The Industrial Movement

Unit 7 Notes

The Rise of Big Business In AmericaFactors Promoting big business in

America:

Abundant Natural Resources New Technologies Transportation Cheap Labor

Abundant Natural ResourcesCoal

Oil

Iron Ore

Water

New TechnologiesFactory System

Steam Engine

Railroads and Steamships

New Machines and Tools

Interchangeable Parts

TransportationCanals, steamships, and especially

railroads

Greatly improved the ability to transport both raw materials and finished products

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

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

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

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”

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”

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

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

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

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

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)

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)

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

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

Other Important Business LeadersHenry Ford

Revolutionized auto making by using the assembly line to produce more affordable cars

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

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

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

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

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

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

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

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

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

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.

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

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

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

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

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.

Important Leaders of LaborSamuel Gompers: Early leader of the

AFofL

Debbs: Leader of the American Railway Union – organizer of the Pullman strike

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

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

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

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