The Age of Industrialization

The American economy actually suffered a decrease in economic output during and because of the Civil war; but was followed by tremendous postwar expansion.

Transcontinental Railroads: Railroads held several firsts: They were (a) the first big business in America; (b) the first draw for the financial markets, and (c) the first industry to develop a large-scale management bureaucracy.

Total mileage of railroad lines ballooned after the war. It had been 30, 600 miles in 1862; by the 1880’s there were more than 167,000 miles of track. Because the railroads were the cord that bound the country together, they received generous financial assistance from the government.

There had been no federal aid to railroads prior to 1850 due to Constitutional scruples. (Remember Mayesville Road?) Between 1850 – 1870, federal land grants to transcontinental railroads were about 129 million acres. The railroads also received over $700 million in cash and $335 million in land.

While the South was out of the Union, the decision of where to route the first transcontinental railroad was easily settled. It was built by two lines; the Union Pacific, which would build west from Omaha, Neb.; and the Central Pacific, which would build east from Sacramento. The company building most of the line would get most of the government subsidy; so the two companies literally raced.

Workers for the Central Pacific were mainly Chinese workers who came for the California gold rush, and then for the railroad jobs. Most were single males who wanted to make money and return; and as a result they often took dangerous jobs for low pay. Many died on the job. They were called "coolies" by the Americans who worked with them.

Aside from workers, the Union Pacific had a retinue of gamblers, prostitutes, and peddlers to "service" the workers; such that the encampment along the line was called "hell on wheels."

The two lines met at Promontory Point, Utah on May 10, 1869.

At the time, the Union Pacific had laid 1,086 miles; the Central Pacific 689.

Several other transcontinental lines followed: The ATSF connected with the Southern Pacific, and later the Great Northern traversed the continent.

Transcontinental railroads were a tremendous benefit. They helped the growth of a truly national market and economic growth; and as a result, the government got more money in tax revenues. The railroads hauled mail either half price or free, and carried government freight and soldiers.

Financing the Railroads: Many shady practices took place; so much so that the tycoons who financed them became known as "robber barons." The term soon spread to other "captains of industry."

There was rampant overcharging and profiteering. The Credit Mobilier Company "bought congressmen like sacks of potatoes," and charged the Union Pacific RR $94 million for work that cost $44 million…a $50 million overcharge.

Chief of the Railroad Villains was Jay Gould, who bought run down railroads, made a few changes with borrowed money, paid himself handsomely while he ran the company into the ground, and then walked away from it.

"Commodore" Cornelius Vanderbilt consolidated a number of major Eastern trunk line railroads and formed the New York Central RR.

Manufacturing and Inventions: The Patent Office registered 235,000 patents in 1890’s. It had registered only 276 during its first ten years.

Among the new patents were new methods in steel making and refining; refrigerated railroad cars, a flour milling machine developed by the Pillsbury family.

Also: George Westinghouse invented an air brake for trains; Alexander Graham Bell invented the telephone.

This began the first corporate wars. Bell was constantly in a patent war with the Western Union Company, which hired Thomas Edison to try and improve it. Bell later formed the American Telephone and Telegraph Company.

Also, Thomas Edison formed the Edison General Electric Company (now just General Electric). He fought a bitter losing battle with George Westinghouse over transmission of electricity. Westinghouse developed "alternating current, (AC) which was stepped down by transformers. Edison’s system was direct current (DC). Edison’s system had a two-mile limit; Westinghouse’s system covered further differences, but the voltage was so high as to make it dangerous.

Edison was determined to defeat Westinghouse by proving the dangerousness of alternating current. He secured a contract from the state of New York to build an execution device using AC and thereby demonstrating that it could kill a person. The result was the "electric chair." In the long run, he lost the battle, and Alternating current became the norm.

Westinghouse’s system meant that factories need not be built near waterfalls or coal supplies for steam. They could be set up anywhere, and operated by electricity.

The real moneymakers of the day were not inventors, but people who knew how to organize a business and promote it. They became the true captains of industry, whom many called robber barons.

John D. Rockefeller founded Standard Oil Company of Ohio in 1870. He was the largest refiner but forced his competition out of business by creating a marketing company for his oil. He managed to get the railroads to rebate a portion of the freight rates in order to keep his business. He even got information from the railroads on how much his competitors were shipping. Once he had his competitors at his mercy, he bought them out at his own price. Within six weeks, he had squeezed out 22 of 26 competitors, and had over 90% of the oil refining business in the U.S.

Rockefeller made his money by building his own products, barrels, cans, etc rather than buy them on the outside. He owned the pipelines leading to the rails, the rail cars, and the storage tanks.

He later organized companies he owned in several states by placing the stock in one giant holding company, in his case, Standard Oil Company of New Jersey. The company was later known as Esso (S.O.); but is now known as Exxon.

Andrew Carnegie: Founded a large steel empire. He knew nothing about the steel business himself, but made his money because of his business acumen. He accumulated capital, and bought out competitors when business was bad. He was a businessman, not an inventor.

Carnegie felt that he and other captains of industry were really public benefactors. He wrote an essay, in 1889, The Gospel of Wealth, in which he said that "Not evil, but good has come to the race from the accumulation of wealth by those who have the ability and energy that produces it." Competition, he said, ensured survival of the fittest.

Both Rockefeller and Carnegie in their later years gave away huge amounts of money to universities, libraries, hospitals, etc. Carnegie called himself a "distributor" of wealth, as he didn’t like the term philanthropist. Rockefeller had simple tastes, did not smoke or drink, and considered it a religious duty.

J Pierpont Morgan: Financier who gained control over a number of railroads, and also consolidated the steel industry, forming the United States Steel Corporation (Now USX). It became the first billion-dollar corporation.

Other captains of Industry were:

· Aaron Montgomery Ward: founded a mail order retailing service for dry goods. He often sold at a large discount.

· Richard Sears and Alvah Roebuck: Catalog business, "cheapest supply house on earth." By 1906, it was the largest retailer in the world. The Sears catalog revolutionized marketing; made it a truly "national" market.

The growth of Industry created a demand for workers, which did improve living conditions for some blue-collar workers; but at the same time, created problems. It resulted in crowded tenement housing in large cities, substandard living conditions, and dangerous working conditions. In 1913, there were 25,000 factory fatalities and 700,000 job related injuries that required at least four weeks disability. The world of small shops was gone, as well as the personal relationships one once enjoyed with one’s employer. One now worked for an impersonal corporation where one was not much more than a number. Ownership was often completely separate from management.

Under the existing labor conditions, there was little opportunity for workers to organize. Laborers were considered simply another commodity to be obtained at the lowest possible price, and managed so as to maintain a profit.

Occasionally, strikes broke out, often with accompanying violence. One in the Pennsylvania coalfields was led by a group of Irishmen who called themselves the Molly MaGuires. Their actions led to violence and ten of them were hanged. There were two other notable events:

· Railroad Strike of 1877: First major interstate strike. Railroads cut wages after Panic of 1873, and again in 1877. Workers walked off job and blocked tracks. There was no real organization, and as a result, the strike soon became a mob. Looting, burning, killing ensued; many people killed. Eventually, the strike failed, because the workers had no organized bargaining power.

There was some fear that this might be the beginning of a worker’s revolution, a "civil war between labor and capital" as one newspaper put it. It did demonstrate to workers the need to organize.

· Sandlot Incident: An Irish immigrant, Dennis Kearney organized a "Workingman’s Party of California." His target was Chinese immigration, which he said was running down wages. The end result were attacks on Chinese workers and anti-Chinese riots.

The first successful effort to form a labor Union came from the meeting to form the National Labor Union in 1866. The organization was more interested in social and political reform than in collective bargaining with employers. It was influential in bringing about a Federal law requiring an eight-hour workday, but otherwise did not succeed.

1869, Uriah S. Stephens formed the Holy Order of the Knights of Labor (Knights of Labor). It was supposed to be a secret, semi-religious order, such as the Masonic Lodge. The Knights led several successful strikes against the Railroads when wages were cut, which increased their membership greatly. By 1886, there were 700,000 members; but afterwards the organization declined.

There was tremendous labor/employer tension in both the U.S. and Europe. This led to the birth of the political doctrine of Anarchism. They believed that government was a device whereby the rich and powerful could abuse and exploit working poor. They considered a society without government the best system; and often attempted to help bring this about by political assassinations. The Russian Czar, Alexander VI was assassinated by an Anarchist who placed a bomb under his carriage. Bombing seemed to be the preferred method, as it was especially destructive. Although most anarchists were in Europe, many emigrated to the U.S., and brought with them the idea of the "propaganda of the deed."

The Haymarket Affair: May, 1884, a group of laborers struck the International Harvester plant over an eight-hour workday. During a clash with police, one striker was killed. Later, an anarchist rally was held to protest the killing. When the police showed up to break up the rally, someone threw a bomb, and killed a policeman.

Several anarchists were tried for murder; four were hanged. All but one were German speaking; but most importantly, the one had a Knights of Labor Card on him. This event caused a tremendous backlash against labor organization, and the Knights pretty much faded as a result.

They did accomplish a few things;

Creation of a Federal Bureau of Labor statistics.

· Foran Act (prohibited Contract Labor.

Contract Labor was the practice where employers imported workers and they worked to pay for their transportation. It was strikingly similar to Indentured Servitude.

Encouraged the development of Industrial Unions. (As opposed to Craft Unions).

1881 the American Federation of Labor was formed. It was actually a federation of independent Unions. Its first President was Samuel L. Gompers. (Met his Great Grandson at Sand Dunes.)Previous labor movements had concentrated on political and social reform. Gomper’s organization worked for immediate goals, "objects that can be realized in a few years," he told Congress. His policy was one of job consciousness. He is presumed to have said to have been interested in "bread and butter I the here and now; rather than pie in the sky in the sweet bye and bye."

Gompers did succeed in making the 8-hour workday standard. In 1889, when the AFL voted to restart demonstrations on May Day in support of the 8-hour day, Mayday became something of a general workers holiday. Communists often celebrated Mayday with its origins practically forgotten.

The AFL was most successful in organizing skilled workers. Although Gompers never objected to industrial unions, (unions composed of manufacturing workers, assembly line workers, etc.) the AFL simply wasn’t as successful organizing them as it was skilled workers. Gompers himself had been a cigar maker, and a member of that union. They were considered to be the elite of the skilled working class.

Cigar workers typically hired young men to read to them while they worked to relieve the monotony. Often, they discussed esoteric topics like Socialism and Darwinism. It is possible that Gomper’s ideas grew from these intellectual roots.

Two events caused severe setbacks in the movement to organize Industrial unions:

· Homestead Steel Strike (1892): Homestead Steel works (Pittsburgh) was one of few places that industrial workers were organized. The company had been founded by Andrew Carnegie, but he had gone to Scotland, and left things in the hands of one H.C. Frick. The plan was to reduce the number of workers, and kill the Union. The company locked out Union workers, and hired Pinkerton guards whose specialty was union busting. A gunfight erupted in which a number of guards and laborers were killed. Also, an anarchist shot and wounded Frick. The event caused a backlash of anti-union feelings. There was little sympathy left for the strikers.

· The Pullman Strike (1894): Workers of the Pullman Palace Car Company lived in a company town, known as Pullman, Illinois. George Pullman was merciless, and charged excessive rents and utility costs. A depression occurred in 1893, during which he laid off large numbers of employees, cut wages up to 40 %, but didn’t lower rents. A strike broke out on May 11, 1894. The Pullman workers had joined the American Railway Union organized by Eugene V. Debs, a charismatic Union organizer. Debs saw an inevitable conflict between labor and management, and began a movement to organize ALL Railroad workers, skilled and unskilled. He was drawn to the Pullman strike like a fish to water.

Sound like anyone we know? Karl Marx, maybe?

Debs got the Union to stop handling Pullman cars after Pullman refused to arbitrate the Union’s complaints. The end result was to paralyze rail traffic in 27 states. The government tried to break it by attaching mail cars to the Pullman cars; as this would be interference with the mails. Fighting ultimately broke out between union members and special deputies, and President Grover Cleveland sent in Federal troops, claiming he had the duty, and authority, to see that the mail was delivered.The Attorney General got an injunction forbidding interference with the mails, and the strike was called off. In the meantime, Debs was sentenced to six months in jail for violating the injunction. The Supreme Court upheld his conviction in In re Debs.

Said the Court: The strong arm of the national government may be put forth to brush away all obstructions to the freedom of interstate commerce or the transportation of the mails.

Debs served his time, but spent it reading Socialist literature, and came out of jail a committed Socialist. In fact when World War One broke out, he said he was in favor of only won war, and that was the worldwide workers revolution.

Unions and Socialism: Major American labor unions had never allied wholesale with the socialists as had been true in Europe. Marxist Ideas had been brought to the Country by German immigrants, and in 1876, the Socialist Labor Party was formed. It had so many immigrant members that its official language was German for its first years. In 1897, Debs announced that he was a socialist; and formed the Socialist Democratic Party from what was left of the American Railway Union. He ran for President in 1900, 1904, and 1912. His total vote increased each time; in the last election, he got 6 % of the total vote. By 1912, 33 American cities had socialist mayors; and a number of Socialist newspapers were in publication. The party fell apart during World War One because of disagreement over support for the War effort.

In 1905, the International Workmen of the World (the IWW Wobblies) was founded. It was intended to be "one big Union," and include all workers, skilled and unskilled. (The AFL had attempted to unionize only skilled workers.) Their ideas were definitely socialist: They called for the ultimate destruction of the State, and its replacement with the one big union, basically a classless society. The Wobblies didn’t have much use for the AFL, whose labor philosophy they considered conservative. One of their organizers, "Big Bill" Haywood said Gompers was a "squat specimen of humanity," who was "conceited, petulant, and vindictive. Debs originally came to the Wobblies like a fish to water; but deserted them over policy agreements. The group had only one successful strike: That was the textile worker’s strike in Lawrence, Mass. Afterwards, opposition to World War One caused them to fall into disfavor, and many of their leaders were jailed.

Bill Haywood fled the U.S. and lived his last years in the Soviet Union where he married a Russian woman and was honored at his death with burial in the Kremlin Wall.