The Incorporation of America

Essential Question Industrialization increased the standard of living and the opportunities of most Americans, but at what cost? Remember Key Economic Concepts: Opportunity Costs and Benefits Rational people maximize benefits and minimize costs Decision making at the margin

Industrialization increased the standard of living and the opportunities of most Americans, but at what cost?

Remember Key Economic Concepts:

Opportunity Costs and Benefits

Rational people maximize benefits and minimize costs

Decision making at the margin

Causes of Rapid Industrialization Steam Revolution of the 1830s-1850s . The Railroad fueled the growing US economy Growth in railroad industry possible because of advances in steam technology.

Steam Revolution of the 1830s-1850s .

The Railroad fueled the growing US economy

Growth in railroad industry possible because of advances in steam technology.

Railroads- America’s first big business Seen as investment opportunity by bankers and speculators Aided the development of other industries. Open road to West Massive increase in mileage 30600 miles in 1862 200000 in 1900 Many subsidized in one way or another by the state (opportunity for corruption)

Seen as investment opportunity by bankers and speculators

Aided the development of other industries.

Open road to West

Massive increase in mileage

30600 miles in 1862

200000 in 1900

Many subsidized in one way or another by the state (opportunity for corruption)

Railroads- America’s first big business Track put down largely by immigrants- esp. Chinese More than 10,000 in 1880 Very dangerous work- explosions and exposure Low pay but better than home ‘ Hell’ on wheels- name for towns that followed them across the West. Gambling, saloons, prostitution Much corruption in the industry Politicians bought “like sacks of potatoes”

Track put down largely by immigrants- esp. Chinese

More than 10,000 in 1880

Very dangerous work- explosions and exposure

Low pay but better than home

‘ Hell’ on wheels- name for towns that followed them across the West. Gambling, saloons, prostitution

Much corruption in the industry

Politicians bought “like sacks of potatoes”

Causes of Rapid Industrialization Technological innovations. Bessemer and open hearth process Refrigerated cars Edison - “Wizard of Menlo Park” light bulb, phonograph, motion pictures.

Technological innovations.

Bessemer and open hearth process

Refrigerated cars

Edison - “Wizard of Menlo Park”

light bulb, phonograph, motion pictures.

Manufacturing and inventions Patent office: 276 patents in 1790s; 235000 in 1890s 1790-1860: 36,000 patents 1897: 22,000 patents 1860-1930: 1.5 million patents Refrigerated car, Bessemer converter; barbed wire; light bulb; record player (of sorts); motion pictures, etc.

Patent office: 276 patents in 1790s; 235000 in 1890s

1790-1860: 36,000 patents

1897: 22,000 patents

1860-1930: 1.5 million patents

Refrigerated car, Bessemer converter; barbed wire; light bulb; record player (of sorts); motion pictures, etc.

Manufacturing and inventions 3 important technological developments that changed manufacturing: Electric power and electric powered machines light bulb sewing machines Chemicals Internal combustion engine

3 important technological developments that changed manufacturing:

Electric power and electric powered machines

light bulb

sewing machines

Chemicals

Internal combustion engine

Thomas Alva Edison “ Wizard of Menlo Park”

“ Wizard of Menlo Park”

The Light Bulb

The Phonograph (1877)

The Ediphone or Dictaphone

The Motion Picture Camera

Alexander Graham Bell Telephone (1876)

Alternate Current George Westinghouse

Alternate Current Westinghouse Lamp ad

The Airplane Wilbur Wright Orville Wright Kitty Hawk, NC – December 7, 1903

Causes of Rapid Industrialization Unskilled & semi-skilled labor in abundance. Abundant capital. New, talented group of businessmen [ entrepreneurs ] and advisors. Market growing as US population increased. Government willing to help at all levels to stimulate economic growth. Abundant natural resources.

Unskilled & semi-skilled labor in abundance.

Abundant capital.

New, talented group of businessmen [ entrepreneurs ] and advisors.

Market growing as US population increased.

Government willing to help at all levels to stimulate economic growth.

Abundant natural resources.

Consolidations and Corporations Capital investment in business increase dramatically 1850: $750,000 1900: $1.9 million This increase puts an emphasis on the need for corporation. Small businesses forced out.

Capital investment in business increase dramatically

1850: $750,000

1900: $1.9 million

This increase puts an emphasis on the need for corporation. Small businesses forced out.

State laws favored corporations Almost anyone could begin a corporation Stockholders share profits Personal risk limited to investment 14th Amendment judged to protect corporations Consolidations and Corporations

State laws favored corporations

Almost anyone could begin a corporation

Stockholders share profits

Personal risk limited to investment

14th Amendment judged to protect corporations

New Types of Businesses Pools - competing companies try to control the market by agreeing how much to produce and sharing profits. “Gentlemen’s agreements.” Trusts - Rockefeller lawyer Sam Dodd creates trusts. A legal arrangement. One company could control an industry by luring or forcing stockholders of smaller companies to give control of their stock “in trust” to a larger companies board of trustees. Used to create monopoly power.

Pools - competing companies try to control the market by agreeing how much to produce and sharing profits. “Gentlemen’s agreements.”

Trusts - Rockefeller lawyer Sam Dodd creates trusts. A legal arrangement. One company could control an industry by luring or forcing stockholders of smaller companies to give control of their stock “in trust” to a larger companies board of trustees. Used to create monopoly power.

New Types of Businesses Horizontal Integration: Control all business producing same product John D. Rockefeller- Standard Oil Vertical Integration: Control all business in entire chain of production (from raw materials, to transport, to final production and distribution) Andrew Carnegie- US Steel

Horizontal Integration:

Control all business producing same product

John D. Rockefeller- Standard Oil

Vertical Integration:

Control all business in entire chain of production (from raw materials, to transport, to final production and distribution)

Andrew Carnegie- US Steel

Horizontal Integration: Control all business producing same product John D. Rockefeller- Standard Oil Vertical Integration: Control all business in entire chain of production (from raw materials, to transport, to final production and distribution) Andrew Carnegie- US Steel New Types of Businesses

Horizontal Integration:

Control all business producing same product

John D. Rockefeller- Standard Oil

Vertical Integration:

Control all business in entire chain of production (from raw materials, to transport, to final production and distribution)

Andrew Carnegie- US Steel

New Type of Business Entities

Standard Oil Co.

U. S. Corporate Mergers

Industrial Consolidation: Iron & Steel Firms

Iron & Steel Production

Entrepreneurs Rockefeller (oil) Destroyed his competition by flooding the market and other ‘cut-throat measures’. Got rebates from railroads- by threat Bought out or crushed his competition 90-95% of refining under his control 1899- $200 million fortune ($4.672B ); $45 million/year in profit ($1.09B )

Rockefeller (oil)

Destroyed his competition by flooding the market and other ‘cut-throat measures’.

Got rebates from railroads- by threat

Bought out or crushed his competition

90-95% of refining under his control

1899- $200 million fortune ($4.672B ); $45 million/year in profit ($1.09B )

Entrepreneurs Andrew Carnegie (steel) Develops a philosophy of business that becomes conventional wisdom. More on this later 1900- $40 million/year income ( $925M ). Sold his company at a dinner party for a price written on a scrap of paper- $492,000,000 ($11.4B).

Andrew Carnegie (steel)

Develops a philosophy of business that becomes conventional wisdom. More on this later

1900- $40 million/year income ( $925M ).

Sold his company at a dinner party for a price written on a scrap of paper- $492,000,000 ($11.4B).

Entrepreneurs JP Morgan (investment banking) Bought 5000 rifles for $3.50 each during Civil War and sold them to generals for $22 @. In addition to the overcharge, they malfunctioned and blew soldiers thumbs off. Morgan, Rockefeller, Carnegie, Philip Armour (meat packing), Jay Gould (rr), James Mellon all paid $300 ($7000) for substitutes during Civ. War. Mellon’s dad: “a man may be a patriot without risking his life or sacrificing his health. There are plenty of lives less valuable .” He bought Carnegie’s company. Then consolidated it with other steel companies to form US Steel. Took a $150 million ( $3.5B )fee for the transaction. He influenced Cong. to put tariffs on foreign steel so he could keep his prices high.

JP Morgan (investment banking)

Bought 5000 rifles for $3.50 each during Civil War and sold them to generals for $22 @. In addition to the overcharge, they malfunctioned and blew soldiers thumbs off.

Morgan, Rockefeller, Carnegie, Philip Armour (meat packing), Jay Gould (rr), James Mellon all paid $300 ($7000) for substitutes during Civ. War. Mellon’s dad: “a man may be a patriot without risking his life or sacrificing his health. There are plenty of lives less valuable .”

He bought Carnegie’s company. Then consolidated it with other steel companies to form US Steel. Took a $150 million ( $3.5B )fee for the transaction.

He influenced Cong. to put tariffs on foreign steel so he could keep his prices high.

New Financial Businessman The Broker: * J. Pierpont Morgan

The Broker: * J. Pierpont Morgan

Cornelius [“Commodore”] Vanderbilt Can’t I do what I want with my money?

William Vanderbilt The public be damned! What do I care about the law? H’aint I got the power?

The public be damned!

What do I care about the law? H’aint I got the power?

Model T Automobile Henry Ford I want to pay my workers so that they can afford my product!

“ Model T” Prices & Sales

Wealth Concentration Held by Top 1% of Households

% of Billionaires in 1900

% of Billionaires in 1918

The “Robber Barons” of the Past

“ The Protectors of Our Industries”

The “Bosses” of the Senate

Workers Distribution of Wealth 1900: 2% own 33% of nations wealth. Top 10% own 75%. 1891: 120 Americans worth at least $10 million ($231.3M). Rags to riches was rare- although some upward mobility was possible. Rags to riches “mostly myth, and a useful myth for control.” Horatio Alger stories.

Distribution of Wealth

1900: 2% own 33% of nations wealth. Top 10% own 75%.

1891: 120 Americans worth at least $10 million ($231.3M).

Rags to riches was rare- although some upward mobility was possible. Rags to riches “mostly myth, and a useful myth for control.” Horatio Alger stories.

New Business Culture: “The American Dream?” Protestant (Puritan) “Work Ethic” * Horatio Alger [100+ novels] Is the idea of the “self-made man” a MYTH??

Protestant (Puritan) “Work Ethic” * Horatio Alger [100+ novels]

Workers Standards of Living If affluence measured by conversion of luxuries into commonplace, then US affluent in years between 1880 and 1920s. Many new products available, but not affordable to all. Incomes rise broadly, but not equally. Income increases did not keep pace with increase in cost of living. Teacher made approx $492/year ($11,333 ). Rent would consume approximately 50% of that salary. Wages increase approximately 30%, but cost of living increased approximately 47%. Many families had to rent out portions of their homes (houses and apartments) to borders to raise extra money. Make about $200/year this way ( $4,625 ).

Standards of Living

If affluence measured by conversion of luxuries into commonplace, then US affluent in years between 1880 and 1920s.

Many new products available, but not affordable to all.

Incomes rise broadly, but not equally. Income increases did not keep pace with increase in cost of living.

Teacher made approx $492/year ($11,333 ). Rent would consume approximately 50% of that salary.

Wages increase approximately 30%, but cost of living increased approximately 47%.

Many families had to rent out portions of their homes (houses and apartments) to borders to raise extra money. Make about $200/year this way ( $4,625 ).

Workers High demand for low skilled and unskilled labor resulted in many immigrants, women, and children in work place. 1880-1900: women employment up from 2.6 to 8.6 million. # of children in non-agricultural occupations triples 1870-1900 1890-1900: >18% of children ages 10-15 work Wages reflect low-skill work: $0.22/hr.; $490/yr. Average wages. ($5.09/hr; $11,333/yr.)

High demand for low skilled and unskilled labor resulted in many immigrants, women, and children in work place.

1880-1900: women employment up from 2.6 to 8.6 million.

# of children in non-agricultural occupations triples 1870-1900

1890-1900: >18% of children ages 10-15 work

Wages reflect low-skill work: $0.22/hr.; $490/yr. Average wages. ($5.09/hr; $11,333/yr.)

Workers Working conditions very poor- unhealthy, unsafe, difficult 1904: 27,000 job fatalities; 50,000 injuries in NY alone. 1914: 35,000 job fatalities + 700,000 injuries that resulted in at least 4 weeks off work. This is after some safety measures have been taken. p. 327 in Zinn regarding injuries. p. 335 regarding work conditions in mill.

Working conditions very poor- unhealthy, unsafe, difficult

1904: 27,000 job fatalities; 50,000 injuries in NY alone.

1914: 35,000 job fatalities + 700,000 injuries that resulted in at least 4 weeks off work. This is after some safety measures have been taken.

p. 327 in Zinn regarding injuries.

p. 335 regarding work conditions in mill.

Workers Triangle Shirtwaist fire on Fire sweeps through 8-10th floor; ladders reach only 7th floor. ½ of all NY workers above the 7th floor. Doors locked to control workers. 146 die. Many from jumping or crushed at doors. p. 326-7 in Zinn

Triangle Shirtwaist fire on Fire sweeps through 8-10th floor; ladders reach only 7th floor. ½ of all NY workers above the 7th floor.

Doors locked to control workers.

146 die. Many from jumping or crushed at doors.

Workers 12 hr. day common. Swing shift every other week. 84 hr. week common in America.

12 hr. day common. Swing shift every other week.

84 hr. week common in America.

Workers Modern factory separated worker from owner- bureaucracy. Status of laborer changed dramatically in a generation: Fewer workers produce more in less time. Workers no longer termed producers- just laborers. Employees. Workers lose independence on assembly line. Must keep pace and perform in a particular way. Be on time. Ford Motor Company: behavior codes. Other companies did this too.

Modern factory separated worker from owner- bureaucracy.

Status of laborer changed dramatically in a generation:

Fewer workers produce more in less time.

Workers no longer termed producers- just laborers. Employees.

Workers lose independence on assembly line. Must keep pace and perform in a particular way. Be on time.

Ford Motor Company: behavior codes. Other companies did this too.

The Reorganization of Work The Assembly Line

Workers Employment of women and children way up. 1880-1900: women employment up from 2.6 to 8.6 million. 1890: >18% of children between 10-15 were employed. Parents forced to sign their children into contracts in mill areas. Age laws were passed in some areas, but difficult to enforce because parents lied because needed money.

Employment of women and children way up.

1880-1900: women employment up from 2.6 to 8.6 million.

1890: >18% of children between 10-15 were employed. Parents forced to sign their children into contracts in mill areas. Age laws were passed in some areas, but difficult to enforce because parents lied because needed money.

The Reorganization of Work Frederick W. Taylor The Principles of Scientific Management (1911)

Workers Frederick W. Taylor. Efficiency expert. Makes workers more a part of the machine. Every move is regulated. Efficiency is science and workers objects of study and regulation. Stopwatches a common sense. Workers lost jobs to this: One case Taylor cut jobs from 600 to 140 in a plant.

Frederick W. Taylor. Efficiency expert. Makes workers more a part of the machine. Every move is regulated. Efficiency is science and workers objects of study and regulation. Stopwatches a common sense.

Workers lost jobs to this:

One case Taylor cut jobs from 600 to 140 in a plant.

Urbanization 1860-1910: Pop. in towns of 2,500 or more grew from 6 million to 45 million (20% to 40% of population) Between 1870 and 1920 # Americans living in cities increased 550%. NY grew from 850,000 to 4 million; Chi. 110,000 to 2 million Chicago had to be lifted up out of mud

1860-1910: Pop. in towns of 2,500 or more grew from 6 million to 45 million (20% to 40% of population)

Between 1870 and 1920 # Americans living in cities increased 550%.

NY grew from 850,000 to 4 million; Chi. 110,000 to 2 million

Chicago had to be lifted up out of mud

Urbanization

Urbanization Housing: one of most persistent problems of cities inexpensive housing scarce landlords split up existing housing- smaller space for families. One family apartment used by 2-3 families. 1890 NY: 702 people per acre. One of highest population densities in the world. Largest rooms in tenements only about 10 feet wide. Interior rooms lack windows. Air shafts breeding gournd for rats; filled with rotting trash.

Housing: one of most persistent problems of cities

inexpensive housing scarce

landlords split up existing housing- smaller space for families. One family apartment used by 2-3 families.

1890 NY: 702 people per acre. One of highest population densities in the world.

Largest rooms in tenements only about 10 feet wide.

Interior rooms lack windows.

Air shafts breeding gournd for rats; filled with rotting trash.

Jacob Riis' How the Other Half Lives (1890)

Mulberry Street Bend, 1889

5-Cent Lodgings

Men’s Lodgings

Women’s Lodgings

Immigrant Family Lodgings

Dumbbell Tenement Plan Tenement House Act of 1879 , NYC

Dumbbell Tenement Plan

Blind Beggar, 1888

Italian Rag-Picker

1890s ”Morgue” – Basement Saloon

” Bandits’ Roost”

Mullen’s Alley ”Gang”

The Street Was Their Playground

Lower East Side Immigrant Family

A Struggling Immigrant Family

Another Struggling Immigrant Family

Child Labor

Urbanization Poverty Employment rose and fell with seasons. Many feared aiding the poor: they would be unwilling to work, according to this reasoning. Assistance was often not very practical- preaching rather than food. Attempt to get poor to reform their habits. Charity Organization Society in 92 cities.

Poverty

Employment rose and fell with seasons.

Many feared aiding the poor: they would be unwilling to work, according to this reasoning.

Assistance was often not very practical- preaching rather than food. Attempt to get poor to reform their habits. Charity Organization Society in 92 cities.

Urbanization New Immigration Their labor was needed, but they were not wanted 1900-1910: 41% of new arrivals in cities were immigrants Many lived in ethnic neighborhoods- this both wanted and resented by Americans America pulled immigrants in with lure of jobs; homelands sometimes pushed them out with economic, political, social situations. Began coming from a different place- East and South Europe. Culturally more different from Americans.

New Immigration

Their labor was needed, but they were not wanted

1900-1910: 41% of new arrivals in cities were immigrants

Many lived in ethnic neighborhoods- this both wanted and resented by Americans

America pulled immigrants in with lure of jobs; homelands sometimes pushed them out with economic, political, social situations.

Began coming from a different place- East and South Europe. Culturally more different from Americans.

Urbanization Ellis Island 12 million immigrants first came here. Not a comforting atmosphere Eye hook to look for trachoma Crowded Held for inspection Bureaucrats did not speak language so often people found their names “Americanized”

Ellis Island

12 million immigrants first came here.

Not a comforting atmosphere

Eye hook to look for trachoma

Crowded

Held for inspection

Bureaucrats did not speak language so often people found their names “Americanized”

Urbanization Nativism rises Immigrants seen as driving down wages and taking jobs from Americans (neither completely true) Immigrants seen as drunks, criminals, charity cases, moral problem Restrictions began to be placed around 1900 (compare to Jefferson’s complaint in D of I that king kept immigrants out). 1880’s: Chinese Exclusion Act.

Nativism rises

Immigrants seen as driving down wages and taking jobs from Americans (neither completely true)

Immigrants seen as drunks, criminals, charity cases, moral problem

Restrictions began to be placed around 1900 (compare to Jefferson’s complaint in D of I that king kept immigrants out). 1880’s: Chinese Exclusion Act.

New Business Culture Laissez Faire  the ideology of the Industrial Age. “ Let it alone” “Leave it be” Individual as a moral and economic ideal. Individuals should compete freely in the marketplace. The market was not man-made or invented. Government hands off the market.

Laissez Faire  the ideology of the Industrial Age.

“ Let it alone” “Leave it be”

Individual as a moral and economic ideal.

Individuals should compete freely in the marketplace.

The market was not man-made or invented.

Government hands off the market.

Laissez Faire Economics and the Supreme Court S Ct interpreted Sherman Act to make interstate strikes illegal- restraint of trade S Ct interpreted 14th Amend. to protect industry, not blacks- Regulations of railroad rates, hours, wages, work conditions all struck down. Corporations viewed as people under the law and they had a right to do what they liked with their property. Freedom of contract- management and labor free to make decisions w/o govt. interference. Assumes that on equal footing. 1890-1910: only 19 14th A. cases in S Ct dealt with blacks; 288 with corporations.

S Ct interpreted Sherman Act to make interstate strikes illegal- restraint of trade

S Ct interpreted 14th Amend. to protect industry, not blacks-

Regulations of railroad rates, hours, wages, work conditions all struck down.

Corporations viewed as people under the law and they had a right to do what they liked with their property.

Freedom of contract- management and labor free to make decisions w/o govt. interference. Assumes that on equal footing.

1890-1910: only 19 14th A. cases in S Ct dealt with blacks; 288 with corporations.

Social Darwinism British economist. Advocate of laissez-faire. Adapted Darwin’s ideas from the “Origin of Species” to humans. Notion of “Survival of the Fittest.” New Business Culture Herbert Spencer

British economist.

Advocate of laissez-faire.

Adapted Darwin’s ideas from the “Origin of Species” to humans.

Notion of “Survival of the Fittest.”

Social Darwinism in America William Graham Sumner Folkways (1906) Individuals must have absolute freedom to struggle, succeed or fail. Therefore, state intervention to reward society and the economy is futile!

Individuals must have absolute freedom to struggle, succeed or fail.

Therefore, state intervention to reward society and the economy is futile!

The Gospel of Wealth: Religion in the Era of Industrialization Russell H. Conwell Wealth no longer looked upon as bad. Viewed as a sign of God’s approval. Christian duty to accumulate wealth. Should not help the poor. speech by R Conwell- p. 262 of Zinn

Wealth no longer looked upon as bad.

Viewed as a sign of God’s approval.

Christian duty to accumulate wealth.

Should not help the poor.

“ On Wealth”/“Gospel of Wealth” Andrew Carnegie “ Gospel of Wealth” (1901). Carnegie’s “Gospel of Wealth”- hard work leads to wealth (not cheating and influence of govt.); Rich are deserving; are benefactors of America. The Anglo-Saxon race is superior. Inequality is inevitable and good. Wealthy should act as “trustees” for their “poorer brethren.”

Carnegie’s “Gospel of Wealth”- hard work leads to wealth (not cheating and influence of govt.);

Rich are deserving; are benefactors of America.

The Anglo-Saxon race is superior.

Inequality is inevitable and good.

Wealthy should act as “trustees” for their “poorer brethren.”

Competing Ideal Reform Darwinism- Lester Frank Ward People differ from animals with their brains. Not simply the pawns of evolution. Can impact the process. Think and take action. Govt can be useful to reduce poverty and promote education (impact the brain).

Reform Darwinism- Lester Frank Ward

People differ from animals with their brains. Not simply the pawns of evolution. Can impact the process. Think and take action.

Govt can be useful to reduce poverty and promote education (impact the brain).

Settlement Houses To help and teach the poor and (esp.) immigrants. Social control through Americanization? Competing Ideal Hull House Jane Addams

Settlement Houses

To help and teach the poor and (esp.) immigrants.

Social control through Americanization?

Regulating the Trusts 1877  Munn. v. IL 1886  Wabash, St. Louis & Pacific Railroad Company v. IL 1890  Sherman Antitrust Act * in “restraint of trade” * “rule of reason” loophole 1895  US v. E. C. Knight Co.

1877  Munn. v. IL

1886  Wabash, St. Louis & Pacific Railroad Company v. IL

1890  Sherman Antitrust Act * in “restraint of trade” * “rule of reason” loophole

1895  US v. E. C. Knight Co.

The Triangle Shirtwaist Factory Fire, March 25, 1911

Triangle Shirtwaist Factory Asch Building, 8 th and 10 th Floors

Typical NYC Sweatshop, 1910

Typical NYC Sweatshop, 1910

Typical NYC Sweatshop, 1910

Typical NYC Sweatshop, 1910

Typical NYC Sweatshop, 1910

Typical NYC Sweatshop, 1910

Inside the Building After the Fire

Crumpled Fire Escape, 26 Died

10 th Floor After the Fire

Dead Bodies on the Sidewalk

Scene at the Morgue

Relatives Review Bodies 145 Dead

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