his122ln03

HIS 122--U.S. Since 1865
Lecture 2: The Birth of Modern America
Economic Developments

I. Introduction--From "island communities" to corporate liberalism

Societies in flux

American society, like those of other nations, constantly in flux, continuously changing
Changes that began in the North in the early 19th century, grew in strength and spread to the rest of the nation after the Civil War

Island communities

"America during the 19th century was a society of island communities"--Robert Wiebe

Weak communication severely restricted interaction among these islands
Education (formal and informal) inhibited specialization and accumulation of knowledge

Heart of American democracy was local autonomy
Controlling society was based on personal, informal ways

During latter part of 19th century, American began to turn away from the island communities to an urban-industrial life
system which ran the island communities could not handle this new life--people in the U.S. had to develop a new way of handling society
Corporate liberalism

By the end of World War I (1918), a new scheme was created for controlling American society
Urban-industrial lifestyle needed order to survive--an order based on regulations and hierarchies
This new scheme of creating order functioned by:

rules with impersonal sanctions
seeking continuity and predictability in the face of continuous change
giving far greater power to government--especially to various administrative agencies with flexible responses
encouraged centralization of authority

People were now identified more by their skill and occupation than their community
This new way of ordering the world came to be known as corporate liberalism

II. The Machine Age: Industrialization--1850s-1920

Change from agrarian to urban, industrial society
Technology, organization, and the quest for wealth

Railroads and telegraph

First large-scale industries
opening of Pennsylvania coalfields in 1840s made operation of steam trains possible on wide-scale basis
getting the full potential out of this new technology required unprecedented organizationl efforts in:

scheduling
bookkeeping--cost accounting
personnel management

organizational innovation came through the creation of administrative hierarchies which

hired men to supervise functional activities over a wide geographic area
and executives to monitor, coordinate, and evaluate the work of lower level managers
large numbers of salaried experts were needed to run these railroads

even with changes in organization, railroads in U.S. were by no means standardized at the end of the Civil War

standardization of railroads took place in a twenty year period following the war
the areas of standardization included:

track size
rate-setting
time keeping methods (standard time zones--mention resistance)

even after standardization took place, railroads still faced the problem of competition

cutthroat competition was keeping many railroads from making any profits, thus driving them into bankruptcy
often, managers of several railroads would run their lines to the same small towns, just so their competitors would not have an advantage (this proved very costly--often all roads lost)
some railroads began to join others to form cartels--to reduce competition by controlling rates and volume of traffic
the failure of so many railroads during the 1890s forced the adoption of centralized administrative structures for the railroads--frequently controlled by those outside the industry
still, overall success of railroad organizations was imitated by others in transportation and communications--steamships, streetcars, telegraph, and later, telephone companies

Railroads and telegraphs provided the fast, regular, and dependable transportation and communication essential to high-volume production and distribution

trains provided more direct communication than did other types of transportation and could do so in most any type of weather
telegraph provided almost instantaneous communication over long distances

Distribution

Next major group of industries to combine new organizational schemes with new technologies were distribution businesses--originally wholesalers, then retailers
distributors had to have fast transportation and communications to get goods from a large number of suppliers to a large number of buyers
first to do this were Marshall Field and A.T. Stewart, soon joined by John Wanamaker and Rowland Macy

they created department stores to sell a wide variety of merchandise
succeeded by maintaining high-volume, high-turnover flow of business by selling at low prices and low profit margins
Soon challenged by Montgomery Ward and Sears, Roebuck in 1890s--opening of mailorder firms

developed rigid system of timetables to fill orders
could process these orders from different departments
used RR's to ship

Manufacturing

last area to really take advantage of new organizational systems
had to wait for new technologies to mass produce, as well as all-weather transportation and organizational development
development of technology in form of continuous-process machines (turning out products automatically) or building of factories where materials flowed continuously from one stage of production to another allowed mass production

James Duke--cigarette rolling machines
Steel mills--automatic steel rollers

depression of the 1870s (beginning in 1873) turned managements attention from technology to management techniques (plants were underutilized during the period)--scientific management evolved during the period

Henry Metcalfe and especially Frederick Taylor develpoed of scientific management

they argued that costs and savings should be based on a standard time and output to be scientifically determined through detailed study of the work being done (time and motion studies)
humans become basically another piece of machinery to be fine tuned

Textile mills--technology without organization

Why and how do businesses become so large--Integration and birth of large-scale businesses

two types of integration

vertical
horizontal

the largest corporations that developed used one or both methods of integration to achieve large size
vertical integration allowed manufacturers to combine several parts together--supply, production, and distribution

some wanted own distribution systems to sell to the now wide-based market

James Duke--American Tobacco could now make many cigarettes, but who would buy

developed his own system of marketing
first to use heavy advertising to convince people they needed his products
Others included Pillsbury (flour), Campbell and Heinz (canned goods), Pond and Proctor and Gamble (soap), George Eastman (photography)

others had special needs to met in distribution

Armour and Swift--meatpacking (needed refrigated train cars and warehouses)
McCormick and John Deere (farm equipment), Remington, and NCR needed to provide special instructions for their customers on how to use equipment

still others needed steady stream of suppliers

Rockefeller and Standard Oil (needed oil for refineries, as well as pipelines and tank cars for distribution)
Carnegie Steel and other steel mills bought mines (coal and iron ore) to guarantee themselves raw materials)

horizontal integration (mergers) came about mainly as an attempt to reduce competition and introduce stability and certainty to prices and profits

cartels were informal, and broke down easily
mergers worked sometimes, but were frowned upon as being non-competitive
some mergers worked (usually where vertical integration had taken place first)

New managerial class

As the larger corporations developed, a new class evolved--managers
Ownership and management of corporations becomes separate
Managers work to ensure stability, continuity--to protect their positions
Expertise becomes their key to advancement

Why do Americans accept this new way of doing business?

The new industrial world far different from what most Americans used to handling

brought hardships to many
run smaller, less efficient firms out of business

Americans embraced the new industrial order because

saw it as more promising environment in terms of material well-being
possibilities for economic and social mobility (climbing the ladder of success)

The gospel of wealth and progress

Social darwinism

Darwin had no direct ties to use of his ideas
Darwinism used to buttress the conservative outlook in two ways

it suggested that nature would provide that the best competitors in a competitive situation would win, thus leading to continued improvement ("survival of the fittest" and "struggle for existence")
idea of development of eons suggested that all sound development should be slow and unhurried (without assistance or interference from the government)

Herbert Spencer and Wm. Graham Sumner--leading proponents

Spencer (Britain, 1850s)

argued that a general law of evolution could be formulated
that law argued for a biological law of society--poor were obviously unfit, should be eleminated by nature
government should not interfere with natural process

At Yale, William Graham Sumner became strong advocate of Spencer's theories--popularized Social Darwinism in U.S.

progress of civilization depends upon the selection process, which in turn depends upon unrestricted competition
society is the product of gradual evolution, it cannot be quickly refashioned by changing the laws

Social Darwinism as a tool to promote racism

Rev. Josiah Strong, Our Country (1885)

believed in universal progress, both material and moral, so long as Anglo-Saxon race could be protected
he felt Anglos were threatened by immigrants, Catholics, Mormons, saloons, large cities, and socialists

Theodore Roosevelt--concluded that coming of the whites to the western frontier could not be stopped, and that a racial war to the finish was inevitable

Critics of Social Darwinism

Lester Ward and Dynamic Sociology--challenges Social Darwinism

sharply distinguished between what he called physical (animal) or purposeless evolution and mental (human) evolution--which could be modified by purposeful action
while environment transforms the animal, man transforms the environment
Ward believed unrestricted competition was harmful

it prevented the most fit from surviving
he argued rational economics not only saves resources, but produces superior organisms
pointed to cultivation of fruit trees and cereal grains and the breeding of cattle as examples of improvements

Ward believed education was a leveling instrument--a means of bringing opportunity to humble people and enabling them to use their talents--strong supporter of public schools

Washington Gladden--minister

warned that the weaker classes would unite to attack a competitive system in which they were threatened with annihilation
saw the principle of competition as the law of plants and animals and "brutish" men, not the highest law of civilized society

Why Social Darwinism on rise until 1890s

American society saw its own image in the tooth-and-claw version of natural selection--the rugged individualist
the dominant groups in society were able to dramatize this vision of competition as a thing good in itself

Culture of professionalism and Universities

during late 19th century, the developing middle class developed a culture of professionalism which dominated the habits of thought and action by which most educated Americans organized their behavior--both public and private
Middle-class Americans of late 19th century were a people in motion, seeking success and betterment--they saw their world not as a fixed organic whole, but as a fluid environment open to manipulation according to their needs and values
these people needed a new style of thought which could provide self-discipline and forms of esteem and achievement that fit with broader values of society
these needs were met by developing an outlook (a culture) that saw a profession as an occupation requiring mastery of esoteric skills and embodying an ethic of service to a client's interest
thus, becoming a professional in a given field provided a source of self-esteem and social prestige
Education and the culture of professionalism

the newly developing American universities served and promoted this middle-class professionalism
offered more electives to the traditional "classical" education
began classes in applied skills, especially in scientific areas
began to develop different schools--business, law, medicine, engineering, social work, education, etc.
opened more graduate schools, for advanced training
provided education and skills in professions--key to authority--helpd to set standards for what it meant to be a professional in a particular field
in turn, the middle class looked upon the universities as institutional centers for this cultural process of creating professionalism

Government assistance to business

Tariffs

taxes on foreign goods
raised prices on foreign goods, thus protected American industries from strong competition by outsiders

Subsidies--government grants to businesses

land grants to railroads
Homestead and Morrill Act--designed to help provide land for settlers and colleges, it principally benefitted businessmen, speculators, merchants, lawyers

patent protection
legal system

tort law--especially negligence

fellow-servant rule, which held that an employee could not sue the employer for injuries caused by the negligence of another employee.
Contributory negligence rules also limited the tort liability of businesses--if employee least bit negligent, company's negligence was negated
assumption of risk--person who undertook a dangerous activity (such as riding trains or working in hazardous occupation) assumed the risk of any injury
forseeability--injury caused by negligence must be foreseeable before it could be compensated--RR fire case in N.Y.

employment contracts--enforced strictly to the letter, most often favored employers over employees
Caveat emptor--buyer beware

Gospel of Wealth

Andrew Carnegie

America as land of free and prosperous
reasons for America's success

ethnic character of people--esp. Anglo-Saxons
geography--plentitude of North America
influence of political institutions based on equality of the citizen

Rev.Russell Conwell (1915)

Baptist businessman and lay minister
Christian duty to become rich
"98 out of 100 of the rich men of America are honest. That is why they are rich." Dishonest rich men are rare
People are poor because of their own shortcomings (God is punishing them)
Money also helps the churches--especially the ministers (Crowell will not turn down a raise in salary)

Rev. DeWitt Talmage

Presbyterian minister in Brooklyn
wanted no working men stinking up his church--"If you are going to kill the church thus with bad smells, I will have nothing to do with this type of evangelization."

Dissenting voices

Henry George and Progress and Poverty (1879)

disturbed by amount of poverty in land of plenty
proposed to redistribute wealth
advocated a single (flat) tax on "unearned increment" that speculators got from rising land prices

Mark Twain and "Poor Little Stephen Girard"

"rags to riches" was just a myth
business success was more likely to come to those who lied and cheated

Edward Bellamy and Looking Backward (1888)

hero falls asleep and wakes up in 2000
finds a nation without wars or poverty
government runs a centralized economy--everyone works for common welfare
religion of solidarity among all preached

Karl Marx and Das Kapital (1867)--had little appeal--mostly to a small group of German immigrants

Antitrust legislation

Sherman Anti-trust Act

explain a trust
Sponsored by Sen. John Sherman in 1890
outlawed trusts and "any other contracts or combinations in restraint of trade"
Act based on Congress' power to regulate interstate commerce
failed to define its terms clearly
Rockefeller dissolves the Standard Oil Trust and creates a holding company--avoids the Sherman Act

U.S. v. E.C. Knight Co. (USSC, 1895)

E.C. Knight Co., a Louisiana trust manufacturing sugar
controls almost 95% of all sugar refining in U.S.--clearly restrained trade
Supreme Court ruled that sugar refining was manufacturing, not part of interstate commerce

Atty. Gen. Richard Olney

did not go after business trusts agressively
did turn around though and use the law against labor unions

E. Mechanization and the changing status of labor

From workshops to mass production

Typical working days

workshops

work done in small shops by skilled artisans
artisans controlled pace of work and flow of workday (breaks, working conditions, etc.)

Small manufacturing concerns

centralized workers in one place
skilled craftsmen worked in groups, each doing one job (over and over)
skilled workers still controlled pace of work, but lost control over other areas (holidays, drinking on job, etc.)

Mechanized shops

workers still centralized
skilled craftsmen not needed to handle routine operations any more as more sophisticated machines took over those tasks--could be run by unskilled operatives
control of shop-floor now passed to management--skilled workers now did set-up, moved into management, or were troubleshooters

Working conditions

length of workday/workweek

normally a 10-12 hour day, depending on industry
six days a week

Men in the North--anywhere from $3.00/day for highly skilled laborers to $1.25/day for unskilled workers
Pay sufficient for people to survive if they worked full time, year-round
Men in the South--$.75-$1.50/day in the South, depending on skill levels--most jobs called for unskilled workers

sporadic nature of work

seasonal unemployment a norm for workers
few worked year round
economic downswings often meant loss of hours and/or reductions in pay

industrial safety

little concern on part of many employers for industrial safety
workers seldom received more than minimal training on equipment
accidents were common, especially in heavy industries--steel, railroad, mining, and textiles
1913--25,000 fatalities and 700,000 injured severely enough to miss more than 4 weeks work
even minor injuries could become bad, due to lack of proper treatment
diseases common in some industries-- black lung (coal), brown lung (textiles), and white lung (baking) in particular
employers fought against government regulation of safety and health--arguing that these measures would be too expensive

fate of disabled workers

usually no compensation from employers--hazards were a risk borne by employees (their regular wages were seen as taking the risk into account)
no government safety net--workers' comp. and disability payments did not exist
some workers joined fraternal organizations (brotherhoods) which provided minimal coverage in case of disabilities--could not provide much for long-term or death
families and neighbors became the only source of help

Employment of women

Number working

by 1890s, large number of women had entered the workplace
women were entering the factories in large numbers for the first time

Types of work

occupations that employed what were seen as traditional female skills

domestic
teaching
nursing

non-traditional occupations

industrial--garment, shoe, cigar, and cigarette, baking
secretarial

previously dominated by males
now with large numbers needed to handle growing paperwork and new machines, women moved into positions

store clerks

Wages

generally half of what men received
reasons

in jobs seen as unskilled
women seen as temporary, not permanent breadwinners for families

Reactions to women entering workforce in large numbers

some traditional occupations were seen as fitting for women--fit in with notions as being in the proper sphere for "ladies" (nursing and teaching)
other occupations viewed as being unfit for "good" women

Employment of children

Working conditions
Child-Labor laws

Labor reform laws

States and the 14th Amendment

a number of state legislatures passed acts limiting amount of hours person could work in certain industries, also age children could work
state courts generally struck the laws down on basis that it violated due process clause of the 14th Amendment, no state could interfere with the right to make lawful contracts

U.S. Supreme Court becomes involved

Holden v. Hardy (1898)

Utah passes law limiting miners to eight-hour work day as proper health measure
Court upheld law due to hazardous nature of mining

Lochner v. New York (1905)

New York passes law limiting bakers to 10-hour work days, or 60-hour work week as health measure
Supreme Court strikes down the law (5-4 decision)--baking not considered a hazardous occupation in their mind (what difference between 10 hours or 12 hours per day?), thus the law unwarranted restriction of freedom of contract
strong dissent from Justices Harlan and Holmes--arguing court should not override valid exercise of state legislature's police power and side with one economic faction

Muller v. Oregon (USSC, 1908)

Oregon law set max. working hours for women laundry workers to 10 per day
Supreme Court upheld law--gender of workers seen as key element, women could be treated differently than men
showed slight change in nature of the legal climate--laws affecting adult males still strictly scrutinized

Other than the courts, the federal government remains uninvolved in labor reform legislation
Should government become involved in regulating working conditions and hours? Are there reasons for protecting children or women that don't apply to men?

Strikes of 1877

Importance of strikes

helped spur organized labor movement
caused many middle-class Americans to view workers as a mob, influenced by outside agitators

Causes

depression of 1870s cuts down on rail traffic
rail lines go through a series of pay cuts to workers
Workers on B & O strike, blocking the railroad

Pittsburgh

heavy violence in Pittsburgh against Penn RR
Railroad calls in Pinkertons to break the strike and protect property
Pinkertons run off by strikers in gun battle

State militias called out in a number of states
Federal government's response

Pres. Rutherford B. Hayes sends in U.S. Army--reason, to protect the U.S. Mail
When shooting stopped, almost 100 people had died

The union movement

Knights of Labor

formed a wide-scale labor union in 1877, amid the turmoil of the railway strikes of that year
Reason for founding K of L

belief that the producer of a good (laborers) deserves the fruits of his or her work (i.e.--labor creates value)
many new workers came from farming background, where farmer works and receives pay for product

Terrence Powderly

Irish Catholic President of the union
dynamic speaker
helped bring in thousands of new members
sought to work through collective bargaining, against strikes

Membership

included all wage earners
excluded: gamblers, speculators, lawyers, bankers, doctors, and stockbrokers

Platform

supported greenbacks, government regulation of health and safety, public ownership of railways and telegraphs, equal pay for women, graduated income tax, and worker-owned cooperative manufacturing enterprises
against child and convict labor

worked to influence politics, sought to elect those friendly to labor
Railroad strikes in 1884-85

several locals launched successful wildcat strikes against a few railroads in 1884 (without Powderly's approval)
in 1885, Jay Gould tries to get rid of all K of L supporters working on his Wabash RR
Powderly authorized a strike against the line and ordered all members to refuse to handle Wabash cars
Gould backs down

1886--Success leads to demise of K of L

success of the strike against Wabash caused ranks to swell to over 700,000 members by 1886
number too large for national leadership to control
a number of locals launched unsuccessful strikes without support of national leadership, which left many disillusioned
Haymarket riot and backlash against unionism
Union membership declines to less than 200,000 over next three years

Rise of yellow-dog contracts

Haymarket Riot

Chicago in May 1886

booming city
meatpacking, railroad, and farming equipment major industries
pro-business atmosphere in government, pro-labor among workers

Events leading to riot

McCormick Harvester plant scene of strike
workers wanted an 8 hour work day
four striking workers shot and killed by police at the plant

May 4, protest rally at Haymarket Square

someone throws a bomb into crowd, killing 7 policemen
police return fire, killing 4 protestors
8 labor activists arrested for murder

Trial and aftermath

trial

no evidence to link 8 arrested to bombing
all were convicted

4 executed, one commits suicide
Gov. John Altgeld pardons remaining 3 in 1893
backlash against labor--organizers seen by middle and upper class as being in league with anarchists

American Federation of Labor

founded in 1886
Reasons for founding A F of L

belief in trade unionism--use the bargaining power of skilled workers

Samuel Gompers

English immigrant, started in cigar-making trade
believed that large-scale industrial organization required large-scale labor organization
work through individual craft guilds for collective bargaining

Membership

limited to members of craft guilds
unskilled laborers not welcome
women and blacks excluded
new immigrants discouraged from joining
membership remained limited until after 1900, when number grew to nearly 1.5 million

Activities

sought to control shop floor--working conditions
worked primarily through attempts at collective bargaining
avoided strikes
stayed out of politics until 1910s, did not trust politicians

Pullman Strike and American Railway Union (1893)

Pullman company policies -- company town
Debs vs. Olney

IWW (Wobblies)

"Big Bill" Haywood
most radical of American labor unions
membership open to all

Women and the labor movement

Opposition by men
Women form own unions (ILGWU--International Ladies Garment Workers Union)

Immigrants, blacks, and the labor movement

Excluded by most labor groups
Accepted by IWW and K of L

Problems of coping outside of labor unions