The Industrial Revolution in America

continent

Railroad Building: Changing the Landscape

The story of the destruction of Native American cultures is intimately connected with the building of railroads across the western part of the United States. During the period of struggle between Indians and whites in the late 19th century, Indian leaders often traveled east to plead their case before sympathetic audiences. One chief was asked what could be done to help preserve the Indian cultures of the West. His answer: “Stop building the railroads.” He may as well have asked for the sun to stop shining. The building of the transcontinental railroads and all their branches was an inevitable part of the Industrial Revolution that drove America following the Civil War.

The building of the first transcontinental railroad by the Central Pacific and Union Pacific Railroad companies was a monumental feat. Whether the men were battling winds and blizzards on the open plains, or tunneling through the Sierra Mountains at the painfully slow rate of eight inches per day, the work was grueling and dangerous. Every mile of track was laid by hand; every spike was driven by strong men with hammers; every wooden tie was lifted into place by railroad workers, sometimes called “Gandy dancers.” The workers who built the railroad came from the ranks of immigrants who flooded the country following the Civil War: They were primarily Italians, Irish, and Chinese. The Chinese especially became very adept at the skills necessary to tunnel through the California Sierra Mountains, using hammers, chisels and black powder to blast through the rock.

promontoryPlans for the first railroad had begun well before the Civil War. In fact, the Central Pacific started building east from Sacramento, California, in 1863. But the Civil War delayed progress until 1865. Then the Union Pacific started out from Omaha, Nebraska, and the two companies worked towards each other to cover almost 2000 miles. In addition to the physical challenges of the mountains, plains, cold and heat, the workers were constantly harassed by Indians who felt that the building of the railroads across reservation lands was a violation of their treaties. Indians also understood that the railroads would bring even more white settlers into their territory, which could hardly bode well for their existence, a condition which had already become tenuous in any case. Indeed, the completion of the first railroad in 1869 at Promontory, Utah, as well as the other transcontinental lines that followed in the ensuing decades, changed the lives of the Plains Indians forever.

In addition to labor and materials, the railroads obviously needed large amounts of capital. Since the federal and state governments saw the railroads as a boon to national and local economic prospects, they were willing to underwrite much of the cost by distributing to the railroads the one commodity which they held in abundance: land. Across the vast open spaces in the West were millions of acres of arable land. That resource, however, could not be converted into profitable farming land without some means for the farmers to get their produce to market. No one would pay a substantial price for land until the prospect existed that a railroad would be constructed to move cattle, grain and other products to urban areas.

Rather than giving funds directly to the railroads in the form of grants or loans, the government divided the land along the railroad rights-of-way into square sections, and alternate sections were given to the railroads. The remaining sections were sold directly to settlers. The government could command a much higher price for land that would be serviced by a railroad, and many settlers willingly paid a premium for the promising sites. Conversely, the lands granted to the railroads could be similarly sold to settlers in order to raise the necessary capital for the actual building. There is no question that this great land giveaway benefited the railroads, the settlers and, indirectly, the workers employed in building the long lines. But the land-grant legislation also provided for the right of federal agencies to use the railroads at discount prices once they were completed. Historians have estimated that the federal government recouped most of its investment during the period of the First World War, when thousands of troops and tons of supplies were moved by rail.

Any time large amounts of money change hands, the opportunity for corruption and misuse of funds is bound to exist, and the building of the railroads proved to be no exception. The owners of the railroad companies formed a construction organization called Credit Mobilier, which was owned and controlled by the same people who owned the railroads. The railroad executives then awarded lucrative contracts to Credit Mobilier, thus lining their own pockets. In order to keep the government from getting too fussy about how this shady business was being transacted, the corporation gave hundreds of shares of stock to congressmen, senators and state legislators. The pretext for such handouts was that the donations would allow government officials to exercise oversight over the roads themselves. In the end, millions of dollars were raised, often changing hands under the table; huge profits were enjoyed, to the benefit of thousands. But in the long run, many miles of railroad track often failed to produce profits and ended up being written off as losses.

What about the farmers who quickly came to depend on railroads for their livelihood? Unfortunately they soon discovered that the railroads, which had a monopoly on the only transportation medium that served their direct needs, could exploit them outrageously. Railroads charged any rate they chose, including fees for storage of farm goods such as grain in railroad-owned silos. They even manipulated railroad rates to take advantage of people in areas on short spur lines who had only one avenue to get their produce where it needed to go. Such exploitation helped to fuel the farmers’ movement which eventually became the core of the Populist movement. It also contributed to the passage of the Interstate Commerce Act of 1877.

Like most other technological advances of that industrial era, the railroads did much good and considerable harm. They changed the lives of Americans in ways of which we are scarcely aware, such as altering our concept of time; railroad managers created the four time zones. The phenomenon of the white collar job was generated largely by railroads, who employed thousands of clerks to manage schedules, billing, and myriad other jobs that were part of the operation of any large corporation.

Even today, in the 21st century, railroads move millions of tons of materials and products far more efficiently than they can be moved by any other means. Railroads no longer occupy the romantic imagination of travelers as they once did, but they remain a vital part of the American economy.

Major points of Railroad Construction:

When the golden spike was driven at Promontory, Utah, in 1869, poet Bret Harte composed some lines in commemoration. The poem began:

What was it the engines said,
Pilots touching head to head.
Facing on the single track,
Half a world behind each back.

The first through train carrying 500 passengers arrived in Omaha within hours of completion of the link. The event was greeted with parades, fireworks, church bells, speeches, thanksgiving services and general hoopla from coast to coast.

The Industrial Revolution in America

If a farmer living in 1500 had suddenly been transported to the year 1800, he might have noticed some changes, but they would hardly have been startling. Most labor was still accomplished by human muscle and animal power; ships were propelled by wind and sails; and transportation, even over modest distances, was measured in days or weeks, not hours. But if you took a farmer or artisan from 1800 and set him on the ground in 1900, the visible changes would no doubt have overwhelmed him.

Although we cannot imagine life in the year 2100, it must be said that the 19th century was the century of the greatest change in the history of man. True, the airplane, spaceship and atomic bomb were products of the 20th century, but those inventions were not unimaginable in 1900, and they did not have the overwhelming impact of, for example, the train powered by a locomotive that forever changed man's appreciation of the concept of time. When the first transatlantic cable was laid in 1858 and Queen Victoria exchanged a message with the President James Buchanan of the United States, people thought a miracle had been wrought.

The accelerating rate of change between the end of the Civil War and the turn of the century was truly astounding. The inventions of Thomas Alva Edison, the entrepreneurial genius of Rockefeller, Vanderbilt, Carnegie, and the contributions of thousands of other imaginative men and women changed daily life in America. Often the change was for the better, but sometimes it was for the worse. In 1820 the factory had been a small, family-oriented business with perhaps a dozen employees. The textile mills of New England were larger, as were the ship yards along the Atlantic Coast, but in most businesses the owner was also the manager, and he knew the name and something of the life of everyone who worked for him.

By 1880 factories were employing hundreds, even thousands of workers. Owners and upper-level managers rarely saw their workers on a day-to-day basis and had little concept of life in their factories. But the advances were impressive: the light bulb, high-grade steel, mechanical devices of all sorts, mass production, the skyscraper, electric power, internal combustion engines, the transcontinental railroad, canned food and ready-made clothing, indoor plumbing, artificial lighting, and countless other advances transformed the lives of those who could afford to take advantage of such things.

factoryAt the lower end of the economic scale, life did not necessarily get better. As millions of immigrants poured into the country, cheap labor was the norm. While workers attempted to organize themselves for better pay and working conditions, they knew that the hordes of immigrants pouring through Ellis Island and other ports of entry were eager to displace them, even at wages scarcely enough to live on. As machines took over much of the process of manufacturing, workmanlike skills often became irrelevant, eliminating much of the need for skilled labor. A man might stand all day pulling a handle or turning a valve or doing some other mindless, repetitive task, which meant that he could be replaced in minutes should he suffer an injury or illness.

As the cities rose and bridges, rail lines, and port facilities expanded, the progress was visible everywhere, even if thousands were too tired or absorbed in their own misery to notice. Large businesses required clerks, accountants, and other white-collar workers, and the new middle class prospered as never before. The weekend, usually consisting of a free half-day on Saturday and all day Sunday, gave workers a chance to rest. As the workday shortened and leisure time increased, the abundance of cheap newspapers and magazines provided endless sources of information for the literate and curious. Schools and universities expanded dramatically. Among very poor people, however, children were often sent to the factory rather than to school, and truant officers often roamed the halls of the factories, driving students back to the classroom. In many cases, the parents would tell the children to return to their places of work as soon as possible; every family member had to produce income if the poor family was to survive and prosper.

Even in those harsh conditions, reforms were underway. The status of the working man was recognized when the first Labor Day was celebrated on Tuesday, September 5, 1882, in New York City. The paid summer vacation became an expectation for many middle-class workers. Although health insurance, unemployment insurance and accident benefits did not evolve fully until the Progressive Era, millions of Americans found life easier and more pleasant than they had during the early 19th century.

Industrialization in America, slow to start because of the Civil War, took off during the last half of the 19th century, so that by the year 1900 American steel production had far outstripped that of the rest of the world. The United States had over 200,000 miles of railroads by 1914, about as many miles as the rest of the world put together. American farm products and manufactured goods were shipped abroad in a growing American fleet of merchant marine vessels, and American travelers toured the globe in search of interesting spectacles.

The “Robber Barons”

Back in the time of Thomas Jefferson, the enemies of freedom included what he and his fellow Republicans called the “aristocracy.” By that he meant monarchists, men of the British upper class (and their American imitators) who wielded unrestrained power. In other words, unbridled government. By the latter part of the 19th century, a new aristocracy had arisen in America—the “great captains of industry.” Those industrialists, bankers, traders, merchants and their ilk were called the robber barons, and the only power sufficient to rein them in was government. So Jefferson's enemy of freedom—big government—became the means of protecting the people from the monied aristocrats.

robber barons

John D. Rockefeller arose from a position of bookkeeper to create the Standard Oil Company in 1870, becoming in the process the richest man in the world and America’s first billionaire. Ruthless in his business practices, he drove smaller oil companies out of business by accepting short-term losses in the sale of kerosene and other products, undercutting the prices of competitors. By 1904 Standard Oil controlled about 90% of the oil business in the United States and had large investments overseas. (See Ron Chernow, Titan: The Life of John D. Rockefeller, Sr., (New York, 1998.)

Cornelius “Commodore” Vanderbilt started working at age 11 as a deck hand on his father’s ferry boat on the Hudson River. In due course he became owner of his own boat and was soon engaged in the lucrative Hudson River traffic between New York and Albany. With the profits he made from his boat business he began to invest in railroads in the 1830s, eventually owning a number of lines that merged into the Grand Central Railroad, which operated between New York City and Chicago.

Andrew Carnegie started working in a factory at age 13 for twelve hours a day, six days a week, for about two dollars a week. Bright, industrious, and a voracious reader, Carnegie was the epitome of the self-made man. From his job as a telegraph operator for the Pennsylvania Railroad, he rose in the company and became more widely engaged in the railroad business. With the capital he accumulated, in the years after the Civil War Civil War he turned his attention to the production of iron goods. By creating profitable partnerships and investing widely and wisely, he eventually saw his Federal Steel Company become the core of the United States steel Corporation, the first billion-dollar industry in the world.

Later in life Carnegie turned to philanthropy, funding educational and cultural facilities, including over 3,000 libraries in 47 states and around the world. He funded the Carnegie Institute of Technology in Pittsburgh and Carnegie Hall in New York City. By the time of his death Carnegie had bequeathed several hundred million dollars, the equivalent of over $4 billion in current terms. He also encouraged his fellow millionaires to meet the responsibilities that accompany the accumulation of wealth, suggesting that it was wrong for a person to die rich.

Management of the huge sums of money needed to form and operate the giant corporations of the industrial era required skillful financiers. J. Pierpont Morgan began work in his father's London bank in 1857. He soon moved to America, where he worked at various investment banks, eventually becoming founder of J.P. Morgan & Company. He was the driving force behind the rise of the House of Morgan, an international entity that became one of the most powerful instruments of commerce and diplomacy in history.

Seen by many observers as arrogant and overbearing, J.P. Morgan orchestrated many of the biggest financial deals of the industrial era, such as the creation of United States Steel. He used his financial power to gain control of railroads and other industries. Morgan also had a huge impact on national and international financial affairs, as the Morgan Bank often served as an adjunct to the United States Treasury. He spent lavishly on works of art, eventually leaving much of his collection to the Metropolitan Museum in New York. Although not as wealthy as some of the industrialists of that gage, he nevertheless controlled billions of dollars. (See Ron Chernow, The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance, New York, 1990.)

All those men and dozens of others like them exercised an extraordinary degree of control over the commercial life of the United States. Their interests interlocked; bankers and industrialists frequently shared seats on each other’s boards of directors, so that the interests of the many contributed to the wealth of the individual corporations. They exercised substantial control over governments, often coming to the rescue in times of financial crisis by pumping dollars or gold into the financial arena. Political leaders frequently used institutions like the House of Morgan to finance government operations and perform diplomatic functions, both in peace and war. In many ways the large corporations exerted more power over the state of the nation that did the government, sometimes for good, often for the benefit of none but themselves.

EdisonThomas Alva Edison started work as a telegraph operator. His technological skills eventually led to the award of over 1000 patents for his own inventions. Best known for his incandescent light bulb, recording and motion picture machines, he was also a successful businessman who was instrumental in creating America’s first network of power companies. His famous laboratory in Menlo Park, New Jersey, was frequently the scene of discussions between Edison and other industrialists such as Henry Ford. He is famous for his maxim, “Genius is one percent inspiration and ninety-nine percent perspiration.”

All those men and dozens of others like them exercised an extraordinary degree of control over the commercial life of the United States. Their interests interlocked; bankers and industrialists frequently shared seats on each other’s boards of directors, so that the interests of the many contributed to the wealth of the individual corporations. They exercised substantial control over governments, often coming to the rescue in times of financial crisis by pumping dollars or gold into the financial arena. Political leaders frequently used institutions like the House of Morgan to finance government operations and perform diplomatic functions, both in peace and war.

Monopolies, Trusts, Pools and Corporate Integration

In an age of fiercely competitive practices, businesses sought means of controlling markets in order to maximize profits. The most obvious way to influence the market was to create a monopoly. When a corporation achieves monopolistic status, it is large enough to dominate the market for the products it makes, thus being able to control prices. A monopoly does not have to control the entire market; economic theory suggests that once a corporation has about a one third share of the market, it has become monopolistic. In modern times, however, the rise of a global economy and international competition has influenced the way individual nations view monopolistic practices. (A close examination of the Microsoft Corporation revels how the issue of monopoly control plays out in more modern times.)

Monopoly control of markets was achieved by the organization of trusts. The standard oil Company offers an example. Between 1868, when the first Standard oil company was founded in Pennsylvania, and 1900, Rockefeller's Standard Oil Corporation brought other companies under its control, some of which were founded by Rockefeller himself. Standard oil companies existed in Ohio, Iowa, New Jersey, California, and elsewhere. Standard also gained control of competing companies such as Atlantic Refining, Acme Oil Company and others. By 1900 the Standard Oil Trust exercised near full control over the oil industry in the United States.

Less formal monopolistic practices included the creation of pools, which consisted of companies that were not legally organized together but nevertheless entered into agreements to control market share, pricing, distribution and so on.

Yet another means by which corporations sought to increase profits was through integration, both horizontal and vertical. Horizontal integration was similar to the formation of trusts, except for the fact that this practice involved the simple takeover of smaller competing companies rather than leaving them technically under separate management. Standard Oil would open new outlets in areas they had not yet reached, sometimes undercutting local companies until they folded or sold out to Standard.

Vertical integration involved a corporation's expanding its operations both up and down the production chain from the procurement of raw materials to the actual retail sale of products. In the steel industry, vertical integration would involve the acquisition of sources of coal and iron ore, the basic raw materials needed for the creation of steel. A company such as Carnegie Steel also acquired fleets of ore boats to move raw materials on the Great Lakes. Oil and steel companies also built railroad spurs, sometimes to avoid the monopolistic practices of their carriers. In the oil business, vertical integration might involve creating a chain of gas stations or businesses that would sell kerosene and other petroleum products direct to the public.

Until the government was able to organize the means to control such practices, corporations in the steel, oil, tobacco, meatpacking, and other industries struggled to control their respective markets. The only restrictions on their predatory practices came from competitors, and when they were eliminated, the giant corporations were able to dictate conditions for the marketing of their products. (The Interstate Commerce Act and Sherman Antitrust Act will be discussed below.)

Certainly the wealth of men like Carnegie provided the wherewithal for philanthropy, which in turn brought great benefits to the American people in the form of universities, hospitals, libraries, museums, parks, and countless other contributions to American society and culture. Advances in science, medicine and the arts were financed through the generosity of those captains of industry and finance. John D. Rockefeller funded medical research to attack chronic disease that plagued poorer segments of society. He also gave generously to Spelman College in Atlanta, an elite college for Black women named in honor of Rockefeller’s wife, Laura Spelman. Despite their well-publicized public generosity, their callous disregard for the plight of those they exploited made the Robber Barons pariahs in the minds of the public. They built great institutions, amassed great wealth, did much good and much harm. Individually and collectively they have been studied in detail. Among the noteworthy industrialists:

(See Charles R. Morris, The Tycoons: How Andrew Carnegie, John D. Rockefeller, Jay Gould and J.P. Morgan Invented the American Supereconomy, New York, 2005.)

Gilded Age Home | Updated August 28, 2013