16: Capital and Labor “Twenty-five years after the death
of Lincoln, America had become, in quantity and value of her products, the
first manufacturing nation in the world.” So wrote historians Charles and Mary Beard,
expressing the amazement many Americans felt when they considered the remarkable expansion
of their industrial economy as the 19th century came to a close. Abundant raw materials,
a large labor supply, the emergence of ruthless entrepreneurs and a federal government
only too happy to promote business, and an expanding market for goods contribute
to the explosion of industry in America. Despite the nation’s burgeoning economic
strength, American government in this era was ill-equipped to deal with growing social problems.
Governance was evenly split between Republicans and Democrats, and divided government prevented
any one party from changing the country in any dramatic way. Voter turnout in this
era was astounding - 78% of eligible voters voted (today, roughly ½ of people vote in our
biggest elections), and people remained fiercely loyal to their parties for personal, economic,
and religious reasons after the Civil War. Major advances in communications in this
era include laying a transatlantic telegraph cable connecting the U.S. to Europe shortly
after the Civil War ended. Alexander Graham Bell developed the first real telephone
in the decade afterward, and by 1900, over one million people had access to one. An
Italian inventor developed radio in the 1890s, and the typewriter, cash register, and calculator
were created simultaneously. Electricity become a source of light and power in the 1870s, and cities
were relying on the technology for streetlights, railway systems, elevators, and
increasingly, for individual homes. Iron production exploded as thousands of miles of
railroad track were laid after the civil war - new technologies allowed iron to be converted into
steel, and a booming steel industry sprung up in and around Pittsburgh Pennsylvania, due
to its abundant iron but more importantly, its plentiful and easy-to-access hard and soft
coal reserves. As the steel industry spread and its furnaces grew larger, new transportation
systems and technologies emerged, including more impressive steam engine technologies. The steel
industry grew closer to the railroad industry, and the industry’s need for lubrication for its
machines helped create a totally new industry at the end of the century - the oil industry.
Demand for oil and petroleum quickly grew as people realized that it could be used for fuel,
and an energy industry was born overnight. The automobile and the airplane followed
the development of the oil/gasoline industry and the invention of the internal combustion
engine in Europe. The automobile industry in America developed rapidly - while not
the first car maker in America, Henry Ford created the motor vehicle industry, and 5
million people were driving his cars by 1917. The Wright Brothers strapped an internal
combustion engine to a glider three years after Henry built his first Ford, and the
personal transportation industry was thus born. Engineers and scientists in private industry
and public universities began to drive both basic and practical research, where government had
previously led. By the turn of the 20th century, many industrialists were embracing
principles of scientific management, known as Taylorism, which advocated for scientific
management of human labor in the machine age. Its leading theoretician, Frederick Winslow
Taylor, persuaded employers to take control of their workplaces, organizing production and making
workers more interchangeable - and the moving assembly line was born, rapidly increasing
efficiency and trimming consumer costs.. The principal agent of industrial development
in the late nineteenth century was still the expansion of railroads - rail lines gave
industrialists access to distant markets and remote sources of raw materials - and they were
America's biggest investors. Rail lines approached 200,000 miles by the turn of the century as
the industry centralized. In turn, railroad tycoons become symbols of the concentration of
American economic power. After the Civil War, businesses like railroad companies began to sell
stocks to the public at large to raise capital, and new corporate forms of organization followed.
Businesses grew and bought other businesses through “horizontal” and “vertical” organization
- so-called “robber barons” like J.P. Morgan and Andrew Carnegie came to control almost ⅔ of the
nation’s steel production by the 20th century - and they did so by buying up the mines, the mills,
and the rail lines themselves. The most celebrated corporate empire of the late 19th century was
John D. Rockefeller’s Standard Oil. He organized horizontally by buying up other refineries
across the nation, and then expanded vertically by buying oil barrel factories, pipelines,
and the freight cars that transported his oil. He became the symbol of monopoly, but Rockefeller
defended himself by pointing to the cutthroat competition of the era as a curse of the modern
economy. Later, the creation of trusts allowed stockholders to entrust a board of trustees with
their votes - by the end of the 19th century, 1 percent of corporations in America controlled
⅓ of the nation’s total manufacturing output. The new rationale for this sort of
concentrated capitalism was based on a belief of individualism - an ideology that remains
at the heart of American conservatism today. As capitalism roared across America,
farmers, workers, and the middle-class increasingly voiced their criticisms, but
the tycoons defended their wealth by saying they had earned their money and power fair and
square, through their own individual talents, which was largely accurate. Their
belief in “survival of the fittest” echoed Charles Darwin’s scientific theory
of evolution - they coined their worldview “Social Darwinism.” According to this worldview,
those who failed were simply unfit for success. But critics of industrial and financial titans
claimed they had earned their wealth not because of the innate fitness of those who succeeded, but
because they had replaced the natural workings of the marketplace by building great monopolies
that would protect them from competition. Some capitalists found a middle ground by
espousing the “gospel of wealth”- they became philanthropists, and treated their private
wealth as a public blessing. At the same time, rags-to-riches stories (notably the works
of Horatio Alger) spread a message of social mobility in industrializing America to the
poorest, and those most down on their luck. Alternative philosophies also existed during
this era - Socialism attracted a considerable following in American city centers. Socialists
blamed social problems on the wealthy, and began to look to the government to de-stratify
the distribution of land and money (and opportunity) in America. Though most Americans
still trusted the nation’s capitalist foundation, many grew concerned about the growth of
monopoly in America - specifically the ability of monopolies to control prices by
strangling competition in the marketplace. Workers in this economy did experience a real rise
in their standard of living, but as labor became de-skilled, they traded more predictable lives for
often more dangerous, less skilled forms of labor. The industrial workforce ballooned as rural
Americans flooded into cities for factory work - and 25 million immigrants hit American
shores in the 50 years after the Civil War ended, inflaming ethnic tensions among the working
class, as foreign-born workers commonly took work for lower wages than “native” Americans in mines, factories, and farms from California
to Texas, Colorado, and New England. Wages and working conditions in this era
took a serious hit - people used to agrarian (agricultural) work found themselves in new,
impersonal factory settings, and they worked ten-hour days, six days a week. Among families,
women and children increasingly joined the labor force to make ends meet. Laborers attempted
to fight back against poor working conditions by creating national unions, but widespread
public opposition to strikes/radical tactics took the steam out of union efforts. Groups
like the Knights of Labor and the American Federation of Labor hoped to abolish child
labor, standardize an 8-hour workday, and give workers more control over their workplaces
- but conflicts between laborers and employers often turned bloody during this era, with
the Haymarket Square bombing in Chicago coming to symbolize the American public’s
distrust of organized labor. Strikebreakers and police were often employed by companies to
end worker demonstrations at the barrel of a gun. Anarchism (previously not a term associated with
violence) became a code word for terrorism and in American minds, and labor forever struggled
to gain a foothold against business in America (for more examples, see: the
Homestead and Pullman Strikes). No group viewed the economic imbalances
at the end of the 19th century with greater frustration than American farmers, who
turned their anger into action by organizing a political movement to reshape the nation’s laws.
Farmers had been organizing to teach each other scientific methods of raising crops and animals,
but economic hardships (and federal indifference toward big-business concentration) turned their
organizations political. Farmers organizations in the North and the South successfully challenged
local and state laws beginning in the 1870s, but knew they would need to make their reforms to the
national level to challenge intrastate business. In places like Florida, Cincinnati, St. Louis,
and Omaha, farmers met to proclaim the creation of the new party, to approve a set of principles,
and to nominate a candidate for the presidency. They called themselves Populists, they were
members of the People’s Party and they sought to gain support for their Omaha Platform. Despite
efforts to attract labor support, the movement remained largely agrarian - and disagreement about
incorporating blacks further prevented the party from challenging the Democrats and Republicans.
Ideologically, Populists called for a graduated income tax, the abolition of national banks,
the end of absentee ownership of land, the direct election of senators, and government-owned
warehouses where they could store their crops. Most importantly, they rejected the
laissez-faire orthodoxies of their time, and raised the most powerful challenge to
industrial capitalism America has ever known. The Panic of 1893 launched the most
severe depression the nation had yet seen. It started with the failure of two railroads
(the Philadelphia and Reading Railroad) to make payments on loans; two months
later, other businesses were failing, and a stock market collapse
sunk many of the national banks, which caused a contraction in the market, forcing
many small loan-dependent businesses to fail. The depression reflected the degree to which all
parts of the American economy were now connected; it also showed how dependent Americans had
become on the biggest railroad, corporate, and financial institutions. Twenty-percent
of workers lost their jobs in the depression, and efforts to organize marches of the unemployed
on Washington went ignored by Congress. To many Americans, the fallout from the depression - the
Homestead and Pullman strikes, for example - was a sign that dangerous instability and maybe
even revolution was afoot. Labor radicalism, real and exaggerated, heightened the sense
of crisis at the end of the 19th century. Financially, the money question became a major
issue in American politics after the depression. The debate centered on what should be the basis
of the U.S. dollar, and what would give it value. Today, the dollar rests on nothing more than
public confidence in the government. But in the 19th century, people believed that currency was
worthless if there was nothing concrete backing it up. Gold and silver had traditionally
backed up the dollar in a ratio of 1:16, but Congress ditched silver in 1873, which
few noticed. As silver prices plummeted (and money dried up after the depression) farmers
suspected a conspiracy between big banks and Congress to devalue the currency and lower the
prices of crops, and demanded government action. The Democratic Party, long blamed for the
economic depression, fell to pieces in 1896. Ultimately, they nominated the Free-Silver
firebrand candidate William Jennings Bryan as their party candidate for
the 1896 presidential election. His Cross of Gold speech rallied the anti-business
movement in America, pulling Populists into the Party and scaring the wits out of Republicans
(American businessmen and conservatives) alike. Bryan stumped all across the country and spoke
to some 5 million Americans across the country. Though he lost the election
and the People’s Party began to dissolve under the weight of its own
contradictions (notably, its commitment to unite all American lower classes despite
being composed of huge contingents of white supremacists), Bryan’s impact on
American politics was not yet finished.