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The Industrial Movement
Unit 7 Notes
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The Rise of Big Business In AmericaFactors Promoting big business in
America:
Abundant Natural Resources New Technologies Transportation Cheap Labor
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Abundant Natural ResourcesCoal
Oil
Iron Ore
Water
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New TechnologiesFactory System
Steam Engine
Railroads and Steamships
New Machines and Tools
Interchangeable Parts
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TransportationCanals, steamships, and especially
railroads
Greatly improved the ability to transport both raw materials and finished products
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Cheap LaborLarge families and the arrival of
immigrants meant a huge population that needed work
High demand for jobs kept the cost of labor down for business
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Economic Environment
Investment Capital: Local and International investors saw a bright
future for American Industry (Many investors had made their money through
the old Triangle Trade)
Laizzes-Faire: The government did not get involved in setting
prices and wages – the market was allowed to control this through “supply and demand” forces
More people wanting jobs Less jobs available People will work for less money
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Economic EnvironmentFederal Government Support
High tariffs kept foreign goods out of US markets
Gave away lands to railroad companies to promote railroad development
Sold lands to mining companies for less than real value
Stayed out of most of the affairs of business – allowed “free enterprise” to take place
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Social AttitudesSocial Darwinism
The ideas of “survival of the fittest” as applied to the business community
The strongest should survive and the weakest businesses will fail
Social Darwinism was used as justification for many actions
Also applied against government thoughts to help the poor – was seen as “against the laws of nature”
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Social AttitudesHoratio Alger Myth:
Based on books by the author Horatio Alger
His characters often embodied the “Puritan Ethic” – hard work brings success
Often featured the dream of a poor boy rising to become a wealthy businessmen
“The American Dream”
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Characteristics of Big BusinessNew ways began at this time to
organize business Incorporation
Corporations are businesses that have many investors owning shares of the business
Shareholders hope to receive a share of the profits at a future time
Losses are spread out to only what a shareholder owns
This increased capital investment in American industry
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Characteristics of Big BusinessTrusts
A group of corporations in a related field, such as oil or railroads – used to control prices, etc.
They were later made illegalDepartment Stores
Putting several small stores together under one roof – more efficient shopping
Mail Order Catalogs Sears and Montgomery Ward opened up
department store shopping to rural areas
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Case Study: Important Business LeadersAndrew Carnegie
Early Life: Immigrant from Scotland, work in textile mill at age 12
Big Break: worked for the PA Railroad, familiarized himself with Bessemer’s process of steel making
Industry: Steel
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Case Study: Important Business Leaders Andrew Carnegie:
Reason for Success: Vertical integration: merging steps of production to cut
cost of production Acquired coal mines, iron ore fields, limestone quarries His prices were lower than any other competitor
Later Life: Sold his company for a quarter of a billion dollars Believed the wealthy had an obligation to society and
gave away millions of dollars – philanthropy Underwrote many public libraries across the United
States
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Case Study: Important Business LeadersJohn D. Rockefeller
Early Life: Born and raised in NY state, focused on accounting from an early age
Big Break: moved to Cleveland, got involved in oil business at it’s beginnings
Industry: oil refining (controlled 90% worldwide)
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Case Study: Important Business LeadersJohn D. Rockefeller
Reasons for Success: Horizontal integration: merging companies that
produce the same product Single minded, goal oriented focus Able to adapt to changing government policies Formal trusts in response to anti-monopoly
legislation
Later Life: His son, John Jr., tried to change his father’s
image into a loveable billionaire (handed out Rockefeller dimes)
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Other Important Business Leaders
Cornelius Vanderbilt:
Began as a ship captain and ended up owning large railroad companies
Owned the New York Central and dominated railroad business between New York City and Chicago
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Other Important Business LeadersJ.P. Morgan
Began as a banker – made money making loans to growing businesses
Took over many bankrupt railroads and merged them into larger profitable ones
Later bought Carnegie Steel and merged it with others to form U.S. Steel
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Other Important Business LeadersHenry Ford
Revolutionized auto making by using the assembly line to produce more affordable cars
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Impact of Big BusinessUrban Growth
Why they came: For jobs and better housing
Immigrants settled in ethnic neighborhoods of cities they landed in
Visions of improved opportunities and prosperity
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Impact of Big BusinessUrban Growth:
Where they went:
The urban industrial centers of the north, mostly
Immigrants tended to settle in the port city of where their boat landed
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Impact of Big BusinessUrban Growth:
Influx of foreign immigrants
“Old” Immigration: Early 1800’s – mostly from northern and western Europe
“New” Immigration: Late 1800’s – mostly from southern and eastern Europe and also from Asia
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Impact of Big Business
Urban Growth
Problems: Crowded tenement apartment buildings were
unsafe and unpleasing living conditions
Crime was prevalent – especially in the poorer areas
Corruption in political sectors was rampant and did not improve most people’s daily lives
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Work and the Workers Factory working conditions:
Long hours (12-16 hour days) Low pay Unsafe conditions – machines, factories, mines Replaceable workers (more people than jobs)
Child labor: Kids were used when possible because business
owners could pay them less Conditions were much more dangerous to kids
who often had trouble operating machines and working long hours
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Work and the Workers Two-wage earners:
New opportunities for women to work came about at this time
Women took jobs out of economic necessity – or to take a greater role in society
Paid less than men were paid for similar jobs (like children) New job opportunities for women:
Factories (Textile Mills): factory work for women was usually limited to textiles
Domestic: jobs done as house cleaners, cooks, and nannies – usually done in homes of wealthy
Clerical: new inventions, such as the typewriter and telephone opened up new job opportunities for women
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Abuses of Big BusinessMonopolies:
Attempts by companies to eliminate competition and “corner the market” for a certain business sector
Influence on Government Contributions to campaigns and candidates
at a state and federal level in hopes to gain favorable legislation
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Abuses of Big BusinessAnti-Organized Labor:
Government sided with management against unions at this time
Unsafe products: Companies often took advantage of lack of
regulations on products
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Abuses of Railroad IndustryLong and Short Haul Abuses:
Charging more for short hauls than long ones
Unfair Storage fees: Charged farmers higher rates (especially in
grain industry)Rebates:
Industrialists given refunds as incentive to use specific railroads
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America Responds to Big Business
Populist Movement:
The populist movement originated with farmers that wanted changes in national politics that would make their situation easier. It was a real threat to Southern Democrats, but eventually died out as economic conditions changed.
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Populist Movement The Grange
Originally organized as a social organization for farming families
Eventually turned into a powerful lobbying group for pro-farmer legislation
Developed into a co-op for agricultural communities to help regulate farm prices
The Granger Movement Pressed Congress to pass laws to regulate the
railroads and the prices they charged farmers Developed co-ops to store and distribute
agricultural products in order to better control prices of farm products
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The Government RespondsMunn v. Illinois (1877)
First of the famous “Granger Cases” – reactions against railroads charging unfair prices to the farming industry
The issue: whether or not a state could regulate prices of railroad activities
Did the US Constitution permit a state to regulate privately owned business?
7-2 decision in favor of the state – gave states power to regulate local businesses
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The Government Responds Interstate Commerce Act (1887)
First federal government regulation of Big Business
Marks an end to the established concept of unquestioned “laissez-faire”
Created the Interstate Commerce Commission – to monitor and regulate interstate businesses – especially railroads – and began to end abuses in this industry
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The Growth of Labor UnionsEarly National Labor Unions
Knights of Labor: Led for many general reforms: 8 hour days,
end to child labor, equal pay for women Declined in power after a few unsuccessful
strikes and competition from the A.F. of L. A. F. of L.
American Federation of Labor – led by Samuel Gompers
Fought hard for basic rights and conditions for workers
Became very popular – but did not welcome women, immigrants, or African-Americans
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Objectives of Labor UnionsBetter wages for workers
Better working conditions: less hours and safer conditions
Better associated benefits like health care, sick days, vacation time, etc.
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Important Leaders of LaborSamuel Gompers: Early leader of the
AFofL
Debbs: Leader of the American Railway Union – organizer of the Pullman strike
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Conflict and Struggle
Tools of Management Yellow-dog Contracts: Owners required
workers to sign oaths not to join unions Detectives were often hired to search out
union organizers – then fire them Lock-outs prevented workers from working
– and getting paid!! Owners often hired replacement workers
(scabs) during a strike Black lists: owners often shared names of
troublemakers – no one else would then hire them
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Conflict and StruggleTools of Unions
Collective bargaining – third party representatives used to negotiate contracts
Strikes – organized action of not reporting for work by employees
Picket – standing near business with signs to call attention to unfair conditions
Boycott – organized action of not buying products of a certain business
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Major Strikes Homestead
Workers at a Carnegie Steel Plant in Homestead, PA went on strike to protest a large wage cut
Management brought in security to protect the plant and continue work
Violence erupted and some people were killed and many wounded
Workers gave in and only a few of them got their jobs back
A major setback for unions – especially in the steel industry
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Other Labor Unions (Mid 1900’s)CIO
Congress of Industrial Organizations Organized skilled and unskilled laborers in
various industries American Railway Union and United Mine
Union were part of the CIOAFL-CIO
1955 – Two largest labor unions in America merged to form an even more powerful labor organization – became largest in the world