ofound Industrial Revolution. This revolution forever changed the face of America and forced all aspects of society to adapt to the sweeping changes that were taking place. During this period of unprecedented economic growth, both business and labor in the U.S. had to deal with the consequences that accompanied the emergence of radically new technologies and the reluctance of the government to exert any sort of control on our booming industries.
To begin with, it may be helpful to examine the factors that led up to the Industrial Revolution in America and catalyzed the rapid growth of the U.S. economy. First of all, America was laden with precious natural resources necessary for industrial growth. These resources included coal, iron ore, copper, lead, oil, and timber (1,3). The presence of these vital resources in such large amounts gave us an inherent advantage over countries that had to import most of their raw materials (i.e. Great Britain, Japan, etc.). Secondly, the United States was blessed with an abundance of cheap labor, mainly immigrants (1,3). Thirdly, the development of new technologies allowed for more work to be done in less time and by fewer people. Fourthly, foreign investment was plentiful because of the influx of money from wealthy Europeans who sought to make a profit off of America’s industrial success (1,3). And lastly, American businesses profited smartly from the government’s industry-friendly policies such as subsidizing railroads with land grants and loans and supporting American made goods through the presence of protective tariffs (1,3).
All of the above factors combined to have a profound effect on businesses in the United States. Increased business leadership, markets, labor, capital, and government support led to the development of big businesses (2). The first of the nation’s big businesses were the railroads (1,2,3). By laying tracks all across the country, railroad companies were able to link together once-isolated markets and, in turn, make handsome profits. Enterprising capitalists such as Cornelius Vanderbilt managed to gain the upper hand on the competition by using uniform gauged tracks and selling stock in their companies to investors (1,2). In this newly competitive American marketplace, businesses soon found that it was no longer feasible to just peacefully coexist with one another. In a free market economy, they found that it was necessary to kill or be killed. In order to ensure prosperity and eliminate competition, many railroad companies resorted to devious and unlawful tactics. Such underhanded schemes included pooling, in which several companies teamed up to shut out competitors, and offering rebates and kickbacks to favored shippers, while charging farmers and other small customers exorbitant rates (2,3). Methods such as these came to characterize big business in an era of uncontrolled capitalism, where the government did little to intervene and for the most part let American industry turn into a free-for-all.
Other highly influential strategies for amassing wealth and eliminating competition were perfected by the juggernauts of the steel and oil industries, Andrew Carnegie and John D. Rockerfeller, respectively. Carnegie was able to dominate the steel industry through the use of a business strategy known as vertical integration (2). Vertical integration entailed the controlling of every aspect of the industrial process. Carnegie Steel would therefore be in charge of every step necessary to steel making, from the mining of raw materials to the shipping of the finished product (2,3). Rockerfeller’s company, Standard Oil, employed the use of a somewhat different method known as horizontal integration (1,2). This tactic consisted of the mother company acquiring all its competitors and bringing them all under one corporate umbrella. They would then be managed by a board of trustees that Rockerfeller and Standard Oil controlled. Although horizontal and vertical integration were based on slightly different methodologies, they both had the same end result- a virtual stranglehold on that company’s particular market.
After examining all the foul play that was going on and the anti-competitive nature of business during the Industrial Revolution, one would probably wonder why the government did nothing to reform big business. There are several answers to this question. First of all, it was the prevailing mindset of the time that business should not be regulated by the government, but by the law of supply and demand (1,3). According to economist Adam Smith in The Wealth of Nations, competition between companies would drive down prices and increase the pressure to make better goods (1,3). This theory of unbridled capitalism is known as “laissez-faire”. By the late nineteenth century, however, it was evident that the monopolistic trusts that were being formed were clearly working against competition in the marketplace. Even so, big businesses were able to avoid government intervention by invoking the laissez-faire theory time and again (1,2,3). Another factor that helped businesses ward off government regulation was the theory of social Darwinism. According to this doctrine, the wealth of the country was better off in the hands of the wealthy because they were the “fittest” of capitalists (1,2,3). Any action that worked against this unbridled capitalism was contrary to natural law and would weaken the evolution of the species.
Because business was changing so rapidly in the United States during the Industrial Revolution, it was only logical that the soul of business- labor- would also experience drastic change. During this period, the standard of living did increase for most people; however, sharper class divisions also arose between the upper, middle, and lower classes (4). The concentration of wealth also shifted more into the hands of the privileged few- by 1890, the richest ten percent of Americans controlled nine-tenths of the nation’s wealth (4). Another consequence of the growth of industry was the emergence of a larger middle class. The growth of larger corporations caused the need for more people to fill middle-level managerial positions (4). This in turn caused the need for more service-oriented jobs such as doctors and lawyers. But while the growth of the middle class was certainly a positive aspect of the Industrial Revolution, its virtues were most definitely offset or surpassed by the plight faced the poverty-stricken masses. By 1900, two-thirds of all Americans worked at wage earning jobs where their pay was determined by supply and demand (4). Because of the great multitudes of immigrants, wages barely rose to the level needed for subsistence. Workers had to work long hours at tedious jobs, without any real hope of ever being promoted. During this time, many women and children were forced into the workplace to provide for their families. Although it was necessary for many
children to abandon school and go to work, this neglect of education almost certainly ensured that they would never advance far up any sort of corporate ladder.
Early attempts to improve wages and working conditions generally failed for several reasons. First of all, companies used lockouts to close factories before labor movements could get organized (4). Secondly, employers circulated black lists containing the names of pro-union workers (4). Thirdly, workers often had to agree not to join unions in order to obtain employment. And lastly, when a strike did occur, companies would call in private guards and obtain court injunctions (4).
In order to better their chances of attaining increases in wages and improvements in working conditions, laborers in the nineteenth century began forming national unions. The first of these was the National Labor Union. After achieving its greatest accomplishment of shortening the work day for government employees to eight hours, it collapsed due to the Depression of 1873 (4). The second national union was the Knights of Labor. In order to protect themselves from harassment by employers, the Knights remained a secret society until 1881. At their peak, they achieved a membership of 730,000; but after the Haymarket Square bombing they slipped back into the woodwork and eventually disappeared (4). The final and most influential union of this period was the American Federation of Labor, organized by Samuel Gompers (4). Unlike previous unions they concentrated on attaining practical economic goals. Through walkouts and collective bargaining agreements they gradually scored small but significant victories for
labor (4). The AFL pioneered the way for unions to come and is still alive to tell the story today.
The Industrial Revolution, despite all its ills and detrimental causes on society and on the nation in the late nineteenth and early twentieth centuries, has to be credited with advancing the United States to the place where it is today and creating for us a sort of Golden Age of prosperity. One way to think of it is as a necessary evil- it had to happen in order for our country to stay in existence, and we should just be glad that it occurred one hundred years ago, and not today.