Chapter 19

William Graham Sumner

A Yale professor of the late 1800s who was America's foremost champion of Social Darwinism.

Molly Maguires

A group of Irish coal miners in Pennsylvania enjoyed good jobs and a stable income. They formed a union in 1869-1873 to protect their interests. In the mid 1870s, Franklin Gowen, president of the Reading Railroad, horizontally integrated all of the carious coal mining operations in northern Pennsylvania in order to create a monopoly. In addition tot hat, he hoped to kill the union so he could lower the miners' pay. Gowen and his men hired Welshmen and Englishmen to fill most of the superintendent and management positions. This left the Irish Catholics to toil in the mines on a daily basis. The acute ethnic tension between the British Protestant management and the Irish Catholic workers made the situation volatile. The Anglo owners/management charged the miners with insubordination and laziness. The Irish workers charged their employers with oppression and rapacious behavior. Labor friction merged with ethnic and religious friction to create a mini-war. The miners created a secret group called the Molly Maguires. A strike in 1875 was accompanied by acts of violence from both sides. Gowen broke the strike and had 20 Mollies arrested, tried, convicted, and hanged. In the public mind, union activity and Irish miners were linked to lawlessness, which was a dubious link. Union activity ceased in the region for 25 years.

The monopoly

A monopoly eliminates competition. It controls nearly all the businesses in a certain industry. Often the word trust was used to designate the form which monopolies would take. Technically the trust consisted of four independent businesses, but in reality the four businesses were different branches of the one centrally managed trust.

The replacement of a single owner with a board of directors

A significant benefit: a dozen board members could raise much more operating capital than a single owner. This enabled businesses to survive economic downturns. A board of directors allowed each member to specialize in their area of expertise.

Unskilled laborers

About 30% of the workforce was unskilled. These jobs were the most menial, as well as the most prone to lay-offs and low pay. When an owner felt the need to cut losses, these workers were the first to go.

Common laborers

About 50% of the workforce were known as common laborers. These workers were a mix of older immigrants, somewhat experienced workers, and native Anglo-Saxons.

Railroads were the first industry to practice horizontal integration

Large railroad companies would lower their rates so much that they were actually losing money. However, they were able to take a larger hit than the small companies, so the small companies went out of business before the larger one. This was how railroad companies integrated horizontally - they forced their competition out of business by lowering their own prices.

Timezones

Managerial issues were of such consequence to the railroad companies that they created our current system of multiple time zones in North America. Prior to the Civil War, there were no time zones; every town set its own time based upon sun location. To facilitate cross-country train schedules, the railroads invented standardized time zones in 1883 that were very similar to those we have today. Congress made the railroad companies' time zones national policy in 1918.

Mill towns

Many mill and mining companies built their own towns, or even cities, for their workers to live in. The company would set the rent for housing, and often would build a store for their workers to buy their groceries/supplies from. Mill towns gave the employer even more leverage over his workers. He could charge virtually any price he in wanted in the company store because there was no competition. He could even pay his employees with redeemable vouchers instead of cash. He could also evict employees he thought were troublesome.

The visible hand of managers

Market forces played a large role in shaping American business in the late 1800s. Free market capitalism was more robust in the US than any where else. However, an equally large role was played by the visible hand of managers, who played an active role in anticipating, responding to, and resisting market forces in often successful attempts to maximize profits.

The most common form of vertical integration

Marketing. Prior to the Civil War, business had relied upon salesmen to sell their product to a larger, non-local market. After 1870, however, big businesses began to do their own marketing.

Labor violence in the 1890s was common

1) 55 Slavic miners in Pennsylvania were gunned down by policemen in the Latimer Riot of 1892 2) At Idaho's Coeur d'Alene River mines in 1892, miners captured the guards sent to defend the mine and blew it up with dynamite. Owners used the Idaho National Guard to arrest more than three hundred miners.

Examples of companies who horizontally integrated

1) John D. Rockefeller's Standard Oil Company pioneered horizontal integration 2) the American Tobacco Company 3) American Sugar Refining

The three factors that contributed to the emergence of national corporations

1) The key role of railroads 2) favorable government policies 3) social Darwinism, the gospel of wealth, and a favorable intellectual milieu.

Railroads were important for two reasons

1) The railroads modeled many of these new business strategies. Other industries later copied the railroads' strategies. 2)The nation's railroad industry was so large that it created an impetus for other industries.

Four strategies and dynamics transformed the U.S.'s mom-and-pop businesses into the world's largest economic enterprises.

1) horizontal integration 2) vertical integration 3) exploitation of a national market 4) the managerial revolution

How many Americans left farms for cities?

11 million. That's kind of sad.

Skilled laborers

About 20% of the workforce was comprised of highly skilled Anglo-Saxon workers who were fluent in English and had already lived in the US prior to 1870. These men had more secure job positions, and were less likely to be laid off.

The Managerial Revolution

American businesses in the late 1800s invented the professional white-collar manager and the concept of a board of directors. These were totally new concepts. In previous years, the owner of a small business was a managerial jack-of-all-trades. He hired new employees, trained employees, fired employees, made strategic decisions for the company, did the bookkeeping, handled sales, and procured necessary raw materials. Few individuals are skilled in all these areas, so businesses like these were generally not very efficient. After the Civil War however, American business owners began hiring specially trained managers who possessed expertise in specific areas. The owner retained ownership of the business, but he handed the day-to-day operation of the business over to his managers. This increased efficiency allowed businesses to outlast the owners death which in turn allowed them to perfect their production techniques and expand their customer bases.

American capitalism compared with Marxism

American capitalism demonstrated a great capacity for self-correction, but repentance was not immediate

Americans did not appreciate the hardships faced by industrial workers

Americans who did not work in industrial jobs and/or lived in rural areas did not appreciate the hardships faced by industrial workers. They only saw seemingly endless strikes, lock-outs, protests, and violence. In addition, so many European immigrants had entered America by the 1880s that "labor union" and "immigrant" had merged in the minds of many native Anglo-Americans. Latent anti-immigrant prejudices thus tainted the organized labor movement.

Single women in the workforce

Among the women who worked for pay, 90% of them were single women. The most common form of urban employment for women was domestic work, and single women frequently worked as live in maids.

Increasing number of woman in the workforce

Around the Civil War, only about 10% of women worked jobs outside the home. By 1910, about 25% of women worked jobs outside the home.

Average wages

Average wages for old-stock Anglo-Saxon Americans nearly doubled from 1860 to 1914. However, average wages for immigrants remained flat. Because of the huge pool of immigrants, employers could almost always find someone willing to work for less.

Why did unskilled industrial laborers tolerate such low wages, long working hours, and bad conditions?

Because it was better than life in the old country had been. Russian serfs and Hungarian peasants were all too familiar with the long hours of back-breaking work they had to endure back home, not to mention the terrible quality of life. In America, workers at least had the hope of improving their lot, saving money, and creating a better life for their children.

Anger at filthy rich men

Because of their conspicuous consumption of their ostentatious wealth, the populace began to view the wealthy businessmen of America as robber barons, not heroic captains of industry. This view was reinforced by the dramatic wealth gap between a poor Cleveland factory worker and the fabulous opulence of John D. Rockefeller, for example. They believed these men prospered by means of unscrupulous deals, cheating, breaking the law, and greedily forcing hard-working men out of business. This perception was reinforced by the work of investigative journalists known as muckrakers. These journalists dug up the dirty stories on businessmen and published them. There was some truth to this perception of wealthy businessmen, however for the most part it was not true. Wealthy businessmen were merely men who played by the rules of capitalism and won. For example, as an additional anomaly to this claim, Andrew Carnegie funded major projects (like public libraries) for the public good. By the time of his death, Carnegie had given away 90% of his fortune to various charities and foundations. Various other businessmen followed suit.

Pace of work

Before 1870, the laborer controlled his pace of work. After 1870, the machine controlled the laborer's pace of work.

Managing the railroads

Before any other big business turned to professional white-collar managers, the railroads did. Planning, coordination, and timely service required a level of systematic organization that other businesses did not require. Andrew Carnegie was the pioneer industrialist who successfully applied the railroad's managerial techniques to another industry, namely the steel industry.

Female industrial workers

Between 1870 and 1920, the number of female industrial workers grew from 325,000 to 2,230,000.

Exploitation of a National Market

Big businesses took advantage of a national market. After a nationwide search, they bought supplies from the cheapest provider. They then sold their products in distant markets in order to get top dollar. A national market was made possible by the new national transportation system: railroads. Every large city was adequately served by large rail lines, and just about all of America enjoyed easy access to rail service. An example of national market exploitation were the wool mills of the Northeast. Northeastern wool mills were much more efficient than Midwestern wool mills, and therefore their product was much cheaper. However, high transportation costs prior to 1870 prevented them from selling in other markets. However, with the cheap transportation costs post 1870, Northeastern wool mills could now sell in the Midwestern market, and thus steal the business of the Midwestern wool mills in their own backyard.

Black women in the workforce

Black women were far more likely to work industrial jobs than white women. In 1900, only 3% of white married women worked for wages outside the home, while 25% of black women did so. This was likely because the black womens' husbands experienced more wage discrimination in the workforce than white men, so the average black family had more of an income deficiency than the average white family.

Gustavus Swift and Philip Armour

Both these men were in the meatpacking industry, and vertically integrated their businesses. They did this by first building butchering facilities in Chicago, and then constructing a network of refrigerated warehouses throughout the country to market and distribute their meat.

In the wake of the Great Railroad Strike of 1887, the balance of power in labor relations began to shift in favor of big business

Businessmen solidified their relationship with the federal government. The government sanctioned owners' hiring their own private armies to break strikes and/or protect private property. This is how the Pinkerton Agency was born. As the relationship between industrialists and the federal government grew stronger, Washington committed to send in state militias or regular US soldiers to break strikes and protect property.

Horizontal integration

Buying out competing businesses so as to control a larger market share. Horizontal integration decreases market competition.

Our situation in 2019 vs industrial workers' in 1895.

By our standards, the urban housing for industrial workers was disgusting and terrible. However, for many immigrants it was better than they had experienced in their native country. Additionally, America to them was the land of opportunity. Even if one started humbly, there was at least a fighting chance of making it to the top.

Children in the workforce

Children were often required to work as well, especially in poor immigrant families. There were no child labor laws in the late 1800s. In 1900, about 25% of all Americans under the age of fourteen worked outside the home for wages.

The 1900s eugenics movement

Committed Social Darwinists believed that they should assist society in its quest to evolve and progress. To this end, they enacted forced sterilization laws that results in the sterilization of mentally handicapped people and some repeat criminals. The modern birth control movement, which was born at this time, also derived strength from the eugenics movement. The hope was that impoverished and uneducated citizens would have fewer children.

Workers turned increasingly to the strike, their only real weapon

During the 1880s, about 10,000 strikes and owner-initiated lock-outs occurred in America. In the 1890s, the number rose to 13,000.

Management-labor relations after 1870

European immigration reached its peak in the early 1900s, which dramatically increased the pool of available replacement workers. Workers possessed little negotiating power with their bosses

Management-labor relations before 1870

European immigration was not at its peak yet, so the pool of available replacement workers was still small. Workers still possessed negotiating power with their bosses

Samuel Gompers and the American Federation of Labor (AFL)

Gomper's AFL was a conservative union that made sure that it did not stir up public fears. It did not attempt to create one big union comprised of all workers, but instead only one comprised of skilled craftsmen. This had the added benefit of closing the doors to new European immigrants and blacks. Gompers only pressed for incremental improvements in skilled workers' conditions like the eight-hour workday, making sure not to advocate for any radical reforms.

Three related dynamics that transformed America

Immigration, urbanization, and industrialization.

Industrial jobs

In 1865, the US was still an agrarian nation, and more than half of all adults were self-employed. In 1920, only about 20% of Americans were self-employed. In 1870, only about 2.5 million workers were employed in manufacturing, whereas 11.2 million were employed in 1920.

Favorable government policies

In the late 1800s, the federal and state governments created an environment where big business could thrive. They did not regulate businesses, and in fact even sided with big businesses in their frequent disputes with labor unions and strikers. The federal court system encouraged this extreme laissez-faire paradigm. However, this wasn't true and unrestrained laissez-faire capitalism, since government assisted big business. Free and open capitalism probably only existed in the United States around 1840.

Industrial work safety

Industrial work was hazardous. There were no government safety standards. Between 1880 and 1900, about 35,000 workers in America were killed annually, with another 536,000 suffering significant workplace injures every year. The railroad industry was especially dangerous. About 1 out of every 137 railroad employees was killed on the job, while 1 out of every 11 incurred a major injury.

Losing a job

Injured employees usually lost their jobs. Employers were under no obligation to retain injured workers or compensate them for on-the-job injuries. There was no government workman's compensation provision or employment insurance. Injured workers usually relied on family members to support them. Workers also lost their jobs during slow seasons or economic recessions. Because of the large pool, employers would have no trouble finding new workers when they needed to hire again.

America's disposition towards horizontal integration

Most Americans harbored a deep distrust of monopolies, trusts, cartels, and other corporate giants. Many Americans believed that healthy competition between independent businesses was best.

Living situation for single urban workers

Most single urban industrial workers did not rent and entire tenement for themselves. They would usually board with another family. This situation offered little to no privacy, so they would spend their time at their favorite restaurant, bar, or club. Perhaps 20% of all the wage laborers lived in such boarding situations.

The character of American business before the Civil War

No sprawling nationwide businesses existed in America before the Civil War. Instead, smaller businesses bought and sold in local and maybe regional markets. Business were typically owned by a single individual or family. When and owner died, the business usually passed on to a partner or close family. Sharp economic recessions often caused the business to go bankrupt.

The Homestead Strike of 1892

On June 29, 1892, workers belonging to the Amalgamated Association of Iron and Steel Workers struck the Carnegie Steel Company at Homestead, Pa. to protest a proposed wage cut. Henry C. Frick, the company's general manager, determined to break the union. He hired 300 Pinkerton detectives to protect the plant and strikebreakers. After an armed battle between the workers and the detectives, several men were killed or wounded, the governor called out the state militia. The Homestead strike led to a serious weakening of unionism in the steel industry until the 1930s. All the old employees were fired.

Railroads were also one of the first industries to practice vertical integration

Railroad companies would acquire their own lumberyards to build their own ties, coal mines to mine their own coal, and telegraph wires to send their own telegraphs. Owners like James J. Hill, the founder of Great Northern Railway, were experts at using vertical integration to create business efficiency, low freight rates, and handsome profits.

The Great Railroad Strike of 1887

Railroad workers across the nation went on strike due to the Baltimore and Ohio Railroad company cutting its employees' wages by 10% three times in the span of a few months. The trains stopped running, and business was on the brink of grinding to a halt. 100 people died in picket line clashes, and 2/3s of the nations trains stood idle. The federal government intervened to stop the strike. President Rutherford B. Hayes claimed that halting the trains mean halting the transportation of US mail, and therefore the US gov. had the right to intervene. This was a skeptical claim however. It was more likely that Hayes intervened because the businessmen involved paid him large campaign contributions. The US army started operating the trains, and the strike was broken. Many strikers lost their jobs and were replaced by new employees.

The importance of Railroads

Railroads were the juggernaut in America's late nineteenth century business transformation.

Why was there no class consciousness and no strong socialist party in the U.S. like there was in Western Europe?

Sharp ethnic differences between workers in America fueled friction instead of cooperation. Employers used this to their advantage and pitted different ethnicities against each other in strikes. This did not happen in Western Europe. Unlike the situation in America, there was no sharp diversity in language, religion, or ethnicity among laborers in England, Germany, and France. Employers could not pit one ethnic group against another. Industrial workers sensed a commonality with other laborers and nurtured a class consciousness. Another factor which prevented the formation of a cohesive working class in the US was the high mobility of American workers. They were frequently relocating in search of better jobs and better living situations. The constantly changing nature of the labor force at a factory stunted worker cooperation. This situation did not exist in Europe. Main point: a house divided cannot stand. In Europe the house was not divided, but in America it was.

Social Darwinism

Social Darwinism is the belief that society's most fundamental social relationships could be explained by Darwinian processes. According to Social Darwinists, the best and brightest in society would inevitably succeed, while the weakest and most incompetent would fail. When a wealthy businessman succeeds, said Social Darwinists, it is simply evidence that he is among the fittest. Andrew Carnegie said that "one of the serious obstacles to the improvement of our race is indiscriminate charity."

The implications of the 1886 Haymarket Riot

The Knights of Labor and all trade unionism were now associated in the public mind with anarchism, violence, and un-American loyalties. Public officials were emboldened to use U.S. soldiers to halt labor union activity, since this was perceived as a means of protecting America from subversive criminals. Across the nation trade unionism withered.

The Pullman Strike of 1894

The Pullman Strike began when the financially strapped railroad car manufacturer fired 1/3 of its employees. The remaining laborers had their wages slashed by 30-40%, but the company did not reduce their rents in the company town. Desperate Pullman workers joined Eugene V. Debs' American Railway Union. The ARU organized the first national labor union strike in US history. A federal judge intervened on the dubious claim that the Sherman Antitrust Act gave him authority to act. This judge ordered Eugene V. Debs to call off the strike. Debs refused and went to jail. President Grover Cleveland sent in U.S. soldiers to break the strike. A riot ensued: 700 freight cars were burned, 13 people died, and 53 were wounded. Management imported unemployed workers from the East Coast to take the strikers' jobs.

Social Darwinism, the gospel of wealth, and a favorable intellectual milieu

The Social Darwinists succeeded in creating an amoral economic environment, where unscrupulous businessmen who thrived by virtue of intimidation, political bribes, corrupt deals, or greedy acquisitions were merely the winners in the survival-of-the-fittest game. Poor immigrants and handicapped people were merely viewed as dead weights in society that held back progress. They should be eliminated. In this environment, might made right, and whatever succeeded was called good. Gospel of wealth: many interpreted financial success as a sign of God's blessing, and subsequently poorness as a sign of God's curse. Prosperity gospel.

U.S. v. E.C. Knight Company (1895)

The Supreme Court virtually killed the Sherman Antitrust Act of 1890 with this decision. The SC ruled that manufacturing was not commerce, which meant that all manufacturing businesses were exempt from this piece of anti-monopoly legislation.

Family income

The average annual income for an industrial worker was about $11,500 in 1890. It took $16,300 to avoid deep poverty, and $24,400 for a family of 4 to live decently. Most urban working men had their wives and children work as well. Wives and children could make around $4,000 a year doing laundering, cooking, or sewing for others. Or they could do piece work for a manufacturer. It is most likely that unskilled workers earned poverty-level wages until WWI.

The character of American business after the Civil War

The character of American business was radically transformed from 1870 to 1915. This was not merely a case of new technology spurring large growth, but it was rather a case of radically new management strategies transforming how American businesses functioned.

Recurring theme in the story of labor unions

The complex mixture of ethnic and labor issues

Laborer conditions

The enormous number of immigrants, which created a labor surplus, along with the weak urban infrastructure created an unusually difficult environment for laborers. Economic relationships between 1870 and 1910 were frequently exploitative and unjust.

Workers homes

The first apartment housing was constructed in 1869. These apartments were designed solely for the middle and upper classes, and thus were outfitted with the latest conveniences. They were multi-family dwellings, but they were private and spacious by that era's standards. Poorer city residents lived in tenements. These were coldly efficient means of housing the maximum number of people as cheaply as possible. At least 1/4th of tenement buildings in American cities were still serviced by outhouses as late as 1920. Tenements were incredibly crowded, hot and stuffy, and in various stages of disrepair.

Owners went on the offensive

The increasing labor pool meant that more and more replacement workers and strikebreakers were available. Increasing mechanization meant that skilled craftsmen were less necessary and unskilled workers could do more of the work.

The railroad industry's effect on the nation's economy

The nation's railroad industry was so large that it created an impetus for other industries. The millions of railroad ties which were needed, both to lay new track and replace old ties, created a booming industry for the Midwest's and South's lumber industries. The railroad industry almost singehandedly created a sufficient customer base for the Pittsburgh and Birmingham iron-and-steel factories. In part because of the railroad companies, steel production in America rose from 732,000 tons in 1878 to over 10 million tons in 1900. In addition to these industries, the railroad companies employed thousands of workers in America. In fact, it became the largest single employer in the US.

The high-water mark of industrial laborers' power came in 1885

The old National Labor Union (NLU), which had existed from 1866 until 1872, was superseded by the Knights of Labor, which sought to include all workers in One Big Union. Their slogan: "an injury to one is the concern of all." All ethnicities and different types of workers joined this union. Under the leadership of Terrence Powderly, the Knights of Labor campaigned for safety and health guidelines in the workplace and an eight-hour work day. They won a number of strikes, the biggest victory coming in 1885 when they successfully struck Jay Gould's Wabash Railroad in 1885. Membership soared to 750,000 workers.

Constructing a railroad line required large amounts of capital

The railroad business necessitated that large numbers of investors cooperate in joint ventures. It also pushed Wall Street to come up with national investment schemes whereby stockholders could invest in the industry.

The cartel

The system that emerges from replacing competition with cooperation in a business environment. i.e., all businesses selling widget A agree to charge a set price for A.

The leading employers among men in the late 1800s

The textile industry employed the most men. Perhaps around 20% of all workers labored in iron and steel mills. The rest were distributed across a wide range of industrial jobs.

Andrew Carnegie and Carnegie Steel

This company was so well vertically integrated that a 1903 observer stated that, "from the moment these crude stuffs were dug out of the earth until they flowed in a stream of liquid steel in the lades, there was never a price, profit, or royalty paid to an outside."

The 1886 Haymarket Riot

This riot crushed the Knights of Labor. Not only were the Knights especially strong in Chicago, but there were also some European anarchists in the city who advocated the overthrow of the US government. On May 3, police had shot and killed four strikers at the McCormick Harvester plant. The next day, a protest rally was about to end uneventfully when a bomb exploded in the midst of an assembly. It killed several dozen person, including some policemen. No one knows who was responsible for the bomb, but it is likely that some of the city's anarchists were to blame. Sadly, anti-union and anti-immigrant hysteria swept the city. Eight local anarchists were rounded up and put on trial. The prosecution conceded that there no evidence, but they said that since the anarchists had encouraged bloodshed and violence, they were guilty of conspiracy to commit murder. Four of them were eventually executed.

The industrial worker

This was an employee who 1) worked for wages, be they hourly wages or "piece wages" based upon productivity; 2) lived either in the city or a company town near his place of employment; 3) performed a fairly specialized job; 4) worked at a pace dictated by machinery; and 5) was part of a large work force that collaborated to produce a product.

Vertical integration

Vertical integration is a business strategy designed to eliminate dependence upon other companies. Vertical integration requires enormous amounts of money because it effectually expands one business into several.