Notes CH 24 Part 1 pp. 528 – 543 “the south”
Industry Comes of Age 1865 -1900
Opening Quote:
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 contracts are becoming sharper; as liveried carriages appear; so do barefooted children. Henry George, 1879 “Progress and Poverty”
Intro:
Why are not the best men in politics? They were being lured away from public life by the attractions of the booming private economy. Talented men wanted profits not the Presidency. They dreamed of controlling corporations, not Congress.
What the nation lost in civic leadership [“forgotten” Presidents of the Gilded Age- Corruption, etc…], it gained in an astounding surge in economic growth.
The United States during this period becomes THE STRONGEST INDUSTRIAL POWER IN THE WORLD…and the lives of millions of working Americans would be transformed in the process.
The Iron Colt Becomes an Iron Horse
***How does the US build and FUND close to 200,000 miles of RR by 1900, more than all of Europe combined? [from 1865 -1900 165,000 miles]
A Federal Government – Private Business combination FUNDS this surge of RR expansion…****SUBSIDIES…[when the govt gives $$$ to private corporations]
This combination increasingly shaped politics from this point forward. HYPOCRISY
****NOTE: HYPOCRISY: Interestingly, the most conservative richest businessmen HATED, AND STILL DO, the idea of govt intervention or regulation OF THE ECONOMY…this period HAD NONE… “LAISSEZ-FAIRE” [HANDS OFF] was the predominant philosophy…believing in Adam Smith’s Capitalistic economic philosophy of the “invisible hand” [the idea that govt should have no impact on an economy… that COMPETITITION OR the “invisible hand” would effectively regulate the economy]
So this is where the conservatives STILL TODAY become hypocrites…they want a govt tariff to protect their industries from “unfair foreign competition,” or the govt subsidies for their particular industries, or laws that prevent workers from unionizing…etc….BUT…DO NOT WANT ANY GOVT REGULATION OR INTEREFERENCE IN MAKING HUGE $$$PROFITS. Simple hypocrisy…
Notes continued…
Transcontinental RR building was so costly and risky…so it REQUIRED? FEDERAL GOVERNMENT SUBSIDIES…Private companies were unwilling to suffer heavy initial losses to build the infrastructure required…[due to the Govt subsidies…that comes from OUR $$$...THIS IS WHY the POPULISTS wanted Govt ownership of the RR’s..was it not OUR $$$ THAT BUILT THESE???]
********THE PACIFIC RAILWAY ACT OF 1862 – is passed by Congress and funds the building of the 1st of 5 TCRR’s built by 1900…ALL BUT ONE (1) BUILT WITH SUBSIDIES FROM THE FED. GOVT. Congress believes that this will enable the govt to use these systems for the MILITARY AND POSTAL SERVICES.
[an “internal improvement,” Clay’s American System being fulfilled, to create one giant national but regionally specialized economy/market…this passes Congress due to the absence of the Southern congressmen who had opposed this type of Federal Government spending previously….]
The Federal Government gave LOANS AND LAND to these companies, Central Pacific building from the WEST and the Union Pacific building from the EAST, to fund this adventure…easily one of the greatest engineering accomplishments of the 19th century. The Land given was parallel to the tracks…so that as the RR progressed the RR’s could sell these lands for $$$, the Loans were based on a promise to pay as the RR became profitable…ALMOST 200 MILLION ACRES WAS GIVEN TO THESE COMPANIES BY THE FEDERAL AND STATE GOVTS….ONE HECK OF A SUBSIDY…TO PRIVATE CORPORATIONS OWNED BY FEW INDIVIDUALS…
**********VERY IMPORTANT TO SEE THE MAP[and read the caption] ON P. 529 [DIGITAL EDITION] “FEDERAL LAND GRANTS TO RAILROADS”
Land grants were given to the railroads parallel to the tracks…BUT… the RR’s had to choose alternating sections of mile-square sections…which gives the appearance of a CHECKERBOARD…until they chose the best sections of land ALL LAND WAS withheld from SALE… [see map]
What does our govt get in return for the 200 million acres? Long-term preferential rates for postal service and military traffic…AND creating a stitched together national economic market the LARGEST IN THE WORLD.
As the RR expansion progresses during this period…stitching together the WEST to the EAST…and combining with the MASSIVE MIGRATION DUE TO THE HOMESTEAD ACT, 1862[which gave each settler in the west 160 acres free if they improved the land and lived on it for 5 years] TOWNS AND CITIES SPROUT UP IN THE WEST…often earlier settlements competed heavily for the RR to come through their towns…often those that lost the RR…BECAME “GHOST TOWNS” – this could be due to no RR, or a MINE running out of resources, or A LACK OF WATER in an ARID WEST…
Spanning the Continent with Rails
The Pacific Railway Act, 1862 contracts with two companies to build the 1st TCRR. The Union Pacific built from Omaha, Nebraska to the WEST and the Central Pacific who built from Sacramento, California to the East… they would meet, eventually by 1869 at Promontory Point, Utah and the Golden Spike would be driven to complete an amazing engineering accomplishment, surely one of the Wonders of the World, at that time.
*****Subsidies for both companies:
For each mile of track constructed…each company was GIVEN 20 square miles of LAND in alternating sections on either side of the track….AND… generous LOAN from the Fed. Govtthat depended on the grade of the track constructed, 16,000$ per mile for flat and 48,000$ per mile for mountainous.
The Union Pacific RR used lots of Civil War veterans mostly of Irish ethnicity; whereas the Central Pacific used some of the same BUT PRIMARILY used Chinese men[80%] to build out from California. As the Track progressed…many wanted to profit from these isolated workers…and so brought goods and services to the workers….towns called “hell on wheels” pop up along the route, some becoming permanent…these towns featured food, drink, gambling, prostitution, laundry etc… just as in the Gold Rush of California…many become very wealthy providing theses services to the isolated workers who were flush with their paychecks. The Union Pacific was led by Thomas Durant and the Central Pacific was led by the “Big Four,”Leland Stanford, Collis Huntington, Charles Crocker, and Mark Hopkins.
The Union Pacific laid 1086 miles of track and the Central Pacific laid 689 miles of track, [easily the most difficult due to the Sierra Nevada mountains]
********Effects of the 1st TCRR:
- Continued the trend that began just before the Civil War that RR’s were the most significant of the new giant corporations in our economy…creating TIME ZONES and a business organization that was copied in their management techniques for over a century…
-Began the massive Federal – Corporate combinations that have a huge influence still today.
-Combined with the trend that began with the Civil War of the growth and influence of the Federal Government over the States.
-Combined with the Homestead Act, 1862…this opened the West to massive settlement.
-One of America’s greatest peacetime accomplishments.
-A Transcontinental RR that Stitched the West and East coast together for the 1st time.
-Allowed for the expansion of Trade to Asia.
-Paved the way for the phenomenal growth of the GREAT WEST; mining, farming, and resources.
-Brought devastation for the Native Americans…being pushed onto reservations and a Reconstruction of their society into one in which the Federal Government demanded they become like white farmer settlers… a tragic story for sure…
-Americans at the time compared this achievement with the Dec. of Ind. and Emancipation of Slaves.
Binding the Country with Railroad Ties
*****4 more TCRR’s are completed by 1900. None received LOANS, but ALL BUT ONE, [Great Northern was built by James J. Hill completely with private funds and NO GOVT SUBSIDY] RECEIVED LAND GRANTS FROM THE FEDERAL AND STATE GOVTS.
- The Northern Pacific, 1883
- The Atchison, Topeka, and Santé Fe, 1884
- The Southern Pacific, 1884
- The Great Northern, 1893- built by James J. Hill, called the greatest of all the railroad builders, the most sound financially of all of the TCRR’s…he perceived that the prosperity of his railroad depended on the prosperity of the area it served…greatly served the people and communities along his RR…unique to say the least at this time.
This massive building and financial speculation led to many problems and much corruption; bankruptcies, mergers, and re-orginizations…[credit mobilier scheme for ex. Ch 23 part 1 notes]
Railroad Consolidation and Mechanization
***“Commodore” Cornelius Vanderbilt- a steamboat pioneer and millionaire CV merged the older Eastern RR’s into a giant corporation, the NY Central. CV amassed a fortune in RR’s, over 100 Million$. Founded Vanderbilt University. His descendants build the largest single-family residence in America, THE BILTMORE, in Asheville, NC.
How does he dominate the RR industry initially… he replaces all of the old iron tracks with NEW STEEL tracks and STANDARDIZED THE GAUGE…[width of track]. The Westinghouse Air Brake and Pullman Palace Cars were also introduced which eventually creates a superior railway service and with Vanderbilt’s dominance over all eastern lines he could make travel affordable…on most popular lines.
*******Revolution by Railways
*****Impact of the Railroads:
United the nation, literally from ocean to ocean.
****Created a single giant unified Market for raw materials and manufactured goods, the largest in the world.
Influenced a huge investment of capital, $, from Foreign and Domestic sources.
Created the 1st gigantic corporations led by entrepreneurs.
****MORE THAN ANY OTHER SINGLE FACTOR…THE RAILROAD LED THE 2ND INDUSTRIAL REVOLUTION.
New markets, new raw material resources, and a boom to the infant STEEL industry.
Stimulated MINING AND AGRICULTURE
FED THE EXPLODING URBAN CITIES
STIMULATED IMMIGRATION AND MIGRATION
ECOLOGICALLY IMPACTED THE PLAINS TO BE PLOWED UP, CATTLE DISPLACED BUFFALO,-HUNTED TO NEAR EXTINCTION, FORESTS DESTROYED FOR LUMBER.
*****NOV. 1883, THE RR’S CREATED “TIME ZONES” FOR PUNCTUALITY.
****RAILROADS MORE THAN ANY OTHER SINGLE FACTOR WAS THE MAKER OF MILLIONAIRES…IN THEIR COMPANIES AND ON THE STOCK MARKET-WALL ST.
WRONGDOING IN RAILROADING
“POWER CORRUPTS, and ABSOLUTE POWER CORRUPTS ABSOLUTELY”
Stock Manipulation busted and boomed many railroads, many at the hands of Jay Gould who excecuted multi-million $ skullduggery schemes to make fortunes on the stock market….
The RR companies attempted to run beyond the law…CVanderbilt, “ Law, what do I care about the law? Hain’t I got the power? William, CV’s son, “The public be damned.”
RR companies bought and sold politicians, bribed judges, elected their own candidates, and gave out free passes to journalists and politicians…
********THE RR KINGS FOR A TIME WERE VIRTUAL MONARCHS…THEY EXERCISED MORE DIRECT CONTROL OVER THE LIVES OF MORE PEOPLE THAN THE PRESIDENT OF THE UNITED STATES.
By Monopolizing the RR’s they in effect controlled the commerce of the entire nation….using Pools, Rebates, and Kickbacks. Their un-ethical business practices controlled the nation, BUT…also made many enemies.
Government Bridles the Iron Horse
Had the nation not just escaped the “slave power” to be now under the influence of the “money power?”
Traditionally, the American People are slow to combat economic injustice…due to a dedication to “free enterprise” and to the principal of “competition” thus PROGRESS that was HOSTILE TO GOVERNMENT INTERFERENCE WITH BUSINESS…
The DEPRESSION OF 1873 changed the people’s perspective…and fought against being “railroaded” into bankruptcy, starvation, and death.
******HUGE**********The 1st time that the RR’s were limited by government happened on the STATE LEVEL…in Illinois, mid-western states, the GRANGE-PATRONS OF HUSBANDRY – A FARMER’S COOPERATIVE GROUP…controlled enough votes in the states legislature to pass GRANGE LAWS…laws that restricted the RR’s MONOPOLISTIC BUSINESS PRACTICES…the Supreme Court upheld these laws in the 1870’s in the case MUNN V. ILLINOIS*****
HOWEVER…. BY 1886…THE RR KINGS CONTROLLED THE COURT AS WELL, and in the WABASH CASE, the court overturned the MUNN ruling…saying that only the FED. GOVT could regulate interstate commerce…
THE FEDERAL GOVT NOW HAD TO ACT…PEOPLE WERE UPSET…[VOTERS] AND SO FOR THE 1ST TIME IN AMERICAN HISTORY – THE FED GOVT PASSED A LAW TO REGULATE BUSINESS IN THE INTERESTS OF THE “PEOPLE” *************THE INTERSTATE COMMERCE ACT, 1887.
The ICA, 1887 – prohibited rebates and pools, required RR’s to publish their rates openly, forbade discrimination against shippers, and outlawed charging more for a short haul than a long one over the same line. MOST IMPORTANT IT CREATED THE INTERSTATE COMMERCE COMMISSION TO ENFORCE THE LEGISLATION.******
The reality of the act was not in practice as harsh as seemed….it was done to attempt to relieve political pressure and the commission was controlled by the railroads BUT IT STILL RANKS AS A RED-LETTER LAW**** IT WAS THE 1ST LARGE-SCALE ATTEMPT BY THE FED GOVT TO REGULATE BUSINESS IN THE INTEREST OF THE SOCIETY AT LARGE….AND BEGAN A SERIES OF REGULATORY AGENCIES THAT WOULD BE CREATED IN THE NEXT CENTURY [progressive era 1900-1920] WHICH WOULD ACTUALLY “REGULATE” BUSINESS FOR THE PEOPLE AND NOT FOR THE PROFITEERS, ALONE.
“There was a public interest in private enterprise that the government was bound to protect.”
Miracles of Mechanization
How does the USA go from 4th in 1860 to 1st by 1894, among manufacturing nations in the WORLD?
FACTORS OF PRODUCTION: (4)
Capital, $, was now abundant due to the massive expenditures of the Civil War and foreign investment.
Natural Resources – with the RR’s these could now be fully exploited
Labor – immigration that is massive brings unskilled labor cheap and plentiful
Entrepreneurship –“ingenuity” …techniques in “mass production” “assembly line” “efficiency” were being perfected by the industrial leaders in all industries…cash register, stock ticker, typewriter, refrigerated rr cars, electric dynamo, electric trolley rr, Alexander Graham Bell’s telephone, Edison’s; electric light, phonograph, mimeograph, dictaphone, moving picture, and even George Eastman’s pocket camera. The electric light alone allows commerce to be done 24 hours a day 7 days a week…production skyrocketed…
The Trust Titan Emerges – Types of new business form
The Robber Barons/Captains of Industry hated competition…and they devised ways to avoid this “inefficient” business practice… remember that Adam Smith in his book, “Wealth of Nations,” states that government should not interfere in business…that there is no need….that “competition” the “invisible hand” would regulate business… Smith did not foresee the RISE OF MONOPOLIES/TRUSTS
ANDREW CARNEGIE –THE STEEL KING
JOHN D. ROCKEFELLER – THE OIL KING
J. P. MORGAN – THE BANKER’S BANKER
VANDERBILT – RR KING
SWIFT – MEAT PACKING KING
DUKE – CIGARETTE KING
MANY, MANY OTHERS…EVENTUALLY ALMOST ALL BUSINESS WERE CONTROLLED BY MONOPOLIES/TRUSTS
***********These men exercised their genius to circumvent [get around] competition. The THREE primary ways they did this was VERTICAL INTEGRATION, HORIZONTAL INTEGRATION AND INTERLOCKING DIRECTORATES.
EX:
***Vertical integration-makes the business the most efficient, in that it controls ALL ASPECTS OF PRODUCTION TO SALE OF A PARTICULAR PRODUCT THAT A BUSINESS PRODUCES…so that other business in the same field can compete…but probably not a efficiently thus less profitable…this style of combination is not necessarily bad for business..[Carnegie Steel]
***Horizontal integration – to own ALL OF THE COMPANIES THAT MAKE A PARTICULAR PRODUCT, this style of combination is HURTFUL TO COMPETITION due to 1 company controlling a whole industry. [Rockefeller’s Standard Oil] JR’s motto, a devout Baptist, was “LET US PREY.” He begins the “TRUST” – where you control corporations by controlling a majority of their stock and quietly appointing the board of directors thus controlling the corporation.
***Interlocking Directorates – when you control a company…you control the board of directors of that company…when you take over other companies, instead of appointing a new board…you appoint your identical board to become the board of each company you acquire…thus interlocking all of the companies under your board of directors…JP MORGAN WAS THE KING OF THIS PRACTICE…EVENTUALLY TAKING OVER AND CONTROLLING THE RR, STEEL, AND BANKING INDUSTRIES IN THE WHOLE USA.
The Supremacy of Steel
Steel was the key ingredient to the Modern Industrial Civilization…”steel is king,” from skyscrapers to railroad lines and cabooses … steel built the NEW AMERICA.