waves); Lee De Forest (1906) invented the "vacuum tube" (enabled broadcasts of signal to be detected and amplified by a radio receiver)
    • 1925 - the TV tube by a Russian, Vladimir Zworykin)
    •  

A. Corporations

• Corporation - a business organization formed by a group of people who are given permission by the state government to sell stock in the company to the public.
  • capital is then used to run the company
  • stockholders are paid a portion of the profits - called dividends
  • ("artificial" legal person - 14th Amendment.)
  • Replaced or improved Old Ways - Proprietorship and Partnership
  • Weakness of old forms of business organizations: single proprietor, and partnership.
    • inability to raise large sums of money.
    • risk of losing everything.
    • disruption of business upon death of owner.
• Three advantages - Encouraged competition
  • 1. Can raise capital
    • ($ invested in businesses for the purpose of making $)
    • could raise enough $ to create large companies by selling stock.
    • Economies of Scale - the more units of a product a company makes the less it costs to make each unit
  • 2. Limited Liability
    • (stockholders' assets cannot be seized to satisfy claim against corporation)
    • If a corporation goes bankrupt the most a stockholder can lose is the money he paid for the stock. Personal assets cannot be claimed by creditors to repay loses.
    • Corporations are treated as if they were individual persons, therefore the civil rights of the company are protected by the 14th amendment
    • As a legal "person", it was protected by the 14th Amendment
    • Since corporations could not be sent to jail this also meant that it was very hard to punish companies for breaking the law.
    • (had to obtain a state charter to begin one)
    • This encourages people to invest in corporations
    • otherwise concentration of wealth would have slowed revolution
      • the richer you were the less likely you would be to risk it all on a new invention
  • 3. Has perpetual life
    • The corporation does not come to an end with the death of an owner, the stock is inherited.
    • An investor may withdraw from the corporation by selling his shares (transferability).

B. The Case of Standard Oil

• John D. Rockefeller - consolidate industry
  • entered the oil business in 1862
  • created Standard Oil Company - 1870
  • Captain of Industry - contributed to the building of America
    • Vertical Integration gaining control of different types of businesses at each stage in the production of a finished good
      • drilling wells (he paid cost - his competitors paid cost + profit)
      • timberland
      • barrel plants
      • refineries
      • warehouses and docks
      • transportation systems
        • pipelines
        • fleets of tankers
        • RR tank cars
      • sales
        • kerosene shops
        • lubricant shops - Vaseline
        • gas stations
      • Individual departments were able to specialize
        • purchasing
        • oil inspection
        • foreign shipping and sales
        • legal affairs
        • cost accounting
      • The result was lower prices and better quality - Vertical integration benefited customers
  • Robber Baron - became the most hated man in America
    • Horizontal Integration - combining or gaining control of most of the companies at the strategic stage of an industry in order to control the industry (monopoly)
      • Rockefeller was the first to use the RR rebate system to get a better deal from the RR by guaranteeing large shipments in order to get a special rate so that he could drive competitors out of business.
      • Rockefeller enjoyed price wars to destroy competitors.
      • Rockefeller used any means necessary to gain control
      • Bought out competitors, especially during depressions when the prices were low.
      • paid workers the least he could get away with
        • in order to keep costs down
        • leading to very low pay and bad working conditions.
      • one of the 1st billion dollar corporations
    • Rockefeller controlled 90% of oil refineries in the U.S. by 1879
      • once he had control he was able to raise his prices to recover losses
    • Standard Oil Trust - 1882 - the first trust controlled by John D. Rockefeller.
      • Other trusts copied Standard Oil and the public became concerned with the decline in competition.
      • Trusts - similar to corporations except that the owners held trust certificates instead of stock.
      • Trust certificates enabled the owner to collect profits just like stock, however actual control of the way the company was run was left to the board of trustees. This allowed wealthy men to control companies that they did not own by creating trusts and making themselves trustees.
      • Therefore no monopoly.
      •  

C. Captains of Industry

• genius
• dedication
• ruthlessness
• talent
• inventiveness
• luck

D. Andrew Carnegie's World of Steel

• Andrew Carnegie - consolidated the industry
  • Scotish Immigrant
  • worked his way up from the bottom despite prejudice
  • Captain of Industry - contributed to America
    • Andrew Carnegie developed the steel industry by reducing costs
      • Mass Production - First developed by Eli Whitney - 1800 - with the use of interchangeable parts
        • Carnegie used it to reduce costs ($56 to $11.50)
      • Open Hearth Process (Bessemer Process) to make steel cheaper.
      • Steel was used to make other machines which could not be made using iron
        • lathes
        • drills
        • presses
    • Vertical Integration gaining control of different types of businesses at each stage in the production of a finished good
      • smelting co. - blast furnaces separated the metal from its ore
      • another co made the steel into slabs
      • rolling co. - made the slabs into sheets
      • Individual departments were able to specialize
        • purchasing
        • research - find the best methods at each stage
        • foreign shipping and sales
        • legal affairs
        • cost accounting
      • Carnegie owned his own iron and coal mines as well as many RR lines
  • Robber Baron - helped to create inequities in America
    • Horizontal Integration - Bought out competitors, especially during depressions when the prices were low.
    • Often undersold competitors in order to drive them out of business.
    • Carnegie paid workers the least he could get away with in order to keep costs down leading to very low pay and bad working conditions.
    • By 1900 Carnegie Steel produced 25% of all steel in the U.S.
• J.P. Morgan - investment banker - richest man in the world
  • controlled 60% of the steel industry
  • J.P. Morgan bought Carnegie out for $500 million in cash (Monopoly)
  • Used holding company concept to create U.S. Steel
  • U.S. Steel in 1901 (one of the first billion dollar companies)

"Vertical Integration"

• purchasing different types of businesses at each stage of production, from the ground up (Rockefeller and Standard Oil) or (Carnegie Steel)
• Advantages - mass production, wide distribution, efficiency, cheaper

"Horizontal Integration"

• control of all businesses at the critical stage of production, the stage where the greatest profit could be realized; one would "expand" in a particular area of production - often called a Monopoly (Carnegie-Steel) or (Standard Oil)
• Disadvantages - eliminate competition, power over consumer and laborer, influence gov't, concentration of wealth into a few hands

E. Kellogg, Post, and the Cereal Wars

• Dr. John Harvey Kellogg
  • Battle Creek, Michigan
  • Seventh Day Adventists Sanitarium
    • health food
  • brother W.K. Kellogg formed the company in 1906
• C.W. Post came to Battle Creek to compete with Kellogg
• both companies used creative advertising and promotions to sell their product

G. The Food Industry did improve diets for workers in the city

• Gail Borden - 1856
  • canned milk allowed transportation of milk to areas off the farm.
• H.J. Heinz
  • marketed preserved foods including ketchup in cities
  • replacing the time consuming process of canning.
• General Mills and Ralston-Purina
  • developed flour processing plants put many local millers out of business.
• Chicago meat-packing industry
  • Philip D. Armour - disassembly line - reduced waste and prices while creating city jobs which were quite dangerous.
  • Gustavus Swift - 1881 - developed the refrigerator RR car to ship meat.
• Only vegetables were local and therefore more difficult to get in the cities.
  • Fannie Farmer - Boston Cooking School Cookbook - 1896
    • established standardized measurements in cooking (teaspoon, tablespoon, cup).

F. Isaac Singer and the Sewing Machine

• Sewing machine invented by Frenchman in 1830
• Improved by Elias Howe in 1846
• over 200 different versions - little success
• Isaac Singer - 1851 version
  • patent wars - legal battles over who owned the various patents for a given product
    • Howe won the battle
    • In order to make money Singer had to market his product well
      • clothing manufacturers
      • housewives
    • Singer set up stores to provide service as well as sell the machine
    • Installment Plan - allowed people to pay a small sum of money over several months
    • Had to periodically come up with new features in order to be able to continue

G. Other methods of selling

• "General Store" and "Specialty Stores" gave way to new ways of selling merchandise
  • Department Stores (H.R. Macy and Co. - 1858),
  • Chain Stores (A & P -1859, Woolworth's -1879),
  • Mail-Order Houses
    • Montgomery Ward - 1872
    • Sears & Roebuck - 1895
• Advertising - newspapers and magazines, then radio (helped create "mass demand")
• Packaging (no need to cut, measure, weigh articles)

A. Laissez-Faire Capitalism

• Laissez-Faire - hands off policy of leaving business alone and letting it regulate itself
• Adam Smith developed this idea arguing that uncontrolled competition was free enterprise
• Adam Smith ("Invisible Hand") - Supply and Demand - Competition
  • would mean better products
  • at lower prices
  • would contol behavior of companies
  • if they misbehave we will buy from somebody else
• Options
  • no gov't interference in business - largely the policy until the Civil War
  • should gov't actually protect business?
  • or should it side with workers?
  • or should it side with customers?
• There were programs to support Big Business

A. The Morrill Tariff - 1861

• Protective Tariff - high tariff - revised it upward to 46% by 1870
  • Levied high tariffs to protect manufacturing from foreign competition
  • Show the export-import tables
• Government ran surpluses
  • Show Government expenditures tables - could have been active
  • Show Government debt - did as little as possible
  • Government was slow to respond to the problems created because of laissez faire
• No corporate or personal income tax
• Businesses could make huge profits
  • charging far more than their product was worth
  • Tariffs eliminated competition - violates laissez-faire in favor of big business
• Customers were not happy - had to buy higher priced items

B. Banking

• National Banking Act - 1863
  • created a system of federally licensed banks
    • state rules did not require adequate cash reserves
    • state banks had issued some 7,000 different notes
      • difficulty in doing business in different states
      • inflation
  • a way to increase capital (member banks had to put 1/3 of their assets into U.S. bonds)
  • provided a "uniform currency" - National Bank Notes
    • made it easier to have Interstate Commerce - business across state lines
  • the government kept the amount of money low - value high
• The West and South were not happy - felt that the banking system was controlled by the East

C. Education

• The Morrill Act - 1862
  • designed to fix a major problem with public education
  • which would assist big business in the long run
  • created public universities that focused on agriculture and business
    • gave each state federal land to be used to set up public land grant institutions
    • Texas A&M - 1876
    • sponsored research
  • American work force became better educated

D. Postal Reform

• 1863 - city mail delivery began
• 1896 - RFD - Rural Free Delivery began
• Sears / Montgomery Wards - catalogs
• 1913 - parcel delivery

E. Government Incentives to Business

• Subsidies - payments to support business
  • tax breaks to factories from states and cities
• Subsidies to Railroad (encouraged others)
  • Government grants of land and subsidies to encourage growth.
  • Financing the railroad - $4.5 billion by 1880
  • Pacific Railway Act of 1862
    • Govt. gave away 200 ft. wide right of way and financial aid
    • ($60 million in loans to the Union-Pacific / Central Pacific alone)
    • Govt. gave away 40 mile wide checkerboard pattern of public domain to convince RR to build through unprofitable areas in the Great Plains
    • (176 million acres to 80 RR)
    • Built 8% of RR - got reduced rates for troops, mail, etc.
• Rest of public domain was reserved for the Homestead Act to encourage immigration
• Indian Concentration

F. Is Bigger Better?

• Tactics of Robber Barons included
  • illegal stock transactions
  • bribery of politicians
  • ruthless dealings with competitors
• Erie Wars
  • Jay Gould - Dishonest, lacked concern for public welfare
  • illegally flooded the market with thousands of shares of stock
  • made those who already owned stock lose money
• Gold Corner
  • James Fisk and Jay Gould
  • bought gold
  • convinced US Grant to take governments gold off the market
    • this drove the price of gold up
    • they then sold their gold
  • Government found out and put their gold back on the market dropping the price of gold
  • Fisk and Gould made $11 million
  • average investor went broke
• Pools - an agreement among several firms to control their output and divide up the market
• Trusts - a group of companies whose stock was controlled by a central board of directors
  • goal - eliminate competition
• Trust Companies - and other attempts to reduce competition (grew out of fierce competition)
  • Pool (fix prices, define sales territory)
  • Trust (1879) - Standard Oil (1882) 40 oil companies into one! ; it was the richest and a model for others)
• Angered small businesses and consumers
  • Lots of abuses, led to the public demand for regulation

G. Corporations and the Courts

• Wabash v. Illinois - 1886
  • court ruled that states could not regulate RR movement across state lines
  • Interstate (as opposed to intrastate) trade could only be regulated by Congress
• Santa Clara County v. Southern Pacific RR Co. - 1886
  • concerned the 14th Amendment
  • Supreme Court declared that it protected corporations as a legal person
• Reasonable treatment of the RR was left to judges to decide

H. Early Federal Regulations

• Interstate Commerce Act - 1887
  • RR 1st industry to be regulated - required to provide reasonable and just rates
  • ICC created - it had little power at first.
  • Courts favored RR - 16 of 17 cases between 1887 and 1906 when ICC was reformed
  • Mergers and interlocking directorates were able to avoid the law
  • Prohibited rate discrimination
  • First exception to Laissez-Faire government
• Sherman Anti-Trust Act - 1890 - outlawed restraint of trade.

  • "In restraint of trade" (stifling competition)

  • vague wording allowed the courts to continue to side with the rich.
    • Too vague to enforce (used against unions) - lacked clarity
  • penalties harsh
    • corporate officials could be jailed
    • triple damages awarded if case is lost
    • monopolies could be broken up
  • It was not very successful in stopping harsh businesses practices.
  • It was important because it set an example for future anti-trust laws.
  • Rockefeller got around this by using Holding Co.
    • Holding Company (1887) - company did not engage in producing a product, it merely "held" stock
  • His oil company bought controlling interest in competing companies
  • Exception to Laissez-Faire government

• New Industrial Products and Services
• Higher Standard of Living - more goods available
• Great Fortunes - Philanthropy
• Growth of Cities
• Increased World Trade and Imperialism
• Problems
  • preventing monopoly
  • protecting consumers and small businessmen
  • improve standard of living for workers
  • maintain effective banking and taxing systems
  • city problems

The Effects of Industrialization - Brainstorm

• Enhanced our national wealth
• Raised standard of living
• Sped up urbanization (factories and jobs)
• Encouraged immigration (workers) and immigration restrictions (Nativism)
• Population boom
• Created mechanization and "technological unemployment"
• Led to a concentration of wealth and power
• Inventions created a better quality of life
• Exploitation of workers spurred unionization
• Produced cycles of prosperity and depression
• Modified social institutions (family, education, religion)
• Led to corruption of politics
• Helped plunge U.S. into world affairs (business reasons)
• Overshadowed politics, making it less important
• Beginning of government regulation
• Created many social problems
• Led to a reform movement (to clean up abuses)
• Beginning of a "money economy"
• Movement to clean up cities and help urban poor (Social Gospel)
• Others?

Categorize into political, economic, and social areas

Industrialization brought many changes to the United States.

Some historians say that such rapid industrialization came at a heavy price.

Our next unit will deal with attempts to correct some of the abuses associated with industrialization GILDED AGE

Impact of the Industrial Revolution

• Resulted in "new wealth"
• Traditional wealth = land and its produce
• "new wealth" was limitless in earning potential.
• Could this wealth be "concentrated"?
• Led to "debate":
  • Was "big business" and its practices justified or not?
  • Were the 19th century "tycoons" "Captains of Industry" or "Robber Barons"?

Return to Lecture Series 4 Table of Contents

Return to History2 Main Page