Transcript for:
Chapter 16: The Nation Industrializes

chapter 16 the nation industrializes 1865 to 1900. remember that 1865 is the last year of the civil war just for context individual choices john d rockefeller for a generation of americans the name rockefeller was synonymous with aggressive competition and monopoly john d rockefeller was born in upper new york state in 1839 and educated in cleveland ohio after working as a bookkeeper he became a partner in a grade and livestock business in 1859 and earned substantial profits during the civil war he soon shifted his attention to the oil refining business a major new enterprise in cleveland the refining business was uncertain and highly competitive and rockefeller set out to stabilize his operations by reducing the competition he joined with others to create a cartel called the south improvement company and then negotiated an astounding deal with the railroads that served cleveland because the three major railroads serving cleveland were highly competitive among themselves tom scott head of the pennsylvania railroad proposed a plan that would have guaranteed each railroad a stable share of the shipping by the rockefeller cartel scott proposed that the three railroad companies double their prices for carrying petroleum products to 256 per barrel but give the south improvement company a rebate of 106 per barrel and also pay the south improvement company 106 per barrel for petroleum products that any other petroleum refining company shipped on the railroads the railroads were also to provide the south improvement company with complete information on all petroleum products shipped by its competitors in return the south improvement company would divide its business among the three railroads with the pennsylvania railroad getting a double share when news of this leaked out in 1872 other refining companies raised a great outcry and the railroad companies promised to treat all shippers equally rockefeller then pursued other means to reduce competition soon rockefeller's standard oil still managed to receive favorable treatment from the railroads and also controlled 90 percent of the refining capacity in the entire country making it one of the few genuine monopolies of the era rockefeller emerged as the first american billionaire after his retirement in the mid-1890s he devoted much of his attention to giving away his fortune especially for research rockefeller's rise to wealth came amidst an economy that was being dramatically and profoundly transformed in 1865 many americans probably anticipated economic growth but few imagine that steel production could increase a thousand times by 1900 or that railroads could operate nearly six times as many miles of truck or that farmers could triple their harvests these economic changes and many others were the result of decisions by many individuals where to invest whether to expand production how to react to business competitor whom to trust americans also made choices about competition and cooperation as the industrial economy took off many people found themselves in a love-hate relationship with competition andrew carnegie leader of the new steel industry loved it arguing that competition ensures the survival of the fittest and ensures the future progress of the race you can guess which race he's talking about there by the way by producing the highest quality largest quantity and lowest prices other entrepreneurs saw competition as the most unpredictable factor they faced and a serious constraint on economic progress carnegie's zeal for competition that means his love of competition was unusual although many entrepreneurs publicly applauded the idea of survival of the fittest most loved competition only in the abstract sense and they preferred to find alternatives to it in their own business affairs other americans also found themselves making choices regarding cooperation individualism was deeply entrenched in the american psyche meaning that we're very individualistic yet the increasing complexity of the economy presented repeated opportunities for cooperation railroad executives as an example of the south improvement company sometimes cooperated by dividing a market rather than just competing in it wageners sometimes joined together to demand better wages like in unions or working conditions the result of these many decisions was the industrialization of the nation and the transformation of the economy this chapter is going to take us up to the turn of the 20th century so keep that in mind foundation for industrialization considering the question what factors encouraged economic growth and industrial development after the civil war by 1865 conditions in the us were ripe for rapid industrialization abundant natural resources a capable workforce an agricultural base that produced enough food for a large urban population and favorable government policies combined to lay the foundation resources skills capital and new federal policies at the end of the civil war entrepreneurs could draw on the vast and virtually untapped natural resources americans have long since plowed the fertile farmlands of the midwest where corn and wheat dominated and the south where cotton was king they had just begun to farm the rich soils of minnesota nebraska kansas iowa and the dakotas as well as the productive valleys of california and oregon through the central part of the nation stretched vast grasslands that received too little rain for most farming but were well suited for grazing like with cattle the pacific northwest the western great lakes region and the south all held extensive forests untouched by the lumberman's song the nation was also rich in mineral resources before the civil war the iron industry had developed in pennsylvania where there was easy access to iron ore and coal pennsylvania was also the site of early efforts to tap underground pools of crude oil the california gold rush beginning in 1848 had drawn many people west and some of them found great riches at the end of the war other minerals lay unused or undiscovered across the country including iron ore coal oil gold and silver and copper many of these natural resources were far from population centers and their use awaited adequate transportation facilities exploitation of some of these resources also required new technologies so basically just because those resources are out there doesn't mean that we can get to them you know in the physical senses and transporting them over land or i actually like get them out of the earth so there's going to be some changes that happen to make all that possible so we can really take advantage of these resources a skilled and experienced workforce was essential for economic growth in the 1790s and early 1800s new englanders had developed manufacturing systems based on interchangeable parts remember that talked about that last semester with eli whitney first used for guns and clocks and factories for making cotton cloth think things like lowell uh we associate lowell with uh cotton production or excuse me um cotton textiles these accomplishments gave them a reputation for yankee ingenuity a talent for devising new tools and inventive methods such skills and problem solving were key ingredients in nearly all large-scale manufacturing because early factories usually relied on skilled artisans to supervise less skilled workers in assembling products some of the early artisans and factory owners came from great britain and the which was the world's first industrial nation another crucial element for industrialization was capital before the civil war capital became centered in the seaport cities of the northeast boston new york and philadelphia especially where prosperous merchants invested their profits in banks and factories capital by the way is just money that you can use to start a business banks were important instruments for mobilizing capital before the war some bankers had begun to specialize in arranging financing for large-scale entrepreneur enterprises and some had opened offices in britain to tap sources of capital there stock exchanges had also developed long before the civil war as important institutions for raising capital for new ventures stock exchanges by the way are places where people buy and sell stocks which are shares in the ownership of companies stockholders may participate in the election of the company's directors and they will also share in the company's profits still another important element for rapid economic development was favorable government policies when republicans took command of the federal government in 1861 of course at the start of the civil war the south with all its democrats is audi at that point so remember congress was pretty much you know run by republicans during the civil war when republicans took command of the federal government in 1861 they were immediately faced with the need to wage war against the confederacy at the same time however they forged new policies to stimulate economic growth beginning with a new protective tariff in 1861. the tariff increased the price of imports to equal or exceed the price of american-made goods thereby protecting domestic products from foreign competition and encouraging investment in manufacturing here in america tariff rates changed periodically but the protective tariff remained central to federal economic policy for more than a half century republicans also passed a series of measures to stabilize and centralize the banking and currency systems new federal land policies too stimulated economic growth before the civil war the federal government claimed excuse me claimed a billion acres of land half of the land area of the nation as federal property or the public domain republicans used the public domain to encourage economic development the homestead act in 1862 provided that any person could receive free as much as 160 acres which is a quarter of a square mile of government land by building a house living on it for five years and farming it the land grant college act in 1862 that same year often called the moral act for its sponsor senator justin merrill in vermont gave land to each state in order to fund a public university which was required to provide education and engineering and agriculture k-state here close to us is an example of a college founded thanks to the moral land grant act also in 1862 congress approved land grants for the first transcontinental railroad and more land grants to railroads followed the transformation of agriculture the expanding economy rested on a highly productive agricultural base improved transportation canals in the early 19th century and railroads later speeded the expansion of agriculture by making it possible to move agricultural produce over long distances before the civil war farmers had developed 407 million acres into productive farmland during the next 40 years this figure more than doubled to 841 million acres map 18 or excuse me 16.1 indicates where this growth occurred the homestead act contributed to the rapid settlement of kansas nebraska the dakotas and minnesota between 1862 and 1890 48 million acres passed from government ownership to private hands in this way other federally owned land could be purchased for as little as 125 per acre and much more was obtained at this bargain price than was required free under the homestead act production of leading commercial crops increased rapidly though the total number of acres in farmland doubled the number of acres planted in corn wheat and cotton more than tripled new farming methods increased harvests even more corn increased by 264 percent wheat by 252 percent and cotton by 383 through these years farm output grew more than twice as much as the population as production of major crops rose prices for them fell because when there's more of something it is worth less though several factors contributed to the situation the most obvious was the supply outpaced demand production increased more rapidly than the population which determined the demand within the nation and the demand from other countries when american farmers received less for their crops they often raised more in an effort to maintain the same level of income to increase their harvests they bought fertilizers and elaborate machinery and the more the farmers raised the lower prices fell and with them the economic well-being of many farmers basically their crops are worth less so they have to grow more and more and more in order to try to make money but as they keep growing more and more and more the prices for their crops continue to decline new machinery greatly increased the amount of land one person could farm a single farmer with a hand tool could harvest two acres of wheat in a day using the mccormick reaper which was first produced in 1849 a single farmer and a team of horses could harvest two acres in an hour for other crops too a person with modern machinery could form two or three times as much land as a farmer 50 years before agricultural expansion also stimulated the farm equipment industry and in turn the iron and steel industry because what else are farm equipment things made out of agricultural exports like cotton tobacco wheat and meat spurred oceanic shipping and shipbuilding and increased ship building meant a greater demand for iron and steel railroads played a crucial role in the expansion and commercialization of agriculture by carrying farm products to distant markets and transporting fertilizer and machinery from factories to farming regions the dawn of big business considering the two questions what was the significance of the railroad and steel industries in the new industrial economy that emerged after the civil war and how did investment bankers such as jp morgan contribute to the new industrial economy to many americans of the late 19th century nothing symbolized economic growth so effectively as a locomotive a train a huge powerful noisy smoke belching machine barreling forward at great speed railroads set much of the pace for economic expansion after the civil war growth of the rail network stimulated industries that supplied materials to the railroads especially steel and coal and industries that relied on railroads to connect them to the emerging national economy railroad companies also came to symbolize big business companies of great size employing thousands of workers operating over large geographic areas and some americans began to fear their power railroads the first big business before the civil war much of the nation's commerce moved on rivers canals and coastal waterways at the end of the civil war the nation still lacked a comprehensive national transportation network railroads clearly had that potential but railway companies operated on tracks of varying gauges gauges by the way are the distance between the two rails making up railroad tracks when they operate on tracks of varying gauges this makes the transfer of rail cars from one line to another impossible few railway bridges crossed major rivers until 1869 no railroad connected the eastern half of the country to the booming pacific coast region by the mid-1880s the elements were in place for a national real network the first transcontinental railway line was completed in 1869 connecting california to omaha nebraska and ultimately to eastern cities within the next 25 years four more rail lines linked the pacific coast to the eastern half of the nation between 1865 and 1890 railroads grew from 35 000 miles of track all the way up to 167 000 miles major rivers were bridged and new inventions increased the speed carrying capacity and efficiency of trains in 1886 the last major lines converted to a standard gauge making it possible to transfer rail cars from one line to another simply by throwing a switch entrepreneurs could now plan in terms of a national economic system in which raw materials and finished products moved easily from one region to another railroads especially in the west expanded with generous government assistance in the pacific railway act of 1862 congress provided the union pacific and central pacific companies not only with big loans but also with 10 square miles of public domain for every mile of track laid an amount soon doubled by 1871 congress had authorized some 70 railroad land grants involving 128 million acres approximately equal in size to colorado and wyoming put together though not all companies qualified to claim their entire grants most railroads sold that land that they were given in order to raise capital for railroad operations by encouraging farmers businesses or organizations to develop the land by selling it to people like that railroad companies also tried to build up the economies along their tracks and thereby boost demand for their freight trains to haul supplies to new settlers and to carry settlers's products like wheat cattle lumber and ore to market the expansion of railroads created the potential for a nationwide market stimulated the economic development of the west and created a demand for iron steel locomotives and similar products railroad companies also provided an organizational model for newly developing industrial enterprises because they span such great distances and managed so many employees and so much equipment railroads incur encountered problems of scale that few companies had ever faced before but that other industrial entrepreneurs soon had to address railroad companies also required a higher degree of coordination and long-range planning than most previous businesses earlier companies typically operated at a single location but railroads function over long distances and at multiple sites financial transactions carried on over hundreds of miles by scores of employees required a centralized accounting office one result was the development of company bureaucracy of clerks accountants managers and agents kind of like the emergence of middle managers that we saw in urban areas last semester railroads became training grounds for administrators some of whom later entered other industries indeed the experience of the railroads was central in defining the subject of business administration when it began to be taught in colleges railroads faced higher fixed costs than most previous companies fixed costs by the way are costs that a company company must pay even if it closes down all its operations for example interests on loans debt payments and property taxes these costs included payments on debts and the expense of maintaining and protecting far-flung equipment and property to pay fixed costs and to keep profits high railroad companies tried to operate at full capacity whenever possible doing so however often proved difficult where two or more lines competed for the same traffic one might cut rates to lure business from the other but if the ever other company responded with cuts and its rates neither stood to gain significantly more business and both took in less income competition between railroad companies thus sometimes became so intense that no line actually showed a profit some railroad operators chose to defuse intense competition by forming a pool in a pool the railroads agreed to divide the existing business and not to compete on rates the most famous was the iowa pool made up of railroads running between chicago and omaha across iowa formed in 1870 the iowa pool operated until 1874 and some polling continued until the mid-1880s few pools lasted very long though often one or more pool members tired of a restricted market share and broke the pool arrangement in an effort to expand thereby setting off a new price war when a polling arrangement became known it brought loud complaints from customers who concluded that they paid higher rates because of the pool to compete more effectively railroads adjusted their rates to attract companies that ship large volumes of goods large shipments sent over long distances cost the railroad companies less per mile than small shipments sent over short distances so companies develop different rate structures for long hauls and short hauls thus the largest shippers with the power to secure low rates could often ship more cheaply than small business and individual farmers railroad companies defended the differences on the basis of difference in costs but small shippers who paid high prices saw themselves as victims of rate discrimination railroads feed state and federal governments as sources of valuable subsidies at the same time they constantly guard it against efforts by their customers to use government to restrict or regulate their enterprises by outlawing rate discrimination for example basically they want government help but they do not want government regulation companies sometimes campaigned openly to secure the election of friendly representatives and senators and to defeat unfriendly candidates they maintain well-organized operations to lobby public officials in washington dc and in state capitals most railroad companies issued free passes to public officials a practice that reformers attacked as bribery some railroads won reputations as the most influential political power in entire states the southern pacific in california for example or the santa fe here in our state of kansas stories of railway officials bribing politicians became commonplace after the civil war the credit mobilier scandal discussed in chapter 18 touched some of the most influential members of congress in the 1870s a decade later carlos p huntington of the southern pacific railroad candidly explained his expectations regarding public officials if you have to pay money to the right to get excuse me to have the right thing done it is only just unfair to do it for huntington the right thing meant favorable treatment for his company by the government politically powerful or not railroads produced significant change between 1850 and 1890 railroads transformed chicago from a town of 30 000 residents to the nation's second largest city chicago emerged as the rail center not just of the midwest but of much of the nation by 1880 more than 20 railroad lines and 15 000 miles of tracks connected chicago with nearly all of the us and much of canada the boom and railroad construction during the 1880s only reinforced the city's prominence entrepreneurs in manufacturing and commerce soon developed new enterprises based on chicago's unrivaled location at the hub of a great transportation network and anybody who's been to chicago can attest they do have fantastic transportation there um and if you go there i'm certain that you'll see train lines and transportation lines you know all over the city it's it's still pretty important in those terms chicago's rail connections made at the logical center for the new business of mail order sales central location and rail connections also made chicago a major manufacturing center by the 1880s chicago's factories produced more farm equipment than those of any other city and its iron and steel production rivaled that of pittsburgh other leading chicago industries produced railway cars and equipment metal products a wide variety of machinery and clothing the city also claimed the title of the world's largest grain market location and rail lines also made chicago the nation's largest center for meat packing livestock from across the midwest and as far as southern texas was unloaded at chicago's union stockyards 400 acres of railroad siding shoots and pens filled with cattle hogs and sheep huge slaughterhouses flanking the stockards received a steady stream of live animals and disgorged a steady stream of fresh canned and processed meat the development in the 1870s of refrigeration for railroad cars and ships permitted fresh meat to be sent throughout the nation and to europe refrigeration and railroad cars really is a big deal i wish your your chapter went in a little bit deeper on that refrigeration means that you can you can you can transport me that you've already slaughtered and that you've already processed it means that you can expand your markets railroads investment bankers and morganization railroads expanded significantly in the 1880s but some lines are in little profit some traverse sparsely populated areas of the west others spread in the area is already saturated by rail service in the 1880s a few ambitious talented and sometimes unscrupulous railway executives maneuvered to produce great regional railway systems the santa fe in the southern pacific for example came to dominate the southwest and the great northern and the northern pacific held sway in the northwest the pennsylvania and the new york central controlled much of the shipping in the northeast by consolidating lines within our region railway executives tried to create more efficient systems with less duplication fewer price wars and more dependable profits railroads required far more capital than most manufacturing concerns even railroads that receive government subsidies required large amounts of private capital the railroads huge appetite for capital made them the first american businesses to seek investors on a nationwide and international scale those who invested their money could choose to buy either stocks or bonds bonds by the way are certificates of debt issued by a government or corporation guaranteeing payment of the original investment plus interest at a specified future date sales of railroad stocks provided the major activity for the new york stock exchange through the second half of the 19th century to raise the enormous amount of capital necessary for construction and consolidation railroad executives turned increasingly to investment banks by the late 1880s john pierpont morgan jp morgan had emerged as the nation's leading investment banker born in connecticut in 1837 son of a successful merchant turned banker young morgan attended schools in switzerland and germany then began working in his father's bank in london in 1857 he moved to new york to a banking position arranged by his father morgan's experience and growing stature and banking gave him access to capital within the united states and abroad in london and paris investors wanted to put their money where it would be safe and give them a reliable return morgan therefore tried to stabilize the railroad business especially to cut through a rate competition that resulted when several companies served one market railroad companies that turn a morgan for capital found that morgan wanted a stay in their management he insisted the company seeking his help reorganize in order to simplify corporate structures and to combine small lines into larger centrally controlled systems he often demanded a seat on the board of directors as well to guard against risky decisions in the future some began to refer to this process as organization and morganized lines soon included some of the largest in the country a few other investment bankers followed similar patterns andrew carnegie and the age of steel the new industrial economy rode on steel lines propelled by steel locomotives steel plows broke the tough sod in the western prairies the new skyscrapers relied on steel frames as they boldly shaped urban skylines steel defined the age made by combining carbon and molten iron and then burning out impurities steel has greater strength resilience and durability than iron however steel was difficult and expensive to make until the 1850s when henry bessemer in england and william kelly in kentucky independently discovered ways to make steel in large quantities at a reasonable cost even so the first bessemer or kelly process plants did not begin production in the us until 1864. that year the entire nation produced only 10 000 tons of steel in 1875 just south of pittsburgh pennsylvania andrew carnegie used a loan from jp morgan's father's bank to construct the nation's largest steel plant employing 1500 workers from then until 1901 when the plant had grown to more than 8 000 workers carnegie held the central place in the steel industry born in scotland in 1835 carnegie and his penniless parents meaning poor came to the u.s in 1848 young andrew worked in a textile mill then as a messenger in a telegraph office he soon became a telegraph operator then a personal telegrapher for a high official of the pennsylvania railroad then a superintendent a high management position for the railroad at the age of 25. at the end of the civil war he devoted his full attention to iron and steel and quickly applied to his own companies the management lessons that he had learned with the railroad carnegie's basic rule was cut the prices scoop the market run the mills full an aggressive competitor he repeatedly cut costs so that he might show a profit while charging less than his rivals he usually chose to undersell competitors rather than cooperate with them in 1864 steel rails sold for 126 per ton by 1875 carnegie was selling them for 69 bucks per ton driven by improved technology and carnegie carnegie's competitiveness prices fell to only 29 a ton in 1885 and less than 20 dollars in the late 1890s was the largest steel manufacturer in the u.s though his company accounted for only a quarter of the nation's production by 1900 the nation produced nearly 10 million tons of steel each year more than any other nation carnegie's company was larger and more complex than any manufacturing enterprise in pre-civil war america in its own day however other companies were as complex and several challenged it in size by 1880 five steel companies each had more than fifteen hundred employees as did several textile mills and a locomotive factory the size of such operations continued to grow in 1900 the three largest steel plants each employed eight thousand and ten thousand workers and seventy other yes excuse me seventy other factories employed more than two thousand workers producing everything from watches to locomotives from cotton cloth to processed meat carnegie and other entrepreneurs transform the organizational structure manufacturing they often join a range of operations formerly conducted by separate businesses acquisition of raw materials processing distribution of finished goods into one company achieving vertical integration vertical integration just to define that again is the process of bringing together into a single company several of the activities involved in creating a manufactured product including acquiring raw materials manufacturing products and then marketing selling and distributing and shipping the finished goods vertical integration is just doing it all in one company from start to finish companies usually developed vertical integration to ensure steady operations and to gain a competitive advantage control over the sources and transportation of raw materials for example guaranteed a reliable flow of crucial supplies at predictable prices such control may have also denied materials to a competitor steel plants stood at one end of a long chain of operations that carnegie under-controlled through partnerships iron ore mines in minnesota a fleet of ships that transported iron ore across the great lakes hundreds of miles of railway lines tens of thousands of acres of columns ovens to produce coke which is cold treated to burn at high temperatures and plans for turning iron ore into bars of crude iron carnegie steel was vertically integrated from the point where the raw materials came out of the ground through the delivery of steel rails and beams and now there's a special exit on page 407 it matters today vertical integration since rockefeller's day vertical integration has been a central feature of american manufacturing many manufacturing companies have sought a competitive advantage by controlling raw materials and other components of manufacturing like carnegie or distribution and marketing of finished products like automobile makers 1920s or doing both like rockefeller in the 1970s and 80s however many american manufacturers moved away from vertical integration preferring to contract with other companies often located in countries with much lower wages to make their products more recently a number of american companies have again embraced vertical integration and for many of the same reasons that motivated carnegie and rockefeller to stabilize their sources of supply and to make themselves more competitive this trend has affected not only such retailers as starbucks but also technology companies such as apple if you want you can use online newspapers to research why many american companies abandon vertical integration in the 70s and 80s or you can use online newspapers to research why some american manufacturers have been returning to vertical integration survival of the fittest the concentration of power and wealth during the late 19th century generated extensive comment and concern one prominent view on the subject was known as social darwinism reflecting its roots in charles darwin's work on evolution social darwinism by the way is defined as the philosophical argument inspired by darwin's theory of evolution that competition in human society produced the survival of the fittest and therefore benefited society as a whole social darwinists opposed efforts to regulate competitive practices in his book on the origin of species published in 1859 darwin concluded that creatures compete with one another for survival in an often inhospitable environment and the survivors are those that have through mutation and inheritance developed traits that are best adapted to their surroundings such adaptation he suggests lead to the evolution of different species each uniquely suited to a particular ecological niche two philosophers herbert spencer writing in england after 1850 and william graham sumner in the us after 1874 put their own interpretations on darwin's reasoning and applied it to the human situation i would say misapplied it to the human situation producing social darwinism which is of course a philosophical perspective that bore little relation to darwin's original work social darwinists contended the competition among people and by extension among powerful entrepreneurs produced progress through survival of the fittest and that unrestrained competition provided the best drought for improving humankind and advancing civilization further they argued that efforts to ease the harsh impact of competition only protected the unfit and thereby worked to the long-term disadvantage of all when applied to government this notion became a form of loss i fare we will come back to the idea of social darwinism in the 20th century unfortunately during the 1930s and 1940s this is going to be an idea that hitler will actually grab onto and after hitler is vocal about supporting this idea it falls out of favor here in the u.s because human society is not um it doesn't necessarily operate on darwinian principles and this this entire theory is not not well founded and not well thought out but we'll talk more about that later the wealthiest entrepreneurs though could be inconsistent carnegie for example embraced spencer's arguments but also preached what he called the gospel of wealth the idea that the wealthy should return their riches to the community carnegie spent his final 18 years giving away his fortune he funded 3 000 public library buildings gave gifts to universities built carnegie hall in new york city and created several foundations like carnegie and rockefeller other great entrepreneurs of that time gave away vast sums to promote learning and research even as some of them also built ostentatious mansions through extravagant parties and otherwise flaunted their wealth although many americans subscribed to the vision of social darwinism propounded by spencer and sumner many others did not entrepreneurs themselves often welcomed some forms of government intervention in the economy from railroad land grants to the protective tariffs to suppression of strikes although most agreed with the social darwinists that government should not assist the poor and destitute other americans disagreed with social darwinists equating a veloci fair with progress henry george a san francisco journalist pointed out in progress in poverty 1879 that amid the greatest accumulation of wealth men die of starvation and he concluded that material progress does not merely fail to relieve poverty it actually produces it lester frank ward a sociologist in 1886 posed a carefully reasoned reputation of social darwinism suggesting that biological competition produces bare survival not civilization civilization he argued derived not from aimless competition but from rationality and cooperation a deeper understanding of history memoirs and autobiographies john d rockefeller and andrew carnegie both wrote books recounting their own lives rockefeller's random reminiscences of men and events as noted in the individual voices feature and carnegie's the autobiography of ander carnegie a person's own account of his or her life is called a memoir or an autobiography an autobiography typically typically recounts a person's entire life but a memoir may focus on just one or a few topics a biography is life story written by another person historians are always interested in memoirs and autobiographies when they examine such sources they do so critically that is they're interested in both finding new information and identifying questionable statements for example if a 70 year old person writes about his childhood as carnegie did there's a possibility that he may not remember the details accurately historians are always skeptical when someone presents a long conversation word for word in quotation marks even though it occurred 50 years before as carnegie did because remembering the exact words us are after such a long period of time is highly unlikely problematic statements can stem from one's perspective describing one's own involvement in an event may involve making assumptions about others's participation and those assumptions may not be accurate so the historian typically looks for as many other primary sources as possible preferably from the time of the event in order to corroborate information from a memoir or autobiography historians once thought of memory as being like a computer's hard disk on which one might find or fail to find a given record or on which records might become mixed together or truncated or cut short cognitive psychologists however think of memory differently as historians have learned from psychologists a new understanding of memory has emerged the memory of an event is actually constructed with the first telling of a story and that memory is reconstructed each time the story is told individuals define and redefine themselves and their relation to other people as they construct and reconstruct their memories of events stories memories may grow and take on new meanings through frequent repetition a person's construction of a memory therefore involves telling a story stories are told for different purposes and psychologists assure us that storytellers fit their story to their audience is the story telling you storytelling excuse me using his or her own life experience to teach a moral lesson to the reader carnegie frequently draws moral lessons from his experiences devoting an entire chapter to promoting his gospel of wealth is the storyteller trying to put a favorable spin on some event for which he or she was criticized carnegie devotes an entire chapter of his autobiography to justifying his behavior during the homestead strike which is on page 463 rockefeller in his memoirs tells his version of the formation of standard oil on page 409 is the storyteller using the story to create a particular image of himself or herself for future readers historians therefore must not only pay careful attention to a person's telling of his or her life but also carefully evaluate the storyteller's purpose for the story and compare the person's account to evidence from other primary sources standard oil model for monopoly just as carnegie provided a model for other steel companies and for heavy industry in general johnny rockefeller revolutionized the petroleum industry and provided a model for other consumer goods industries the major product of oil refining was kerosene which transformed home lighting as kerosene lamps replaced candles and oil lamps during the civil war rockefeller sold supplies to the union army in 1863 he invested his profits in a refinery after the war he bought control of more refineries and incorporated them as standard oil in 1870. their finding business was relatively easy to enter and highly competitive and aggressive competition came to define standard oil recognizing the competitive advantage technology could bring rockefeller recruited experts to make standard the most efficient refiner he secured favorable treatment from railroads by offering a heavy and predictable volume of traffic and he usually sought to persuade his competitors to join the cartel he was creating if they refused he sometimes tried to drive them out of business by 1881 following a strategy of horizontal integration which by the way do not confuse with vertical integration horizontal integration is when you merge one or more companies doing the same thing or similar activities as a way of limiting competition or enhancing stability and planning basically when you combine a bunch of like companies by 1881 following a strategy of horizontal integration rockefeller and his associates controlled some 40 refineries with about 90 percent of the nation's refining capacity standard also moved toward vertical integration by gaining control of oil fields building transportation facilities including pipelines and ocean going tanker ships and creating retail marketing operations by the early 1890s standard oil had achieved almost complete vertical and horizontal integration of the american petroleum industry a monopoly over an entire industry between 1879 and 1881 rockefeller and his associates centralized decision making among all their companies by creating the standard oil trust a new organizational form designed to get around state laws that prohibited one company from owning stock in another rockefeller and others who held shares in the individual companies exchanged their stock for trust certificates issued by standard oil standard oil thus controlled all the individual companies though technically did not own them eventually when new laws in new jersey made it legal for corporate charters corporates excuse me corporations charted in new jersey to unstock in other companies rockefeller set up standard oil of new jersey as a holding company for the companies and the trust once standard oil achieved this near monopoly it consolidated its operations by closing older refineries and building larger plants based on the newest technology such innovations reduced the cost of producing petroleum products by more than two-thirds leading to a decline by more than half in the price paid by consumers standard also took a leading role in world markets producing nearly all american petroleum products sold in asia africa and latin america during the 1880s rockefeller retired from active participation in business in the mid-1890s standards monopoly was short-lived because of the discovery of new oil fields in texas and elsewhere at the turn of the century new companies tapped those fields and quickly followed in their own paths to vertical integration nonetheless the rockefeller interests companies dominated by rockefeller's managers steadily gained in power they included the national city bank of new york an investment bank second only to the house of morgan railroads mining real estate steel plants steamship lines and other industries in the wider world cartels now american entrepreneurs sometimes cooperated through pools or cartels such efforts rarely lasted very long unless they took legal form as a trustworthy holding company in contrast cartels emerged as a more typical form of business cooperation in germany which was also undergoing rapid industrialization in the late 19th century by 1905 nearly 400 industrial cartels were operating in germany and were especially prominent in the coal iron and steel industries and in chemicals by then there were also at least 40 international cartels typically including companies from neighboring european countries the first attempted a global cartel initiated by a french company in 1887 in an effort to monopolize worldwide production of copper included participation by companies in france germany spain and the united states it briefly controlled three-quarters of the world's supply of copper but lasted only until 1889. and it's worth noting that the first industrial world well the first industrial war world war one starts in 1914 so um just sort of keep that in mind as world war one breaks out it's going to be between industrial powerhouses thomas edison and the power of innovation by the late 19th century many american entrepreneurs had joined rockefeller and carnegie in viewing technology as a powerful competitive device railroads wanted more powerful locomotives roomier freight cars and stronger rails so they could carry more freight at a lower cost steel companies developed demanded larger and more efficient furnaces to make more steel more cheaply ordinary citizens as well as famous entrepreneurs seemed infatuated with technology one invention followed another an ice making machine in 1865 the vacuum cleaner in 1869 the telephone in 1876 the phonograph in 1878 the electric light bulb in 1879 an electric welding machine in 1886 and the first american-made gasoline engine automobile in 1895 to name only a few by 1900 many americans had come to expect a steady flow of ever more astounding creations especially ones that could be purchased by the middle and upper classes kind of sounds like our expectations today don't you think many new inventions relied on electricity and there one person stood out thomas a edison born in 1847 he secured the first of his thousand-plus patents at age 22. in 1876 edison set up the first modern research laboratory and he opened a new and improved facility in 1887. edison promised a minor invention every 10 days and a big thing every six months and he backed up his words with results his laboratories invented or significantly improved electrical lighting electrical motors the storage battery the electric locomotive the phonograph the microphone and many other products research and development by edison's laboratories and others quickly translated into production and sales nationwide sales of electrical equipment were insignificant in 1870 but reached nearly 2 million dollars 10 years later and nearly 22 million dollars in 1890. such sales meant that generating and distributing systems had to be constructed and wires to carry electrical current had to be installed along city streets and in homes the pace of this work picked up appreciably after nikola tesla demonstrated the superiority of alternating current or ac over direct current or dc for transmitting power over long distances edison's distribution networks had relied on dc which had limited their range early developers of electrical devices and electrical distribution systems needed major financial assistance and investment bankers came to play an important role in public utility companies general electric for example developed out of edison's company through a series of mergers arranged by none other than jp morgan selling to the nation so you've got it you're making things now how are you going to get it to consumers and how are you going to make them aware of and then want your products the expansion of manufacturing accelerated earlier trends toward new and more affordable consumer goods large vertically integrated manufacturers of consumer products often competed to sell items that differ little from one another and that cost virtually the same such companies frequently competed not on the basis of price but through advertising by the late 19th century advertisements in newspapers and magazines have become large and complex as manufacturers relied on advertising to promote many mass-produced consumer goods including patent medicines clothing books packaged foods soap and petroleum products in some cases notably cigarettes advertising greatly expanded the market for the product after the federal patent office registered the first trademark in 1870 companies rushed to develop brands and logos they hoped to distinguish their products from nearly identical arrivals along with advertising came new ways of selling previously most people expected to purchase goods from artisans who made items on order shoes clothes and furniture or from door-to-door peddlers like with pots and pans or in specialty stores like hardware and dry goods or in general stores in urban areas following the civil war the first american department stores appeared and flourished offering many types of ready-made products fashionable clothing shoes household goods and much more department stores products unlike those in most previous retail outlets not only had clearly marked prices but also could be returned or exchanged if the customer were dissatisfied r h macy's in new york city jordan marsh in boston marshall field in chicago and similar stores relied heavily on newspaper advertising to attract throngs of customers especially women from throughout the city and its suburbs they targeted middle and upper class women but also appealed to young single women who worked for wages and could afford the current fashions young single women also found white-collar jobs as clerks in the new department stores the variety presented by department stores paled when compared to the array of goods available through the new mail order catalogs led by two chicago companies montgomery ward which issued this first catalog in 1872 and sears roebuck and co whose first general catalogs appeared in 1893 mail-order houses aimed at rural america they offered a wider range of choices than most rural dwellers had ever seen before from hams to hammers handkerchiefs to harnesses department stores and mail order houses became feasible because manufacturers are now producing many types of consumer goods in large volumes mail-order houses dependent on railroads and the u.s mail to deliver deliver their catalogs and their products across great distances and department stores relied on railroads to bring goods from distant factories together advertising mail-order catalogs in rural areas and department stores in urban areas begin to change americans as buying habits this helps to create a real nationwide economy economic concentration in consumer goods industries carnegie rockefeller edison morgan and a few others redefined the expectations of american entrepreneurs and provided models for their activities in a number of consumer goods industries massive complex companies vertically integrated sometimes horizontally integrated often employing extensive advertising appeared relatively suddenly in the 1880s the american sugar refining company created in 1887 imitated rockefeller's organization to control three quarters of the nation's sugar refining capacity by the early 1890s james b duke used efficient machinery extensive advertising and vertical integration to become the largest manufacturer of cigarettes in 1890 he merged with his four largest competitors to create the american tobacco company which dominated the cigarette industry gustavus swift in the early 1880s began to ship fresh meat from his slaughterhouse in chicago to markets in the east using his own refrigerated rail cars he eventually added refrigerated storage plants to several cities along with a sales and delivery staff other meat packing companies followed swift's lead by 1890 half a dozen firms dominated meat packing such a market in which a few firms dominate an industry is called an oligopoly oligopolies were and are more typical than monopolies some of the new manufacturing companies did not sell stock or use investment bankers to raise capital standard oil like carnegie steel never went public that is rockefeller never used the stock exchange to raise capital instead he expanded either through mergers or by making purchases capitalized by his profits rockefeller and his associates like carnegie and his partners concentrated ownership and control in their own hands so did many others among the new manufacturing companies as late as 1896 the new york stock exchange sold stock in only 20 manufacturing concerns gradually however the passing of the first generation of industrial empire builders ownership grew apart from management many new business executives were professional managers ownership rested among hundreds of thousands of stockholders all of them wanted a reliable return on their investment even though the vast majority remained uninvolved with business operations the huge size of the new companies also meant that most managers rarely saw or talked with most of their employees careful cost analysis the desire for efficiency and the need to pay shareholders regular dividends led many companies to treat most of their employees as expenses to be increased or cut as necessary with little regard to the effect on individuals toward a more perfect union corporate personhood section 1 of the 14th amendment states in part no state shall deprive any person of life liberty or property without due process of law nor deny to any person within its jurisdiction the equal protection of the laws in 1819 long before the 14th amendment was adopted the supreme court specified that corporations have the same rights regarding contracts as persons with the rise of large and powerful corporations after the civil war more and more cases involving corporations began to come before the supreme court in 1888 in pembina silver mining co vs pennsylvania the supreme court ruled on the meaning of the 14th amendment under the designation of person there is no doubt that a private corporation is included such corporations are merely associations of individuals united for a special purpose and permitted to do business under a particular name and have a succession of members without dissolution while the supreme court has continued to define the meaning of the 14th amendment there has been no successful challenge to the ruling that a corporation is legally a person with constitutional rights to due process and equal protection under state laws there have been a number of recent supreme court cases dealing with corporate personhood if you're interested at all in that do a google search or see me if you would like some help with that seeking a new cell the term new south usually refers to efforts by some southerners after reconstruction to modernize their region some new south advocates promoted a more diverse economic base with more manufacturing and less reliance on a few staple agricultural crops as a way to strengthen the southern economy and integrate it into the emerging national economy foremost among proponents of the new south was henry grady who built the atlanta constitution into a powerful regional newspaper in the 1880s like chicago atlanta grew as a railroad center though destroyed by sherman's troops in 1864 atlanta rebuilt quickly and became the capital of georgia in 1877. thanks in part to grady's skillful journalism the city emerged as a symbol of the new south a center for transportation industry and finance remember that before the civil war the south really lagged behind the north in terms of education banking industry manufacturing now the south is trying to fix that and trying to become a little bit more like the north a little bit more modern and industrial the importance of railroads and spurring atlantis growth was no coincidence after the civil war inadequate transportation especially railroads posed a critical limit on the south's economic growth during the 1880s however southern railroads more than doubled their miles of track in the 1890s jp morgan led the efforts to reorganize southern railroads into three large systems dominated by the southern railway with the emergence of better rail transportation some entrepreneurs began to consider introducing new industries some southerners had long advocated that their cotton be manufactured in the cloth in the south rather than in the new england textile mills that have been using southern cotton since early in the century the southern cotton textile industry boomed during the 1880s and 1890s the south counted 161 textile mills in 1880 and 400 in 1900 so in the span of what is that 20 years they're building about 250 240 new textile mills that's a ton the new mills had more modern equipment and were larger and more productive than the mills of new england they also had cheaper labor costs partly because they relied on child labor similar patterns characterize the emergence of cigarette manufacturing as another new southern industry in the end however these on enterprises did little to improve the lives of many southerners most of the new companies paid low wages and some chose locations in the south specifically to take advantage of its cheap unskilled and non-union labor other southerners tried to diversify the region's agriculture and reduce its dependence on cotton and tobacco such efforts however ran up against the cotton textile and cigarette industries both of which built factories in the south to be near their raw materials thus southern agriculture changed little owners and sharecroppers discussed last chapter farmed small plots obligated by their rental contracts to cropley or croplands to raise cotton or tobacco in parts of the south farmers became even more dependent on cotton than they had been before the civil war parts of georgia for example produced almost 200 more cotton in 1880 than they did in 1860 of greater potential to transform part of the south was the iron and steel industry that emerged in northern alabama dominated by the tennessee coal iron and railroad company the industry drew on coal from tennessee and alabama mines in iron ore from northern alabama in 1897 the first southern steel mill opened in ensley alabama and quickly established itself as a serious rival to those of the north soon birmingham alabama emerged as one of the world's largest producers of pig iron in 1907 jp morgan arranged the merger of the tennessee company into his united states steel corporation the turn of the century also saw the beginning of a southern oil industry near beaumont texas with the topping of the spindle top pool so productive the press labeled it the world's greatest oil well the center of petroleum production now shifted from the midwest to texas oklahoma and louisiana where important discoveries also came in 1901 in addition to attracting attention from standard oil the new discoveries prompted the growth or creation of new companies notably gulf and texaco incorporating the west into the national economy considering the questions what were the causes and outcomes of the indian wars of the late 19th century could they have been avoided and what were the major ways in which the west was incorporated into the national economy as rockefeller was monopolizing the petroleum industry and edison was perfecting the light bulb the us army was subduing the last indian resistance in the west before the civil war the issue of slavery had blocked economic development efforts in the west the secession of the southern states permitted the republicans who took over the federal government to open the west to economic development through such measures as the pacific railway act and the homestead act the end result was the incorporation of the west into the emerging national industrial economy at the expense of native american freedom and livelihood war for the west when congress decided to use the public domain western land to encourage economic development most americans consider the west to be largely largely vacant in fact american indians lived throughout most of the west the most tragic outcome of the development of the west was the upheaval in the lives of the native americans who lived there long before the acquisition of horses and guns had transformed the lives of western native americans the transformation was most dramatic among tribes living on or near the great plains this vast relatively flat and treeless region was the uh the rangeland of huge herds of buffalo horses found their way into the great plains slowly trickling northward from spanish settlements in what is now new mexico and reaching the upper plains in the mid-18th century by that time french and english traders working northeast of the plains had begun to provide guns to the indians in return for furs together horses and guns transformed the culture of some planes tribes although the possession of horses might confer status among most of the plains indians a person achieved high social standing not by accumulating possessions but by sharing possessions francis laflesche son of an omaha leader learned from his father that the persecution of the poor the sneer their poverty is a wrong for which no punishment is too severe his mother reinforced the lesson when you see a boy barefooted in lame take off your moccasins and give them to him when you see a boy hungry bring him to your home and give him food the native american peoples of the plains included both farmers and nomadic hunters the farmers lived most of the year in large prominent villages women raised corn squash pumpkins and beans and gathered wild fruits and vegetables men hunted and fished near their villages and cultivated tobacco before the arrival of horses twice a year entire villages went on foot on extended hunting trips for buffalo during these hunts the people lived in tepees cone-shaped tents of buffalo hide they were easy to move acquisition of horses changed the culture of these indians only slightly the horse revolutionized the lives of other planets planes indians though because a hunter on horseback could kill twice as many buffalo as one on foot the horse substantially increased the number of people the planes could support the horse also increased mobility permitting a band to follow the buffalo as they moved across the grasslands some groups abandoned farming entirely and became nomadic living in tepees year-round and following the buffalo herds by the early 19th century the horse culture existed throughout the great plains the lakotas the largest of all the groups who adopted the horse culture were the westernmost members of a group of native american peoples often called sioux a name applied to them by the french that translated to snake see the comments in this video for a really interesting article about the title the name sue i would highly recommend that you check it out their name for themselves can be translated as allies reflecting their organization as a confederacy the lakotas share a common language but the northern cheyenne were clearly con were generally considered members of the lakota confederacy by the mid-19th century before 1851 federal policymakers had considered the region west of arkansas missouri iowa and minnesota and east of the rocky mountains to be a permanent indian country but farmers bound for oregon and gold seekers on the way to california carved trails across the central plains and in 1851 congress approved a new policy designed in part to open the central plains as a railroad drought to the pacific the new policy promised each tribe a definite territory of limited extent and well-defined boundaries within which the tribe was to live the government was to supply whatever needs the tribes could not meet themselves federal officials first planned large reservations taking up much of the great plains with the end of the civil war in 1865 railroad construction crews prepared to build westward federal policy makers tried to head off hostilities with the tribes by carving out a few great western reservations the remainder of the west was to be opened for development railroad building mining and farming native americans on the reservations were to be given food and shelter by by the federal government and agents were to teach them how to farm and raise cattle treaties were negotiated in 1867 and 1868 in fulfillment of the new policy in 1867 a conference at medicine lodge creek produced treaties by which the major southern plains tribes accepted reservations in what is now western oklahoma in april of 1868 many members of the northern plains tribes met at fort laramie and signed treaties creating a great sioux reservation on the northern plains they believed that they retained unseated lands for hunting in the powder river country present-day northeastern wyoming and southeastern montana in may 1868 the crows agreed to a reservation in montana in june of 1968 the navajos accepted a large reservation in the southwest given the fluid structure of authority amongst most indian peoples however those people who signed the treaties didn't necessarily obligate those who did not as some federal officials were negotiating these treaties other federal officials were permitting and even encouraging white hunters to kill the buffalo for sport for meat and for hides purchased by tanneries in the east in the mid-1870s more than 10 million buffalo were killed and stripped of their hides which sold for a dollar or so the southern herd was wiped out entirely by 1878 and the northern herd followed by 1883. only 2 000 buffalo survived the remnant of a species whose numbers once seemed as vast as the stars given the importance of the buffalo and the lives of the plains indians their way of life was doomed once the slaughter began some members of the southern plains tribes refused it to accept the terms of the medicine lodge greek treaties and continue to live in their traditional territory resisting efforts to move them onto their reservations they occasionally attacked stagecoach stations ranches travelers and military units after a group of southern cheyennes inflicted heavy losses on an army unit general william tecumseh sherman the civil war general and now head of the army decreed that all native americans not on reservations are hostile and will remain so till killed off sherman's response was the usual reaction of a conventional military force to guerrilla warfare concentrate the friendly population in defined areas in this case that was reservations and then opened fire on anyone outside of those areas in the winter of 1868 to 69 the army launched a southern campaign under the command of general philip sheridan another union army veteran who directed his men to quote destroy their villages and ponies to kill and hang all warriors and bring back all women and children the brutality that ensued convinced most southern plains tribes to abandon further resistance in the early 1870s sizable buffalo herds still roamed west and south of indian territory in the red river region of texas though this was not reservation land the medicine lodge creek treaties permitted indians to hunt there when white buffalo hunters began work there in 1874 young men from the kiowa comanche and southern cheyenne tribes attacked them sheridan responded with another war of attrition destroying tepees food and animals when winter came the cold and hungry indians surrendered in order to avoid starvation war leaders were imprisoned in florida far from their families buffalo hunters then quickly exterminated the remaining buffalo on the southern plains on the northern plains many lakotas and some northern cheyennes led by crazy horse and sitting bull lived on unseated hunting lands in the powder river region complicating matters further gold was discovered in 1874 in the black hills in the heart of the great sioux reservation touching off an invasion of indian land by miners as the northern pacific railroad prepared to lay track in southern montana federal authorities determined to force all lakota and cheyenne people onto the reservation triggering a conflict that is sometimes called the great sioux war military operations in the powder river region began in the spring of 1876. sheridan ordered troops to enter the area from three directions and converge on the lakotas and cheyennes the offensive went dreadfully wrong when lieutenant colonel george a custer without waiting for the other units sent his seventh cavalry against a major village that his scouts located the encampment on the little big horn river proved to be one of the largest ever on the northern plains custer unwisely divided his force and more than 200 men including custer himself met their deaths that winter u.s soldiers unleashed another campaign of attrition on the northern plains troops defeated some indian bands hunger and cold drove others to surrender crazy horse and his band held out until spring and then surrendered only when told that they could live in the powder river region a few months later crazy horse was killed when he resisted being put into an army jail sitting bull and his ban escaped to canada and remained there until 1881 when he finally surrendered the government cut up the great sioux reservation into several smaller units and took away the powder river region the black hills which the lakotas considered sacred and other lands after the great sioux war no native american group could muster the capacity for sustained resistance in 1877 an effort to move the nez pierces onto a new reservation in western idaho led to a battle in which a small group of nez pierces defended a larger group of uh defeated excuse me a larger group of u.s troops and local civilian volunteers led by chief joseph venez pierces then attempted to flee to canada between july and early october they evaded the army as they traveled east and north more than 200 members of the band died along the way in the end chief joseph surrendered on the condition that the nez pierces would be permitted to return to their previous home federal officials instead sent the nez pierces to far away indian territory where in an unfamiliar climate many died of disease the last sizable group to resist confinement was geronimo's band of charical apaches who long managed to elude the army in the mountains of the southwest they finally gave up in 1886 and the men were sent to prison in florida the last major confrontation between the army and the native americans came in 1890 in south dakota some lakotas have taken up a new religion the ghost dance which promised to restore the buffalo and sweep away the whites fearing an uprising federal authorities ordered the lakotas to stop the ritual and concern that sitting bull might encourage defiance ordered his arrest he was killed when some of his followers resisted a small band of lakotas fled but were surrounded by the seventh cavalry near wounded knee creek when one lakota refused to surrender his gun both indians and soldiers fired their weapons the soldiers with their vastly greater firepower quickly prevailed as many as 250 native americans died as did 25 soldiers the events that wounded me marked the symbolic end of armed conflict on the great plains and the wounded knee massacre in 1890 is often looked at as the sort of the end of indian resistance in the west once the federal government began to encourage rapid economic development in the west displacement of the indians was probably inevitable from the beginning the indians faced overwhelming odds they had a superior knowledge of the terrain superior horsemanship and mobility and great courage of course but the us army had superior numbers and superior technology the army was also often able to find allies among native american groups who were traditional enemies of the defiant tribes transforming the west railroads cattle and mining long before the last battles between the army and the indians the incorporation of the west into the national economy was well underway railroad construction played a major role in the eastern united states railroad construction usually meant connecting established population centers eastern railroads moved through areas with developed economies connected major cities and hauled freight to and from the many towns along their lines at the end of the civil war this situation existed almost nowhere in the west most western railroads were built first to connect the pacific coast to the eastern half of the country railroad promoters understood that a transcontinental line was unlikely at first to carry enough freight to justify the high cost of construction thus they turned to the federal government for assistance the pacific railway act of 1862 provided loans and 10 square miles later increased to 20 of the public domain for every mile of traffic in this way federal lawmakers sought to tie california and nevada with the rich deposits of gold and silver to the union and to stimulate the rapid economic development of other parts of the west and all right there's a brief review of content earlier in the chapter two companies received this federal support the union pacific which began laying tracks westward from omaha nebraska territory and the central pacific which began building eastward from sacramento california construction began slowly partly because crucial supplies rails and locomotives had to be brought to each starting point from the eastern united states either by ship around south america to california or by riverboat to omaha both companies experienced labor shortages too the union pacific solved its labor shortages only after the end of the civil war when former soldiers and construction workers flooded west many of these people were irish immigrants the central pacific filled its work gangs earlier by recruiting chinese immigrants by 1868 central pacific construction crews totaled six thousand workers and union pacific crews totaled five thousand the sheer cliffs and rocky ravines of the sierra nevada slowed construction of the central pacific chinese laborers sometimes dangled from ropes to create a road bed by chiseling away the solid rock face of a mountain because the companies earned their federal subsidies based on miles of track wade construction became a race in which each company tried to build faster and farther than the other in 1869 with the sierra nevada far behind the central pacific boasted of laying 10 miles of track in a single day the tracks of the two companies finally met at promontory summit north of salt lake city on may 10 1869 other lines followed during the next 20 years bringing most of the west into the national market system westerners greeted the arrival of a railroad in their communities with joyful celebrations but some wondered if they had traded isolation for dependence on a greedy monopoly the southern pacific successor to the central pacific became known as the octopus because of its efforts to establish a monopoly over transportation throughout california it had a reputation for charging the most that a customer could afford james j hill of the great northern in contrast was called the empire builder for his efforts to build up the economy and prosperity the region alongside his rails which ran west from minneapolis to puget sound whether octopus or empire builder railroads provided the crucial transportation network for the economic development of the west in their wake cattle raising mining farming and lumbering all expanded rapidly cattle were first brought into south texas then part of new spain or mexico in the 18th century the environment encouraged the herds to multiply and mexican ranchers developed an open range system the cattle grazed on unfenced grasslands and vaqueros or cowboys herded the half wild longhorns from horseback many practices that developed in south texas were subsequently transformed transferred to the range cattle industry including roundups and branding at the end of the civil war five million cattle ranged across texas and in the slaughterhouses of chicago cattle brought 10 times or more their price in texas to get a cattle to get cattle from south texas to midwestern markets texans herded cattle north through indian territory now oklahoma to the railroads being built westward half a dozen cowboys a cook and a foreman or the trail boss could drive one or two thousand cattle between 1866 and 1880 some four million cattle plotted north from texas as railroad construction crews pushed westward cattle towns sprang up notably abilene and dodge city kansas in cattle towns the trail boss sold his herd and paid off his cowboys most of them quickly headed for the saloons brothels and gambling houses eastern journalists and writers of dime novels discovered him and embroidered the exploits of town marshalls like james b wild bill hickok and wyatt earth giving them national reputations deserved or not as town tamers of heroic dimensions in fact the most important changes in any cattle town came when middle class residents especially women organized churches and schools determined to create law-abiding communities like those from which they had come back east most texas cattle were loaded on eastbound trains but some continued north where cattlemen had virtually free access to vast lands still in the public domain one result of these long drives was the extension of open range cattle raising from texas into the northern great plains by the early 1870s the profits and cattle raising on the northern plains attracted attention in the east england and elsewhere among investors eager to make a profit some brought in new breeds of cattle which they bred with texas longhorns producing hearty ranged cattle that yielded more meat by the early 1880s so many cattle ranches were operating the beef prices began to fall then in the severe winter of 1886 to 87 uncounted thousands of cattle froze or starved to death on the northern plains and many investors went bankrupt cattle grazing lost some of its romantic aura and afterward became more of a business than an adventure surviving ranchers fenced in their ranges and made certain that they could feed their herds during the winter as the cattle industry grew the cowboy became a popular icon fiction after the 1870s and motion pictures later created the cowboy image a brave white clean-cut hero who outwitted scoundrels and rescued fair-haired white women from snarling villains in fact most real cowboys were young and unschooled many cowboys were also african-americans or of mexican descent and others were former confederate soldiers on a cattle drive they worked long hours up to 20 hours a day they faced serious danger ever heard stampeded they slept on the ground and they had biscuits and beans they earned about a dollar a day and spent much of their work and time in the saddle with no human companionship just as railroads made possible the cattle drives so too did railroad construction advanced the expansion of mining discoveries of precious metals and valuable minerals in western mountains inevitably prompted the construction of rail rail lines to the sites of discovery and the rail lines in turn permitted rapid exploitation of the mineral resources by bringing in supplies and heavy equipment the mining industry changed rapidly solitary prospectors panning for gold and mountain streams gave way to corporations and wage workers mining operations quickly became vertically integrated including mines or crushing mills railroads and companies that supplied fuel and water for mining in most parts of the west the exhaustion of surface deposits led to construction of underground shafts and tunnels such operations required elaborate machinery to move men and equipment thousands of feet into the earth and to keep the tunnels cool dry and safe by the mid-1870s some nevada silver mines boasted the most advanced mining equipment in the world there temperatures soared to 120 degrees in shafts more than 2200 feet deep mighty air pumps circulated air from the surface to these depths and ice was used to reduce temperatures massive water pumps kept the shafts dry powerful drills speeded the removal of ore and enormous ore crushing machines operated day and night on the surface in butte montana a gold discovery in 1864 led to discoveries of copper silver and zinc in what has been called the richest hill on earth mine shafts there reach depths of a mile and access 2 700 miles of tunnels western miners organized too forming strong unions beginning in butte and spreading throughout the major mining regions of the west miners and unions secured wages five to ten times higher than what miners in britain or germany ever earned transforming the west farming and lumbering railroad construction also facilitated the expansion of western farming after the civil war the land most easily available for new firms stretched from what is now north dakota southward through the current state of kansas map makers in the early 19th century had labeled this region the great american desert it was not a desert some parts were very fertile but west of the line of aridity roughly the 98th or 100th meridian sparse rainfall limited farming farmers who followed traditional farming practices risked not only failing but also damaging a surprisingly fragile ecosystem after the civil war farmers pressed steadily westward spurred by the offer of 160 acres of free land under the homestead act or lured by railroad advertising that promised fertile and productive land at little cost those who came to farm were as diverse as the nation itself thousands of african americans left the south seeking farms of their own like the exodusters immigrants from europe especially scandinavia germany bohemia and russia also flooded in many times railroad companies would even advertise overseas and they would you know print their posters and whatever language uh was spoken in the country they're advertising and they would tell people hey hey you can grow the same crop over here as you grow over there especially a lot of russian immigrants they're the ones who bring the hard red winter wheat that we have here in kansas most homesteaders however moved from areas a short distance to the east where farmland had become too expensive for them to buy single women could and did claim their own land sometimes the wife of a male homesteader sorry about that did the same claiming 160 acres in her own name next to the claim of her husband by one estimate one third of all homestead claims in dakota territory were held by women in 1886. some single women seem to have seen homesteading as a speculative venture intending to sell the land and use the money for such purposes as starting a business paying college tuition or creating a nest egg for marriage the homestead act had clear limits the 160 acres that it provided were sufficient for a farm east of the line of viridity west of that line however it was often possible to raise wheat but most land required irrigation for other crops or was suitable only for cattle raising which required much more than 160 acres federal officials were sometimes lacked in enforcing the homestead axe requirements some cattle rangers manipulated the law by having their cowboys file claims and then transfer the land of the rancher after they received title to it aura ranchers claimed the land along both sides of streams knowing that surrounding land was worthless without access to water and thus they could control the whole watershed without establishing ownership those who complied with the requirement to build a house and form the land often faced an unfamiliar environment the planes were virtually barren of trees the new plane settlers therefore scavenged for substitutes for construction material and feel that eastern pioneers obtained without cost from trees on their own land initially many families carved homes out of the land itself some tunneled into the side of a low hill to make a cave-like dugout for a home others cut the top cut the tough prairie sod into blocks and laid them like bricks to make the walls of the house many combined dugout and sod construction saudis became common throughout the plains but seldom made satisfactory dwellings for fuel to use in cooking or heating women burned dried cow dung or sunflower stocks blaine's families looked to technology to meet many of their needs barbed wire first patented in 1874 provided a cheap and easy alternative to wooden fences the barbs effectively kept ranchers as cattle off farmland ranches eventually used it too to keep their herds from straying much of the plains had abundant groundwater but the water table was deeper than in the east so settlers used windmills to pump the water up because the sod was so tough special plows were developed to make the first cut through it the most serious problem for pioneers in the great plains was a much reduced level of rainfall compared with eastern farming areas during the late 1870s and into the 1880s when the central plains were formed for the very first time the area received unusually heavy rainfall making it seem like hey maybe this is really good land for farming then in the late 1880s rainfall fell below normal and crop failures drove many homesteaders off the plains by one estimate half of the population of western kansas left between 1888 and 1892 only after farmers learned better techniques of dry farming secured improved strains of wheat and began to practice irrigation did agriculture become viable even so farming practices in some western areas failed to protect soil that had formerly been covered by natural vegetation this exposed soil became subject to severe wind erosion and years of low rainfall stay tuned for the dust bowl throughout the northeast and the middle west the family farm was the typical agricultural unit in the south after the civil war family operated farms whether run by owners or by sharecroppers also became typical very large farming operations in those areas tended to be exceptions in california and some other parts of the west however agriculture sometimes involves huge areas the intensive use of heavy equipment and wage labor today agriculture on such a large scale is known as agribusiness wheat was the first major crop for which farming could be entirely mechanized by 1880 in the red river valley of what is now north dakota and in the san joaquin valley in central california wheat farms were as large as 100 square miles such farming businesses often called bonanza farms in dakota territory required major capital investments in land equipment and livestock one dakota farm required 150 workers during spring planting and 250 or more at harvest time by the late 1880s some california wheat growers were using huge steam-powered tractors and combines most of the great dakota wheat farms had been broken into smaller units by the 1890s but in some parts of california agriculture flourished on a scale unknown in most parts of the country one california company miller and lux held more than a million acres scattered throughout three states though california wheat raising declined in significance by 1900 large-scale agriculture employing many seasonal laborers became established for several other crops growers of fruits and similar crops tended to operate in small farms but they still required a large workforce to harvest time to pick the crops quickly so they could be shipped to distant markets while they were still fresh fruit raising spread rapidly as california growers took advantage of refrigerated railroad cars and ships by 1892 fresh fruit from california was for sale all the way over in london the coastal areas of the pacific northwest are very different from other parts of the west there heavy winter rains and cool damp summer fogs nurtured dense coniferous forests especially tall douglas firs and coastal redwoods the growth of california cities and towns required lumber and it came first from the coastal redwoods of central and northern california when the most accessible strand stands of timber had been cut loggers moved north to oregon and washington seattle developed as a lumber town from the late 1850s onward as companies in san francisco helped to finance an industry geared to providing lumber for california cities by the late 19th century some companies have become vertically integrated owning lumber mills along the northwest coast a fleet of schooners that hauled rough lumber down the coast of california and lumber yards in the san francisco bay area as railroads extended in the into the pacific northwest they promoted the development of the lumber industry by offering cheap rates to transport logs lumber production in oregon and washington boomed leaving behind treeless hillsides subject to severe erosion during heavy winter rains westerners committed to rapid economic development seldom thought about ecological damage for the long-term costs of such practices was not immediately apparent water and western development it has been said that in the west whiskey is for drinking water is for fighting over throughout much of the west water was scarce but crucial to economic development mining used large amounts of water for cooling the mines and separating valuable ore from worthless rock some companies in california used gigantic water cannons to blast away the vegetation and soil on mountainsides in order to get at underlying gold deposits on the great plains a cattle rancher claimed grazing land by controlling a stream in the west competition for water sometimes produced conflict usually in the form of courtroom battles in many parts of the west irrigation was vital to the success of farming as early as 1899 irrigated land in the 11 westernmost states produced 84 million dollars worth of crops although individual entrepreneurs and companies undertook significant irrigation projects the magnitude of the task led many westerners to look for federal assistance just as they had sought federal assistance for railroad development basically it's too expensive for an individual to do so hey let's get the government to do it when uncle sam wrote one irrigation proponent waves his hand toward the desert and says let there be water we know that the stream will obey his commands the national irrigation association created in 1899 organized lobbying efforts producing the reclamation act in 1902 under that law the reclamation service became a major power in the west as it moved the region's water to areas where it could be used for irrigation reclamation projects sometimes drew criticism however for disproportionately benefiting large landowners a lot of that's going to happen under president theodore roosevelt stay tuned for his administration lack of water potentially posed stringent limits on western urban growth beginning in 1901 san francisco sought federal permission to create a reservoir by damming the hetch hetchy valley on federal land adjacent to yosemite national park in the sierra nevada opposition came from the sierra club formed in 1892 and dedicated to preserving sierra nevada wilderness congress finally approved the project in 1913 and the enormous construction task took more than 20 years to complete los angeles resolved its water problems in a similar way by diverting the water of the owens river to its use even though owens valley residents resisted by trying to dynamite the aqueduct despite potential water worries between the end of the civil war in 1900 san francisco emerged as the metropolis of the west the commercial financial and manufacturing center for much of the region west of the rockies building on the city's role as the major port city on the pacific coast san francisco bankers played key roles in development in the west channeling profits from gold and silver mining into railroad and steamboat lines and manufacturing enterprises by the 1800s san francisco was home to foundries that produced locomotives technologically advanced mining equipment agricultural implements for large-scale farming and ships not until 1900 that a few other western cities like denver salt lake city seattle portland and especially los angeles seriously challenged the economic dominance of san francisco boom invest the economy from the civil war to world war one considering the question what were the major changes in the us economy from the civil war ending in 1865 up until world war one which starts in 1914 this is also the last section of the chapter the nation grew dramatically in the late 19th century or excuse me late 19th and early 20th centuries between 1865 and 1920 the population increased by nearly 200 percent from 36 million to 106 million during the same years railroad mileage increased by more than a thousand percent the output of manufacturing increased by a smaller margin agricultural production grew far faster than the population perhaps most significantly the total domestic product per capital and constant dollars nearly tripled growth and depression in the 1870s and 1880s much of this growth was sporadic economic historians think of the economy as developing through a cycle in which periods of expansion or growth alternate with times of contraction which could be recessions or depressions characterized by high unemployment and low productivity although this alternation between expansion and contraction is predictable there is no predictability or regularity to the duration of any given up or down period during the late 19th century contractions were sometimes severe producing widespread unemployment and distress after 1865 a post-war recession lasted until 1867 reflecting sharp dislocations as the economy shifted from wartime production to other ventures after several short expansions and contractions a major depression began in october of 1873 and lasted until march of 1879 and remember that's one reason why the north sort of gives up on reconstruction they're distracted by this panic the period from 1879 to 1893 was generally one of expansion 105 straight months of growth spurred in particular by railroad construction but growth was interrupted three times by contractions totaling 61 months two of them quite short during boom periods companies advertised for workers and ran their operations at full capacity when the demand for manufactured goods fell companies reduced production cutting hours of work or dismissing employees as they waited for business to pick up some businesses shut down temporarily and others closed permanently thus americans living in the late 19th and early 20th centuries came to expect that hard times were likely in the future regardless of how how prosperous life seemed at the moment until the early 20th century federal intervention in the economy was limited largely to stimulating growth through the protective tariff and land distribution programs state and federal governments provided no unemployment benefits though churches and charity organizations sometimes would give out food unemployed workers had to rely on their savings or the earnings of other family members families who failed to find work might go hungry or become homeless in a depression jobs of any sort were scarce and competition for every opening was intense most adult americans therefore understood the wisdom of saving up for hard times whether or not they were actually able to do so the depression that began in 1873 was both severe and long lasting between 1873 and 1879 355 banks closed down a number equivalent to one bank and nine that existed in 1873. state and federal governments did nothing to save failing banks given the crucial role of banks as a source of credit for industry and agriculture bank failures led to a credit contraction that in turn significantly delayed recovery nearly 54 000 businesses failed equivalent to one and nine operating in 1873. the contraction hit urban wage were earners especially hard many lost their jobs or separate a reduced work week workers who kept their jobs saw their daily wages fall 17 to 18 percent from 1873 to 1878 or 9. one massachusetts worker described the consequences for his family in 1875. i have six children last year three of my children were promoted to the next grade in school and i was notified to furnish different books school children were responsible providing their own textbooks back then i wrote a note to the school committee stating that i was not able to do so i then received a note stating that unless i furnished the books called for i must keep my children at home i then had to reduce the bread for my children and family in order to get the required books to keep them at school every cent of my earnings is consumed in my family and yet i have not been able to have a piece of meat on my table twice a month for the last eight months thus long-term economic trends reflect dramatic growth and the short-run boom and bust nature of the economy repeatedly claimed its victims economic collapse and depression in the 1890s another major depression began in january of 1893 and lasted despite a brief upswing until june of 1897. it began when the reading railroad declared bankruptcy a financial panic quickly set in one business journal reported in august that never before has there been such a sudden and striking cessation of industrial activity everywhere industrial plants shut down in large numbers more than 15 000 businesses failed in 1893 more proportionately than in any year since the 1870s at the time no one understood why the economy collapsed so suddenly and completely in retrospect the slowing of agricultural expansion and railroad construction contributed significantly to the downturn railroad building drove the industrial economy in the 1880s but it slowed and then fell in half by 1893 and 1895. the decline in railroad construction initiated a domino effect toppling industries that supplied the railroads especially steel production of steel rails fell by more than a third and 32 steel companies closed their doors some railway companies found they could not pay their fixed costs especially their obligations to bondholders requiring them to declare bankruptcy by 1894 almost one-fifth of the nation's railroad mileage had fallen into bankruptcy banks with investments in railroads and steel companies collapsed one bank out of every 10 failed between 1893 and 1897 bank failures further contracted credit limiting the possibilities for new investments that would spur expansion no agency kept careful national records on unemployment but a third or more of the workers in manufacturing may have been out of work during the winter of 1893-4 chicago counted 100 000 unemployed people roughly two workers out of five many who cut their jobs received smaller paychecks as employers cut wages and hours the depression produced widespread suffering many who lost their jobs had little to fall back on except charity newspapers told of people who chose suicide when faced with the dire options of starving to death or stealing food many men and some women left home desperate to find work hoping to send money to their families as soon as they could some walk the roads and others hopped on freight trains riding in boxcars the merger movement as the economy finally revived in the late 1890s americans witnessed an astonishing number of mergers in manufacturing and mining a merger movement that lasted from 1898 until 1902. the high point came in 1899 with 1208 mergers involving 2.3 billion dollars in capital the merger movement resulted partly from economic weaknesses revealed by the railroad companies the threat of vicious competition among reviving manufacturing companies prompted reorganization there too the most prominent of the new corporations was the united states steel as the economy edged out of the depression jp morgan began combining separate steel-related companies to create a vertically integrated operation andrew carnegie had never carried vertical integration to the point of manufacturing final steel products such as wire barrels or tubes by vertically integrating to include that very last step morgan threatened to close off a significant part of carnegie's market faced with the formidable prospect of having to build his own manufacturing plants for finished products carnegie ended up selling all of his holdings to morgan for 480 million dollars which is equivalent to more than 1.3 billion dollars today in 1901 morgan combined carnegie's company with his own to create united states steel the first corporation capitalized at over a billion dollars as with railroad construction in the 1880s investment bankers sought two objectives in organizing reorganizing an industry first they wanted to make the industry stable so that investments would yield predictable dividends and second they wanted to make the industry efficient and productive so the dividends would be high so we're looking for predictable dividends and also high dividends toward that end investment bankers not only drove the mergers but also placed their representatives on the boards of directors of the newly created companies to guarantee that those two objectives were the top priority by 1912 the three leading new york banking firms together occupied 341 directorships and 112 major companies investment bankers argue that benefits from their activities extend far beyond the dividends that shareholders received one of morgan's associates predicted in 1901 that as a result of mergers and restructuring production became more regular labor would be more steadily employed at better wages and panics caused by overproduction would become a thing of the past in fact the new industrial combinations failed to produce long-term economic stability the economy continued to alternate between expansion and contraction after the severe depression of 1893-7 for example a period of general expansion was interrupted by downturns in 1903 1907-8 1910-11 and 1913-14 morgan's hopes for stability through centralized control failed to be realized but his activities and those of his contemporaries created many of the characteristics of modern business many industries were oligopolistic dominated by a few vertically integrated companies and the stock market had moved beyond the sale of railroad securities to play an important role in raising capital for industry individual voices john d rockefeller explains the inevitability of big business rockefeller retired in the mid-1890s and devoted much of his time thereafter to philanthropy or charity he also took the time to write some reminiscences which were published as random reminiscences of men and events this excerpt provided provides rockefeller's view on the origins of standard oils monopoly over petroleum the full text of rockefeller's book is available online in several places the exit tells us much about rockefeller's thinking and practices efficiency and economy were central to rockefeller's vision for success in a highly competitive industry for rockefeller these goals were often to be achieved through technology in significant part it was standard oil's extension of its operations to the retail level and the aggressive competitiveness displayed at the retail level that gave the company its reputation for ruthlessness and here we get an idea of why rockefeller took this approach we also learned part of rockefeller's argument for the inevitability of the development of big business and of monopolies and oligopolies basically they're bound to happen and here's why the cleansing of crude petroleum was a simple and easy process and at first the profits were very large naturally all sorts of people went into it the butcher the baker and the candlestick maker began to refine oil and was only a short time before more of the finished product was put on the market than could possibly be consumed the price went down and down until the trade was threatened with ruin this great depression of the 1870s led to consultations with our neighbors and friends in the business in the effort to bring some order out of what was rapidly becoming a state of chaos to accomplish all these tasks of enlarging the market and improving the methods of manufacturing a large way was beyond the power or ability of any concern as then constituted it could only be done we reasoned by increasing our capital and availing ourselves of the best talent and experience it was with this idea that we proceeded to buy the largest and best refining concerns and centralize the administration of them with a view towards securing greater economy and efficiency to get the advantage of the facilities we had in manufacture we saw the utmost market in all lands we needed volume to do this we had to create selling methods far in advance of what then existed we had to dispose of two or three or four gallons of oil where one had been sold before it is too late to argue about advantages of industrial combinations they are a necessity and if americans are to have the privilege of extending their business in all the states of the union and into foreign countries as well they are a necessity on a large scale and require the agency of more than one corporation chapter summary we made it after 1865 large-scale manufacturing developed quickly in the united states built on a foundation of abundant natural resources a pool of skilled workers expanding harvests and favorable government policies the outcome was the transformation of the us economy entrepreneurs improved and extended railway lines creating a national transportation network manufacturers and merchants now began to think in terms of a national market for raw materials and finished goods railroads were the first businesses to grapple with the many problems related to size and they made choices that other businesses imitated investment bankers notably jp morgan led in combining separate rail companies into larger and more profitable systems steel was the crucial building material for much of industrial america and andrew carnegie revolutionized the steel industry he became one of the best known of many entrepreneurs who developed manufacturing operations of unprecedented size and complexity what carnegie did in steel john d rockefeller did an oil others followed their lead producing oligopoly and vertical integration in many industries technology and advertising emerged as important competitive devices one important result was the introduction of both a wide range of new consumer goods and new ways for consumers to purchase things like those mail-order catalogs and the department stores some southerners promoted the creation of a new south through industrialization and a more diversified agricultural base the outcome was mixed the south did acquire significant industry but the region's poverty was little reduced federal policy makers hoped for the rapid development of the west and often used the public domain to accomplish that purpose native americans especially those of the great plains seem to pose an obstacle to industrial development but most were defeated by the army and relegated to reservations throughout the west railroad construction overcame the vast distances making possible cattle raising on the western great plains farming in the central part of the nation extensive mining and lumbering in california especially landowners transformed western agriculture into a large-scale commercial undertaking water posed a significant constraint on economic development in many parts of the west prompting efforts to reroute natural water sources throughout the late 19th century the economy moved through cycles of expansion and contraction with especially severe depressions in the 1870s and the 1890s at the end of the 1890s a large number of mergers in mining and manufacturing were seen as having the potential to stabilize the economy but ultimately they failed to do so