3.2 Industrialization

The Railroads

• After the Civil War, railroad construction expanded.
• Pacific Railway Act: the construction of a transcontinental railroad by the Union Pacific and Central Pacific railroad companies; completed on May 10, 1869.
• Railroads encouraged the growth of industry. They linked the nation and increased the size of markets.
• The railroad industry stimulated the economy by spending large amounts of money on steel, coal, and timber.
• In the early 1800s, most railways served only local needs, resulting in many unconnected rail lines. Eastern capitalists wanted to create a single rail transit system from the many smaller railroads.
• Eventually seven systems controlled most of the railroad traffic.
• 1883: rail service became safer and more reliable when the American Railway Association divided the country into four time zones, or regions.
• Why did the railroads need to standardize time across the country?
• Big connected railroad systems increased efficiency, decreased time spent in travel, and united Americans from different regions.
• The gov’t gave land grants to railroad companies to encourage railroad construction.
• Railroad companies like the Union Pacific and Central Pacific were able to cover all their building costs by selling the land to settlers, real estate agencies, and other businesses.

Railroads and Business

• The wealth of railroad entrepreneurs led to accusations that they had got their wealth illegally. Bribery was common.
• Not all railroad entrepreneurs were corrupt.
• James J. Hill: built the Great Northern Railroad without any federal help. It became the most successful transcontinental railroad and the only one not to go bankrupt.

The Rise of Big Business

• By 1900 big business dominated the economy of the United States.
• Corporation: an organization owned by many people but treated by law as a single person.
• Stockholders, the people who own the corporation, own shares of ownership called stock. Issuing stock allows a corporation to raise large sums of money and spreads out the financial risk.
• corporations invest the stock money in new technologies to increase their efficiency.
• Big corporations had an advantage over small manufacturing companies.
• Big corporations could produce cheaply and continue to operate, even in poor economic times, by cutting prices to increase sales.
• Many small businesses with high operating costs were forced out of business.
• Andrew Carnegie began vertical integration of the steel industry.
• A vertically integrated company owns all the different businesses it depends on for its operation.
• saves money but also makes the big company bigger.
• Business leaders also pushed for horizontal integration - combining many firms doing the same type of business into one large corporation.

Monopolies and Trusts

• Monopoly: when one company gains control of an entire market.
• In the late 1800s, Americans became suspicious of large corporations and feared monopolies.
• Many states made it illegal for a company to own stock in another company without permission from the state legislature.
• 1882: Standard Oil formed the first trust, which merged businesses without violating laws against owning other companies.
• A trust allows a person to manage another person’s property.
• holding company: doesn’t produce anything itself. It owned the stock of companies that did produce goods.
• The holding company controlled all the companies it owned, merging them all into one large enterprise.

The Workers

• Workers in industrial America faced monotonous work, dangerous working conditions, and an uneven division of income between the wealthy and the working class.
• Many thought that the only way to fix it was to form unions

Marxism

• The ideas of Karl Marx
• popular in Europe.
• The struggle between the workers and the owners shaped society.
• He believed the workers would revolt and gain control.
• a socialist society would be created in which the wealth was evenly divided, and classes would no longer exist.
• Tens of thousands of immigrants arrived in the United States. People began to associate Marxism with immigrants.
• They became suspicious of unions as well.

Unions

• Employers opposed industrial unions, which united all craft workers and common laborers in a particular industry.
• To prevent unions from forming, companies would have workers take oaths or sign contracts promising not to join a union. They would also hire detectives to identify union organizers.
• Workers attempted to create large unions, but rarely succeeded.
• confrontations between owners and government ended in violence.
• If a union was formed, companies used a lockout to break it.
• Workers went without pay and were locked out of the property.
• If the union did strike, employers would hire replacement workers called strikebreakers.
• Workers who organized a union or strike were fired and put on a blacklist—a list of troublemakers.
• Once blacklisted, a worker could get a job only by changing trade, residence, or his or her name.
• 1886: delegates from over 20 trade unions organized the American Federation of Labor (AFL).
• The AFL’s first leader was Samuel Gompers. Gompers wanted to keep unions out of politics and to fight for small gains such as higher wages and better working conditions.
• The AFL had three goals:

1. to get companies to recognize unions and agree to collective bargaining;
2. to push for closed shops, where companies could only hire union members;
3. to promote an eight-hour workday

Women in the Workplace

• By 1900: more than 18% of the labor force.
• Women worked as domestic servants, teachers, nurses, sales clerks, and secretaries.
• Women were paid less than men. It was felt that men needed a higher wage because they needed to support a family.
• Most unions excluded women.