In the 1880’s, Americans built railroads at a frantic pace. By 1890, there were 167,000 miles of railroad track connecting the nation from north to south and east to west.
Railroads did more than connect the nation. Railroads required standardized times to insure a consistent schedule for trains. In 1883, the railroad companies established 4 time zones in the U.S. to coordinate delivery and pickup schedules.
Railroad companies introduced sleeping cars to accommodate long-term travel. Railroads also developed refrigerated cars to facilitate the transport of perishable food items across the nation. For the first time, states could transport agricultural goods anywhere in the nation and establish new markets for those goods. Factories could ship their products across the nation to consumers anywhere.
Railroad companies became the first “big businesses” in the nation. Railroads consumed more than half of the nation’s steel between the 1860’s and 1890’s, along with 20 percent of the coal production.
Unfortunately, railroads’ business practices often outstripped the government’s ability to enforce ethical business practices. Jay Gould (of the gold market cornering fame) and other railroad owners became known as “robber barons” for their cutthroat business practices.
Railroad owners constantly sought to gain new customers and retain new ones. Railroad companies offered secret rebates to some customers, while other customers paid top rates for the same services. Rebates led to deflation in the national economy. Railroads also met competition by either destroying rivals with drastically reduced prices or, if that couldn’t work, by engaging in anti-competitive cooperation to maintain high shipping prices (called “pooling”). Railroads broke state laws against “economic conspiracies” whenever they engaged in pooling.
Customers grew angry when they learned of the railroads’ business practices and demanded action. Railroads crossed state boundaries and therefore were considered above states’ abilities to regulate them. States created railroad commissions, but railroad companies challenged the commissions. One case made it to the Supreme Court: Munn v. Illinois in 1877 led to a Court ruling that upheld commissions’ ability to regulate railroad rates within state boundaries.
The question became what to do when railroads crossed state boundaries — which the largest ones did. In 1886, the Court ruled in Wabash, St. Louis, and Pacific Railway Company v. Illinois that enforcement of Illinois law infringed on interstate commerce. Only Congress could provide relief from the anti-competitive practices of the railroads. Congress finally passed the Interstate Commerce Act in 1887 that created the Interstate Commerce Commission and gave it the power to investigate complaints against railroad companies. The law also prohibited rebates and pooling.
The ICC was the first federal regulatory commission. Before its creation, each state had managed its own business affairs. In spite of their effect on businesses, railroads’ expansion helped draw the nation together after the Civil War.
Big Business and Monopolies
The nation experienced more economic downturns from 1881 to 1885 and 1887-1888. Falling prices caused by anti-competitive practices tightened the money supply. On the other hand, businesses that faced intense competition struggled to produce profits. These businesses — such as steel, oil, and railroads — responded with practices to eliminate competition by creating monopolies.
The best-known monopoly was John D. Rockefeller’s Standard Oil. Rockefeller founded the Standard Oil Compnay in 1870. First, Rockefeller worked to get rebates from the railroad companies. Secondly, Rockefeller began buying competitors. By 1880, Rockefeller controlled 90% of the oil-refining capacity of the nation. Rockefeller also began purchasing companies that supplied products to Standard, creating both “horizontal” (oil-related) and “vertical” (suppliers) monopoly status.
Standard Oil could not legally own stock in other oil companies; nor could it legally conduct business in states other than Ohio. Registering in other states would give competitors a legal means to determine the company’s next moves. Therefore, Standard Oil responded with the trust, an informal common control of businesses in a certain market.
Standard Oil’s stockholders agreed to create a board of nine trustees to manage the company’s affairs. This board held the company’s stock “in trust” and conducted business on behalf of the company. The trust selected the board of directors and set policy for subsidiaries in other states. While the company could not legally operate outside Ohio, the trust could operate anywhere.
Trusts were used to control markets by controlling production and prices. Trusts also fixed prices below market value to drive competition out of business or to the point where the trust could purchase competing businesses.
The trust’s success was short-lived as states responded with laws that eliminated its advantages. First, states passed laws allowing corporations to operate across state lines by opening branches in other states. New Jersey and Delaware passed “holding company” laws that allowed large companies to hold stock in smaller subsidiaries.
Andrew Carnegie formed a monopoly in steel production with the Carnegie Steel Company. Carnegie rose from working as an immigrant in a textile factory to owning the largest steel company in the nation. Improvements in steel-making helped Carnegie reduce the cost of steel rail for railroads from $58 a ton to $25 a ton. Carnegie bought mines to insure coal and iron ore supplies; boats to ship ores to railroad terminals; railroads to carry the ore to mills; and sales companies to sell his steel across the nation.
Improvements in steel production revolutionized American industry. Cheap steel led to new tools to cut and manipulate the metal in new ways. Steel became a mass-produced commodity.
Both Rockefeller and Carnegie used management techniques to standardize practices in their industries, leading to more efficiency and greater quality of their products. Supplies of oil and steel went from being scarcities in businesses to being accepted as part of life.
Invention in America
While Rockefeller and Carnegie transformed American business practices, others were transforming other parts of American life. Alexander Graham Bell invented the telephone in 1876; by the end of the century, telephone lines crossed the nation. In 1878, the typewriter was invented. Then, in 1877, Thomas Edison created the phonograph, allowing the recording of sound and its preservation. Edison’s laboratory in Menlo Park, NJ became the center of American invention. Edison followed the phonograph with the invention of the incandescent light bulb in 1879. The light bulb led to the expansion of the electric industry. In a move that helped determine the future of the industry, Edison’s rival, George Westinghouse, pioneered the development of alternating current to allow electrical transmission farther than Edison’s direct current process.
Electricity’s expansion led to greater developments in urban transportation. Electric streetcars began replacing horse-drawn cabs in the 1880’s.
Workers’ Rights
Industrialization led to major transformations in the American work force. In 1877, more than half of American workers worked in agriculture. In the 1870’s, immigrants fleeing troubles in Europe began entering the work force, especially from Ireland, Germany, Britain, and Scandinavia. Most of the immigrants stayed in large cities in the North and Midwest.
Skilled workers face challenges as mass-production industrial techniques began replacing the need for long-term apprenticeships; anyone could stand at a machine all day and produce far more pieces than a skilled craftsman could make in a week.
Workers often worked 12-hour days, 7 days a week. Conditions were dangerous, especially in mining and steel production. From 1880 to 1900, 35,000 workers died on the job, and another 500,000 were injured. Workers had no sick leave or sick pay; vacations were rare, and retirement was almost unknown. Businesses placed profits above worker safety and well-being.
Workers responded with the creation of unions to provide protection and power against their employers. (Definition of Labor Union: a group of workers joined to protect and promote their interests, especially by dealing as a group with their employers.)The National Labor Union (NLU) was formed by several trade unions in 1866. Unfortunately, the NLU faded before 1870.
Railroads faced the first labor issues. Professional employees such as engineers, firemen, and brakemen were difficult to replace, giving them greater leverage in negotiations. When these employees came together to create unions, company executives saw them as competitors for power within the companies.
On 1 July 1877, the eastern railroads cut their employees’ pay by 10% (remember the Panic of 1873? It’s still going.). Employees called an unplanned strike. General strikes spread to the large cities; in Baltimore and Pittsburgh, strikers battled the state militia. Governors called the state militia in other states as well. Eventually, the federal government sent in the army. Hundreds were killed.
The Noble and Bold Order of the Knights of Labor emerged from the chaos, calling on greater government intervention on behalf of workers. The Knights had few membership requirements, giving it the ability to grow quickly and spread across the nation. By 1885, the Knights had more than 100,000 members, including women and blacks. In 1885, the Knights conducted a strike against Jay Gould’s railroad. When the Knights won official recognition to represent Gould’s employees, membership swelled to more than 700,000 members. When the Knights called another strike in 1886, Gould used his influence to get the police to break the strike.
Violence became an unfortunate affair in many strikes. On 4 May 1886, Chicago workers came together in Haymarket Square to protest police interference in a strike against the McCormick Company (of mechanical reaper fame). When the police tried to break up the meeting, a bomb went off, killing a policeman. Other police responded by firing into the crowd. Seven policemen and 2 demonstrators died, and 70 were injured. Eight people were charged with the bombing, but none of the people arrested had taken part in the Haymarket Square protest. Four of the 8 were executed, 1 died of suicide, and the other 3 went to prison.
The Knights’ leader, Terence Powderly, had often questioned the wisdom of striking and vigorously opposed violence. However, the conservative business leaders and politicians blamed the Knights for the violence at Haymarket Square and other strikes across the nation.
Samuel Gompers had never agreed with Powderly’s non-violent tendencies. Gompers rose through the Cigar Makers International Union. In 1886, Gompers and other union leaders organized the American Federation of Labor; its participating unions represented over 150,000 workers. The AFL, however, represented only craftsmen and skilled workers. The AFL never tried to organize other workers beyond this base. The union grew to 300,000 within 10 years and helped its members win new rights, but it never tried to spread those benefits to the hundreds of thousands of unskilled workers in the nation.
Agricultural Trends and Westward Expansion
The South and West experienced major changes as industrialization spread from the Northeast and Midwest. The Indians may have resisted their confinement to the reservations, but after Custer’s defeat at the Battle of the Little Big Horn, little could be done to stem the tide of American settlers moving west. Geronimo managed to continue resistance in the Southwest, but after his capture he was taken to Florida in exile. Geronimo died in Fort Sill, Oklahmoa in 1909.
Congress passed the Dawes Severalty Act in 1887. Senator Henry Dawes of Massachusetts gave the act its name. The Dawes Act split Indian reservations into 160-acre tracts for the Indians to farm. Unfortunately, the Indians did not care to farm in this fashion, and the Act allowed unclaimed land to be taken by white settlers.
Meanwhile, mining booms and busts spread across the West as gold and other metals were found. Camps mushroomed overnight, only to disappear once the mines played out.
Elsewhere across the West, cattle ranchers raised cattle in several states. Cattlemen in Texas sent their cattle to Kansas and Nebraska for rail transport to slaughterhouses in Chicago. Before long, however, cattle farming moved closer to Chicago and the railroads. Cattle farming entered a huge boom as railroads could carry Western cattle to markets in the East and Europe.
In 1885-86, the boom came to an end when the price for beef plummeted. Many farmers lost everything in the bust. Other changes came as sheep ranchers moved west. Other farmers soon adopted a new invention: barbed wire. With barbed wire fences, the open range came to an end.
The End of Reconstruction
In the South, Republicans withdrew federal troops following the 1876 election. This election saw the Democrats regain control of Florida, Louisiana, and South Carolina. Democrats stood for white supremacy and limited government. Many Democratic politicians saw themselves as “redeemers” who had rescued the South from the Republicans and their pro-North, pro-business, pro-integrationist policies. Democrats maintained control of the South for the next decades through voter intimidation and appeals to white supremacy.
Industry moved south in the 1870’s and 1880’s. Railroads expanded to twice what they had been in 1860, but the track mileage still amounted to only 19,430 miles. Southern forests provided lumber for the nation, while vast deposits of iron ore brought steel-making to the South. Birmingham, Alabama became known as the “Pittsburgh of the South” for its steel industry. Textile mills sprung up to take advantage of the region’s cotton plantations and farms.
Southern cotton plantation owners faced a huge problem at the end of the Civil War: the loss of their slave labor. Farmers devised the “sharecropping” system to compensate. Poor families were allowed to farm part of the plantation in return for a portion, or “share,” of their crop.
The South faced another major problem: segregation. Congress passed the Civil Rights Act in 1875 to prohibit racial discrimination in public accommodations. However, the Supreme Court ruled in the Civil Rights Cases of 1883 that congress could prohibit only state actions by the 14th Amendment. Individual acts of discrimination were a state matter. Southern states chose to do nothing about individual acts of discrimination. Before long, opposition to Black voting began to grow, leading to violence in some areas of the region. Blacks began seeing segregated facilities across the region as well as state legislatures began writing new laws enforcing segregation.
Some blacks responded by creating rival networks to provide opportunities. Booker T. Washington started the Tuskegee Institute in 1881; black churches became the backbone of black culture.
The South also introduced a habit to the nation: cigarettes. James Buchanan Duke invented a cigarette-making machine that allowed his company to make more than 800 million cigarettes annually by 1880.
Political Developments, 1877-1887
The Democrats and Republicans faced major problems following the electoral stalemate of 1876. Most elections were close affairs. The Republicans won the presidency in 1876, 1880, and 1888, while the Democrats won in 1884 and 1892. Control of the Congress swapped several times.
Voters turned out in large numbers for elections, with as many as 80% of eligible voters voting in nationwide elections. Morality and religion often dictated voting patterns. Republicans supported Protestant morality and government policies enforcing it. Democrats, favoring a smaller government, supported non-government interference in what were perceived as private matters.
Both parties had to contend with issues such as the gold standard, taxation, and protective tariffs. Voters in the South and West favored a silver standard so there would be more money in the system, but the Northeastern industrialists favored the gold standard.
The question of the Panic of 1873 continued: Should government participate in the nation’s economy? Republicans said yes; Democrats said no.
Rutherford B. Hayes, the winner of the 1876 presidential election, wanted civil service reform; Congress wanted a continuation of the “spoils system.” Congress passed the Bland-Allison Act in 1878, calling on the government to buy silver on a monthly basis. Hayes vetoed the bill, but Congress overrode his veto.
Hayes served only 1 term. The Republicans chose James Garfield from Ohio to run as their presidential candidate in 1880, while the Democrats chose Winfield Scott Hancock, a Civil War general. Unlike Grant, Hancock lost.
Garfield was assassinated only 4 months into his presidency by Charles J. Guiteau, a mentally ill man who was upset Garfield didn’t appoint him consul in Paris. Garfield died on 19 September and was succeeded by Vice-President Chester Alan Arthur. Garfield’s assassination was a major reason for Congress’ passage of the Pendleton Act in 1883. The Pendleton Act created a civil service system and limited the spoils system. Only 15,000 federal jobs out of 131,000 were classified under the Pendleton Act, but the Act was the beginning of a competent, professional bureaucracy.
Arthur did not run for president in 1884, so the Republicans chose James G. Blaine of Maine for its candidate. The Democrats chose Grover Cleveland, the governor of New York. Cleveland had to overcome the stigma of an illegitimate child for whom he accepted paternity. Furthermore, some major Republicans from the Northeast threw him their support. These Republicans, called “Mugwumps,” felt that Blaine was tainted by corruption and wouldn’t support civil service reform. Even worse, one of Blaine’s supporters said a vote for Cleveland was a vote for “rum, Romanism, and rebellion.” Liquor dealers and drinkers, Catholics and Southerners were not amused. Cleveland won the election.