Chapter 17: Industry, Big Business, and Labor Unions, 1865–1900

TIMELINE

1859	First oil well drilled in Titus, Pennsylvania
1869	Transcontinental railroad completed  • Knights of Labor founded
1877	Nationwide railway strike takes place
1881	Standard Oil Trust established
1883	Standard “railroad” time goes into effect
1886	American Federation of Labor founded  • Haymarket Riot occurs
1887	Interstate Commerce Commission established
1890	Sherman Antitrust Act passed
1892	Homestead strike takes place
1894	Pullman strike occurs

IMPORTANT PEOPLE, PLACES, EVENTS, AND CONCEPTS

American Federation of Labor

Credit Mobilier Scandal

Great Railroad Strike

Knights of Labor

Pullman Strike

Standard Oil Trust

American Railway Union

Eugene V. Debs

Haymarket Riot

“New South”

“railroad time”

steel

Andrew Carnegie

Samuel Gompers

Homestead Strike

oil

John D. Rockefeller

Ida Tarbell

Carnegie Steel

Jay Gould

Industrial Workers of the World

Terrence Powderly

Sherman Antitrust Act (1890)

“You have no right to be poor. It is your duty to be rich…. It is cruel to slander the rich because they have been successful. They are not scoundrels because they have gotten money. They have blessed the world.”

—from the speech “Acres of Diamonds” by the Rev. Russell H. Conwell, 1900

INTRODUCTION

The United States went from being primarily a rural nation after the Civil War to the world’s leading industrial power by the 1920s. This period is often known as America’s second industrial revolution (the first began in the 1820s with the development of a mechanized textile industry in New England). Essential to this transformation was the use of new technologies to increase productivity. Several factors contributed to this change, including an abundance of natural resources, an available labor source, a host of new inventions, and rapidly expanding markets. The effects of industrialization were profound. Reverend Conwell, in the quote above, sings the praises of industrial giants. Huge corporations developed, wielding unprecedented power. Labor relations became increasingly quarrelsome, and a reform movement developed to challenge the power of the new large corporations. America became a more urban nation, as farmers and immigrants were drawn to industrial work.

NEW TECHNOLOGIES

Mass Production

New techniques introduced in the post–Civil War period greatly increased productivity. Giant factories brought many operations under one roof. Standardized, interchangeable parts were introduced to a variety of processes. Factories became more mechanized as machines, rather than workers, began to make products. The cigarette-making machine is a good example. These mass production techniques brought a flood of goods to the market.

Natural Resources and Industrial Development

Anthracite coal was the most important fuel of the second industrial revolution. The burning of coal was used to generate steam. Steam engines replaced water, animal, and human power in a number of operations.

Oil and oil refining became important in the post–Civil War period as kerosene, a by-product of oil, was used to light lamps. In 1859, Edwin L. Drake successfully used steam power to drill for oil in Titusville, Pennsylvania, making it practical to access large amounts of oil from beneath the earth’s surface. Oil, second only to coal in importance as a fuel during the last part of the 19th century, would become even more important in the 20th century with the development of automobiles.

Steel—which is produced by removing impurities from iron and adding alloying elements—became cheaper and more available as a result of the Bessemer process, developed in the 1850s. Steel, more flexible and stronger than iron, became an important material in barbed wire, plows, rails, bridges, and tall buildings.

Railroads

Perhaps the most important technological development of the 19th century was the railroad. Railroads allowed for the transportation of agricultural products, raw materials, and manufactured goods over great distances, creating, in effect, a national rather than local economy. The companies that built and operated the railroad lines amassed enormous power and became embroiled in scandal and accusations of abusive practices.

Americans clamored for a route to the West before the Civil War. The first transcontinental railroad, built by Chinese and Irish immigrant workers, was completed when the Union Pacific, building westward from Nebraska, and the Central Pacific, working eastward from California, met at Promontory Point, Utah, in May 1869. In the following decades, other lines were completed to the Pacific Ocean.

Railroad companies lobbied the government to create standard time zones, to end the confusion of time being slightly different from town to town. The creation of “railroad time” in 1883 demonstrated the enormous power of the railroad companies.

The unbridled power of the railroad companies was evident in the Credit Mobilier Scandal (1867). Stockholders in the Union Pacific railroad set up a construction company to lay track at inflated costs. These stockholders would gain the windfall profits for themselves. They also offered stock to members of congress to keep them quiet.

Railroad companies also abused their power by fixing prices and charging exorbitant fees. Farmers in the West had to pay the fees because they needed to get their crops to market, and often only one line would serve an area. Railroad practices were a focus of agrarian protest movements.

THE RISE OF BIG BUSINESS

Just as with the railroad industry, the economy became increasingly dominated by a few very large companies. A few of these companies exercised near-total control of certain industries; their owners exercised enormous power, both in the economy and in the political sphere. Reformers made some mostly unsuccessful attempts to check the power of these corporate giants. Contemporaries and historians have debated how these owners should be remembered.

Methods of Control

Owners of large corporations used a variety of methods to gain and maintain control of a particular industry. Companies combined, or merged, to form larger companies. A horizontal monopoly involved several companies in the same business combining, effectively controlling an industry. Vertical integration occurred when a company gained control of the various aspects of an industrial process; for example, from the mining of raw materials to transportation to manufacturing to distribution. A trust was formed when competing companies would create a single board of trustees to oversee operations of the various companies. Thus, control was more tightly exercised, and competition was reduced.

“Captains of Industry” or “Robber Barons”?

Observers at the time had mixed feelings about the emerging class of corporate giants. Some marveled at the technological wonders and abundant consumer goods produced by industry. Others saw the dangers and abuses of power exercised by these “robber barons.”

Jay Gould is generally regarded as the most ruthless business owner of this era. He gained this reputation through bribery, threats, and conspiracy against competitors. His operations included railroad speculation, stock trading, tanneries, and newspaper publishing.

History has looked more favorably on Andrew Carnegie. Carnegie, a Scottish immigrant, illustrated the “rags-to-riches” story, as he rose from being a child employee in a cotton mill to exercising control of the steel industry. Carnegie invested money in new technologies in his steel mills and, consequently, lowered production costs. He gained control of all aspects of steel production, from mining iron to running railroads, creating a vertically integrated company. Carnegie is known for his philanthropy; he donated his entire fortune to public libraries, museums, concert halls, and institutes of higher education.

John D. Rockefeller achieved a monopoly in the oil-refining business through horizontal integration. Rockefeller’s company, Standard Oil, went from refining 2 to 3 percent of crude oil in the United States in 1870 to over 90 percent of it a decade later. He pushed out competitors through a variety of methods, such as arranging rebates with freight lines. His techniques were exposed by muckraker Ida Tarbell in her 1904 book The History of the Standard Oil Company, though Rockefeller defended them as legal and fair.

Attempts at Reform

The government responded to popular pressure to rein in the power of big business with the Sherman Antitrust Act (1890), which stated that any attempt to interfere with free interstate trade by forming trusts was illegal. However, it proved to be difficult to enforce.

LABOR CONFLICTS (1877–1914)

Although big business became increasingly profitable in the post–Civil War period, many workers believed their lives were growing more difficult and less rewarding. They were also threatened by the growing power of industrial giants and the new methods of production, which removed any semblance of control they had over the work process. Owners of large corporations, on the other hand, believed that in an intensely competitive economy, they had to maintain, or even cut, wages, while at the same time increasingly mechanize the work process. As a result, a series of intense labor battles occurred between 1877 and the turn of the century.

Conditions in Factories

Factory workers were routinely subject to long hours (12 or more per day), repetitive and often dangerous work, and low pay. Factories lacked ventilation and light. There were no medical, unemployment, disability, or retirement benefits. Child labor was common. Women and children tended to make even less money than men.

Formation of Unions

To improve their lot, workers formed unions, organizations that could negotiate with owners for better pay and conditions. Unions could use a variety of techniques to press their case, but striking (stopping work) proved to be the most successful in the long run.

Industrial unionists believed that the key to success lay in organizing skilled and unskilled workers in a specific industry. An important early industrial union was the Knights of Labor. The union was open to men and women of all races and skill levels. It advocatedarbitration rather than striking. It grew under Terrence Powderly’s leadership in the 1880s but declined by the century’s end. Another example was the American Railway Union, which was founded by Eugene V. Debs. Industrial unionism would not achieve great success until the 1930s.

The American Federation of Labor, founded by Samuel Gompers in 1886, was a coalition of craft unions. Craft unions, such as Gompers’s cigar makers’ union, attempted to organize skilled workers in a particular field. The AFL encouraged strikes and was largely successful in winning improvements for its workers.

After the disastrous Pullman strike (see next section), Eugene Debs came to believe that the problems that workers faced were inherent in the capitalist system itself. He and others turned to socialism, a political ideology that advocated the eventual end of the private enterprise system and the advent of a worker-run society. The more radical labor union, Industrial Workers of the World, under the banner “One big union,” combined socialist and anarchist ideas but failed to attract a mass following. Their members were called the Wobblies.

Significant Strikes and Incidents

The Great Railroad Strike (1877) began when workers went on strike in West Virginia to protest a wage cut. The strike spread from New York to San Francisco, virtually halting rail traffic in the United States. President Hayes called in military troops to put down what is the closest the United States has ever come to a general strike (a cessation of work by the majority of workers in every industry).

The Haymarket Riot (1886) began as a peaceful demonstration for the eight-hour day. After a rally protesting police violence was ordered to disperse in Chicago’s Haymarket Square, someone threw a bomb. The police fired into the crowd. A total of seven police officers and four others were killed. Eight anarchists were tried, with little evidence; four were executed. The incident turned many people away from the labor movement and crippled the Knights of Labor.

The Homestead Strike (1892) against the Carnegie Steel Company was broken up by gun-wielding private Pinkerton guards (labor spies). A daylong gun battle at the Homestead plant in Pennsylvania left 10 dead. The Carnegie plant reopened after the National Guard was sent in. The strike was a thorough defeat for Carnegie’s workers. Indeed, in its wake, the entire steel industry rid itself of union activity by 1900.

The Pullman Palace Car Company built luxurious sleeper cars for the railroads. Its workers lived in what was touted as a model community of the same name near Chicago. When Pullman announced a wage cut, the workers were incensed. The Pullman Strike(1894) began when Debs organized a nationwide sympathy strike of workers who handled Pullman cars. The federal government issued an injunction against the strike because, it claimed, the mail was stopped. President Cleveland sent in troops to break up the strike.

Management Resists Demands by Organized Labor

The outcome of a particular strike depended on a number of factors, including the strength of the union, the condition of the economy, and the strategy of management. Yellow-dog contracts mandated that employees agree not to join unions. Owners also hired replacement workers, called “scabs” by unions. Finally, employers circulated blacklists of “troublemakers,” who were not to be hired.

Government Supports Management

In general, local, state, and federal governments used their power to side with the owners of companies. As with the Pullman strike, the government often issued orders, or injunctions, for a particular strike to end. Once an injunction against a strike was issued, strikers were considered lawbreakers and were subject to arrest or the use of force by police officers or federal troops. At times, strikers armed themselves as well, but they were outmatched by the firepower of the government.

The Supreme Court asserted that strikes violated the Sherman Antitrust Act on the grounds that they were combinations in restraint of free trade. The Act was used more frequently against labor unions than against trusts.

INDUSTRY AND THE SOUTH

The South was much slower to industrialize than the North, despite the hope of some Southerners to create a “New South” in the 1870s. The South had fewer cities and lacked money to invest in industry. What money that did exist was invested in rebuilding after the Civil War. Also, fewer Europeans immigrated to the South. The South remained agricultural, with Northern-owned railroads exerting control over transportation and Northern corporations resisting competition from the South. Late in the century, the South developed furniture and textile industries, as well as a steel industry in Birmingham, Alabama, but eventually even these came under the control of Northern capital.

SUMMARY

The “second industrial revolution” dramatically changed the American economy, as small manufacturers gave way to powerful corporations. Americans began to purchase most of the goods they used, rather than making or growing them at home. A national, and eventually international, economy was created. Some workers and farmers feared—and organized against—the growing power of the corporate giants that came to dominate America in the late 19th century. In the labor battles, the tactics of owners, along with the government’s cooperation, tilted the scales in favor of management.

•  Anthracite coal: A type of coal, noted for being hard and clean burning

•  Blacklist: A list, circulated among potential employers, of alleged “troublemakers” not to be hired

•  Craft unionism: The movement to form labor organizations made up of skilled workers within a particular field

•  Horizontal integration: The joining together of companies engaged in similar business practices to create a virtual monopoly

•  Industrial unionism: The movement to form labor organizations that represent every worker in a single industry, regardless of his or her level of skill

•  Injunction: A court order stopping a specific act, often used against unions to end a strike

•  Mass production: Techniques used in industry to produce large quantities of goods using interchangeable parts and moving assembly lines; elements of mass production were developed in the 19th century; the process was perfected by Henry Ford in the 1910s

•  Robber baron: Critical term for the owners of the big business of the Gilded Age who accumulated great wealth and power

•  Scab: Derogatory term used by the labor movement to describe workers who cross picket lines

•  Socialism: An economic system in which the state controls the production and distribution of certain products deemed necessary for the good of the people

•  Trusts: Large corporations created by the consolidation of competing companies to form a monopoly or near monopoly

•  Unions: Worker organization formed to press for workplace demands, such as better wages and safer working conditions

•  Vertical integration: The joining together of companies to control all aspects of the production process of an item, from the mining or growing of materials through production and distribution of the final product

•  Yellow-dog contract: Agreements employers forced potential employees to sign in which the employees agreed not to join unions or go on strike

REVIEW QUESTIONS

1.   “Yellow-dog” contracts

(A)    required African Americans to agree to work as sharecroppers.

(B)    were the result of collective bargaining by unions and owners.

(C)    were part of the strategy used by owners to prevent the establishment of unions.

(D)    were welcomed by craft unions.

(E)    were emblematic of Gilded Age corruption.

2.   The Bessemer process created an inexpensive way to

(A)    refine oil.

(B)    assemble the parts of an automobile.

(C)    create steel.

(D)    harvest corn and wheat.

(E)    generate electricity.

3.   The Sherman Antitrust Act

(A)    was used successfully to break up trusts.

(B)    was welcomed by Andrew Carnegie.

(C)    was consistent with the philosophy of social Darwinism.

(D)    was used most effectively against striking unions.

(E)    strengthened the Clayton Antitrust Act.

4.   An important trend that characterized American society during the Gilded Age was

(A)    harmony and peace at industrial sites.

(B)    clean, efficient government.

(C)    a decline of rail transportation and an increase in truck and automobile use.

(D)    the continuation of rural traditions.

(E)    a growing economy.

ANSWERS AND EXPLANATIONS

1.    C

Some employers required potential employees to sign “yellow-dog” contracts before hiring them. These contracts stated that the employee would not join a union. Unions opposed these contracts, and they were eventually declared illegal. “Yellow-dog” contracts were forced upon potential employees—they were not the result of negotiations. No specific legislation required African Americans to work as sharecroppers. However, many of the black codes made owning property difficult for African Americans. No legitimate union would welcome “yellow-dog” contracts. The contracts are not examples of corruption; they were not secret contracts involving kickbacks or slush funds.

2.    C

The Bessemer process allowed for the inexpensive processing of iron into steel. As a result, steel became a more common building material and was used extensively on bridges and skyscrapers. No one person is associated with developing the oil-refining process, but Rockefeller is associated with bringing the industry under his control. Ford is associated with developing the process for mass producing automobiles, thus reducing costs. Cyrus McCormick invented the mechanical reaper in the 1850s, making harvesting grains easier and cheaper. Edison built the first commercial electric-generating station in New York City in 1882.

3.    D

The Supreme Court ruled that strikes were illegal combinations that stood in the way of free trade, making the Sherman Antitrust Act an effective tool to block striking unions. The Sherman Antitrust Act of 1890 was not very successful in breaking up trusts; vague wording rendered it ineffective. In general, the owners of big business, such as Andrew Carnegie, were opposed to government attempts to rein in their power. A strict adherent of social Darwinism would reject any attempt by the government to interfere in or regulate the economy. The stronger Clayton Antitrust Act was passed in 1914.

4.    E

Industrial expansion fueled an overall growth in the American economy. The era was fraught with battles between labor and owners. Government during the Gilded Age was known for its corruption, most notably during the Grant administration and during “Boss” Tweed’s reign in New York City. Choice (C) is incorrect for the Gilded Age; it would be correct if the question were about the post–World War II period. Though rural traditions might have held on in pockets of America, the era is noted more for change than tradition.