America in the Gilded Age

Transcription

1 America in the Gilded Age

2 Chapter 3 Industrialization (in the US) 2

3 Lesson 1 The Rise of Industry Mini Economics Lesson: Society must answer three basic questions to determine how to use its limited resources: What to make? How much to make? Who to make it for? 3

4 A. Economic Systems 1. Traditional Economy a. Decisions made by: head of family or tribe b. Survival drives economic decisions c. Prices and Wages undetermined as very little surplus or trade d. Found in developing countries, mostly in rural areas e. Also known as a subsistence economy f. Most goods & services produced & consumed by the family/for family 4

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6 2. Market Economy a. Decisions made by Individual or Privately owned businesses b. Desire for Profit drives economic decisions c. Prices and Wages determined by the laws of supply and demand d. This type of economy is found in the USA! e. It is also known as Free Enterprise and Capitalism f. Competition is valued to provide consumers with the best quality product at the best possible price g. Gov t role in a market economy: to provide some services and impose certain regulations 6

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8 3. Command Economy a. Decisions made by the Government b. Social goals drive economic decisions c. Prices and Wages determined by the Gov t d. Found in countries like Cuba and North Korea today + the former USSR e. Also known as COMMUNISM gov t owns, operates all major farms, factories, utilities, stores f. Production doesn t necessarily reflect consumer demand 8

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10 4. Mixed Economy Combo of Market and Command Economy a. Gov t owns/operates some basic industries while allowing private enterprise in other parts of economy b. Decisions driven by Profit and Social Goals c. Prices and Wages determined by Supply and Demand and the Gov t d. Found in many European countries (UK, France etc) e. Also known as Socialism f. characterized by HIGH TAXES (to pay for the many social svcs like housing, health care, child care, pensions) g. Belief that wealth should be distributed more equally through entitlements 10

11 Mixed Economy (Socialism) Government Private Enterprise Laws of Supply & Demand Determine price & production Determine price & production Operates some businesses Owns some businesses 11

12 B. Business-Friendly Government was Republican Dominated 1) supported many Laissez-Faire principles 2) supported the free enterprise system by letting privately owned business firms operate with minimal gov t control 3) became known as Party of Big Business 12

13 C. Biz-Friendly Gov t largely supported Laissez-Faire Capitalism: policy that the gov t should interfere as little as possible in the nation s economy Laissez-Faire Principles 1) role of gov t : protect private property + keep the peace 2) prices and wages determined by the laws of supply & demand not the gov t 3) gov t should limit costly regulations that lead to increased prices - regulation: gov t imposed rule or law 4) gov t should keep taxes and spending low 5) gov t should keep debt to minimum: (if gov t borrows from banks, then $ not available for individuals for their own use) 13

14 D. Benefits and Costs of Laissez-Faire 1) Benefits: Free market makes the most of efficient use of resources (without government interventions, how resources are used is decided by the way people choose to spend their money, thus increasing efficiency overall) Avoids people becoming reliant on the gov t (because individuals are forced to become more productive or make better decisions in order to do well financially) Encourages creativity and growth (the need for people to be economically self-reliant will give added incentive to come up with creative ideas and processes that wind up benefiting everyone) Competition determines which industries succeed or fail and society prospers if the economy is left in the hands of those who can compete 14

15 2) Costs: If a person falls on hard times under laissezfaire there is no government programs ensuring a minimum standard of living Firms may ignore issues such as pollution, unsafe working conditions, without regulations from gov t Firms may form monopolies where they can effect the market price and cause a welfare loss for consumers Businesses that may be essential (like the financial giants) may fail causing commerce to be affected. 15

16 E. Gov t intervention that promoted growth of business and industry (against Laissez-Faire principles) 1) Protective Tariffs tariff: tax on imported goods - due to fear that new US industries could not compete with established European industries 2) Subsidies in land and money (land grants to RRs etc) subsidy: monetary assistance granted by a gov t to a person or group in support of an enterprise thought to be in the public interest 16

17 3) provided a system of laws to protect competition, property and enforce contracts this encouraged entrepreneurship entrepreneur: one who organizes, manages, and assumes the risks of a business or enterprise 4) established a system of patents which encouraged new inventions patent: an official document that gives a person or company the right to be the only one that makes or sells a product for a certain period of time 17

18 Lesson 3: Big Business A. Shift from individually owned businesses to Large Corporations 1. Corporation: an organization owned by many people but treated by law as if it were a single person a. people who own the corporation are known as stockholders b. Stockholders own shares of the company called stock. The more stock a person owns, the larger their share of the corporation c. Why Incorporate? 1) Raise money from sale of stock 2) Spread out the financial risk! 18

19 d. Role of Big Corporations 1) people pool $ together to raise vast sums of money enough to build RRs, steel mills etc made modern industrial production possible 2) Economies of Scale: reduction in cost based a corporation s ability to make goods more cheaply because they produce so much so quickly large manufacturing facilities 3) Could negotiate deals and rebates lower operating costs further. e. Effect on Small Biz? Some couldn t compete against Big Biz forced out of business 19

20 B. Consolidation of Industry consolidation = the uniting of separate companies into a single one 1. The Panic of 1873 (an economic depression) a. companies suffered loss of sales and falling prices b. some large producers began driving smaller companies out of business or purchasing them c. Some hoped to eliminate the competition by establishing a monopoly monopoly: total control of a type of industry by a single person or one company 20

21 1) The problem with monopolies: free to charge whatever they wanted! Quality not guaranteed! 2) leads to gov t intervention and laws to prevent anti-competitive practices of business 21

22 2. Still some businesses sought to better consolidate industries to bring efficiency and reduce cutthroat competition tried to get around anti-monopoly laws a. some companies organized Pools. Pools: agreements between companies to maintain prices at a certain level - Usually broke apart when 1 member would try to lower prices to steal biz away from another 22

23 b. some companies formed Trusts Trust: a group of companies whose stock is controlled by a central board of directors 1) instead of buying another co. outright, company gives stock to board of trustees. These stockholders receive a portion of trust s profits. 2) Since they just managed the stock, didn t own it, they were not violating the law 23

24 c. Some companies formed Holding Companies Holding Company: a company whose primary business is owning a controlling share of stock in other companies 1) they don t produce anything; they own the stock of companies that do 2) by controlling the stock, it is sort of merging them into one large company 24

25 d. some companies Vertically Integrated Vertical Integration: the combining of companies that supply equipment and services needed for a particular industry 1) owns all stages of production the different businesses on which a company depends for its operation 2) allows businesses to save $ 3) allows big business to get bigger 25

26 4) Andrew Carnegie and Steel - idea to make $ by investing in companies that served the RRs - invested in iron mills, sleeping cars, RR bridges - Opened a Steel company ( US Steel) and customized his mills to use the new Bessemer process

27 e. Some companies Horizontally Integrated Horizontal Integration: the combining of competing firms into one corporation 1) eliminates the competition 2) allows big businesses to get bigger 27

28 3) John D Rockefeller and Standard Oil - Standard Oil controlled 26 similar companies and gained control of 90% of the world oil refining industry

29 Vertical & Horizontal Integration It is NOT about direction (side-to-side or up and down). It is about one leading to the next vs. side by side into one. Vertical comes from the French word verticalis meaning directly overhead. 29

30 Gov t Corruption in the Industrialization Era 30

31 Government Land Grants to Railroads 31

32 A. Robber Barons 1. Some RR entrepreneurs engaged in corrupt practices that led to the acquisition of great wealth. They were called Robber Barons Robber Barons: a wealthy person who tries to get land, businesses, or more money in a way that is dishonest or wrong - often used ruthless tactics to drive out the competition - often exploited workers and kept wages low to enrich themselves - sometimes bribed public officials 32

33 B. Credit Mobilier Scandal Stockholders from Union Pacific RR set up Credit Mobilier a construction co. - Credit Mobilier overcharged Union Pacific RR - Since same investors controlled both, Union Pacific RR paid bills - Investors made millions, RR almost bankrupt 2. RR investors realized they could make more money selling land than operating a RR - bribed Congressmen to vote for more land grants to RRs by offering them stock shares of Union Pacific at a price well below their value. 33

34 Lesson 4: Unions (aka Labor Unions, or just Labor) A. Working in the US in the Industrial Era 1. Problems faced by workers: a. unhealthy & dangerous working conditions (lint, dust, toxic fumes in the air; lack of safety devices) b. low pay, repetitive tasks c. lack of job security- workers easily replaced by new immigrants d. child labor 34

35 2. While there was a rise in standard of living for all Americans (thanks to all of the new technology in agriculture and industry) there was a growing division of income between wealthy & working class standard of living: a person s or group s level of material well-being, as measured by education, housing, health care and nutrition 35

36 3. Deflation ( ) a rise in value of $ a. Caused prices to fall so companies cut wages (that were already low) b. This results in a call for Unionization 36

37 1) historically unions fight for: - higher wages - shorter hours - better working conditions 2) today unions fight for all of the above + more benefits 38

38 B. Early Unions 1. Type of industrial workers in 1800s: skilled (craft) workers vs. unskilled (common) labor a. skilled workers = special skills & training. - higher wages - control of time - formed trade unions. trade union: an organization of workers with the same trade or skill b. unskilled labor = few skills - lower wages 43

39 2. Industry owners and management oppose unions a. regard them as conspiracies that interfered w/ property rights b. Actions taken to prevent unions from forming: 1) sign oath/contract promising not to join union 2) undercover agents identify union organizers 3) workers blacklisted list of troublemakers, made it difficult to get another job 4) lockouts: locked union members out of property refused to pay them 5) if strike? Hired strikebreakers (replacement workers 44

40 3. Political & Social Opposition to Unions a. Courts often ruled against them and sided with business owners in legal battles b. Many Americans saw them as threats to our institutions - seen as MARXIST - Marxism: belief that the basic force shaping capitalist society was the class struggle between workers & owners - Marx believed workers would eventually revolt, take over factories, seize the gov t, seize private property, divide wealth evenly. - result? A classless society 45

41 Marxism 46

42 c. some workers advocate anarchism anarchism: belief that there should be no gov t d. Marxism/Anarchism spreading in Europe. At same time, Europeans immigrating to US - American workers are uniting in Unions, and Marxism calls for workers to unite so Unions are SCARY! 47

43 C. Struggle to Organize 1. Great Railroad Strike of 1877 a. Panic of 1873 led to wage cuts followed by NATIONWIDE labor protest biggest in the US to date b. RR workers across country walked off jobs - involved 80,000 workers in 11 states & affected 2/3 of US RRs c. Workers smashed equip., tore up tracks, blocked rail svc d. States send militias. Gun battles erupted e. President Hayes sent Army. Restored order, but 100 people dead & property destroyed 48

44 d. States send militias. Gun battles erupted e. President Hayes sent Army. Restored order, but 100 people dead & property destroyed July 21-22, 1877, rioters destruction in Pittsburgh, PA 49

45 2. The Knights of Labor a. 1 st nationwide industrial union Industrial Union: an organization (union) of skilled AND unskilled workers b. demands: - 8 hr workday - equal pay for women - abolition of child labor - creation of worker-owned factories c. Supported arbitration (impartial 3 rd party workers and mgmt reach agreement d. Began using strikes by successful at first - membership rose 50

46 3. The Haymarket Riot Chicago, Haymarket Square May 1886 a. demanded 8 hr workday organizers called strike to show support for it on May Day b. strikers & police clash 1 striker killed c. Anarchists organize meeting, 3000 people. Police come, bomb is thrown, police fire, workers fire, - 7 police dead - 4 workers dead 51

47 d. 8 arrested. 7 are German immigrants who support anarchism e. All 8 convicted, 4 executed f. 1 convicted was Knights of Labor member reputation ruined 52

48 4. The Pullman Strike a. American Railway Union (ARU) organized in 1893 b. Pullman Co made Pullman RR cars forced workers to live in Pullman, IL and buy goods from company stores c. Depression of Pullman slashed wages. Workers had trouble paying rent & paying high prices at the company stores Pullman, IL (George Pullman s company town) 53

49 d. workers who complained were fired. Strike began e. ARU members nationwide stopped handling Pullman cars. Threatened to paralyze US economy f. US Mail cars attached to Pullmans: to interfere w/ mail is violation of federal law g. Court ordered halt to boycott. Strike & ARU collapsed 54

50 The Pullman Strike Violence in Chicago escalated when federal troops came to break the 1894 Pullman factory strike, as illustrated in this drawing from Harper's Weekly. More than one thousand rail cars were destroyed, and 13 people were killed. (Photo Courtesy of In 1898, the Illinois Supreme Court ordered Pullman Town sold off, ruling that a company town was incompatible with the spirit of America. Chicago Historical Society) 55

51 D. American Federation of Labor 1. organized 20 + trade unions (skilled workers only), led by Samuel Gompers a. believed unions should stay out of politics b. rejected socialist/communist ideas c. Fought for higher wages/better working conditions d. Strikes ok, negotiate better 56

52 2. Goals of the American Federation of Labor: a. recognize unions/agree to collective bargaining b. push for closed shops companies hire only union workers c. 8 hr workday 57

53 American Federation of Labor 3. Samuel Gompers was the first president of AFL, a position he held almost continuously from 1886 until Glompers tried to concentrate on pure and simple unionism, rather than politics, and preferred negotiations over strikes. 58

54 E. Working Women 1. by 1900, women = 18% of labor force a. 1/3 = domestic servants; 1/3 = nurses, teachers; 1/3 = industrial (garment/food processing) b. wages less than men for same job (men had to support the family) 2. Women s Trade Union League (WTUL) organized to promote women s labor issues a. 8 hr day b. Create minimum wage c. No evening work for women d. Abolish child labor 59

55 F. Early Labor Unions Fail 1. Too many strikes 2. Too much violence associated with strikes 3. Early unions were disorganized 4. Gov t/courts usually sided with Biz leaders. 5. Effectiveness of blacklisting, lockouts etc. 6. Associated with Radicalism: Marxism/Anarchy 60