THE PREEMINENT INDUSTRIAL powers of the nineteenth century—Great Britain and its two rivals, Germany and the United States—transformed the physical world. They laid iron tracks across thousands and thousands of miles. They built enormous factories, to which they drew millions of men and women, most of them recently off the farm. They collected capital in banks, consumed coal, finished steel, dug minerals from the earth, leveled hills, diverted the water from rivers into canals, and generally displayed the previously undetected strength and ingenuity of human beings. Despite the impersonality of all these changes, particular people brought them about: swashbuckling heroes of enterprise and the workingmen and women whose lives industrialization had turned upside down. A few men so completely grasped the dynamics of capitalism that they established firms that are still among the world’s largest. The initiative lay with these industrialists, yet their workers found ways with courage and determination to organize vibrant oppositions to the new rulers of their universe. The success of these labor movements depended upon the political tactics, ideological assumptions, and historical precedents within the different capitalist countries. The story begins with the entrepreneurs.
Because capitalism created unparalleled freedom of action in the economy, its history is studded with stories of personal endeavors. Major accomplishments in science and engineering gave direction to nineteenth-century entrepreneurs who scoured these advances for their commercial potential. As the scope of enterprise grew larger and larger, a few individuals carved out large economic domains of their own. Cornelius Vanderbilt, Andrew Carnegie, and John D. Rockefeller in the United States and August Thyssen, Carl Zeiss, and Siemens in Germany were the giants who carried their nations to economic preeminence in the nineteenth century. They founded the companies of Carl Zeiss, Thyssen, Krupp, and Siemens in Germany and the New York Central Railroad, U.S. Steel, and Standard Oil in the United States. These leviathans of industry created powers as sweeping as those of monarchs, which ironically meant that these hyper-competitors shrank competition because of the size of the market share they commanded. Too large to be run by a single man or even a family, they formed giant corporations that came to characterize capitalism in the twentieth century.
These men didn’t just make huge fortunes; they pioneered the industries that were to dominate their age: railroads, steel, oil, electrical-powered tools, scientific apparatuses, pharmaceuticals, and dyes. American entrepreneurs like Vanderbilt, Rockefeller, and the Scottish-born Carnegie were fierce competitors who beat down prices as they simultaneously drove rival companies out of business. German leaders like Zeiss and Siemens more typically relied on institutional support for research to advance and diversify Germany’s economy. Thyssen was called the American, a sobriquet that doubled as criticism of his ferocious individualism more typical of American entrepreneurs than German ones.
Often these founders of megafirms came from prominent families. The German industrialist Alfred Krupp took over the management of his father’s ironworks firm. Thyssen’s was a family of successful entrepreneurs. In our own time, Bill Gates got a boost from a wealthy father. Yet other industrial giants sprang de novo into the world of trade with little in their backgrounds to suggest a future fabulous success. The perfect example, Cornelius Vanderbilt, began his ascent from a modest waterside farm on Staten Island. Carnegie came from a poor immigrant family, and Rockefeller started at the bottom of the business hierarchy. Siemens got his start through service in the German Army, and Zeiss grew up in a family of toymakers.
Vanderbilt’s talents unfolded with the country’s revolution in transportation as he moved from running ferries to transatlantic steamships to railroads. The rivalry among early railroad operators produced near chaos in an area where coordination was essential. So Vanderbilt reorganized the untidy mess of diverse railroads coming into New York City, making Grand Central Station a permanent tribute to his organizational acumen.1 Starting in the old way with personal savings and family loans, Vanderbilt moved smoothly in middle age to the new financial world of stock trades, mergers, and clearinghouse transactions. While old-fashioned in many of his habits, he had no trouble adapting, as many others could not, to corporate capitalism with its fluid commerce in stock shares with fluctuating values. Through his no-holds-barred style, Vanderbilt managed to give competition a bad name, something rather remarkable in a country so committed to individual effort and laissez-faire policies.
Unlike the tyros of New York City financial circles, Vanderbilt retained the feral energy of his youth, probably best captured in his adventures in Central America. When thousands of Americans rushed to get to California during the gold rush, Vanderbilt set up a route through Nicaragua, building roads there to expedite the passage to the Pacific. His competitors tried to get the government to withdraw Vanderbilt’s operating permit, so he brought down the Nicaraguan government. Vanderbilt’s exploits dazzled and dismayed his contemporaries, particularly those who crossed him. He could also astound as when at age eighty he responded to the panic of 1873 by buying up those companies on the ropes to broaden his railroad empire. And then there was the 260-foot-long yacht with its grand staircase and ten elegantly-furnished staterooms to give authentic glitter to the name “Gilded Era.”2
Carnegie and Rockefeller were also self-made millionaires. The arrival of steam-powered looms had destroyed the livelihood of Carnegie’s father and prompted his mother to scrape together enough savings from her shop to move her family from Scotland to the sooty shores of the Monongahela River. Carnegie’s stunning proficiency as a telegraph operator smoothed an upward path in the Pennsylvania Railroad Company, whence he became a venture capitalist dealing in railroads, bridges, and oil derricks.
Carnegie could be a charmer, which came in handy when he was selling bonds—often of dubious value—in Europe. Returning with substantial profits, he invested in ironworks, steel mills, and iron ore fields around Lake Superior. The Civil War with its demand for armament turned Pittsburgh into a major industrial center. When Congress raised a steep wall of tariffs in the 1870s, it gave Pittsburgh and Carnegie the protection they needed for their growing pains. He was one of the first industrialists to integrate their operations upward from the extraction of raw materials to the finishing of steelworks, mainly rails. He was a relentless competitor, whose goal was always to “scoop the bottom,” beating out his rivals with lower prices, often aided by the hard bargains he drove with the workers. In 1892 he merged his various investments into the Carnegie Steel Company.3
A decade later the banker J. P. Morgan bought out Carnegie to form U.S. Steel. Morgan pronounced Carnegie the country’s wealthiest man. Had his $100 million estate been liquidated at his death in 1877 it would have contained one-twentieth of all American dollars! Unskilled workers then earned about $8.50 a week. (By comparison, Bill Gates’s $53 billion represents $1 in every $130 when a minimum wage job in 2009 would bring in $290 a week.) Giving away money with the same zeal he brought to earning it, Carnegie quickly shrank his estate, estimated at his death at $23 million. Grateful for access to a private library when he was a boy, he established more than twenty-five hundred public libraries in the United States, Canada, and Scotland, his homeland.
Carnegie may be one of the most complex figures in the history of American capitalism. Denied a formal education, he studied literature and history throughout his life. His intellectual interests went beyond reading. He also wrote voluminously about political systems and his philosophy of enterprise. His business archive is stuffed with letters to American presidents, annotated board minutes, advisory memos to himself, memorandums to subordinates, accounting sheets, and drafts of the numerous articles that he had submitted for publication. One thing that had distinguished his Scottish relatives was their radicalism in support of labor, a tradition Carnegie left behind when he came to America. Typical of the self-made man, he believed that any boy in America could succeed, discounting the limited space at the top. Still, he considered the pursuit of profits distasteful, writing, “No idol is more debasing than the worship of money!”
Like Vanderbilt and Carnegie, Rockefeller came from a farm family, though his father at least had one thousand dollars to lend his son when he wanted to set himself up as a commission merchant to sell grain, hay, meats, household goods, and farm implements. In 1853, a scion of a distinguished New England family, Benjamin Silliman, demonstrated that the petroleum that produced a smelly, smoky light was actually a mixture of hydrocarbons that could be purified through fractional distillation. This enhanced the value of the oil widely found in Ohio and Pennsylvania by perfecting its preparation as a lubricant and a source of cheap, clean light. Rockefeller decided to pursue a career in refining oil. He called his start-up company Standard Oil.
Sizing up the railroad companies’ need for secure returns to offset their fixed costs, Rockefeller promised a steady freight volume in exchange for lower fares for the transport of crude oil to his Cleveland refineries and the return trip of refined oil to New York. With this cost leverage, he began his long career of gobbling up other oil refineries, often lowering his prices below cost just to rid himself of a competitor. Rockefeller had unshakable faith in the future of oil even before the internal-combustion engine had been perfected. When overcapacity sank prices in 1870, he bought up all the companies whose owners had lost heart.4 Then he mounted an aggressive marketing campaign.
Fractional distillation involves heating oil. Because the components of oil have different boiling points, the process produces in sequence gas, naphtha, gasoline, kerosene, and lubricating oil. Only gasoline had no practical use at the time. Thirty years later the arrival of the automobile changed that. Standard Oil enjoyed monopoly control of the oil industry. In 1882 Rockefeller created one of the first trusts out of some forty separate companies, a business form that consolidated decision making. When such business combinations stirred up controversy, he defended them as essential to commanding capital and delivering more products at lower prices. In fact they facilitated central management. By 1896 Rockefeller was worth some two hundred million dollars, twice the fortune of Vanderbilt at his death twenty years earlier.
Rockefeller’s business tactics had not escaped critical notice. A devout Baptist, he recoiled at the hardhearted reputation he had acquired, especially the way Ida Tarbell depicted him in a popular muckraking magazine series. Following the advice of a public relations consultant, Rockefeller increased his giving to Baptist churches and began funding medical schools. Having embarked on a new career as a philanthropist at the age of fifty-seven, Rockefeller sponsored the idea of matching funds, where he would contribute to a project only if others did. He founded the University of Chicago through such a method and then in 1913 set up the Rockefeller Foundation to “promote the well-being of mankind throughout the world.” After divesting himself of five hundred million dollars, Rockefeller died a popular man.
Retrospectively, the lives of successful entrepreneurs appear boringly similar, especially if they started out poor. As boys they excel at whatever jobs they take at fourteen or fifteen, thrive as precocious self-improvers, display a determination to set up their own businesses, persevere assiduously to some level of prosperity, attract the attention of sponsors, and then launch themselves into new industries, all along divining the direction of economic growth. What stands out is their single-mindedness and their inability to stop their upward climb until they’ve reached the top or even created a top higher than anyone had ever imagined. Vanderbilt in railroads, Carnegie in steel, and Rockefeller in oil rode the tiger of fixed capital costs into the new world of giant corporations and trusts. They and their peers changed the landscape of capitalism. Adam Smith had argued that the invisible hand of competition would work to deliver goods at lower prices as entrepreneurs strove for a larger share of the market. But this assumed easy entries for new competitors. Instead high fixed costs limited competition to those with ready funds.
German Entrepreneurs
When August Thyssen died, the New York Times obituary dubbed him “the Rockefeller of the Ruhr.” This was a concession to the alliteration of r’s, for Thyssen was more like Andrew Carnegie. His fierce, competitive energy transformed the German steel industry. He came from a wealthy Rhineland banking family. His marriage at thirty brought even more money to his enterprises. Thyssen began buying up mills to meet the growing demand for the strip steel used in barrels, bales, crates, tubes, and pipes. He marketed his goods as far away as Russia, establishing foreign sales as a major component of his business. When the crisis of 1873 depressed prices, Thyssen boldly expanded production, diversified his enterprises, and turned to sales promotion. This of course is what Vanderbilt did, both men demonstrating the risk-taking and counterintuitive decisions that made them the stuff of legends.
By the end of the 1880s the operation of Thyssen & Company included coal mining, iron smelting, blast furnaces, steel mills, and machine engineering. The specialized, quality products that Thyssen offered in German, French, and English catalogs contrasted with the standardized high-volume production of American companies. He had a fine technical education, and he turned out to be a natural business organizer, developing a highly sophisticated structure of operations. He expected his department managers—often men in their twenties and thirties—to be as versatile as he was in handling both technical and marketing matters. The vertical integration he achieved in most of his production lines gave him enormous cost advantages. Yet despite the size of his operation, he maintained family control until the 1920s. Thyssen was a larger than life figure. He invested in new technologies that involved a constant addition of capital, a response that contrasted sharply with the now-cautious British entrepreneurs.5
Ernst Werner von Siemens was more a scientist, an engineer, and an inventor than a businessman, yet he founded one of the world’s most successful corporations. The Prussian budget, when he grew up, devoted almost as much money to education as it did to the military. Not having enough money to study civil engineering, he entered the Prussian artillery corps in 1835. Six years of technical study brought young men exemptions from two years of military service and a commission in the army reserve, complete with a uniform! The army benefited as well from this program. Siemens’s early inventions included a gold and silver electroplating process, a differential regulator, and several devices to improve the Wheatstone telegraphy machine. After leaving the army, Siemens concentrated on practical applications to gain money for his beloved experiments. He was the first to suggest using gutta-percha, a latex extracted from various tropical trees, to wrap electric cables for underground and underwater cable lines. He developed instruments for continuously testing cables like the one that linked Great Britain and India.
In 1847 Siemens’s first company moved aggressively into the new field of electricity. Siemens discovered the dynamoelectric principle that enabled batteries to generate continuous current and high voltage. In the 1860s he patented inventions involving electricity. New products moved through his laboratory with the regularity of the solar system. Publishing papers on dynamos, heat resistance, and measuring instruments and various electric magnetic apparatuses, Siemens pointed German industry toward new processes and products. He left a company that has remained closest to his founding initiatives in energy, electrical engineering, and communications.
Carl Zeiss came out of the strong German handicraft tradition that gave to many cities and regions a specialty: the gold, silver, and copper wares of Augsburg, the woodcrafts and toys of Nuremberg, the knives and scissors of the Rhineland, steel tools from Remscheid and brass ones from Stolberg. To which we might add the beer of Bavaria. After a twelve-year apprenticeship, Zeiss benefited from the biologists’ new interest in examining cells. He won a contract for making and repairing all of the scientific apparatuses of the University of Jena in 1846. Twenty years later his firm produced its thousandth microscope; forty years later, its ten thousandth. In 1866, Zeiss teamed up with Ernst Abbe to study the pressure that the latest microscopes put on glass. Their challenge was to modify glass to meet these demands. At the same time, they were experimenting with cameras, an invention of increasing importance to consumers, scientists, and manufacturers. Together Zeiss and Abbe discerned that rays from lenses focused on different places. Studying the mathematics of this phenomenon led to the new wave theory of light. In 1870 another glass chemist, Otto Schott, joined the Zeiss and Abbe enterprise.
At this point the firm moved beyond the horizons of most German artisans by emphasizing new product design. In Zeiss’s insistent improvement of scientific apparatus to accommodate scientific advances, he, along with his contemporaries Siemens and the chemists Justus von Liebig and Fritz Haber, linked German capitalism to technological frontiers. After Zeiss’s death in 1888, his firm achieved microscopes of magnification of 2000X that could identify good from bad bacteria. Today it produces binoculars, cameras, planetariums, microscopes, semiconductors, nanotechnology, spectrometers, and optronics.
Haber directed his research to agricultural searching for a way to replace the fertilizers German farmers needed during World War I, when the British blockade cut off their supply of nitrates from Chile and Peru. Haber’s synthesis of ammonia made possible the nitrogen fertilizers that plumped up crop yields worldwide. His Nobel Prize citation said that he had wrested bread from air. Haber had also experimented with chemical gases, leading to the development of pesticides, among them Zyklon B. In a bitter coda to a successful life, the Nazis used Zyklon B in its concentration camps, where several of Haber’s relatives died.6 Less macabre but still worrying, we can appreciate today that many of these advances compromised the atmosphere’s future with their accelerating use of fossil fuel and chemical fertilizers.
All through the century, people moved in a chain migration from farm work to rural industry and small-town shops to factories, mines, and railroad jobs. Without the protection that wealth confers, they had to accept changes whether they wanted them or not.7These men and women could be old-fashioned or up-to-date in their attitudes, loyal, insubordinate, diligent, slovenly, slow, or bright, as human beings are wont to be. But in capitalist calculations they counted as commodities, subject to the laws of supply and demand. Malthus had interpreted one of these laws applying to laboring men and women when he predicted that the growth in the supply of babies in response to young people’s employment opportunities would sooner or later get caught in the scissors of declining harvests. He had not counted on the improvements in farming that enhanced crop yields. Still, his point about the short-run effect of increasing births was on the mark.
In the first half of the century the working class did not do well in Europe. Living standards were dropping in both rural and urban areas. The patterns of birth and death that had continued for centuries were being disrupted by greater fertility and lower morality. Wages did not keep up with expenses, and women in particular suffered. Though life had never been easy for the rural poor, in the cities there was marked job discrimination. The persistent short supply of food led women to defer to their husbands’ greater need for nutrition. In the English countryside when farmers, lured by new farm equipment, switched from raising livestock to growing grain, they pushed women out of paid farm work and into poor-paying work or homebound drudgery.8 Women also suffered from their husbands’ vulnerability to layoffs and industrial accidents.
Changing Options for the Poor
The mechanization of farm equipment, at first drawn by horses and later by steam and internal-combustion engines, had a worldwide impact. The bountiful harvests of American farms, thanks largely to Cyrus McCormick’s reaper, ushered in a period of prosperity for America’s family farms and drove down world commodity prices. Cheap American grains prompted calls as early as the 1870s within European countries for tariff protection. Easily transported across the Atlantic by the steam-powered shipping industry, America’s abundant harvests slowly wiped out the peasant economies of eastern and southern Europe. There ensued a reordering of agricultural production as countries rushed to find a place in the global division of agricultural specialties. In this system, farmers planted one or two crops instead of the diversity that they had grown earlier. Agricultural corporations began to replace farming families, whose members crowded into nearby cities or emigrated.
An alternative to enduring bad living conditions in Europe was to look for a new home in the countries of North or South America or to go yet farther, to Australia or New Zealand. As early as 1818, officials in Westphalia reported “a wandering spirit” and “the craze to emigrate to America.” By the 1840s one thousand Europeans were arriving in the United States each week. Two decades later most European countries had lifted all restrictions on travel for women and for those men who had completed their military service. Starting at the end of the nineteenth century, redundant rural workers in Poland, Russia, Hungary, Italy, Serbia, and Greece crossed the Atlantic to make a fresh start abroad. Others moved to their own industrializing cities. In 1892 a receiving center opened up on Ellis Island in the harbor of New York City. When immigration peaked in the first decade of the twentieth century, almost a million men, women, and children were arriving every year.
Everywhere people were on the move. In the Pacific, waves of Chinese left for Siam, Java, the Malay Peninsula, British Columbia, New South Wales, and California, which also attracted immigrants from Japan. An estimated three million Indians went to Nepal and East Africa as migratory workers.9 In all, close to fifty million left southern China and India for Southeast Asia, and the same number of Russians and Chinese moved to Central Asia, Siberia, and Manchuria.10 Spain sent more than a million people to Cuba and Latin America. Italians went to the United States, Argentina, and Tunisia; the French to Algeria. Despite its advanced economy, Great Britain sent twelve million of its men and women to the United States, New Zealand, Canada, and Australia while six million Germans emigrated to Brazil and North America. Once a beachhead of Bavarians or Irish or Swedes had been established abroad, it was easier for relatives and friends to make the journey. Clearly the new economic practices associated with capitalism were having profound and far-reaching effects.
While European populations grew, in the United States population exploded, going from five and a half million in 1800 to seventy-six million in 1900. A decade later there were ninety-two million Americans. White Latin Americans longed for European immigrants to whiten their population; manufacturers in the United States needed men and women to run their factories. In all, fifty-six million European men, women, and children made Atlantic crossings in what was the largest migration in history.11 The slave trade had brought eleven million. Since most of the immigrants were young and male, the United States had a low dependency rate with its men and women working at full tilt. Relatively few people were too young or too old to work.
In the century and a half between 1750 and 1900, European population went from 140 to 430 million people. It had once represented 17 percent of the world’s people; now it had a quarter of them. The immediate causes of this dramatic increase in population came first from a drop in the death rate. During the course of the nineteenth and early twentieth centuries, better health, sanitation, and medicine extended life while mortality from age-old killers like cholera, typhus, tuberculosis, smallpox, and typhoid also abated. Enhanced fertility rates explain the long-term gain in population. In 1870, these dropped rather precipitously, but population continues to grow with rising life expectancy.
Overpopulation without matching economic development exacerbated ethnic tensions. Pogroms in Russia, Poland, and other Eastern European countries sent a large number of Jews to swell the tidal wave of immigrants washing on American shores between 1880 and 1914. Motives for leaving home ran the gamut from avoiding military service, fleeing taxes, hungering for adventure, getting higher wages, wanting land, or seeking political and religious freedom.12 Steamships sped up the trips while steerage rates remained low. This steady flow of cheap labor came at the right time for corporate America, which was de-skilling many jobs as it set up factory assembly lines.
Steel plants, oil refineries, sweat shops, and a myriad of factories beckoned from Pittsburgh, Buffalo, Youngstown, Toledo, and Newark to those who landed at Ellis Island. Most immigrants manned the factories, but some from Sweden and Norway went west to settle the newly opened land in Iowa, Wisconsin, and Minnesota. Women, depending upon the customs from their native Greece, Germany, or Ireland, took factory jobs, worked as servants, or stayed home making artificial flowers, hats, and clothes. For the latter group, the sewing machine was the key invention. Sometimes whole families toiled in their tenement apartments turned each morning after breakfast into miniworkshops.
These additional workers acted like an abundant supply of any element in production; it lowered prices—i.e., wages. In most American cities with populations of close to five hundred thousand, two-thirds of the people would be foreign born or had parents who were. Arriving in a country still run by WASPs, the white Anglo-Saxon Protestants of British and German descent, they became what were called hyphenated Americans, as in Polish-American or Italian-American, according to their country of origin.
Debating Capitalism’s Origins
Industrialization reshaped the working class. Members of a new proletariat reacted differently to the economic changes that were remapping their country. Industrialization had come more swiftly to Germany, Belgium, and France in the middle decades of the nineteenth century than to Great Britain and the United States. Its arrival assaulted customs whereas in the Anglo-American world the mechanization of the workplace began in the eighteenth century and spread slowly. Stretching over generations, this leisurely pace made it credible to think of industrialization as part of an evolutionary unfolding of their society’s natural potential for economic development, as Adam Smith had argued. Not so across the Channel. There critics saw industrialization as a rapacious transformation engineered by an upstart upper class eager to destroy both the aristocracy and the peasantry, which had once been protected from economic turbulence.
With a shared perspective on the disruption and exploitation of industrial capitalism, opponents multiplied rapidly. Differing more in what they recommended than in their understanding of the disaster that had hit Europe, they fell into large ideological groups. Syndicalists, especially strong in France, believed in organizing direct action like general strikes to wrest control of the workplace from owners. Because they wanted unions or syndicates of workers to be in charge, they got the name “syndicalists.” Anarchists wanted to abolish all government, arguing that government worked hand in glove with the industrialists. As their principal theorist Pierre-Joseph Proudhon said, “Property is theft.” Here Proudhon was emphasizing the potent idea that private property was not natural but rather a device for confiscating the benefits of the industrial wealth that workers were actually creating. More idealistic than the others, anarchists looked to a future in which a kind of volunteer mutuality guided social decisions. Karl Marx had a more complicated theory about history itself: He saw industrialization as a stage in an inevitable progression to the socializing of the great wealth industrialists had created. For him, communism represented the final development in which government would be confined to the administration of things, not the rule of people.
These theories became the organizing principles behind proselytizing efforts. Working days of ten or twelve hours in six-day weeks at factories hazardous to health made men and women receptive to organizers. Campaigning for the eight-hour day came first. In 1864 the radicals and their followers founded the International Workingmen’s Association in London. Often called the First International, the IWA met annually in cities in Western Europe. It peaked with a membership of five million. Insurgencies in several European countries in 1848 had made governments particularly suspicious of labor agitation, so police and informers regularly attended labor gatherings.
Marx and Proudhon influenced each another, but they differed on the use of force. Proudhon believed that peaceful change was possible. The anarchists split from the Marxists in the First International, but later anarchists advocated violence in the service of social justice. With the array of radical explanations available, labor supporters differed on whether to form a political party to change government, join the Marxist wait for the overthrow of the capitalist system, or work within the system to spread the fruits of industrialization.
Labor Activists in Europe
The growth of radical groups alarmed leaders in the capitalized West. After two assaults on the life of Kaiser Wilhelm I in 1883, the German government outlawed all Social Democratic, Socialist, and Communist organizations. It renewed that law every three years. Unlike the United States, Germany had a tradition of social support, stemming from the paternalism of an earlier era. The draconian law about workers’ organization passed in the midst of an outburst of welfare legislation. In the words of Chancellor Otto von Bismarck, the propertyless classes must recognize that “the state is not only an institution of necessity but also one of welfare…serving their needs and interests.” Within a decade he had secured laws to insure workers against sickness, industrial accidents, old age, and incapacity. With employers charged for these programs, the insurance policies operated universally and efficiently.
The fear of labor unrest pushed manufacturers closer to, if not exactly into the arms of, the aristocratic Junkers while the menace of socialism prompted the Junker-dominated German government to champion social legislation that also slowed emigration from Germany.13 The German government spent generously on primary and secondary education. In a nourishing exchange of influences, industry profited from literate workers while industrial occupations animated workers to become politically active. Extending the suffrage was seen as a curb on radical effort to redistribute wealth. Despite the government’s outlawing of radical groups, support for the Social Democratic Party of Marxist lineage continued to grow.
More than half a million Englishmen and-women turned the old pagan holiday of May 1st into an international workers’ holiday when they marched to Hyde Park to demonstrate for the eight-hour day in 1890. In Latin America, labor unrest began in the second decade of the twentieth century. Syndicalists and anarchists in Argentina, Brazil, and Uruguay organized general strikes not just to secure gains for labor but to bring down the governments that colluded with bosses and landowners to maintain control over the working class. Even in the United States, the National Socialist Party, the Socialist Labor Party, the Farmer Labor Party, and the Communist Labor Party fielded candidates for elections in 1918 and 1920. Still, American workers did not take readily to radical ideas, preferring to work within the system to improve conditions and pay.
Germany and Great Britain saw powerful labor parties arise to compete with conservatives for political power. Following decades of struggle against the government and within the sprawling labor movement itself, English workers formed a labor party in 1900. Craft unions, representing the best-paid, best-educated part of the labor force, confined their activities to incremental improvements in wages and conditions. Unskilled workers who formed unions in the 1880s were much more aggressive, risking arrests and incarceration from their noisy public demonstrations for eight-hour workdays and safer conditions. They made the public look at the faces of women disfigured by the phosphorus they worked with in making matches. Not being able to restrict entry to their trade as the craft unions could, unskilled workers turned to strikes, picketing, and public marches to gain attention. Riots were not uncommon.
Buffeted by competition from Germany and the United States for their share in international markets, British industry fell on hard times. Job losses and stagnating wages became labor’s best recruiters. Prominent British intellectuals formed the Fabian Society to persuade the public to endorse such socialist measures as nationalizing major industries. Those who favored building a political movement won out. Within two decades the British Labour Party had displaced the Liberal Party as the principal rival of the Conservatives.
The Unique Struggle of American Labor
Labor’s situation differed strikingly in the United States. Without an aristocracy or even a recognized elite as in the colonial era, Americans felt themselves to be politically undifferentiated members of an embrasive democracy. Class distinctions, while evident, grated on Americans’ self-image. Even men without property got the vote during the nineteenth century, the Fourteenth Amendment securing it for African American men as well. Industrialization after the Civil War brought new opportunities to native-born white workers.14 As corporations took over from family owners and partnerships, business bureaucracies expanded. Native-born workers’ literacy and familiarity with American ways gave them a leg up, enabling many to exchange their blue collars for white ones. As clerks or supervisors they were able to move off the shop floor and into offices, where work was cleaner, the workday shorter, and the wages better. Like all Americans, they benefited from the steady stream of immigrants who came to take jobs in American factories because cheap labor kept the price of goods low. Farming also remained an option through most of the nineteenth century, even if the best land was gone. The actual number of farms in the United States increased until 1950, though the percentage of agricultural laborers steadily declined.
The plight of industrial workers worsened. As in Great Britain, skilled workers belonged to craft unions that focused on ensuring their privileges. Foreigners expanded the great pool of unskilled laborers who had few rights at the work site. Employers could fire them “at will…for good cause, no cause or even for cause morally wrong, without thereby being guilty of legal wrong.”15 American common law, following that of Great Britain, dealt with labor complaints under centuries-old master-servant statutes that were skewed in the master’s favor. The employer, for instance, was not responsible for an accident in the workplace if it had been caused by the negligence of a fellow worker. The law also construed labor unions as conspiratorial organizations, and foreign labor organizers were subject to deportation. Property rights trumped human rights consistently in court, despite measures favorable to workers passed into law. Unions did better during times of prosperity, when profit-happy employers were willing to make concessions.
Americans enthusiastically identified with the ideal of an egalitarianism citizenry and were generally indifferent to the great gaps in wealth among them. Foreign laborers strove to join the great middle group of their adopted country. Blacks constituted the most conspicuous exception to America’s commitment to assimilation. Once southern whites put in place after the Civil War the regime for segregating blacks and whites in schools, buses, and restaurants, they became obsessed with keeping African Americans “in their place.” An almost absolute social divide marked relations between the races, unlike anything in Europe. Of small comfort, this arrangement did provide opportunities for black entrepreneurs to bring goods and services to their communities.
The very distinctive ideology that dominated public discourse in the United States operated against organized labor. The public tended to view workers as individuals charged with taking care of themselves and their families. Thomas Jefferson made limited government a robust American value. As the champion of ordinary Americans Jefferson believed that curtailing federal power was the best way of shrinking the influence of a moneyed elite. The new concentration of power in industrial corporations undermined his assumptions, but it took a long time for the public to realize the need for a government equipped to monitor and curtail the great industrial enterprises. Populists, as the radicals were called, and the more cerebral Progressives, who followed in their reform path at the turn of the twentieth century, finally succeeded in alerting the public to the dangers of unchecked economic power.
Aroused, various disgruntled groups supplied the political muscle to get ameliorating legislation through Congress. They ranged from farmers dependent upon railroad companies to owners of small businesses threatened with being gobbled up by larger firms. Reform leaders among women exposed the wretched social environment in which immigrant families lived. Jane Addams and Florence Kelley, through their work in urban settlement houses, publicized the unsafe tenements and abusive employers that foreigners had to contend with. Drawing on the old anti-aristocratic rhetoric, turn-of-the-century reformers labeled the titans of industry “robber barons” and compared their highhanded ways with an aristocracy. It was a term with resonance in the United States because for so long the country had prided itself on not having a feudal past like Europe’s. The sprawling native-born white middle class also associated the often violent strikes and protests of the closing decades of the nineteenth century with European inspiration. Only slowly did labor win the favor of the public watching on the sidelines.
People were concerned when corporate indifference threatened the food they ate. Upton Sinclair wrote The Jungle to awaken his fellow citizens to the terrible labor conditions in meat-packing plants. Almost incidentally he detailed how sausages were packed with various impurities like sawdust. Those vivid descriptions stuck in readers’ minds. Congress passed the Meat Inspection Act and a Pure Food and Drug Act the same year as The Jungle’s publication in 1906. States also began to legislate to protect workingwomen and children. Civil service reform curbed the rampant municipal corruption of this so-called Gilded Age.
In 1902 Ida Tarbell enthralled the reading public month after month with a serialized history of Standard Oil, a tale every bit as fascinating as the adventures of Captain Kidd, with Rockefeller operating with the same moral compass as the pirate had. The public gained access to the shenanigans, shady deals, and sinister manipulation that went into Rockefeller’s oil monopoly. Tarbell’s book spoke to President Theodore Roosevelt, whose administration prosecuted Standard Oil under the Sherman Antitrust Act.16 Still, corporations continued to find sympathizers on the Supreme Court who ruled against laws that they thought would unduly restrain freedom of action in the marketplace. Workers’ safety got short shrift from both employers and legislators. It was not until 1937 with the construction of the Golden Gate Bridge that a safety net was used on a construction site. It saved twenty lives.
The arrival of a million foreigners a year aroused the resentment of some native-born Americans toward these strangers who seemed to have taken over their cities. Not only were the newcomers darker in skin and hair color, but in the closing decades of the nineteenth century many of the newcomers were Catholics or Jews rather than Protestants like the overwhelming number of Americans. Such xenophobic sentiments had already led to the exclusion of the Chinese in 1882. Imbued with the sense of the United States as a refuge from bad conditions in Europe, some in the public considered the immigrants ungrateful if they agitated for better conditions, though most immigrant workers were too preoccupied with adjusting to a strange new country to respond to organizers unless they had already been radicalized in Europe. The flagrant poverty of immigrants packed into tenements in eastern cities, along with their strange habits, aroused suspicions and fueled campaigns to limit immigration. It was a challenge to turn a work force of such ethnic diversity into an effective labor movement.
Seven tailors formed the Noble and Holy Order of the Knights of Labor in the United States before the arrival of the so-called new immigrants. Starting in 1869, the Knights of Labor maintained strict secrecy to ward off government repression. It reached out to skilled and unskilled workers, blacks, and women as well as the mainstream white male laborer. The only groups officially excluded were doctors, bankers, lawyers, producers of liquor, and gamblers. Its agenda included an eight-hour workday, prohibition of child labor, a graduated income tax, nationalizing of public utilities and railroads, equal pay for equal work, and the establishment of cooperatives to offer an alternative to manufacturing with wage labor. Although it originally eschewed strikes, the Knights got involved in the Haymarket Square riot, which pretty much ended its upward trajectory. This ugly incident began when someone among the Chicago marchers threw a bomb toward the police. Seven officers and dozens of civilians died. The public turned sharply against labor organizers, making it relatively easy to convict and execute four anarchists.
The Knights of Labor plummeted from a membership of close to a million to just a hundred thousand in the last fifteen years of the century. In the wake of this decline, Samuel Gompers, an English immigrant cigar maker, formed the American Federation of Labor in 1886. The most successful union organization in the United States, the AFL recognized the autonomy of its participating craft unions. Gompers, who remained at the head of the AFL until his death in 1924, actually saw the potential benefit for workers in capitalism. Stressing “pure and simple unionism,” the AFL grew steadily as it worked for the immediate improvement of workers’ wages and conditions. Its initial openness to unskilled laborers, blacks, and women closed over time, in part because of the prejudices of the member unions, which forced segregation on black unions. They viewed women at best as part of a pool of labor that, like illegal immigrants today, kept wages down. At worst, they were likely strikebreakers.
In keeping with its fierce loyalty to the federation’s core membership of white men, the AFL urged Congress to renew the 1882 immigration restriction on Chinese in 1901. Still, the AFL never enlisted more than 5 percent of the work force. It had an uphill struggle because native-born Americans who were moving into the city from the countryside after the Civil War experienced real improvements in their standard of living, bolstered by steady factory work, accessible medical clinics, and free public education.
Gompers’s “business unionism” offended radicals who wanted to bring down the capitalist system that they saw as unfairly monopolizing the profits from workers’ productivity. The Industrial Workers of the World injected some radicalism into the American labor movement when it began in 1905. Among the crew of unionists, socialists, and anarchists who had had their fill of Gompers were Eugene V. Debs, Daniel De Leon, Joe Hill, Big Bill Haywood, and “Mother” Jones, all major figures in the American radical tradition. As if creating a contrasting mirror image of the AFL, the IWW strove for worker solidarity strong enough to overthrow the capitalist system. With the motto “An injury to one is an injury to all,” the Wobblies, as they were called, insisted that employers had nothing in common with their workers. Displaying the fierce militancy of the miners who formed the initial core of their membership, the IWW recruited lumberjacks, the hoboes of migratory labor, silk makers, and textile workers, many of them in the Deep South and Pacific Northwest. Wobblies participated in 150 strikes in their first two decades. Despite a number of labor actions, the union movement in the United States remained weak, especially when compared with European countries.
Anarchists, many of them foreign, hoped that the violence would arouse America’s workers to the evils of the industrial system. Two of them, Alexander Berkman and Emma Goldman, plotted in 1892 to kill Henry Clay Frick, manager of Andrew Carnegie’s steelworks after he had crushed the steelworkers’ union. Berkman failed to kill Frick and spent twenty-eight years in prison while Goldman went on to become one of the most effective speakers in radical circles. More successful at assassination was Leon Czolgosz, who shot the newly elected president William McKinley when he was attending the Pan-American Exposition in 1901. The IWW’s aggressive stance toward American institutions elicited strong reactions from state and city governments as well as vigilante groups eager to mete out some rough justice to them.
After the successful Russian Revolution brought Communists to power in 1917, Americans became exceedingly frightened of the anarchists in their midst. Zealous prosecutors convicted Nicola Sacco and Bartolomeo Vanzetti for the murder of two pay clerks in Braintree, Massachusetts, largely on the basis of their being anarchists. Sacco and Vanzetti became martyrs after their executions, prompting yet one more anarchist bombing, this one on Wall Street, which left thirty dead, two hundred injured, and the office of J. P. Morgan destroyed. Mass deportations followed, including those of Berkman and Goldman. As they were departing, they received word that Frick had died. “Deported by God,” Berkman commented dryly.
Critical of the AFL for resting on its laurels with 5 percent of the American work force, the Wobblies never gained more than fifty thousand members. Internal dissension along with public dislike halted their forward motion. Nor were the assassinations of the anarchists effective in stirring up American workers. Most radical groups opposed the First World War. One of their great disappointments was that war undermined the solidarity that they had been building for more than a half century among international workers. When the fighting began, each labor group repaired to the side of its own country. The AFL, with its more moderate policies and tolerance of differences among member groups, was better positioned to survive in the United States. Its comeuppance lay in the future, when the Congress of Industrial Organizations pulled together unskilled workers in 1938.
The public construed the strong foreign component in American labor unions as an explanation for union militancy. They found union strikes peculiarly menacing. Antipathy to the new immigrants’ presence in the United States overrode the corporations’ lust for labor when nativists succeeded in getting exclusionary immigration laws passed. The 1921 law set up a quota system that operated against the new immigrants of the 1880–1914 period. The law set a maximum of 357,000 immigrants annually, giving preference to those coming from northwestern Europe. Within another generation the hyphenated Americans had become thoroughly assimilated, but the national origins quota system lasted until 1965.
The Growing Importance of Consumers
Instead of the pyramid often used to describe a social structure with its great mass of people at the bottom tapering upward to a narrow elite at the top, American society was shaped more like a tomato with a rich slice at the top and a broad middle narrowing only gradually. With no aristocracy in its past and a working class that until recently had been composed mainly of farmers, the United States nurtured a sprawling middle class. Differences in taste, education, and local prominence persisted, but they lacked the backing of an influential upper class. No doubt refined tastes were cultivated in closed social circles. Snobs existed but, like garden snakes, with little venom. Most Americans liked being like one another.
The uniformity among the white population in the United States underpinned a new phenomenon of capitalism, the mass market in consumer goods. Rather than seek distinction, most Americans rather enjoyed buying things their neighbors had. “Keeping up with the Joneses” was not a search for distinction but rather for equality. Families took pride in being able to buy exactly the same things that their friends owned. Belonging to a homogenous middle group felt comfortable, an attitude perfect for mass production. Making the shift from an economy concentrating on toolmaking, railroads, and other elements of production in the opening decades of the twentieth century, corporations began churning out standardized home decorations, children’s goods, entertainment items, and popular fashions.
Department stores sprang up in cities to gather all these consumer goodies under one roof. As if to gild the lily of the new retailing, department store owners hired famous architects to design handsome edifices to house their cornucopias of wares. Staircases, surrounding a grand foyer, gave a view of story upon story packed with ready-to-wear clothes, cookware, furniture, bedding, appliances, jewelry, cosmetics, and fabrics. Less glamorous than the department stores with their great ground-floor display cases were companies like Sears, Roebuck and Montgomery Ward that pioneered mail-order retailing. As early as 1900, their famous catalogs featured a thousand pages of illustrated items.17 In the inexorable logic of market success, these modern emporiums began the long war of attrition against mom-and-pop stores, the little shops that had long serviced local neighborhoods. Capitalism’s “creative destruction” had found a new battlefield.
Trains and trolley cars made it feasible to build houses in the suburbs of the cities where people worked. The same streetcars, interurban trolleys, and private automobiles that carried men “downtown,” as the American city center became known, at the beginning and ending of the workday were also available for shoppers, most of them women, in the middle of the day. This became yet another homogenizing force for the great middling class of American consumers. Some families, being too poor to enjoy the goods lining store shelves and pictured in mail-order catalogs, were excluded from this great spending spree, but the goods acted as a mighty incentive for them to join the consuming crowd. Sidewalks, paved streets, and telephone lines announced the connection of outlying neighborhoods to one of the hubs of commerce that stretched across the country.
Much had happened to make possible the surge of consumer spending. In a certain sense, capitalism had created its own consumers. Workers’ wages had grown. The organization of giant corporations called into being a battery of white-collar jobs—accountants, clerks, stenographers, salespersons, lawyers, and bankers. For reasons more pertinent to social prejudice than capitalist preferences, many firms resisted hiring married women for many of these positions. Instead unmarried women flooded into downtowns to fill the office buildings that rose up alongside the department stores. The national standard of living got better, life expectancy increased, and factories disgorged an endless stream of inventions to delight the senses and minimize drudgery in the kitchen, on the farm, and on the shop floor.
Women became a new and powerful force in the economy through their buying habits.18 In Europe the emergence of what we now would call a consumer culture dealt the deathblow to aristocratic leadership in style and manners. Instead a wide band of middling consumers emerged to exert their preferences in the marketplace. The plethora of electrical equipment that eased domestic chores—mixers, stoves, refrigerators, washing machines, and mangles—left many women time to shop. They also were charged with preparing their children to choose well in this new world of multiple options. Those who didn’t work had time to develop recreational outlets, pursue high culture, and support philanthropic outfits while the brigades of young female clerks and salespersons sharpened urban fashions, even among men. The wide range of consumer goods provided a rich palette for painting one’s identity.
These new patterns of consuming behavior created their own challenges to producers. Up to this point capitalist enterprises had responded pretty much to a demand that was steady, what economists call inelastic. People spent the largest part of their household budgets on food, shelter, and clothing. Manufacturing and extractive industries bought machinery and equipment, predicated on calculable needs. All that changed when the important buyer became an ordinary man or, more likely, woman. With the fascinating new items getting cheaper, more people found the money to buy them—if they wanted to. There was the rub: the uncertainty in optional spending, spending out of desire rather than need. By the beginning of the twentieth century, consumers were spending considerable amounts of money on inessentials like fashion accessories, upholstered furniture, electrical conveniences, cars, and entertainment paraphernalia. Demand reflected not just purchasing power but what we might call preference power. Those firms catering to consumers had to deal with tastes or, worse, fads that came and went with dizzying speed.
Anything as important as the new consumption tastes had to develop its own experts. Soon they appeared in the form of advertising agencies devoted to spreading information and inciting desire. The need to advertise arrived simultaneously with popular magazines and radio shows that became the means for paying for both media. Print advertisements and radio commercials, since they involved grabbing the public’s attention, put a premium on colorful pictures, persuasive voices, and psychological savvy. A popular magazine, Good Housekeeping, established an experimental station to test new household items in 1900. Soon it was giving a “seal of approval” to its advertised products. Electric outdoor signs had become visible in big cities by 1910. Promoting products and producing entertainment worked interactively to create a popular culture in which people were as likely to whistle a commercial jingle as a romantic ballad.
Marketing too became important as firms competed with one another to get their soap or shampoo, medicine or road maps, handbags or hosiery at “the point of sale” in department stores, pharmacies, and grocery stores. Brand names vied for buyers’ loyalty. Some became so well-known that people turned them into common nouns like “hoover” and “kleenex.” Ad campaigns lobbed new lines into public discourse like “I’d walk a mile for a Camel” or descriptions of soap as being “99&44/100th percent pure.” Whole new industries emerged to give advice about what to buy. Catering to customers’ tastes became imperative, as did extending credit through charge accounts and installment plans. Chain stores appeared at the beginning of the twentieth century, often enticing customers with extended credit. Schools even helped train children to become wise consumers with programs that encouraged savings for spending.19 An inconclusive debate raged throughout the twentieth century on whether advertising manipulated buyers by implanting fake needs and false expectation or whether consumers used their purchasing power to get the market to give them what they wanted.
Despite the activism of a whole generation of labor organizers, the labor market in the United States remained pretty much unfettered by regulations, though a convergence of interests in the 1910s led states to pass workers’ compensation laws. These took conflicts over on-the-job accidents or illnesses out of the courtroom and created prepaid insurance to take care of workers’ losses.20 Employees and employers shared costs and accepted limited liability. Even though unions picketed plants, went out on strike, and campaigned vigorously for the eight-hour workday and a decent wage, they rarely triumphed. Most companies had difficulty seeing their employees as citizens or prospective buyers of their goods. Much more to their liking were company union, towns, and company-run stores, where they could control their work force.
The United States moved into a consumer-dominated economy a decade or two before other capitalist countries.21 Typical of his probusiness bias, AFL president Gompers was quick to see an opening for labor in industry’s new capacity to turn out goods, especially when they produced more goods than demand registered in the market. Mass production, after all, was profitable just because it produced so many of the same things. Gompers saw that workingmen and women had an unexploited potential as buyers rather than as mere elements of production. The prevailing view about how wages were set, propounded in the early nineteenth century, argued that employers would always push wages down to the minimal amount a family needed for subsistence. This “iron law of wages” operated that way through much of the nineteenth century, but if wages rose, it was possible to see that this could stimulate the whole economy.
Marx had seen the downward pressure on wages as central to the industrial system and part of the reason why it could not sustain itself. Marxist labor leaders in Europe and the United States confidently believed that capitalism was doomed to extinction. Gompers, no theorist, took a different tack about the frequent layoffs and long workweeks endured by laborers. Working men and women, he said in 1887, needed “more”: more money, more leisure, more freedom. He clearly had caught the spirit of capitalism when he emphasized, “We do want more, and when it becomes more, we shall still want more. And we shall never cease to demand more until we have received the result of our labor.”22
Gompers’s “more” campaign explained that treating laborers as the cultural and social creatures that they were would solve businesses’ central conundrum of being able to make more goods than there were buyers for them. Younger economists agreed with Gompers as they deserted the labor theory of value for one that highlighted demand. Wages, if still sporadic, did in fact go up; the eight-hour workday was becoming common without a drop in the average wage rate. Gompers was not alone in recognizing that the economy had fundamentally shifted from a basis in scarcity to one driven by plenty. The American economist Simon Nelson Patten in his 1907 study New Basis of Civilization added intellectual firepower to the notion that the age of abundance had arrived.
This question brings to mind economic debates in late-seventeenth-century England, when the idea that popular spending might have an impact on the economy first surfaced. Then those in foreign trade actively stimulated new tastes with their imports of colorful calicoes. They waxed eloquent about the unlimited wants of human beings. It was not the inelastic demand of food and shelter that was going to drive the economy forward, they said, but the elastic demand for superfluous goods like a third or fourth blouse. Standing fiercely against this cheerful commentary were the manufacturers for whom ordinary people appeared as lazy, improvident, tardy, accident-prone, and surly laborers. Three centuries later the tension between these two groups of capitalists plays out in battles over protective tariffs, minimum wage laws, and expanded social benefits. Yet the ever-growing productive capacity of capitalist economies makes it even more imperative to choose between keeping wages down or enhancing the purchase power of workingmen and women.
Businessmen are not by nature reflective; they like to act. The leviathans of industrial capitalism had worked wonders in mills, plants, and mines across the world during the nineteenth century. Proud of their own accomplishments, they had contempt for employees who would use group power to coerce concessions from them. Yet there existed a puzzle at the heart of their economy that Gompers and Patten had hit upon. Workers were both employees—an element in determining prices—and customers, with the power to drive sales with their purchases. It takes time for ideas to catch up with events. Consumer capitalism came on quickly, pushed forward by the marvels of electricity and telegraphy. What it revealed was that men and women play many roles in the economy: breadwinner, full or part-time worker, saver, spender, consumer, register of tastes, and producer of future workers. Any adequate analysis of the developing economies of the West has to probe the meaning and efficacy in all these phases of a person’s experience.