Chapter 24: Industry Comes of Age (1865–1900) PDF

Chapter 24 Industry Comes of Age r 1865–1900 The wealthy class is becoming more wealthy; but the poorer class is becoming...

Chapter 24 Industry Comes of Age r 1865–1900 The wealthy class is becoming more wealthy; but the poorer class is becoming more dependent. The gulf between the employed and the employer is growing wider; social contrasts are becoming sharper; as liveried carriages appear; so do barefooted children. Henry George, 1879 A s the nineteenth century drew to a close, observers were asking, “Why are the best men not in politics?” One answer was that they were being lured away from public life by the lusty attractions of a crucial case. When Lincoln was shot in 1865, there were only 35,000 miles of steam railways in the United States, mostly east of the Mississippi. By 1900 the figure had spurted up to 192,556 miles, or more than that for the booming private economy. As America’s Indus- all of Europe combined, and much of the new trackage trial Revolution slipped into high gear, talented men ran west of the Mississippi (see Figure 24.1). ached for profits, not the presidency. They dreamed of Transcontinental railroad building was so costly controlling corporations, not the Congress. What the and risky as to require government subsidies, as it had nation lost in civic leadership, it gained in an astound- in many other industrializing nations. Everywhere, ing surge of economic growth. As late as 1870, agricul- the construction of railway systems promised greater ture remained the nation’s biggest business. By 1900 national unity and economic growth. The extension it accounted for less than half of the national econ- of rails into thinly populated regions was unprofitable omy. Until the end of the Civil War, the United States until the areas could be built up, and private promot- imported more merchandise than it exported. By 1900 ers were unwilling to suffer heavy initial losses. Con- it annually delivered more than $600 million worth of gress, impressed by arguments pleading military and manufactured goods to the world’s marketplace. Ameri- postal needs, began to advance liberal loans to two cans did not achieve this economic transformation all favored cross-continent companies in 1862 and added by themselves. Foreign investment, labor, trade, and enormous donations of acreage paralleling the tracks. technology made it possible. Although in many ways All told, Washington rewarded the railroads with still a political dwarf, the United States was about to 155,504,994 acres, and the western states contributed stand up before the world as an industrial colossus— 49 million more—a total area larger than Texas (see and the lives of millions of working Americans would Map 24.1). be transformed in the process. Grasping railroads tied up even more land than this for a number of years. Land grants to railroads were made in broad belts along the proposed route. an The Iron Colt Becomes  Iron Horse Within these belts the railroads were allowed to choose alternate mile-square sections in checkerboard fash- ion. But until they determined the precise location of The government-business entanglements that increas- their tracks and decided which sections were the choic- ingly shaped politics after the Civil War also under- est selections, the railroads withheld all the land from girded the industrial development of the nation. The other users. President Grover Cleveland put an end to unparalleled outburst of railroad construction was this foot-dragging practice in 1887 and threw open to 512 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.  The Railroad Age 513 CONTINENT AND COUNTRY TOTAL WORLD 595,767 Total North and 317,925 South America United States 259,687 Canada 21,624 Brazil 9,300 Mexico 8,600 Argentina 8,255 Other Americas 10,459 Total Europe 220,261 Germany 41,793 France 36,348 Great Britain 32,088 Russia 30,140 Austria-Hungary 26,501 Italy 13,063 Spain 9,860 Sweden 7,910 Other Europe 22,558 Total Asia 31,024 British Empire 25,488 Japan 1,460 China 200 Other Asia 3,876 Total Australia 17,922 Total Africa 8,635 Algeria and Tunis 3,094 Cape Colony 2,873 Egypt 1,541 Other Africa 1,127 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 600,000 Railroad track built in kilometers, 1889 Figure 24.1 Railroads Worldwide, 1889* *Another calculation of railway track per 10,000 inhabitants in 1904 revealed that the United States was still far out in front, with 26.4 miles of track compared to 15.2 miles for the second-place country, Sweden. Much farther behind were the major western European nations of France (7.3), Germany (6.1), and Great Britain and Ireland (5.4). (Sources: Kennedy: Henry Poor, Poor’s Pageant, American the Railroads of the United States for 1891 (1891); Slason Thomp- Manual of14/e son, Railway Statistics of the United States of America for the Year Ending June 30, 1906, Compared with the 1053641_la_24_01 Official Reports 7/10 and Recent Statistics of Foreign Railways (1907).) of 1905 6/17/08, settlement the still-unclaimed public portions of the also a “cheap” way to subsidize a much-desired trans- land-grant areas. portation system, because it avoided new taxes for Noisy criticism, especially in later years, was leveled direct cash grants. The railroads could turn the land at the “giveaway” of so valuable a birthright to greedy into gold by using it as collateral for loans from private NuGraphic Design, Inc.But corporations. 7 Laurelwood Drive, New Fairfield, the government did CTreceive 06812 (203) 746-4181 bankers benefi- (203) 746-4182 or, fax [email protected] later, by selling it. This they often did, at cial returns, including long-term preferential rates for an average price of $3 an acre. Critics were also prone postal service and military traffic. Granting land was to overlook the fact that the land did not have even Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 514 Chapter 24 Industry Comes of Age, 1865–1900 that relatively modest value until the railroads had rib- Coast—especially gold-rich California—more securely boned it with steel. to the rest of the Republic. Frontier villages touched by the magic wand of The Union Pacific Railroad—note the word Union— the iron rail became flourishing cities; those that were was thus commissioned by Congress to thrust westward bypassed often withered away and became “ghost from Omaha, Nebraska. For each mile of track con- towns.” Little wonder that communities fought one structed, the company was granted 20 square miles of another for the privilege of playing host to the rail- land, alternating in 640-acre sections on either side of roads. Ambitious towns customarily held out monetary the track. For each mile the builders were also to receive and other attractions to the builders, who sometimes a generous federal loan, ranging from $16,000 on the blackmailed them into contributing more generously. flat prairie land to $48,000 for mountainous country. The laying of rails began in earnest after the Civil War ended in 1865, and with juicy loans and land grants Spanning the Continent with Rails available, the “groundhog” promoters made all possible haste. Insiders of the Crédit Mobilier construction com- Deadlock in the 1850s over the proposed transconti- pany reaped fabulous profits. They slyly pocketed $73 nental railroad was broken when the South seceded, million for some $50 million worth of breakneck con- leaving the field to the North. In 1862, the year after struction, spending small change to bribe congressmen the guns first spoke at Fort Sumter, Congress made pro- to look the other way. vision for starting the long-awaited line. One weighty Sweaty construction gangs, containing many Irish argument for action was the urgency of bolstering “Paddies” (Patricks) who had fought in the Union the Union, already disrupted, by binding the Pacific armies, worked at a frantic pace. On one record-breaking Map 24.1 Federal Land Grants to Railroads The heavy red lines indicate areas within which the railroads might be given specific parcels of land. As shown in the inset, land was reserved in belts of various widths on either side of a railroad’s right of way. Until the railroad selected the individual mile-square sections it chose to possess, all such sections within the belt were withdrawn from eligibility for settlement. The “time zones” were intro- duced in 1883 (see p. 518), and their boundaries have since been adjusted. © Cengage Learning Mountain Central Eastern 50°N 60°W Vancouver Pacific Time Time Time Time C a n a d i a n Pa c i f i c R Seattle R Tacoma WASH. CANADA Gre Québec ( b u i l t wi t h o a t N o r t h e r n u t f e d e r a l l a n d g r an t s) pe MONT. MINN. L. Su rior Ottawa Montréal ME. N o r t h e r n Pa c i f i c R R N. DAK. Duluth M VT. OREGON I CH Hu L. on WIS. Toronto L. N.Y. N.H. IDAHO L. Michigan r ario. Boston S. DAK. Hamilton Ont l RR MASS. WYOMING ntra k Ce R.I. cif ic R R rie Yo r CONN. 40°N Pa U n i o n Pa c i f i Chicago L. E w New York ntra l c RR Ne Ce NEB. PA. N.J. Salt Lake IOWA OHIO NEVADA City Pittsburgh Philadelphia San IND. DEL. 70°W Francisco UTAH Denver ILL. nia R R CALIF. y lva MD. TERR. COLO. Kansas City nn s W.VA. St. Louis Pe Washington, D.C. Fe R R ay VA. N ta MO. KY. ilw n KANS. Ra Sa r n Atlant ic & he N.C. & Pa c i f i c R R ka INDIAN pe ut Los Angeles TERR. TENN. So So ARK. o ARIZ. TERR. S.C. n T uth PAC I F IC e r n Pa c i fic R AT L A N T I C Atchiso R OCEAN N. MEX. TERR. MISS. GA. OCEAN 120°W El Paso ALA. Savannah TEXAS 30°N LA. PATTERN OF LAND GRANTS New Orleans FLA. One square mile held by government or sold M EXI CO Gulf of Mexico Right of way: 100 yards wide 100°W 0 200 400 Km. One square mile granted Primary federal land 90°W 80°W to railroad grants to railroads 0 200 400 Mi. Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.  Railroads Span the Nation 515 day, a sledge-and-shovel army of some five thousand they walked away with tens of millions in profits, they men laid ten miles of track. A favorite song went like kept their hands relatively clean by not becoming this: involved in the bribing of congressmen. The Central Pacific, which was granted the same Then drill, my Paddies, drill; princely subsidies as the Union Pacific, had the same Drill, my heroes, drill; incentive to haste. Some ten thousand Chinese labor- Drill all day, ers, sweating from dawn to dusk under their basket No sugar in your tay [tea] hats, proved to be cheap, efficient, and expendable Workin’ on the U.P. Railway. (hundreds lost their lives in premature explosions and When hostile Indians attacked in futile efforts to other mishaps). The towering Sierra Nevada presented protect what once rightfully had been their land, the a formidable barrier, and the nerves of the Big Four laborers would drop their picks and seize their rifles. were strained when their workers could chip only a few Scores of people—railroad workers and Indians—lost inches a day tunneling through solid rock, while the their lives as the rails stretched ever westward. At rail’s Union Pacific was sledgehammering westward across end, workers tried their best to find relaxation and the open plains. conviviality in their tented towns, known as “hells A “wedding of the rails” was finally consummated on wheels,” often teeming with as many as ten thou- near Ogden, Utah, in 1869, as two locomotives—“facing sand men and a sprinkling of painted prostitutes and on a single track, half a world behind each back”—gen- performers. tly kissed cowcatchers. The colorful ceremony included Rail laying at the California end was undertaken the breaking of champagne bottles and the driving of by the Central Pacific Railroad. This line pushed a last ceremonial (golden) spike, with ex-governor Stan- boldly eastward from boomtown Sacramento, over and ford clumsily wielding a silver maul. In all, the Union through the towering, snow-clogged Sierra Nevada. Pacific built 1,086 miles, the Central Pacific 689 miles. Four far-seeing men—the so-called Big Four—were the Completion of the transcontinental line—a mag- chief financial backers of the enterprise. The quartet nificent engineering feat for that day—was one of included the heavyset, enterprising ex-governor Leland America’s most impressive peacetime undertakings. It Stanford of California, who had useful political con- welded the West Coast more firmly to the Union and nections, and the burly, energetic Collis P. Hunting- facilitated a flourishing trade with Asia. It penetrated ton, an adept lobbyist. The Big Four cleverly operated the arid barrier of the deserts, paving the way for the through two construction companies, and although phenomenal growth of the Great West. Americans Snow Sheds on the Central Pacific Railroad in the Sierra Nevada Mountains, by Joseph H. Becker, ca. 1869 Formi- dable obstacles of climate and terrain confronted the builders of the Central Pacific Railroad in Granger Collection the mountainous heights of California. Note the Chinese laborers in the foreground. Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 516 Chapter 24 Industry Comes of Age, 1865–1900 In 1892 James Baird Weaver (1833–1912), nominee of the Populists, wrote regarding the railroad magnates, “ In their delirium of greed the managers of our transportation systems disregard both private right and the public welfare. Today they will combine and bankrupt their weak rivals, and by the expenditure of a trifling sum possess themselves of properties which cost the outlay of millions. Tomorrow they will capi- talize their booty for five times the cost, issue their bonds, and proceed to levy tariffs upon the people to pay dividends upon the fraud. ” New Orleans to San Francisco and was consolidated in the same year. The last spike of the last of the five transcontinen- tal railroads of the nineteenth century was hammered home in 1893. The Great Northern, which ran from Duluth to Seattle north of the Northern Pacific, was the Union Pacific Museum Collection creation of a far-visioned Canadian American, James J. Hill, a bearlike man who was probably the greatest rail- road builder of all. His enterprise was so soundly orga- nized that it rode through later financial storms with flying colors. Yet the romance of the rails was not without its sordid side. Pioneer builders were often guilty of gross Promoting the Union Pacific overoptimism. Avidly seeking land bounties and push- Railroad, 1869 ing into areas that lacked enough potential population to support a railroad, they sometimes laid down rails that led “from nowhere to nothing.” When prosper- ity failed to smile upon their coming, they went into compared this electrifying achievement with the Dec- bankruptcy, carrying down with them the savings of laration of Independence and the emancipation of the trusting investors. Many of the large railroads in the slaves; jubilant Philadelphians again rang the cracked post–Civil War decades passed through seemingly end- bell of Independence Hall. less bankruptcies, mergers, or reorganizations. Bwith inding the Country  Railroad Ties and Railroad Consolidation  Mechanization With the westward trail now blazed, four other trans- continental lines were completed before the century’s The success of the western lines was facilitated by weld- end. None of them secured monetary loans from the ing together and expanding the older eastern networks, federal government, as did the Union Pacific and the notably the New York Central. The genius in this enter- Central Pacific. But all of them except the Great North- prise was “Commodore” Cornelius Vanderbilt—burly, ern received generous grants of land. boisterous, white-whiskered. Having made his millions The Northern Pacific Railroad, stretching from in steamboating, he daringly turned, in his late sixties, Lake Superior to Puget Sound, reached its terminus in to a new career in railroading. Though ill-educated, 1883. The Atchison, Topeka and Santa Fe, stretching ungrammatical, coarse, and ruthless, he was clear- through the southwestern deserts to California, was visioned. Offering superior railway service at lower completed in 1884. The Southern Pacific ribboned from rates, he amassed a fortune of $100 million. His name Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Union Pacific Museum Collection The Union Pacific and the Central Pacific Link at Promontory Point, Utah, May 10, 1869 Railroad financiers, dignitaries, spectators, and Chinese (Central Pacific) and Irish (Union Pacific) work gangs witnessed the historic joining that created the nation’s first transcontinental railroad. After the two locomotives chugged within a few feet of each other, Central Pacific chief and former California governor Leland Stanford tapped a golden spike into a prepared hole on the last tie with a silver-plated maul. The golden spike was whisked away to be preserved for posterity at the Stanford University Museum, but the iron one that replaced it was hardly ordinary. It was wired to a Union Pacific telegraph line, while a copper plate on the maul was connected to a Central Pacific wire. When they touched, they closed a telegraphic circuit that sent the news to cities all over the country. is perhaps best remembered through his contribution pyres, for the wooden cars were equipped with sway- of $1 million to the founding of Vanderbilt University ing kerosene lamps. Appalling accidents continued to in Tennessee. be almost daily tragedies, despite safety devices like the Two significant new improvements proved a boon telegraph (“talking wires”), double-tracking, and (later) to the railroads. One was the steel rail, which Vander- the block signal. bilt helped popularize when he replaced the old iron tracks of the New York Central with the tougher metal. Steel was safer and more economical because it could bear a heavier load. A standard gauge of track width Revolution by Railways likewise came into wide use during the postwar years, The metallic fingers of the railroads intimately touched thus eliminating the expense and inconvenience of countless phases of American life. For the first time, a numerous changes from one line to another. sprawling nation became united in a physical sense, Other refinements played a vital role in railroad- bound with ribs of iron and steel. The railroads ing. The Westinghouse air brake, generally adopted in emerged as the nation’s biggest business, employing the 1870s, was a marvelous contribution to efficiency more people than any other industry and gobbling up and safety. The Pullman Palace Cars, advertised as “gor- nearly 20 percent of investment dollars from foreign geous traveling hotels,” were introduced on a consid- and domestic investors alike. erable scale in the 1860s. Alarmists condemned them More than any other single factor, the railroad as “wheeled torture chambers” and potential funeral network spurred the amazing economic growth of 517 Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 518 Chapter 24 Industry Comes of Age, 1865–1900 the post–Civil War years. By stitching North America wealth was amassed by stock speculators and railroad together from ocean to ocean, the puffing locomotives wreckers. opened up the West with its wealth of resources. Trains hauled raw materials to factories and sped them back as finished goods for sale across the continent, making the United States the largest integrated national market Wrongdoing in Railroading in the world. The forging of the rails themselves gener- Corruption lurks nearby when fabulous fortunes can ated the largest single source of orders for the adoles- materialize overnight. The fleecings administered cent steel industry. by the railroad construction companies, such as the The screeching iron horse especially stimulated Crédit Mobilier, were but the first of the bunco games mining and agriculture in the West. It took farmers that the railroad promoters learned to play. Methods out to their land, carried the fruits of their toil to mar- soon became more refined, as fast-fingered financiers ket, and brought them their manufactured necessities. executed multimillion-dollar maneuvers beneath the Clusters of farm settlements paralleled the railroads, noses of a bedazzled public. Jay Gould was the most just as earlier they had followed the rivers. adept of these ringmasters of rapacity. For nearly Railways were a boon for cities and played a lead- thirty years, he boomed and busted the stocks of the ing role in the great cityward movement of the last Erie, the Kansas Pacific, the Union Pacific, and the decades of the century. The iron monsters could carry Texas and Pacific in an incredible circus of speculative food to enormous concentrations of people and at the skullduggery. same time ensure them a livelihood by providing both One of the favorite devices of the moguls of manip- raw materials and markets. ulation was “stock watering.” The term originally Railroad companies also stimulated the mighty referred to the practice of making cattle thirsty by feed- stream of immigration. Seeking settlers to whom their ing them salt and then having them bloat themselves land grants might be sold at a profit, they advertised with water before they were weighed in for sale. Using seductively in Europe and sometimes offered to trans- a variation of this technique, railroad stock promoters port the newcomers free to their farms. grossly inflated their claims about a given line’s assets The land also felt the impact of the railroad— and profitability and sold stocks and bonds far in excess especially the broad, ecologically fragile midsection of the railroad’s actual value. “Promoters’ profits” were of the continent that Thomas Jefferson had purchased often the tail that wagged the iron horse itself. Railroad from France in 1803. Settlers following the railroads managers were forced to charge extortionate rates and plowed up the tallgrass prairies of Iowa, Illinois, Kan- wage ruthless competitive battles in order to pay off the sas, and Nebraska and planted well-drained, rectangu- lar cornfields. On the shortgrass prairies of the high plains in the Dakotas and Montana, range-fed cattle rapidly displaced the buffalo, which were hunted to near-extinction. The white pine forests of Michigan, Wisconsin, and Minnesota disappeared into lumber that was rushed by rail to prairie farmers, who used it to build houses and fences. Time itself was bent to the railroads’ needs. Until the 1880s every town in the United States had its own “local” time, dictated by the sun’s position. When it was noon in Chicago, it was 11:50 a.m. in St. Louis and 12:18 p.m. in Detroit. For railroad operators wor- ried about keeping schedules and avoiding wrecks, this patchwork of local times was a nightmare. Thus on November 18, 1883, the major rail lines decreed that Lilbrary of Congress the continent would henceforth be divided into four “time zones.” Most communities quickly adopted rail- road “standard” time. Finally, the railroad, more than any other single factor, was the maker of millionaires. A raw new aris- William H. Vanderbilt, Robber Baron This 1885 cartoon tocracy, consisting of “lords of the rail,” replaced the takes aim at Vanderbilt’s notorious comment, “The public old southern “lords of the lash.” The multiwebbed lines be damned!” became the playthings of Wall Street, and colossal Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.  Reforms in Railroading 519 exaggerated financial obligations with which they were principle that competition is the soul of trade, they saddled. cherished a traditionally keen pride in progress. They The public interest was frequently trampled under- remembered that Jefferson’s ideals were hostile to gov- foot as the railroad titans waged their brutal wars. ernment interference with business. Above all, there Crusty old Cornelius Vanderbilt, when told that the shimmered the “American dream”: the hope that in a law stood in his way, reportedly exclaimed, “Law! What catch-as-catch-can economic system, anyone might do I care about the law? Hain’t I got the power?” On become a millionaire. another occasion he supposedly threatened some asso- The depression of the 1870s goaded the farmers ciates: “I won’t sue you, for the law is too slow. I’ll ruin into protesting against being “railroaded” into bank- you.” His son, William H. Vanderbilt, when asked in ruptcy. Under pressure from organized agrarian groups 1883 about the discontinuance of a fast mail train, like the Grange (Patrons of Husbandry), many midwest- reportedly snorted, “The public be damned!” ern legislatures tried to regulate the railroad monopoly. While abusing the public, the railroaders blandly The scattered state efforts screeched to a halt in bought and sold people in public life. They bribed 1886. The Supreme Court, in the famed Wabash, St. judges and legislatures, employed arm-twisting lobby- Louis & Pacific Railroad Company v. Illinois ists, and elected their own “creatures” to high office. case, decreed that individual states had no power to They showered free passes on journalists and politi- regulate interstate commerce. If the mechanical mon- cians in profusion. One railroad man noted in 1885 ster were to be corralled, the federal government would that in the West “no man who has money, or official have to do the job. position, or influence thinks he ought to pay anything Stiff-necked President Cleveland did not look kindly for riding on a railroad.” on effective regulation. But Congress ignored his grum- Railroad kings were, for a time, virtual industrial bling indifference and passed the epochal Interstate monarchs. As manipulators of a huge natural monop- Commerce Act in 1887. It prohibited rebates and oly, they exercised more direct control over the lives pools and required the railroads to publish their rates of more people than did the president of the United openly. It also forbade unfair discrimination against States—and their terms were not limited to four years. shippers and outlawed charging more for a short haul They increasingly shunned the crude bloodletting of than for a long one over the same line. Most important, cutthroat competition and began to cooperate with one it set up the Interstate Commerce Commission (ICC) to another to rule the railroad dominion. Sorely pressed administer and enforce the new legislation. to show at least some returns on their bloated invest- Despite acclaim, the Interstate Commerce Act ments, they entered into defensive alliances to protect emphatically did not represent a popular victory over precious profits. corporate wealth. One of the leading corporation law- The earliest form of combination was the “pool”— yers of the day, Richard Olney, shrewdly noted that the an agreement to divide the business in a given area new commission “can be made of great use to the rail- and share the profits. Other rail barons granted secret roads. It satisfies the popular clamor for a government rebates or kickbacks to powerful shippers in return for supervision of railroads, at the same time that such steady and assured traffic. Often they slashed their supervision is almost entirely nominal.... The part of rates on competing lines, but they more than made wisdom is not to destroy the Commission, but to uti- up the difference on noncompeting ones, where they lize it.” might actually charge more for a short haul than for What the new legislation did do was to provide an a long one. As a result, small farmers usually paid the orderly forum where competing business interests could highest rates, while large customers got the best deals. resolve their conflicts in peaceable ways. The country could now avoid ruinous rate wars among the railroads and outraged, “confiscatory” attacks on the lines by Government Bridles the Iron Horse pitchfork-prodded state legislatures. This was a modest accomplishment but by no means an unimportant one. It was neither healthy nor politically acceptable that so The Interstate Commerce Act tended to stabilize, not many people should be at the mercy of so few. Impov- revolutionize, the existing business system. erished farmers, especially in the Midwest, began to Yet the act still ranks as a red-letter law. It was wonder if the nation had not escaped from the slavery the first large-scale attempt by Washington to regu- power only to fall into the hands of the money power, late business in the interest of society at large. It her- as represented by the railroad plutocracy. alded the arrival of a series of independent regulatory But the American people, usually quick to respond commissions in the next century, which would irre- to political injustice, were slow to combat economic vocably commit the government to the daunting task injustice. Dedicated to free enterprise and to the of monitoring and guiding the private economy. It Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 520 Chapter 24 Industry Comes of Age, 1865–1900 foreshadowed the doom of freewheeling, buccaneering business practices and served full notice that there was a public interest in private enterprise that the govern- ment was bound to protect. Miracles of Mechanization Postwar industrial expansion, partly a result of the railroad network, rapidly began to assume mammoth proportions. When Lincoln was elected in 1860, the Republic ranked only fourth among the manufacturing nations of the world. By 1894 it had bounded into first place. Why the sudden upsurge? Liquid capital, previously scarce, was now becom- ing abundant. The word millionaire had not been coined until the 1840s, and in 1861 only a handful of individ- uals were eligible for this class. But the Civil War, partly through profiteering, created immense fortunes, and Library of Congress these accumulations could now be combined with bor- rowings from foreign capitalists. Investors from abroad loaned more money to the United States in the post- war period than any country had previously received. Unlike in other countries, in America they mostly put Thomas Alva Edison in His Lab, 1888 Edison was the money into private hands, not public coffers. Inves- dubbed the “Wizard of Menlo Park,” New Jersey, where he tors primarily from Britain, but also from France, Ger- lived and established the first major industrial research many, the Netherlands, and Switzerland, sometimes laboratory. Edison was not only an ingenious inventor; he owned all or part of an American business. Other times also figured out how to apply the principles of mass they simply lent their money to the thousands of Euro- production to his inventions. Phonographs, telephones, pean companies set up to manage investment in U.S. telegraphs, incandescent electric lighting, fluoroscopes, kinetoscopes, and many more technological wonders industry. Either way, Europeans were usually content to spread throughout the world following their development let Americans run the business—until hard times hit in Edison’s lab. and they demanded more say over company operations or government economic policies. Innovations in transportation fueled growth, too, by bringing the nation’s amazingly abundant natural became a cornerstone of a vast steel empire. Copper, resources—particularly coal, oil, and iron—to the fac- bauxite, and zinc made similar journeys from mine to tory door. A shipping system through the Great Lakes manufacture. carried the rich iron deposits in the Mesabi Range of The sheer size of the American market encouraged Minnesota to Chicago and Cleveland for refining. innovators to invent mass-production methods. With This priceless bonanza, where mountains of red-rusted cheap transportation crisscrossing the nation and an ore could be scooped up by steam shovels, ultimately ever-larger population able and eager to consume, any- one who could make an appealing new product avail- able for a good price in large quantities—and figure out Regarding the exploitation of immigrant labor, Ralph how to market it—thrived. Industrialists continued to Waldo Emerson (1803–1882) wrote in 1860, refine the pre–Civil War “American System” of using specialized machinery to make interchangeable parts, “ The German and Irish millions, like the Negro, have a great deal of guano in their des- culminating in 1913 with Henry Ford’s fully developed moving assembly line for his Model T (see pp. 231–232 tiny. They are ferried over the Atlantic, and and 711–712). carted over America, to ditch and to drudge, to The captains of industry had a major incentive make corn cheap, and then to lie down prema- to invent machines: they made it possible to replace turely to make a spot of green grass on the expensive skilled labor with unskilled workers, now prairie. ” cheap and plentiful as a result of massive immigration. Steel, the keystone industry, was built largely on the Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.  The Rise of the Trusts 521 sweat of low-priced immigrant labor from eastern and southern Europe, working in two 12-hour shifts, seven The Trust Titan Emerges days a week. Despite pious protests to the contrary, competition Just as industry served as a hothouse of inven- was the bugbear of most business leaders of the day. tion, brilliant ideas gave rise to whole new lines of Tycoons like Andrew Carnegie, the steel king; John business. Between 1860 and 1890, some 440,000 pat- D. Rockefeller, the oil baron; and J. Pierpont Morgan, ents were issued. Business operations were facilitated the bankers’ banker, exercised their genius in devising by machines such as the cash register, the stock ticker, ways to circumvent competition. Carnegie integrated and the typewriter (“literary piano”), while the refrig- every phase of his steel-making operation. His miners erator car, the electric dynamo, and the electric rail- scratched the ore from the earth in the Mesabi Range; way speeded urbanization. One of the most ingenious Carnegie ships floated it across the Great Lakes; Carn- inventions was the telephone, introduced by Alexander egie railroads delivered it to the blast furnaces at Pitts- Graham Bell in 1876. America was suddenly turned burgh. When the molten metal finally poured from into a nation of “telephoniacs,” as a gigantic com- the glowing crucibles into the waiting ingot molds, munications network was built on his invention. The no other hands but those in Carnegie’s employ had social impact of the telephone further expanded when touched the product. Carnegie thus pioneered the cre- it lured “number please” women away from the stove to ative entrepreneurial tactic of vertical integration, the switchboard. Telephone boys were at first employed combining into one organization all phases of manu- as operators, but their profanity shocked patrons. facturing from mining to marketing. His goal was to The most versatile inventor of all was Thomas improve efficiency by making supplies more reliable, Alva Edison (1847–1931), who as a boy had been con- controlling the quality of the product at all stages of sidered so dull-witted that he was taken out of school. production, and eliminating middlemen’s fees. His severe deafness enabled him to concentrate without Less justifiable on grounds of efficiency was the distraction. Edison was a gifted tinkerer and a tireless technique of horizontal integration, which simply worker, not a pure scientist. “Genius,” he said, “is one meant allying with competitors to monopolize a given percent inspiration and ninety-nine percent perspira- market. Rockefeller was a master of this stratagem. He tion.” Wondrous devices poured out of his “invention perfected a device for controlling bothersome rivals— factory” in New Jersey—the phonograph, the mimeo- the trust. Stockholders in various smaller oil compa- graph, the dictaphone, and the moving picture. He is nies assigned their stock to the board of directors of his probably best known for his perfection in 1879 of the Standard Oil Company, formed in 1870. It then consol- electric lightbulb, which turned night into day and idated and concerted the operations of the previously transformed ancient human habits as well. People had competing enterprises. “Let us prey” was said to be previously slept an average of nine hours a night; now Rockefeller’s unwritten motto. Ruthlessly wielding vast they slept just a bit more than seven. power, Standard Oil soon cornered virtually the entire The Octopus, 1904 This cartoon visually captures a feeling of widespread resentment against Standard Library of Congress Oil as a powerful, sprawling “octopus” whose tentacles controlled all branches of government. Copyright 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 522 Chapter 24 Industry Comes of Age, 1865–1900 world petroleum market. Weaker competitors, left out of the trust agreement, were forced to the wall. Rock- Carnegie and Other Sultans of Steel efeller’s stunning success inspired many imitators, and Kingpin among steelmasters was Andrew Carnegie, an the word trust came to be generally used to describe undersized, charming Scotsman. As a towheaded lad of any large-scale business combination. thirteen, he was brought to America by his impover- The imperial Morgan devised still other schemes ished parents in 1848 and got a job as a bobbin boy for eliminating “wasteful” competition. The depres- at $1.20 a week. Mounting the ladder of success so fast sion of the 1890s drove into his welcoming arms many that he was said to have scorched the rungs, he forged bleeding businesspeople, wounded by cutthroat com- ahead by working hard, doing the extra chore, cheer- petition. His prescribed remedy was to consolidate rival fully assuming responsibility, and smoothly cultivating enterprises and to ensure future harmony by placing influential people. officers of his own banking syndicate on their various After accumulating some capital, Carnegie entered boards of directors. These came to be known as inter- the steel business in the Pittsburgh area. A gifted orga- locking directorates. nizer and administrator, he succeeded by picking high- class associates and by eliminating many middlemen. Although inclined to be tough-fisted in business, he The Supremacy of Steel was not a monopolist and disliked monopolistic trusts. His remarkable organization was a partnership that “Steel is king!” might well have been the exultant war involved, at its maximum, about forty “Pittsburgh mil- cry of the new industrialized generation. The mighty lionaires.” By 1900 he was producing one-fourth of the metal ultimately held together the new steel civiliza- nation’s Bessemer steel, and the partners in these pre– tion, from skyscrapers to coal scuttles, while providing income tax days were dividing profits of $40 million a it with food, shelter, and transportation. Steel making, year as their take-home pay, with the “Napoleon of the notably rails for railroads, typified the dominance of Smokestacks” himself receiving a cool $25 million. “heavy industry,” which concentrated on making “cap- Into the picture now stepped the financial giant of ital goods,” as distinct from the production of “con- the age, J. Pierpont Morgan. “Jupiter” Morgan had made sumer goods” such as clothes and shoes. a legendary reputation for himself and his Wall Street Now taken for granted, steel was a scarce com- banking house by financing the reorganization of rail- modity in the wood-and-brick America of Abraham roads, insurance companies, and banks. An impressive Lincoln. Considerable iron went into railroad rails and bridges, but steel was expensive and was used largely for products like cutlery. The early iron horse snorted exclusively (and dangerously) over iron rails. When in the 1870s “Commodore” Vanderbilt of the New York Central began to use steel rails, he was forced to import them from Britain. Yet within an amazing twenty years, the United States had outdistanced all foreign competitors and was pouring out more than one-third of the world’s supply of steel. By 1900 America was producing as much as Britain and Germany combined. What wrought the transformation? Chiefly the invention in the 1850s of a method of making cheap steel—the Bessemer process. It was named after a derided British inventor, although an American had stumbled on it a few years earlier. William Kelly, a Ken- Library of Congress tucky manufacturer of iron kettles, discovered that cold air blown on red-hot iron caused the metal to become white-hot by igniting the carbon and thus eliminating impurities. He tried to apply the new “air boiling” tech- nique to his own product, but his customers decried J. P. Morgan (1837–1913) As the most influential banker “Kelly’s fool steel,” and his business declined. Gradu- of his day, Morgan symbolized to many people the power and arrogance of “finance capitalism.” The chronic skin ally the Bessemer-Kelly process won acceptance, and disorder on his nose inspired the taunt “Johnny Morgan’s these two “crazy men” ultimately made possible the