AP US History
January 16-20-2017 (short week)
MONDAY (No School)
TUESDAY (turn in the Western Project and DBQ)
- Examine the rise of modern day corporations by examining the development in the steel and oil industries during the Gilded Age Period (WXT-3) (WXT-7)
MaterialsStrategy/Format
pptLecture-discussion
Student skills
Chronological Reasoning (1,2,3)
Comparison/Context (4,5)
Crafting Arguments/Evidence (7)
Introduction
The late 19th century is one of the most rich periods in U.S. history and we will be examining it in great detail over the next couple of weeks. Between 1869 and 1910, the value of American manufacturing rose from $3 billion to $13 billion. The steel industry produced just 68,000 tons in 1870, but 4.2 million tons in 1890. The central vehicle of this surge in economic productivity was the modern corporation (digitalhistory.com). You got the section started last night by looking at some information about the all important railroad industry. The development of railroads was really the key to nearly every economic advancement (and a few crises) in this period. It spawned the stock market, foreign and state investments, and a wave of new technologies that fed into the railroad industry. The railroad business was unlike anything that the world had seen and there were vast fortunes won and lost in its development. The competition was cut-throat and eventually the normally laissez-faire ideas of the Republicans and most Democrats were forced to change and initiate a wave of corporate regulation in this period. The Sherman Anti-Trust Act was passed in 1890 to regulate trusts and monopolies. The Interstate Commerce Act 1887 was designed to regulate railroads in particular (which it still does today).
Today we are going to examine the growth of the corporation in what was sometimes called the "new economy" by using two of the most famous corporate giants of the period: Andrew Carnegie and John D. Rockefeller as our examples. Both men embody the period in multiple ways. John D. Rockefeller's Standard Oil Company was worth $600 million and when Carnegie sold his steel empire to J.P. Morgan and his investors the result, Unites States Steel, was the first $1 billion corporation. In both cases, the rail industry was a major buyer and a vital supplier. We will also look at how they built their empires using new innovations and practices that were sometimes questionable. Both are remembered today but for sometimes different reasons.
Andrew Carnegie and the Steel Industry
He was a compelling figure that embodied the "Horatio Alger" stories about people who rose from "rags to riches." Coming to America as an immigrant from Scotland where the family business ironically was destroyed by the new factory system, he enrolled in night classes and worked long arduous hours. he studied a new discipline, accounting and learned the techniques of "cost-benefit "analysis. Carnegie also served as a messenger boy met at the telegraph office was Thomas A. Scott, then superintendent at Pennsylvania Railroad. Scott was quite taken by the young worker hiring him as his private secretary and personal telegrapher at $35 a month. Carnegie worked his way up the ladder in Pennsylvania Railroad and succeeded Scott as superintendent of the Pittsburgh Division. At the outbreak of the Civil War, Scott was hired to supervise military transportation for the North and Carnegie worked as his right hand man. It was here that Carnegie first realized the connection between steel and the rail business.
One of the keys to Carnegie's success was his interest in innovation. He used this when he build his first steel mills. Carnegie would embrace a new steel refining process being used by Englishman Henry Bessemer to convert huge batches of iron into steel, which was much more flexible than brittle iron. Carnegie threw his own money into the process and even borrowed heavily to build a new steel plant near Pittsburgh. Carnegie was ruthless in keeping down costs and managed by the motto "watch costs and the profits take care of themselves."
Vertical integration and horizontal integration were two key business practices that would Carnegie's steel juggernaut was unstoppable, By 1900 Carnegie Steel produced more of the metal than all of Great Britain, then the second largest steel producer. Here's how these practices worked: Horizontal integration is the process of merging similar industries, industries that produce similar products. Horizontal integration would include tactics like buying competing companies that produce the same goods as you do. Vertical integration is the process of buying out suppliers of that particular industry. For example, a steel company would have an advantage over competitors by vertical integration if that company bought out places like coal fields or iron mines, places that competing steel companies rely on to make their steel. This would let you control the raw materials and transportation systems. The principle difference is that horizontal integration buys the competing companies while vertical integration aims at the raw material sources necessary to produce that product.
Carnegie and Labor
There was no doubt that on some level Carnegie appreciated the plight of the working class. Carnegie was unusual among the industrial captains of his day because he preached for the rights of laborers to unionize and to protect their jobs. He even pioneered the concept of profit sharing with his workers. However, Carnegie's actions did not always match his rhetoric. Carnegie's steel workers were often pushed to long hours and low wages. In the Homestead Strike of 1892, Carnegie threw his support behind plant manager Henry Frick, who locked out workers and hired Pinkerton strike breakers to intimidate strikers. Many were killed in the conflict, and it was an episode that would forever hurt Carnegie's reputation and haunt the man.
"The Gospels of Wealth"
Carnegie once said, "The man who dies thus rich dies disgraced." Carnegie believed that the wealthy should repay their debt to society. True to his beliefs, by his death in 1919 he had divested himself of more than 95 percent of his fortune. He built a library building for any town that would provide a site, stock the building with books, and guarantee maintenance expenses. He provided pensions for professors at universities that agreed to meet strict academic standards. In addition to funding music halls, outdoor swimming pools, and church organs, he also set up endowments to promote teaching and world peace. Of course the Carnegie Endowment exists to this very day. Because of these ideas men like Carnegie were sometimes referred to as being "captains of industry"
John D. Rockefeller and the Oil Business
The modern impression of Rockefeller is somewhat different. Many have called his a "robber baron" implying that he somehow used illegal means to build the oil business. Of course, that was true to some degree as it was even for Carnegie. Here's one of my favorite stories about him. At the urging of his mother, he loaned a local farmer $50 at 7% interest payable in one year. When the farmer paid him back with interest the next year Rockefeller was impressed and said of it in 1904: "The impression was gaining ground with me that it was a good thing to let the money be my servant and not make myself a slave to the money."
Unlike Carnegie who did odd jobs until he finally was fortunate enough to meet Thomas Scott, Rockefeller was a lower middle class young man who was fortunate to attend a private academy in New York. Rockefeller excelled at mental arithmetic and was able to solve difficult arithmetic problems in his head -- a talent that would be very useful to him throughout his business career. In other subjects Rockefeller was an average student but the quality of the education was very high. Then he attended what we would now call a business school in Cleveland where the family had moved. His first official job like Carnegie was bookkeeping.
At around age 20 Rockefeller went into business for himself, forming a partnership with a neighbor Clark & Rockefeller -- commission merchants in grain, hay, meats, and miscellaneous goods. At the end of the first year of business, they had grossed $450,000, making a profit of $4,400 in 1860 and a profit of $17,000 in 1861. The commission merchant business was very competitive and Clark & Rockefeller's success was due in large part to Rockefeller's natural business abilities.
Like many northern businesses theirs expanded rapidly during the Civil War. Grain prices went up and so did their commissions. Most of their selling was done on commission, so Clark & Rockefeller took no risks from price fluctuations. Rockefeller's style was very precise and calculated. He was not a gambler but a planner. He avoided speculation and refused to make advances or loan. But despite the success he was not content and believed the future lay in development of raw materials and that's how he came to be in the oil game.
In 1859 the oil business had its first great innovation when Edwin Drake struck oil near Titusville, Pennsylvania, setting off a frenzied oil boom in what soon became known as the "oil regions" of northwestern Pennsylvania. A sample of the Pennsylvania oil was sent to a Yale University chemist analyze it. The chemist determined that the Pennsylvania oil was of very high quality and could be refined into a variety of useful products. The technology used by Drake was not new. What was new was the idea of drilling for oil -- the idea that you could pump oil out of the ground like you could pump water. The Pennsylvania oil was of high quality. One barrel yielded 60-65% illuminating oil, 10% gasoline, 5-10% naphtha (a volatile inflammable liquid used as a solvent in dry cleaning, varnish making, etc.), with the remainder tar and wastes. All of these were valuable but Rockefeller hated to waste anything and wanted to perfect a new process.
The next step in the process was vertical integration where bought his own pipe making and barrel making operation. He did not have to initially buy transportation because his product was valuable enough that dealt with railroads to get rebates on shipping. He was eventually served by two railroads and by 1869 was the largest refiner in the world. Imagine how wealthy he'd be if the gasoline engine had been yet perfected!
His technique was always the same. The merger would be effected by an increase in the capitalization of The Standard Oil. The rival refinery would be appraised and the owners would be given Standard Oil stock in proportion to the value of their property and good will and they would be made partners in Standard Oil. The more talented owners would also be brought into the Standard Oil management. If they insisted upon cash they received it.
Later some owners who had been bought out complained to the press that they had been treated unfairly. The evidence is overwhelming that the Standard’s rivals were paid fair -- even generous -- prices for their property, and if they had the wisdom to take Standard Oil stock, they ended up very rich indeed.
By 1872, Rockefeller had bought up and/or merged with almost all the refineries in Cleveland. The inefficient and poorly constructed refineries were dismantled. Eventually Rockefeller controlled 90% of the oil market.
The Standard Oil Trust: Rise and Fall
By 1890, The Standard had set up an elaborate nationwide distribution system that reached nearly every American town. By 1904, 80% of American towns were served by Standard Oil carts that delivered the various products directly to businesses and homes. Standard Oil’s campaign to dominate even the smallest of the retail markets is probably the single most important reason that company became so disliked by the American public. The Standard was aggressive in its marketing practices and tried to force all grocery and hardware stores that sold kerosene and lubricants to sell only Standard products. This policy -- though successful in the short run -- made the Standard widely unpopular and simply increased its vulnerability to political attack….. I call that the "Walmart Effect"
In 1892 the Trust was formally dissolved. The Attorney General of Ohio had brought suit against the Trust in 1890 and it lost in 1892. Each trust certificate was to be exchanged for the proportioned share of stock in the 20 component companies of the Standard. The irony is that this had no practical effect on the Combination. The same men were still in charge, only now they were simply the majority shareholders of all the component companies.
The irony is that because of his practice and the anti-trust case Rockefeller is somehow seen as a villain. From the mid-1890s until his death in 1937, Rockefeller’s activities were philanthropic. Rockefeller's fortune peaked in 1912 at almost $900,000,000, but by that time he had already given away hundreds of millions of dollars. The University of Chicago alone received $75 million by 1932! The list of recipients is really too long to recount but like Carnegie, his money is still around as part of the Rockefeller Foundation
Homework
Tomorrow in class we will complete the timed LEQ part of the test
Study for potential essays on the following topics. You will choose ONE of the prompts tomorrow in class from a List of FOUR potential topics
You will NOT be allowed to use notes
The Rise and Fall of Populism (be certain to know key beliefs)
The problems of organized labor in America (Be sure to know terms and a few example strikes)
The New Immigration(be sure to know groups and why they came, also comparisons with antebellum immigration)
The explosion of big business in America (be sure to know key business leaders and innovations, also factors why corporations developed)
WEDNESDAY
- Timed LEQ writing assignments based upon the Gilded Age
MaterialsStrategy/Format
Essay Prompts/RubricsGuided Writing W.CCR.4
Instructions
- As you know timed writing is critical for success on the AP exam. On that day you will have 2 essays, a DBQ and an LEQ 9There will be 2 and you will choose one). The DBQ =55 mins writing time and is 25% of the total test score. The LEQ = 35 and is 15% of the exam total
- You will write one of the presented essays and have the rubric to view as you write (but not on the AP exam). It will be due today.
Homework
Complete the take home version of the unit test (posted on the class website)
The take home test is due in class on Friday
FRIDAY (Begin New Unit and Chapter 18 in the text)
- Examine the growth of leisure time activities during the Gilded Age Period (CUL-7) (CUL-3,5)
- Discuss how these activities reflected social class distinctions (CUL-7)
MaterialsFormat
web notes and videoLecture-discussion
Student Skills
Chronological Reasoning (1,2)
Comp/Context (4,5)
Historical Interpretation (8)
Introduction
- This period of time in America (and England) is often called the Victorian Era. It has come to imply the new set of values and ideas that stemmed largely from the growth of the middle class. The Victorian ideals came to express a set of middle class values that were often very moralistic. In other words, these expressed the “proper way” of doing things. Of course who decided the “proper way?” Well not surprisingly they did.
Also equally unsurprising, there arose challenges to this value set. In many ways this is simply a continuation of what we have seen in the antebellum years when the Whig Party became focused on social issues. This idea spread when the Republican Party began to dominate the post-Civil War period. However, by the late 19th century the value set was more equated to economics and class and less to political party. One important component of this growth was the development of a more urban based America where the middle class dominated. Another impulse to push a set of values had to do with the “new immigration.”
- Last week we saw the explosive growth and development of urban areas. This was due to the New immigration” and also from a shift of population within the U.S. Cities grew in size owing in large part to the development of transportation within the cities. This helped to create the earliest concepts of suburbia. A key link in this development was a new awareness of class structure. We first discussed this in terms of architecture and living spaces. We also cited the growth of not only a new middle class culture but also of a growing awareness of the economic importance of the so-called "Gibson Girl" (Of or relating to a clothing style marked by a high neck, puffed sleeves, and a tightly fitted waistline). More on this later.
- Another important change that was certainly becoming evident by the 1890s-1900 was the growth of leisure time activities. This was reflected in the new middle class culture but can also be seen in clothing styles and even music. Eventually a middle class mentality also grew and was even criticized by member of the middle class itself.
- Today and tomorrow we are going to look at some of these leisure time activities and the development of music and clothing styles. A key development in this will be the growth of spectator sports. We will also break this up by social identity
The Middle-Upper Classes