Chapter 18: Big Business and Organized Labor

The Rise of Big Business

I.

Big corporations dominated the economy, as well as political and social life.
A. Businesses grew and integrated all the processes of production and
distribution of goods into single companies, creating larger firms.
1. Some grew by mergers and dominated the whole industry.
B. Inventors and business owners developed more efficient, laborsaving
machinery and mass production techniques that spurred dramatic advances
in productivity and efficiency.
1. As the volume and efficiency of production increased, the larger
businesses and industries expanded their operations across the
country and in the process developed standardized machinery and
parts.
C. Entrepreneurs took advantage of fertile business opportunities to create
huge new enterprises.
D. Federal and state politicians encouraged the growth of business by
imposing high tariffs on foreign imports
1. To blunt competition and provide land and cash to finance
railroads and other transportation improvements.
2. Federal government issued massive land grants to railroads and
land speculators.
3. Distributed 160-acre homesteads to citizens through the important
Homestead Act of 1862.
E. Glided Age: capitalism
1. Government did not regulate the activities of big businesses, or
provide any oversight of business operations or working
conditions.
2. Entrepreneurs were in charge.
a. Business leaders spent time and money to ensure that the
government stayed out of their businesses.
b. Got what they wanted from Congress and state legislators.

i.

In 1868, the New York state legislature legalized the

bribery of politicians.

3. By 1879, the agricultural sector experienced a rapid growth that it

became the worlds leader.
a. Provided wheat and corn to be milled into flour and meal.
b. Cattle industry: slaughtering and packing meat major
industry.
c. Farmers stimulated the industrial sector of the economy.
4. Railroads connecting the East and West coasts played a crucial role
in the development of related industries and in the evolution of an
interconnected national market for goods and services.
a. Benefited from an abundance of power sources.
i.

II.

Water, wood, coal, oil, and electricity inexpensive

compared with those of the other nations of the
world.

The Second Industrial Revolution

A. First industrial revolution began in late 18th century.
1. Propelled by 3 new technologies: coal-powered steam engine,
textile machines for spinning thread and weaving cloth, and blast
furnaces to produce iron.
B. Second Industrial revolution mid-nineteenth century and was centered in
the US and Germany.
1. Spurred by 3 related developments:
2. First breakthrough: Creation of interconnected transportation and
communication networks
a. Facilitated the emergence of a national and international
market for American goods and services.
b. Completion of the national telegraph and railroad networks
c. The emergence of steamships, which were much larger and
faster than sailing ships
d. Laying of the undersea telegraph cable, which spanned the
Atlantic Ocean and connected the US with Europe

3. Second major breakthrough: widespread of electrical power

accelerated the pace of industrial change
a. Electricity created dramatic advances in the power and
efficiency of industrial machinery
b. Spurred the urban growth through the addition of electric
trolleys and subways
c. Enhanced the production of steam and chemicals
4. Third major catalyst for the 2nd industrial revolution: systematic
application of scientific research to industrial processes
a. Figured out how to refine kerosene and gasoline from crude
oil, and how to improve steel production
b. Developed new product: telephones, typewriters, adding
machines, sewing machines, cameras, elevators, and farm
machinery
c. Steel, oil, food processed food, and tobacco took advantage
of new technologies to gain economies of scale that
emphasized maximum production and national, as well as
international marketing and distribution
III.

Railroads
A. The railroads symbolized the urban-industrial revolution
1. By 1897, the rail network grew to nearly 200000 miles
a. They helped populate the Great Plains and the Far West
2. It was expensive, and the long-term debt required to finance it
would become a major cause of the financial panic of 1893 and the
ensuring depression
3. They were Americas first big business, the first financial market
known as Wall Street in NYC, and the first industry to develop a
large-scale management bureaucracy
4. They were bigger than textile mills and iron foundries
5. They required more capital and more complex management

6. Opened the western half of the nation to economic development,

enabled federal troops to suppress Indian resistance, ferried
millions of European and Asian immigrants across the country,
provided the catalyst for transforming commercial agriculture into
a major international industry, and transported raw materials to
factories and finished goods to retailers
7. But they also created problems
a. Companies allowed for dangerous working conditions
b. Lure of enormous profits helped to corrupt the political
system as the votes of politicians were bought with cash of
shares of stock
c. Created the modern practice of political lobbying, and
they came to exercise a dangerous degree of influence over
both the economy and the political system
IV.

Building the Transcontinental

A. The differences between the North and South over the choice of routes had
held up the start of a transcontinental line
B. Republicans in Congress to pass the Pacific Railway Act in 1862
1. Authorized the construction of a rail line along a north-central
route, to be built by the Union Pacific Railroad westward from
Omaha, Nebraska and by the Central Pacific Railroad eastward
from Sacramento, CA
a. Most of the work was done after 1865; depended on
government support
2. Transcontinental railroads tied the nation together, changed the
economic and political landscape, and enabled the US to emerge as
a world power
3. The Union Pacific work crews, composed of former Union and
Confederate soldiers, former slaves, and Irish and German
immigrants, coped with bad roads, water shortages, extreme
weather conditions, Indian attacks, and frequent accidents and
injuries
4. The Central Pacific crews were mainly Chinese workers lured to
America first by the California gold rush
5. All sorts of issues delayed the effort to finish the transcontinental
line

a. Iron prices spiked

b. Broken treaties prompted Indian raids
c. Blizzards shut down work
6. Continental line
a. Linked the Atchison, Topeka, and Santa Fe railroad with
the Southern Pacific railroad at Needles in southern
California
b. The Southern Pacific which had absorbed the Central
Pacific, pushed through Arizona to Texas in 1882, where it
made connections to St. Louis and New and New Orleans
c. To the north, the Northern Pacific had connected Lake
Superior with Oregon by 1883
d. The Great Northern, from St. Paul, Minnesota, made its
way to Tacoma, Washington
V.

Financing the Railroads

A. Called the robber barons because of their shady financial practices of
railroads executives
1. An epithet extended to other captains of industry
2. Cornelius Vanderbilt railroad tycoon
B. The building of the Union Pacific and the Central Pacific involved
shameless profiteering by construction companies controlled by insiders
who overcharged the railroad companies
1. Crdit Mobilier of America bribed congressmen and charged the
Union Pacific $94 million for a construction project that cost at
most $44 million
C. Jay Gould, prince of railroad robber barons, used corporate funds for
personal investments and the payment of judicious bribes for politicians
and judges
D. Cornelius Vanderbilt, the Commodore, was a railroad baron
1. Connections to New York City and Chicago
2. His son, William Henry, extended the Vanderbilt railroads in 1877

VI.

Inventions Spur Manufacturing

A. Technological innovations spurred phenomenal increases in the industrial
productivity
1. 1790s: 276 inventions; 1890s: almost 235000 new patents
a. New processes in steelmaking and oil refining enabled
those industries to flourish
i.

Invention of the refrigerated railcar allowed meats

of the West to reach national markets in the East;
gave rise to great packinghouse enterprises in the
Midwest

2. List of commercial innovations:

a. 1868: Barbed wire, farm implements, the air brake for
trains
b. 1867: steam turbines, electrical devices, typewriters
c. 1869: vacuum cleaners
3. Thomas Edison: development of electrical industries; in NJ
a. Invented the phonograph in 1877; light bulb in 1879
b. Created the storage battery, Dictaphone, mimeograph,
electric motor, electric transmission, and the motion picture
camera and projector
c. Oil and gas lamps used; in 1882, the Edison Electric
Illuminating Company began the great electric utility
industry
4. George Weshinghouse, inventor of the air brake for railroads,
developed the first alternating-current electric system in 1886 and
set up the Weshinghouse Electric Company to manufacture the
equipment
a. Edison said the method was too risky, but Westinghouse
system won the battle of the currents and the Edison
companies had to switch over
5. Nikola Tesla: invention in 1887; invention of electric motors
enabled factories to locate wherever they wishes
a. Electric motors led to development of elevators and
streetcars

Entrepreneur
VII.

VIII.

IX.

Rockefeller and the Oil Trust

A. Was in Cleveland; good location for servicing the oil fields of western PA
1. The first oil well in the US began producing in 1859 and led to the
Pennsylvania oil rush of the 1860
2. 1870: The Standard Oil Company of Ohio, Rockefeller recognized
profits in refining oil
3. He wanted to reduce expenses, so he bought most of the other
competing companies
4. Instead of depending upon the products or services of other firms,
Standard oil produced its own oil, barrels, etc., in economical
terms, this is called vertical integration
5. 1882: Standard Oil Trust, more efficient control
a. The trust device proved vulnerable to prosecution under
state laws against monopoly or restraint of trade
b. 1892: Ohios supreme court ordered the Standard Oil Trust
dissolved
6. Rockefeller perfected the idea of the holding company: a company
that controlled other companies by holding the majority or all of
their stock
a. Convinced that a big business was a natural result of
capitalism at work
b. Brought his empire under the direction of the Standard Oil
Company of NJ
i. Less vulnerable to prosecution under state law,
some holding companies were broken up by the
Sherman Anti-Trust Act of 1890 (prohibits trusts:
property if held by one party for the benefit of
another)
Carnegie and the Steel Industry
A. Became district superintendent of the PA railroad and became president of
the company
1. Developed a military telegraph system
2. Moved up from telegraphy to railroading to bridge building to
steelmaking and investment
a. Wanted to dominate; abused his power and became a
compulsive liar
B. Before the mid-19th century steel could only be made from wrought iron
1. 1855: Briton Sir Henry Bessemer invented the Bessemer converter
a. Process by which steel could be produced directly and
quickly from pig iron (crude iron made in a blast furnace)
J. Pierpont Morgan, Financier
A. Financial power
1. Investment banker bought corporate stocks and bonds wholesale
and sell them for a profit

X.

XI.

XII.

XIII.

XIV.

2. Bought out Carnegies huge steel and iron holdings in 1901

Sears and Roebuck
A. Extending the reach of national commerce to people who lived in farms
and small towns
1. Aaron Montgomery Ward reach people by mail than by foot
B. Sears, Roebuck and Company dominated the mail-order industry
1. Richard Sears and Alvah Roebuck: 1890s
a. The Sears, Roebuck catalog in 1897 was 786 pages
i. Featured groceries, drugs, tools, bells, furniture,
iceboxes, stoves, household utensils, musical
instruments, farm implements, boots ad shoes,
clothes, books, and sporting goods
2. Buy goods in high volume from wholesalers enabled it to sell
items at prices below those offered in rural general stores
3. Became one of the largest business enterprises in the nation
4. Working Class
Social Trends
A. Spread of corporations was a rising standard of living for most people
1. Immigrants: workers at the bottom
2. Real wages and earnings in manufacturing went up 50% between
1860-1890, because of long-term decline in prices and the cost of
living
3. Working conditions were dangerous
a. Worked 59 hours; steelworkers: 12 hours a day
b. Factories maintained poor health and safety conditions
4. Overcrowded in major cities, death rate was higher than in
countryside
5. People were dependent upon the machinery and factories of
owners
Child Labor
A. Children worked full-time for meager wages
1. Poor families; 1880: 1/6 children in nation was working
2. Some states passed laws limiting the number of hours children
could work and established a minimum age
Disorganized Protest
A. Difficult for workers to organize unions
1. Most civic leaders respected property rights more than the rights of
labor
2. Business executives believed that a labor supply was simply
another commodity to be procured at the lowest possible price
3. Workforce was made up of immigrant workers from different
cultures
The Molly Maguires
A. Irish group called Molly Maguires
1. Outraged by the dangerous working conditions in the mines

XV.

XVI.

XVII.

2. Used intimidation, beatings, and killing to right perceived wrongs

against Irish workers
3. 1874-1875: mine owners hired Pinkerton detectives to stop the
movement
a. At trials in 1876, 24 of the Molly Maguires were convicted;
ten were hanged
b. Trial resulted in wage reduction in the mines and the final
destruction of the Miners National Association, a Union
the Mollies dominated
The Great Railroad Strike of 1877
A. First major interstate strike in American history
1. After the financial panic of 1873 and depression, rail lines in the
East had cut wages
2. 1877: another 10% was cut, causing workers in WV to walk off the
job and block the tracks
a. Spread from Maryland to California
b. Lacked organized bargaining power failed strike
The Sand-Lot Incident
A. California: railroad strike gave rise to a working-class political movement
1. 1877: SF meeting intended to express sympathy for the railroad
strikers ended with attacks on passing Chinese
a. Sporadic anti-Chinese riots led a mob attack on Chinatown
b. Depression of 1870s hit the West Coast hard, and the
Chinese were scapegoats for white laborers who believed
Asians had taken their jobs
c. Irish immigrant, Denis Kearney, organized the
Workingmens Party of California
i. Called for the US to stop Chinese immigration
ii.
In 1882, Congress voted to prohibit Chinese
immigration for ten years
Anti-Chinese Agitation
A. Tension between labor and management over wages and conditions
B. 1876: whites in CA set fire to 2 cabins filled with Chinese ad shot them
C. Peaked in the 1880s after Congress passed the bill restricting further
immigration from China
1. 1880s: lawsuits were filed on behalf of dispossessed Chinese
immigrants, demanding that the US enforce its own laws
a. Anti-Chinese prejudice continued
b. 1892: Congress passed a law written by Thomas J. Geary
i. Geary Act renewed the exclusion of new Chinese
immigrants and required all Chinese residents of the
US to carry a resident permit
ii.
Chinese were not allowed to testify in court and
could not receive bail in Habeas Corpus (cant be
held without reason) proceedings
iii.
Chinese Americans called it the Dog Tag Law

XVIII.

Toward Permanent Unions

A. 19th century: Build national labor union

1. 1830s-1840s, dominated by reformers with schemes that ranged
from free homesteads to utopian socialism
a. 1850s had seen the beginning of job-conscious unions in
selected skilled trades
b. By 1860, there were about twenty such craft unions;
because of the demand for skilled labor, those unions grew
in strength and number
2. First overall federation of such groups in 1866, when the National
Labor Union (NLU) convened in Baltimore
a. The NLU comprised delegates from labor and reform
groups more interested in political and social reform than in
bargaining with employers
i.

Came up with ideas such as 8-hour workday,

workers cooperatives, greenbackism (printing
money to inflate the currency and relieve debtors,
and equal rights for women and African Americans

ii.

Persuaded Congress to enact an 8-hour workday for

federal employees and to repeal the 1864 Contract
Labor Act (encouraged the importation of laborers
by allowing employers to pay for their passage to
America
1) Employers took advantage of the Contract
Labor Act to recruit foreign laborers willing
to work for lower wages than Americans

XIX.

The Knights of Labor

A. Before NLU collapsed
1. Labor group: the Noble Order of the Knight of Labor
a. Founder: Uriah S. Stephens
b. Started in 1869
c. Endorsed the reforms advanced by previous workingmens
groups, including the creation of bureaus of labor statistics
and mechanics lien laws (to ensure payment of salaries),
elimination of convict-labor competition, establishment of
the 8-hour day, and use of paper currency

d. Emphasized reform measures and preferred boycott to

strikes as a way to put pressure on employers
e. Proposed to organize worker cooperatives that would
enable members to own their own large-scale
manufacturing and mining operations
f. 1879: Terence V. Powderly took over for Stephen as head
of the Knights of labor
i.

XX.

1886: the organization peaked and went into rapid

decline after the failure of a railroad strike

Anarchism
A. Violent tensions between labor and management during 19th century in US
and Europe
B. Anarchist believed that government was in itself an abusive device used
by the rich and powerful to oppress and exploit the working poor

XXI.

The Haymarket Affair

A. Labor-related violence increased in 1880s
1. Gap between rich and working poor widened
2. Chicago was the fastest growing city in the nation
a. Hotbed of labor unrest and a magnet for immigrants
b. Haymarket affair grew out of prolonged agitation for an 8hour workday
i.

1884: Knights of Labor organizers set May 1, 1886,

as the deadline for adopting the 8-hour workday

ii.

After the deadline passed, Chicago workers went

on strike

iii.

May 3, 1886, violence erupted at the McCormick

Reaper Works plant
1) Striking union workers and scabs
(nonunion workers who defied the strike)
clashed outside the plant

iv.

May 4, during speeches about wages, police tried

breaking up the crowd and told militants to
disperse; someone threw a bomb
1) After that, all labor meetings were banned

v.

Anarchist leaders sentenced to death without

evidence they were a part of the bombing
1) Lawyers for anarchist appealed the
convictions in the Illinois Supreme Court

3. Samuel Gomper, founding president of the American of Labor

(AFL), nations leading union
4. Several factors accounted for the Knights decline
a. A leadership devoted more to reform than to the nuts and
bolts
b. The failure of the Knights cooperative worker-owned
enterprises
c. A preoccupation with politics that led the Knights to
sponsor labor candidates on hundreds of local elections
5. Knights long-lasting achievements
a. The creation of the federal Bureau of Labor Statistics in
1884
b. Foran Act of 1885, penalized employers who imported
contract labor (workers were committed to a term of labor
in exchange for transportation to America)
c. 1880 federal law providing for the arbitration of labor
disputes
d. Spread the idea of unionism and initiated a new type of
union organization: the industrial union, an industry-wide
union of skilled and unskilled workers
XXII.

Gompers and the AFL

A. The craft union (skilled workers) opposed efforts to unite with industrial
unionism
1. Feared loss of their crafts identity and loss of bargaining power if
joining with the unskilled laborers

2. 1886: delegates from 25 unions organized the American Federation

of Labor (AFL)
3. Gomper focused on concrete economic gains higher wages,
shorter hours, better working conditions, and avoided involvement
with utopian ideas or politics
4. Important affiliates of the AFL: the United Mine Workers, the
International ladies Garment Workers, and the Amalgamated
Clothing Workers
XXIII.

The Homestead Strike

A. 1892: homestead steel strike
B. The Amalgamated Association of Iron and Steel Workers, founded in
1876, largest craft union at time
1. Excluded unskilled steelworkers and failed to organize the larger
steel plants
2. Henry Clay Frick: president of steel company in 1889, friends
with Carnegie
3. Carnegie knew that a cost cutting reduction in the number of
highly paid skilled workers through the use of labor saving
machinery and a deliberate attempt to smash the union
a. The company announced on June 25 that it would treat
workers as individuals unless an agreement with the union
was reached by June 29
i.

A strike began that day

ii.

Frick didnt want to negotiate, built a fort, hired 300

union busting men from the Pinkerton Detective
Agency to protect what was soon dubbed Fort Frick

iii.

Pinkerton and unionists fought and Pinkerton

surrendered
1) PAs Governor dispatched state militia to
protect the strikebackers, whom Frick hired
to restore production

iv.

Strike lasted until November

1) Alexander Berkman tried to assassinate
Frick on July 23; FAILED

v.

Carnegie and Frick eliminated the union

b. None of Carnegies steel plants after the Homestead strike

employed unionized workers
4. Frick and Carnegies partnership ended

I.

The Pullman Strike

A.

1894: notable walk out in American history

1.
Paralyzed the economies of the 27 states and territories making up
the western half of the nation
a)
Pullman, IL: Pullman Palace Car Company; employees
who built rail cars were required to live in the company town, pay
rents, and utility costs that were higher than those in a nearby town
2.
George Pullman, after the depression of 1893, laid of 3000/5800
employees ad cut wages
a)

Strike began on May 11, 1894

b)
Pullmans workers had been joining the new American
Railway Union, founded by Eugene V. Debs
(1)
June 1894, Pullman refused Debs plea for a
negotiated settlement of the strike, the union workers
stopped handling Pullman railcars
(2)
By end of July, they shut down most of the railroads
in the Midwest
c)
July 3, 1894, President Cleveland sent federal troops into
the Chicago area
d)
Cleveland claimed authority and stressed his duty to ensure
delivery of the mail
(1)

Union called off the strike on July 13

(2)

District court cited Debs for violating the injunction

(a)
Supreme Court upheld the decree in the case
of In re Debs (1895) on broad grounds of national
sovereignty

II.

Mother Jones
A.

Mother Jones: labor agitators

B.

1867: yellow fever epidemic: killed her family

C.

Great Fire of 1871: lost all her belongings

D.

Joined the Knights of Labor

1.
Wanted to promote higher wages, shorter hours, safer workplaces,
and restrictions on child labor
2.
During a miners strike on WV, Jones was arrested for conspiracy
that resulted in murder
a)
Senate committee investigated conditions in the coal mines
and set her free
3.

Dedicated to end exploitation of children in workplace

a)
1903: organized a week long march of child workers from
PA to the NY home of President Theodore Roosevelt
(1)
The children she brought were physically stunted
and mutilated, with missing fingers from machinery
accidents
(2)
Roosevelt refused to see the children; soon PA state
legislature increased the legal working age to 14

III.

Socialism and the Unions

A.

Majority of unions never allied themselves with socialists

B.

Marxism was imported by German immigrants

1.
Karl Marxs International Workingmens Association, founded in
1864, inspired a few affiliates in the US
2.

1877, Marx moved from London to NY

3.

1877, Marxists in America organized the Socialist Labor Party

a)
The group gained little notice before the rise of Daniel De
Leon in the 1890s

C.
IV.

Debs vs. Leon

The Wobblies
A.

Industrial Workers of the World (IWW): 1893 Montana

B.
Western Federation was the storm center of violent confrontations with
unyielding mine operators who mobilized private armies against it
C.
1905 the founding convention of the IWW drew a variety of delegates
who opposed the AFLs philosophy of organizing unions made up of only skilled
workers

1.
Debs participated but many of his comrades preferred to work
within the AFL
2.

Leon seized this chance to strike back at craft unionism

D.
The revolutionary goal of the Wobblies was an idea labeled syndicalism
by its French supporters: the ultimate destruction of the government and its
replacement by one big union
1.
They split because of policy agreements; Western Federation of
Miners, then Debs, then Leon. William D. big Bill Haywood of the
Western Federation remained
a)
E.
V.

Haywood despised the AF; called Gompers conceited

The Wobblies was destroyed during WWI

The Stresses of Success

A.
Glided Age captains of industry and finance generated enormous fortunes
and marked improvements in the quality of everyday life
B.
Industrial revolution created profound inequalities and fermenting social
tensions