Chapter 24 – Industry Comes of Age

1. The Iron Colt Becomes an Iron Horse

a. In order for promoters to begin the railroad building, governments granted subsidies to entice them.
b. When railroads were built, land grants dictated that the areas on either side were saved for the railroad
company or held by the government and sold. Railroad companies tied up the process until they decided
which land was the closest. Cleveland ended this practice in 1887 and allowed settlement in unclaimed
portions of the areas.
c. The railroad system granted the government preferential rates for the post and military traffic. Granting
land rather than money avoided the taxes on it. The railroads could eventually use it for collateral or sell it.
d. When the railroad passed through a town, it was prosperous. Towns fought for the privilege of a railroad.
2. Spanning the Continent with Rails
a. In 1862, Congress provisioned the start of the railways. It was to connect the Pacific coast more firmly to
the Union. The Union Pacific Railroad was commissioned by Congress to start the railway and go
westward from Omaha, Nebraska. The rail-laying began in earnest after the war in 1865.
b. Irish males, most former Union soldiers, worked in harsh conditions on the railway. When Indians attacked,
the Irish picked up their guns and many lost their lives. Entertainers made their living with the tented Irish.
c. On the California end, the rail was laid by the Central Pacific Railroad. It led from Sacramento through the
Sierra Nevada. This was led by the Big Four including Leland Stanford and Collis P. Huntington. The Big
Four came away with millions in profits but did not bribe Congressmen.
d. The Central Pacific was given the same impetus to work quickly. They used Chinese laborers that were
expendable, cheap, and efficient. However, the Sierra Nevada’s barrier frustrated them.
e. The two railways met near Ogden, Utah and were ceremonially connected by Leland Stanford.
f. It welded the West Coast to the Union and facilitated trade with Asia.
3. Binding the Country with Railroad Ties
a. The Northern Pacific Railroad led from Lake Superior to the Puget Sound ended in 1883.
b. The Atchison, Topeka and Santa Fe (Midwestern deserts to California) ended in 1884.
c. The Southern Pacific Railroad led from New Orleans to San Francisco ended in 1884.
d. The Great Northern, created by James J. Hill, ran from Duluth to Seattle, north of the Northern Pacific, and
ended in 189. Hill believed that the prosperity of the railroad depended on the prosperity of the area.
e. Builders were often overoptimistic, bankrupted themselves and lost their investors’ money.
4. Railroad Consolidation and Mechanization
a. Older eastern networks were welded together and expanded especially the New York Central by
“Commodore” Cornelius Vanderbilt, who had made his money through steamboating. He offered superior
railway service at lower rates and amassed a fortune. He donated $1 million to the Vanderbilt University
b. Two improvements to the railroads: steel rail which was safer and more economical and a standard for the
gauge of a track.
c. The Westinghouse air brake, adopted in the 1870s, was a boon to efficiency and safety.
d. Pullman Palace Cars were introduced on a national scale in the 1860s.
e. Accidents were a daily part of life on the railway.
5. Revolution by Railways
a. There was now a large market for the country and business people were thinking on a continental scale.
b. Railways spurred industrialization – raw goods were transported to factories and the factories sent goods to
the larger market. Stimulated mining and agriculture in the west as it carried product to market.
c. Railways stimulated the growth of cities – could feed and employ a large amount of people.
d. Railroad companies stimulated immigration because they wanted settlers to which they could sell land.
e. Ecologically, the area suffered as natural resources were displaced my profit-gearing resource.
f. Before 1883, each town had its own local time based on the sun’s position. In 1883, the major railroads
declared that the country would be divided into 4 local time zones in order to schedule better and avoid
crashes. Local people adapted to the railroad time.
g. A new class of millionaire emerged as “Lords of the Rail”
6. Wrongdoing in Railroading
a. Jay Gould was the most adept at manipulating the fortunes of the railroads in order to make money off the
stock.
b. “Stock watering” – promoters exaggerated claims of a line’s profitability and sold stocks at way higher
rates than they were worth. Railroad managers were forced to compete to pay off their financial debts.
c. The railroads had an elaborate system of buy-offs so that they would be allowed to infringe on the law.
d. Railroad kings exercised direct control over people’s lives and entered into alliances with each other into
order to protect their profits. A “pool” was when the barons divided the business and profits of an area.
7. Government Bridles the Iron Horse
 a. The people began to wonder than they were at the mercy of the Lords of the Rail. However, they took the
economic principles of free enterprise very seriously and remembered that Jefferson was hostile to
government intervention in business. There was also the faint dream that becoming a millionaire was
possible for them in the land of opportunity.
b. The 1870s depression finally forced the poor Midwestern farmers to protest. Organizations like the Grange
(Patrons of Husbandry) forced Midwestern legislatures to regulate the railroad barons. In 1886, the
Supreme Court decided in the Walbash case that the states had no authority to regulate interstate trade.
c. Cleveland opposed the act but in 1887, Congress passed the Interstate Commerce Act. It prohibited rebates,
pools, discrimination against shippers and charging longer for a short run than a long one. It also required
railroads to publish rates openly and set up the Interstate Commerce Commission (ICC).
d. It was nominal control over the railroads, but it provided a forum to resolve conflicts in the industry and
prevent rate wars between railroads and end “confiscatory” attacks by state legislatures.
e. It was the first attempt of the government to regulate trade and foreshadowed more.
8. Miracles of Mechanization
a. By 1894, America was the top manufacturing nation. Reason?
i. Liquid capital was now readily available in the form of millionaires.
ii. The natural resources of the country were about to be exploited (coal, oil, and iron)
iii. Massive immigration provided cheap, readily available labor.
iv. American inventiveness boomed with the techniques of Eli Whitney, business tools, and
urbanization tools.
b. In 1876, Alexander Graham Bell invented the telephone – new “number please” women
c. Thomas Edison invented the phonograph, the mimeograph, the Dictaphone and the moving picture. He also
invented the electric light bulb, which affected sleeping patterns and turned night into day.
9. The Trust Titan Emerges
a. Competition was the enemy of big business. Andrew Carnegie, the steel king, “vertical integrated” every
step of the steel process – from his miners to his ships to his railroads to blast furnaces. His meant to
improve efficiency by making more reliable and quality steel by controlling all steps.
b. John Rockefeller, the oil baron, practiced “horizontal integration” which meant allying himself with his
competitors in order to corner the market. He used a “trust” in which smaller stockholders assigned their
stock to the board of directors of his Standard Oil Company. They could then force others out of business.
c. J.P. Morgan, the bankers’ banker, eliminated competition by consolidate rival enterprises and ensure future
harmony by placing officers of his own on their board of directors – “interlocking directorates.”
10. The Supremacy of Steel
a. Steel making, notably rails for railroads, typified by the dominance of “heavy industry,” which
concentrated on making “capital goods” such as clothes and shoes.
b. Steel was a commodity in America – used only for cutlery and Vanderbilt was forced to import it from
Britain when he first started making his tracks out of it.
c. Soon, America became the highest manufacturer in the world because of the Bessemer process. William
Kelly discovered that cold air blown on a red-hot iron caused the metal to become white-hot by igniting the
carbon and eliminating impurities.
d. America was one of the few places in the world where one could find, coal, rich iron ore and other
ingredients in close proximity. It also had abundant labor and industrial leaders.
11. Carnegie and Other Sultans of Steel
a. Established a steel business in Pittsburgh and though tough in business, disliked monopolies. He produced
¼ of the nation’s Bessemer steel and brought home millions in profit.
b. J.P. Morgan had established himself as a man with integrity, believing that “money power” was only
dangerous in the wrong hands, and his weren’t wrong.
c. By 1990, Carnegie was ready to sell his holdings. Morgan was dipping into the steel pipe industry and
Carnegie threatened to ruin him if he didn’t buy Carnegie out.
d. In 1901, Morgan launched the US Steel Corporation, the first million-dollar corporation in America
12. Rockefeller Grows an American Beauty Rose
a. In 1859, the first oil well in Pennsylvania (“Drake’s Folly”) was discovered and gained more wealth that
that of all the 49ers with gold. Kerosene, the first petroleum product, replaced whale oil for use in lamps
and became the nation’s 4th most valuable export. Whaling became obsolete.
b. By 1885, Edison’s light bulbs had replaced kerosene; the only market was in rural America and overseas.
By 1900, oil became useful for gasoline-burning automobiles, replacing steam and electricity.
c. John D. Rockefeller organized the Standard Oil Company of Ohio in 1870. He achieved greatness by
ignoring business ethics and using spies to root out the competition.
d. However, Rockefeller’s monopoly provided a superior product at a cheap price and led to important
economies at home and abroad, partly because of its large-scale production and distribution.
 e. Soon the sugar trust, the tobacco trust, the leather trust, the harvester trust and the meat trust were
established, which created a class of newly rich that scrambled for power. Generally, the people leading the
anti-trust crusades were of the older class of power.
13. The Gospel of Wealth
a. Some of the wealthy credited God in their success. However, most defenders of wide-open capitalism used
Darwin’s survival-of-the-fittest theory. With this in mind, these people held contempt for the poor since, as
they had risen from the poor, the poor were simply lazy. Social reform was unlikely in this atmosphere.
b. The plutocracy used the Constitutional clause that gave Congress sole jurisdiction over interstate commerce
was used time and time again to stop state legislatures from interfering with business. They also used the
14th amendment, interpreting the business as a “legal person.”
c. Businesses sought to incorporate in “easy states” like New Jersey with little restrictions on big business.
14. Government Tackles the Trust Evil
a. People finally appealed to Congress and the Sherman Anti-Trust Act of 1890 was signed into law. It was
largely ineffective, with no distinction between “good” trusts and “bad” trusts, because it was largely
unenforced and had a series of loopholes that lawyers could use.
b. It actually proved to curb labor unions or labor combinations that were restricting trade.
c. Early prosecutions were ineffective and more trusts were formed under McKinley than another other like
period. Until 1914, when it was better enforced, there were questions as to who was controlling who.
15. The South in the Age of Industry
a. After the Civil War, the plantation system had devolved into a system of sharecroppers.
b. In the 1880s, machine-made cigarettes replaced the homemade kind, helping the southern economy. In
1890, James Buchanan Duke absorbed his competitors into the American Tobacco Company.
c. Industrialists tried to encourage more manufacturing, with only moderate success. Henry W. Grady, editor
of the Atlanta Constitution, was a supporter of the new idea.
d. One obstacle was the regional rate-setting systems imposed by the northern-dominated railroad interests.
They discriminated in favor of northern manufacturing going south and southern raw materials going north.
For example, coal and iron ore deposits near Birmingham, Alabama plus the low-wage southern labor
should have given the Birmingham steel the advantage. But the steel lords of Pittsburgh pressured the
railroads into adding a “Pittsburgh plus” fee, adding on a fee as if it had been shipped from Pittsburgh.
e. In 1880, Northern capital began establishing cotton mills in the South, drawn by the tax benefits and the
prospect of cheap and nonunionized labor.
f. The factories were a godsend but at considerable cost. Cheap labor in small rural towns dominated. Rural
white southerners sought employment at the mills, receiving ½ of what their counterparts in the north
received. Many southerners saw the mills as the only place for steady jobs and wages.
16. The Impact of the New Industrial Revolution on America
a. The American standard of living rose, high in comparison to other industrial nations. Jeffersonian ideals of
the small farmer and complete free enterprise were sacrificed as the government “trust-busted.”
b. America now had to base itself around the factory clock instead of nature. They also had to accustom their
selves to the factory regimen.
c. Now, women received new jobs as switchboard girls and stenographers. The “Gibson Girl” created by
Charles Dana Gibson in the 1890s symbolized a woman’s newfound independence. For middle-class
women, careers meant delayed families and economic necessity. They faced the same working conditions
as their male counterparts but they received less money.
d. “Industrial buccaneers” flaunted their wealth, evoking criticism. Some was jealously, but most came from
groups of socialists that were new immigrants.
e. Most people now depended on wages. The line between working-class and middle-class was the
vulnerability of the breadwinner’s job. Reformers tried to created job security.
f. Foreign trade now developed in America and American products were sent across the globe.
17. In Unions There Is Strength
a. The worker now became deprived of all originality, more so than ever before. The corporation employed
the workers rather than the owners and the stockholders didn’t encourage personalization.
b. The machines displaced employees and while more jobs were created than destroyed, the manual worker
often suffered. Employers utilized railroads to import labor from everywhere and immigrants made the
conditions favorable to employers rather than laborers.
c. Workers were forced to band together for basic rights. The worker was much more dependent on the
corporation than the corporation on the worker. They could pool wealth and buy lawyers, politicians, and
press. They could employ strike-breakers and thugs to beat up organizers.
d. Corporations could also have judges issue injunctions to start working again. If chaos ensued, the company
could request federal troops. Employers could use the “lockout” and stave employees. They could require
employees to sign “yellow-dog contracts” or “ironclad oaths” that they wouldn’t join unions. Agitators
 could be blacklisted from other companies. They could even own the “company town” which made the
workers essential serfs.
e. The middle-class became annoyed by the frequent strikes. American wages were the highest in the world
and if the owners of corporations had come from laborers, then they must be lazy. The strike seemed
inherently socialistic and therefore bad.
18. Labor Limps Along
a. The Civil War gave a boost to labor – it was scarcer and the cost of living high. By 1872, there were many
national unions representing artisans.
b. The National Labor Union, organized in the 1866, represented a large amount of workers. They excluded
Chinese and barely allowed women and blacks. The blacks formed the Colored National Labor Union but
racism against white unionist and support of the Republican party halted cooperation. The depression of the
1870s nearly killed the labor force but it never died.
c. The Noble and Holy Order of the Knights of Labor was formed in 1869 as a secret society to prevent
employer retaliation. They sought to include all laborers, but they prohibited “nonproducers.”
d. They campaigned for codes of safety and health, but mostly for the 8 hour day.
e. They were lead by Terence V. Powderly and when they won a strike against Jay Gould’s Wabash railroad
in 1885, membership skyrocketed to 3/4ths of the total labor force.
19. Unhorsing the Knights of Labor
a. In 1886, the Knights were involved in a series of May Day strikes in Chicago. The city contained many
anarchists plotting the overthrow of the American government. On May 4, 1886, the Chicago police
advanced on a meeting to protest brutalities by the authorities. A dynamite bomb was thrown, killing police
b. 5 anarchists were blamed, one committed suicide and three were given prison terms. John P. Altgeld, newly
elected governor of Illinois, pardoned them after reviewing the case.
c. The Haymarket square bomb associated in the public’s mind anarchists with the Knights. The eight hour
movement suffered now and strikes met with little success.
d. Skilled labor soon tired of sacrificing the advantage of being irreplaceable and went to the American
Federation of Labor. This ended the Knights.
20. The AF of L to the Fore
a. The American Federation of Labor, organized in 1886, was the creation of Samuel Gompers. The
federation was a collection of national unions. He spurned attempted at government interference. He sought
better wages, hours and working conditions. A main goal was the “trade agreement” authorizing the
“closed shop.” He used the walkout and the boycott. Some unions in the federation had large funds that
could hold out against prolonged strikes.
b. Although meant for all workers, its main demographic was only skilled, leaving unskilled to fend for
themselves. It was basically nonpolitical, though it did reward friends in the polls. It held out against the
panic of 1893 well and could boast a large membership.
c. The greatest weakness of organized labor was that it only was supported by a small percentage of labor. In
1894, Labor Day was made an official holiday by Congress. Though they made small gains, nothing was
given to labor on a silver platter and it would be years until gains were substantially made.