HUMANITIES 554
KEY INDIVIDUALS, HISTORY:
CARNEGIE, ROCKEFELLER AND FORD AND THE WORLD THEY MADE

AMERICAN BUSINESS, THE AMERICAN ECONOMY AND AMERICAN LABOR (1870-1920): AN OVERVIEW

Key Individuals and Economic Forces

This course begins with the place of John D. Rockefeller, Andrew Carnegie, and Henry Ford in American economic and social history. I have chosen these three business leaders because through them we can best study the forces which made corporate industrial America, the world we live in today. Rockefeller was the first great "trust" builder, buying and forcing out competitors, until at one time, his Standard Oil trust refined 90% of the oil produced in the United States. He was thus a most spectacular example of the movement toward the concentration of economic power in fewer and fewer hands, a movement which developed in our period. Carnegie not only perfected the most efficient steel-making business of his day, but he preached a theory to justify the huge fortunes he and others had amassed. He is therefore important not only as a business leader, but as a theorist in defense of his class. The third of these men, Henry Ford, helped make the automobile a mass product and pushed through a radical reorganization of work in the assembly line. Moreover, he not only changed the way we live and work, but he created a public image with an unusual place in the history of capitalism -- the millionaire as a man of the people.

The title of the course, "Key Individuals," raises a problem. Had none of these particular individuals lived, American life might not have been radically different. This is not to say that these individuals are not worthy of study, or that they did not leave a special mark; rather, it is to say that individuals operate in a particular economic and social context, which plays a large role in determining how they will act. As Glenn Porter, The Rise of Big Business (your reading for this section), makes clear, economic "integration" into larger and fewer business units—popularly known as monopolies—was a general tendency in the American economy. Rockefeller was only the first and most notorious trust-builder. To take another example, Carnegie did not "invent" his intellectual justification for huge fortunes. He used current ideas of Social Darwinism and philanthropy, and by virtue of his business fame and his wealth, he received a hearing that others were denied. Finally, Henry Ford did not, by himself, "create" the assembly line. He was the dynamo behind the efforts of his engineers, managers, and workers, but it was a collective effort, and that effort itself largely pushed forward the tendencies already inherent in industrial capitalism at that time.

You will understand the details of each of these stories better as we move on through the course. The point I am making is simply that I do not believe in "the great man" or "great woman" theory of history. Vast social and economic changes generally do not come about simply because of a single individual. Each may leave his or her mark, but each operates within a particular social and economic context that shapes his possibilities.

Such a view of history certainly isn’t as simple as "the great man" theory in explaining and identifying change, but it is truer to life, and a much more exciting way to understand social change in all its complexity. In no way does it negate the value of studying large-scale historical change through the work of three key individuals like Rockefeller, Carnegie, and Ford.

Our World and Theirs

One of your readings for Part I, Glenn Porter’s The Rise of Big Business, contrasts the world of 1800 and the world of 1900 -- the world of farms and crafts and villages against the world of booming cities, huge impersonal bureaucracies, often meaningless work, and great extremes of wealth and poverty. By developing a further contrast between the years of 1800 and 1970, we can see even more sharply how such people as our three key individuals created the world we live in. Here we merely want to draw the contrast; later, you will learn more about the how and why of the massive change that made the contrasts.

In 1800 the United States was not industrialized. Perhaps 80% of adult white males were farmers, craftsmen, or small business proprietors. In a basic sense, they were masters of their lives by virtue of their economic independence; they were not, in the Marxian sense, proletarianized. In other words, they owned their own shops, tools and land; they owned productive property and did not have to work for others.

Even by 1870, only about 25% of the work force was what we traditionally think of as working class, namely factory, mine, construction, and transportation employees. Even those workers did not usually labor in huge impersonal factories. The average factory or mine in 1870 contained only 8 workers. Many of these workers, moreover, lived in small towns and villages. In fact, 70% of the American population lived in towns of under 2,500 people. For the most part, people still labored according to human rhythms rather than the clock, the assembly line, or scientifically determined work quotas. As one worker recalled the shoe shops of an earlier day from the perspective of 1899:

One man owned the shop; he took in work and three, four, five or six others, neighbors, came in there and sat down and made shoes right in their laps, and there was no machinery. Everybody was at liberty to talk; they were all politicians... Of course, under these conditions, there was absolute freedom and exchange of ideas, they naturally would become more intelligent shoe workers at the present time, when they are driving each man to see how many shoes he can handle, and where he is surrounded by noisy machinery.

Already, in 1899, this shoe worker could look back on a golden age which industrial capitalism had destroyed.

In recent times, the changes are even starker. Some 75% of the American population lives in urban areas. Although not all workers are blue-collar workers (about 35% are), there is a sense in which the vast majority of "proletarians," owning no productive property (land, machinery, tools) and going into the market not to sell products they have made in their own shops, but to sell the only thing they have—their labor. Today, only about 15% of the American labor force are big capitalists, small self-employed proprietors, upper-level managers, and independent professionals (for example, doctors in private practice). The rest work for someone else.

This similarity of condition, the widespread absence of what the early 19th century would have considered essential to personal and political independence—namely the ownership of productive property, is not always visible to people. It is buried beneath the material possessions people do have and which, along with home ownership, now confer not only physical comfort, but a kind of middle-class status, regardless of occupational position. It is concealed beneath the tremendous gradations in the occupational hierarchy in which upward mobility, particularly from blue-collar to white-collar work, now often substitutes as the sign of middle-class status for the 19th-century worker’s goal of self-employment.

On the other side of this mass of workers are tremendous agglomerations of economic power in the large corporations. In 1973, the top two industrial American corporations, General Motors and Exxon (one unit of Rockefeller’s old Standard Oil) had assets of $20 and $25 billion respectively. Each had a net profit of around $2.5 billion. In 1962, out of 420,000 manufacturing concerns, the top 100 held 46% of all assets and garnered 57% of all after-tax profits. A mere 2% of all stock owners owned 58% of all common stock in publicly owned corporations. Finally, in 1959, the top 10% of the U.S. population took 28.9% of total personal income while the poorest 50% of the population got much less, only 22.7%.

The massive agglomerations of economic power in the biggest corporations, the great inequalities of wealth along with wide dispersal of material goods, and the fact that the vast majority of people today work for someone else rather that for themselves—all of these are largely consequences of the rise of big business capitalism in the late 19th and early 20th centuries. They have come down to us from the time of Rockefeller, Carnegie and Ford. In very fundamental ways, we are truly the inheritors of the world made by our three key individuals.

Key Questions

Questions which are still relevant today were first widely asked in the late 19th century. Questions of power and democracy and individualism in an economy of huge economic units, questions about factory labor, and questions of economic and social equality, all were raised in a modern fashion in the era of Rockefeller, Carnegie and Ford. Some of these questions and problems constitute underlying themes of our course.

You should have in mind the following general question:

Who should control the wealth of society?

What justification did individuals give in the late 19th century? Rockefeller answered, "The good Lord gave me my money." Vanderbilt shouted, "Law! What do I care about the law! Hain’t I got the power?" Carnegie, as you will see, argued that the rich deserved to be rich and powerful because they were the most talented and capable, as proved by their success in achieving wealth and power.

On the other side, writers argued that the great fortunes were made by exploiting the labor of workers who had no choice but to work for wages and who had nothing to sell but their power to labor. Some, like Edward Bellamy (of whom you will read), assumed that the wealth of society, produced by the labor of all, belonged to all. In Europe, Karl Marx argued that ultimately all wealth derived from labor, but that capitalists, by virtue of their monopoly of capital, factories, and tools (i.e. productive property), in effect, forced people to work for them and appropriated the profits of their labor to themselves.

Here, in the argument between Rockefeller and Carnegie on the one side and Bellamy and Marx on the other, is the classical confrontation over the control of society’s wealth. It is a debate we will again in this course.

What about economic planning?

Some people believe that the only kind of economic planning occurs when governments do it and that such planning is a threat not only to competition, but to freedom. As you will see in Porter’s The Rise of Big Business, big business acted first to restrain and even eliminate competition, and to institute a form of economic planning over production, prices and profits. Indeed, this was Rockefeller’s driving impulse. It was the cause of the formation of the trusts, pools, and mergers of the late 19th century. We will see, then, that a century ago, industrial capitalism itself began to shift the question from one of whether we should have a system of uncontrolled competition to the question of who should restrain the competition—private individuals or government—for the industrialists themselves often ended uncontrolled competition before government stepped in.

What is the meaning of individualism?

Historically, individualism has had a material base in the ownership of productive property. Only in an economic system in which many individuals held productive property (chiefly farms) could individualism sink deep roots and spread its seeds. In the 1600’s and 1700’s, a "free" person was a person with land or a shop, that is, productive property. Most other people were not owners and therefore not free. They were slaves, indentured servants, bound apprentices, children, and women—all under the control of the master of the household. With property ownership widespread among the white adult male population, individualism took root in the United States.

The 19th century was at once the heyday and the twilight of a new kind of dynamic individualism. Thousands of articles and books poured out the "get-ahead" message. The "self-made man," the cult of Horatio Alger, received a wide hearing. Yet also in this period, particularly in the late 19th century, the opportunities for self-employment and ownership began to shrink. More and more workers became proletarianized, that is, ceased to own productive property or shops. Labor papers and government investigations of the late 19th century burst with the despairing laments of workers no longer able to set themselves up in business. As one machinist told a Congressional Committee in 1883:

Well, I understand that at this present day you could not start in the machinist’s business to compete successfully with any of these large firms with a capital of less than $20,000 or $30,000. That is my own judgment. There have been cases known where men started ten or fifteen years ago on what they had earned themselves... but since that time it appears the large ones are squeezing out the smaller, and forcing more of them into the ranks of labor, thus causing more competition among the workers.

With the economic base of self-employment torn away, the question arises of the meaning of individualism. If it exists today, in what way? What is it based on? How firm are its roots? To what extent do the modern media and modern technology threaten self-determination?

Summary. Throughout our study we shall be asking questions about labor, the meaning of work, and class struggles in American history. You may think it odd that in a course which begins with three business leaders, so much attention is devoted to the labor question. But as you will come to see, the labor question was a key one for owners. Workers are to capitalists as water is to life. For it is the workers who actually produce the goods and services of the society. Labor costs are always a chief concern of the owner, and therefore managing the labor force becomes a prime consideration. Moreover, industrial capitalism, most notably in Carnegie’s Homestead plant and Ford’s Highland Park factory, transformed the way people worked. That is, in studying labor problems we will be studying one of the most important ways in which our key individuals changed the world. We will be asking: how and why were changes in the work process accomplished; what kinds of resistance did they meet; and finally, what was gained and what was lost in human and in economic terms through these changes. Along the way, we will also briefly survey some of the main topics in union history.

Robber Barons

The story of American business in the late 19th century involved some of the most stirring exploits in our history. It is a history filled with incredible feats, unbelievable ruthlessness, intricate financial manipulations, and outright crime. Politicians were bribed, competitors eliminated, laborers worked to death, and the public fleeced. The whole story was best told in the book that named the period, Matthew Josephson’s The Robber Barons (1934), which you will be reading. Rockefeller’s story is told in Ida Tarbell’s History of the Standard Oil Company.

A few of the most spectacular stories of the period are worth recounting here. Perhaps the most unscrupulous of all the Robber Barons was Jay Gould, railroad magnate. His most amazing foray took him into the telegraph business. Jay coveted Western Union. First, he built a telegraph line of his own and before long he was chipping away at Western Union’s business to the tune of $2 million a year. Western Union was forced to buy him out. No sooner was that done than he built another line and again engaged in a furious price war with Western Union. Again the Union bought him out and he agreed to build no more telegraph lines.

Then the serious business began. Gould had his newspaper attack the financial soundness of Western Union, and by adroit maneuvering, he drove down the price of Western Union stock. At a low point, he began to buy, and one morning, he awoke with a controlling interest in Western Union Telegraph Company. He celebrated by declaring a 38% stock dividend!

A favorite trick of Gould’s was to play with the fortunes of one of his own railroads. Through his newspaper, the New York World, and through well-placed rumors, he got it around that his railroad was having a profitable year. In this way he boomed confidence in his stocks, sold them at high prices, and made a handy personal profit. Later he would float a rumor that his railroad was on the skids; the stocks would fall and Jay would begin buying them back, much richer than when the whole game started. Gould even played this little game with the one railroad he really liked. As Matthew Josephson put it, he loved this railroad, "but loving it, he could not help raping it occasionally."

Perhaps the most significant tales of the period involve the construction of the transcontinental railroads in the 1860’s and 1870’s. Linking the Midwest and the West Coast, these lines had to be built over tremendous distances and through and around immense natural obstacles like the Sierra Mountains and the Rockies. Moreover they would be constructed before there was sufficient traffic to make them profitable. Hence it would be difficult to raise the money to build the roads from private sources. To solve these problems, businessmen and politicians came up with a solution: government subsidies. Since many of the new railroads were not likely to be profitable soon, and since the cost of construction was enormous ($30,000-$60,000 a mile), local, state, and federal governments stepped in with loans and gifts to subsidize construction. The Union Pacific, for example, got a $27 million loan and the Central Pacific a $24 million loan from the federal government. More importantly, the roads received gifts of state and federal lands for each mile of track they constructed. All total, the railroads gathered in about 200 million acres of land (about 10% of the total land mass of the continental U.S.). About 70% of this went to four railroads: the Southern Pacific, the Union Pacific, the Northern Pacific, and the Santa Fe. About 11% of California, 18% of Minnesota, 23% of North Dakota, and 22% of Washington were handed over to the railroads to do with as they wished.

These huge grants of land stimulated construction of railroads beyond what was necessary, what was rational, and what was, by any normal calculation, profitable. Railroaders pushed ahead to lay down track, through the snow, over shifting sands and on freezing ground. The track might have to be ripped up and replaced next year, but that did not matter. For every mile of track laid, the roads were granted a parcel of federal land.

To carry on construction, the railroad owners found another profitable venture. They established construction companies—separate companies owned and directed by themselves. Typically these construction companies overcharged on the cost of construction. It has been estimated, for example, that the Pacific railroads cost three times what they should have. Where did the excess go? Into the pockets of the construction company owners. In the process, the railroads themselves were saddled with high costs and excessive amounts of stocks, bonds and other debts which, over the years, had to be paid off by the road. Given this extreme over-building of railroads and construction overcharges, it is not surprising that many railroads went bankrupt. In 1876, two-fifths of railroads bonds were in default, 65 railroads were bankrupt and European investors were about to lose $600 million dollars. 

Robber Barons?

The shenanigans of Jay Gould, the manipulations that attended the construction of the transcontinental railroads, and the ruthlessness of Rockefeller helped to give the period its name and the historians a controversy. You can sample the debate in the collections by Brewer and d’A. Jones mentioned in the bibliography.

Were the "Robber Barons" just criminals, fleecing the public or were they industrial statesmen? Were their methods simply part of the business system, and therefore, forgivable or not depending on whether you believed in capitalism and the accumulation of profit by private individuals? Or is it simply that some were Robber Barons and some industrial pioneers? These are questions you will be asked to answer in your first paper, after you have read Glen Porter’s The Rise of Big Business, Allen Solganick’s "The Robber Baron Concept and its Revisionists," the sections on Rockefeller and Carnegie, and Josephson’s Robber Barons.

These readings provide you with a sampling of the variety of interpretations surrounding the Robber Barons. Glenn Porter locates himself in the "amoral" school. He claims to transcend the old categories of debate as to whether the Barons were "good" or "bad." You will have to judge whether he is successful. In the process you will struggle with the interesting problem of "objectivity" in history, whether it is possible, and whether it is desirable. You must try to discover an author’s biases and implicit judgments. You might ask whether describing what happened as though it were inevitable does not in itself constitute a positive moral judgment that what happened was for the best.

Allen Solganick’s position is quite clear. The barons were not industrial pioneers and life for most people worsened during the period. Solganick claims the figures show that the American economic growth rate, when compared to that of other countries, was not remarkable. Thus, Solganick condemns the Robber Barons, and, apparently, the whole system in which they operated. Josephson’s the Robber Barons, written in the 1930’s, includes much detail. It is essentially the prototype for Solganick’s analysis.

Another position has appeared at the turn of the century. In her History of the Standard Oil Company, Ida Tarbell took a middle ground. She praised the "legitimate greatness" of the Standard Oil Company in creating an efficient business, but she vigorously condemned Rockefeller’s unscrupulous underselling of competitors to drive them out of business and use of secret rebates from the railroads that carried his oil. Tarbell judged Rockefeller against what she considered were the ethics of American competition and fair play, and found him wanting. Tarbell’s position might suggest a question: to what extent did "unfair" competition flow naturally from seeking profits in a capitalist system, and to what extent are there ethical principles within the business system, and finally, to what extent was the golden age of competition, which Tarbell used against Rockefeller, doomed. These are questions you may touch on in your first written assignment.

Competition

It certainly seemed that "pure competition" was doomed in many industries, including the three we are studying. As nature abhors a vacuum, so most economic groups abhor competition. Businesses seek to monopolize markets, farmers want government subsidies, professionals try to limit entry into their profession, and workers form unions to insulate themselves from the competitive labor market.

Rockefeller eventually captured 90% of the nation’s oil refining capacity. When it was formed in 1901 from the steelworks of Carnegie and several competitors, United States Steel had about 60% of the market. General Motors eventually captured almost 50% of the automobile market. It is true that, as Glenn Porter shows, combinations were not always successful. Rockefeller soon lost his almost monopolistic position. Even the highly concentrated auto industry suffers powerful competition from foreign auto makers. Still, the tendency toward concentration and combination seems an inevitable one. Karl Marx predicted it, Glenn Porter clearly thinks it was irresistible, and utopian novelist, Edward Bellamy, whose Looking Backward you will be reading later, was confident that the tendency would lead to one big trust, governing the whole economy, and necessarily, demanding public control.

What did the transition from competition to combination mean? Classically, and very simply, competition among many sellers is supposed to keep prices down and to stimulate better products. Each seller lures buyers with lower prices and a better mousetrap. This model is related to another key idea - The law of supply and demand. If the supply is large relative to the buyers (demand), prices should fall. If the supply is less than the demand, prices will rise. In a truly competitive situation when there is an oversupply, prices will fall to the point at which the least efficient businesses will not be able to make a profit and they will be wiped out. The late 19th and early 20th centuries were simultaneously years in which competition was often fierce and in which industrialists and bankers strove mightily by sometimes "artificial" means to eliminate competition and to restrict production (supply).

In the early stages of their respective industries, Carnegie and Ford exemplified the classical doctrine of competition. Through more efficient production, each continued to cut cost and prices and garnered an even larger share of the market. In fact, through the latter half of the 19th century, before combinations were completely effective, prices dropped throughout the economy, in part, because of more efficient production and competition.

But the "pure" state of competition did not endure. Extreme competition led to such low prices that companies went bankrupt. Extreme competition led to wild price wars and great instability which made long-range planning difficult. Thus industrialists—and investment bankers like J.P. Morgan who had to sell the stocks and bonds of American corporations—sought a way to stabilize the situation and restrain competition. Rockefeller worked in the most direct way possible; he simply bought or forced out the competition and artificially limited the supply of oil. (Porter describes other methods of eliminating competition.)

In no case did these efforts result in perfect monopoly, that is, total control of an industry and a market by one corporation. Rockefeller came closest.

The pattern which usually developed was what economists call "oligopoly." Not one but a few large concerns divided the market and competed by means of advertising, service, and product differences rather than price differences. Typically, the largest corporation in the industry became the "price leader," establishing prices for the whole industry; for the largest unit usually had the power to bring other corporations back into line by temporarily underselling them.

It was in the period we are studying that industrial America was put on the road to oligopoly. In the very period in which competitive individualism was praised to the high heavens and the Darwinian struggle of the fittest to survive proclaimed a law of nature, capitalists and financiers worked hard to temper that struggle, eventually creating great industrial combinations to restrain that most dangerous of all conditions - competition!

Labor in the Age of Big Business

The popular outcry against the growing power of the corporations in the late 19th century forced the U.S. Congress to pass several laws purporting to regulate or break up the combinations. None were very successful; it is possible they were not meant to be. Eventually, Standard Oil and several other big firms were broken up, but they were the exception rather than the rule.

In fact, the Sherman Anti-Trust Act, passed in 1890, was used more frequently against another kind of economic combination - labor unions. It is important to review the labor history of the period so that you have an alternative interpretation to the impression left in Glenn Porter’s The Rise of Big Business, that Americans gladly "embraced" the new industrial order.

Given the destruction of traditional crafts and workers’ control, and the frequency of depressions in the late 19th century (check your reading by Allen Solganick), it is not surprising that workers resisted the imposition of the new economic order, or, that once accepting it, they had to struggle violently to protect themselves within it.

At first, perhaps from 1800-1880, American workers looked upon the industrial capitalist as a subversive, destroying traditional crafts, old patterns of living, the human pace of life, the American ideal of democracy, and the possibility of economic independence through self-employment. The earliest trade unions and indeed, the largest of the century, the Knights of Labor, was dedicated to destroying the wage system. They called it wage slavery and they meant it. As they saw it, huge industrial corporations now forced people to sell their labor, the use of their person, where before workers came into the market as artisans or farmers to sell a product.

The Knights of Labor, which reached a membership of 700,000 in the 1880’s was a union whose leaders resisted the economic division of a society into a capitalist class and a wag-working class without capital. The Knights’ leaders looked back to an earlier day when the craftsperson (the producer) and the owner of the shop and tools were the same person. They claimed that there was no fundamental conflict between capitalist and worker; indeed, the Knights’ leadership wished to restore conditions in which the worker could become a capitalist.

But events cut the ground out from under them. The proletarianization of the work force proceeded rapidly. Bitter, often bloody labor struggles became common in the late 19th century. In 1877 after four years of depression and many wage cuts, railroad workers went on strike. With community support, they engaged in pitched battles with the national guard, which eventually quashed the strike. In 1885-1886 Knights of Labor members engaged in several massive strikes. Also, in separate actions, thousands of workers demonstrated for the 8-hour day. The Knights’ refusal to lead these demonstrations, and the leadership’s fear of strikes, eventually led to the organization’s downfall.

Destined to become the dominant force in the union movement until the 1930’s was the American Federation of Labor. The AFL was not a union but a federation of unions, chiefly in the skilled trades. (For a long time, the carpenters were the largest union in the AFL) Because AFL unions were chiefly organized according to skill, the growing numbers of unskilled workers (including many women, Blacks, and recent immigrants), were left unorganized. Although successful against great odds, the AFL represented only a small group of workers and could not speak for the working class as a whole.

In 1893 Eugene Debs formed a different kind of union, the American Railway Union (ARU). Until that time, railroad workers were organized along lines which followed the AFL pattern - a separate brotherhood for each skill or line of work, and only the most privileged were organized. (There were separate brotherhoods for engineers, conductors, firemen, etc.) Debs proposed to unite all railroad workers into one union (except for black workers - the ARU was racist and excluded them), in order to include the formerly non-unionized unskilled, and also to stop the strikebreaking that the disunited brotherhoods had allowed against one another. Barely a year old, the American Railway Union was some 250,000 strong when it met its greatest challenge in 1894. With the onset of the depression, George Pullman, maker of sleeping cars, cut wages and laid off workers in response to sagging business. But Pullman, who owned the town and the houses of his workers, did not cut rents. He refused to negotiate any issues with a strike committee, and the Pullman workers, supported by Debs’ American Railway Union, went on strike. Soon railroads throughout the nation were not running. The strike appeared victorious.

At that point a third party entered on the side of the railroads - the United States Government. This story is an instructive one in the history of Laissez-faire (the theory that governments should not intervene in the economic arena) in the late 19th century. In fact, when unions were involved, governments invariably came in on the side of the employer. In this case, the United States Attorney General, Richard Olney, and the "impartial" U.S. observer on the scene in Chicago, Edwin Walker, had financial ties to the railroad owners. A sweeping injunction was granted forbidding the strike leaders from doing or saying anything with regard to the strike on the grounds that the union was a restraint of trade under the Sherman Act. Federal troops were brought in to "restore order." The result: twenty strikers were killed. The strike was squashed and the union destroyed.

After the turn of the century, unions in the American Federation of Labor continued their growth. A few employers even acquiesced in their existence, sitting down with labor in the National Civic Federation. But most employers were still determined to destroy unions; they mounted a vigorous open shop campaign in the early years of the century.

Samuel Gompers and his American Federation of Labor were not only menaced on the right by employers, but on the left by two new working-class organizations. The Socialist Party of America, formed in 1901, picked up steam, electing many local politicians, gaining almost a million votes for Eugene Debs’ presidential campaign in 1912, and even challenging Gompers for the presidency of the AFL.

In 1905, the Industrial Workers of the World (I.W.W.) was formed. The Wobblies, as they were known, aimed to unionize the millions of unskilled workers left out of the AFL. Ultimately, the Wobblies aimed to overthrow capitalism by shutting the whole economic system down in a general strike. Gompers met these threats to his leadership and to the narrow group of workers represented in the AFL by vigorously resisting both the open shop and socialism. Eventually he tied labor’s star of the Democratic Party and during Woodrow Wilson’s first administration (1912-1916), the Democrats responded with just enough reform legislation (a child labor law, an 8-hour day for some railroad workers, and apparent protection from anti-labor injunctions) to take the wind out of the rising Socialist sails. Moreover, once the United States entered World War I in the Spring of 1917, Sam Gompers and the AFL enthusiastically supported the war effort and were rewarded with government support for collective bargaining. (The war period will be discussed in detail in a later section.)

The Industrial Workers of the World, meanwhile, met fierce government and employer resistance in their organizing campaigns. Nevertheless, by 1916, the Wobblies had quietly established a firm base among migrant farm workers in the midwest, and loggers and miners in the west. Once the United States entered the World War (April, 1917), however, both the I.W.W. and the Socialist Party came under unrelenting attack. Employers and governments used the wartime crisis to destroy these radical organizations. Wobbly leaders were arrested and convicted of sabotaging the war effort. (Actually they had done very little anti-war work.) The Socialist Party, picking up electoral support as the only anti-war party in the field, was similarly attacked for hindering the war effort. At one time nearly every important Socialist leader was on trial or in jail. What the wartime crisis began, the anti-Communist Red Scare of 1919 completed. By 1920, both organizations were no longer threats to capitalism.

One great struggle yet remained. In 1919, over 300,000 Steelworkers went on strike for union recognition, higher wages, and the 8-hour day (many worked the 12-hour day, seven days a week). The leader of the strikers, William Z. Foster, was tarred as a communist; the strikers’ organizing efforts were hindered by local and federal authorities; and United States Steel, swollen with wartime profits, was able to wait until hunger forced the strikers back to work.

Thus, on the threshold of the 1920’s, capital reigned supreme. The left-wing of the American labor movement (the I.W.W. and the Socialist Party), had been wiped out. The United States, alone of the major industrial countries, had no significant revolutionary socialist movement. The union movement had been restricted to the small segment of the labor force represented in AFL unions, and even it growths would be stymied in the 1920’s. Perhaps no group of capitalists in the western world emerged from this period of heavy industrialization and big business formation (1870-1920) in such a powerful position as the Americans. That they did so was due, in part, to the high productivity of American industry which allowed relatively high wages to some workers, to big business’ success in using vast numbers of immigrant workers happy to have a job and often divided from other ethnic groups and, finally, to the combination of ruthlessness in suppressing left-wing movements and labor unions, and on the other hand, a certain flexibility, usually through the Democratic Party, in absorbing some of labor’s demands.

SUPPLEMENTAL READING MATERIAL

Please read the article entitled "The Robber Baron Concept and Its Revisionists" by Allen Solganick; it is located at the end of this course guide.

STUDY QUESTIONS

Required Reading

Additional readings and suggestions for background reading for those of you who would like to brush up on your knowledge of the period are described in the bibliography after the study questions.

Study Questions (to guide your readings, not to be handed in.)

The overview of the period from 1870-1920 which you have read should help you in reading. You will not be coming to the readings cold and you will already have a number of questions in mind. It might help to study again the overview before you read the required book and article, to be sure your feel comfortable with the material and the questions being posed.

The following questions should help you focus your readings. Although you are not going to hand in your answers, it will probably be easier to do your writing assignments if you take a few notes for yourself.

  1. How have the changes outlined in Porter’s The Rise of Big Business shaped your life in ways that make it different from what it would have been in 1800 or 1870? The way you live, the way you work, relationships on the job, the prices you pay, the products that are available to you?
  2. What were the forces that led to "economic integration?" Analyze the differences between "vertical" and "horizontal" integration. What were the forces that led to each? What roles did competition and technology play in the formation of each kind of integrated enterprise. How is the formation of horizontal combinations (including the mergers at the turn of the century) related to problems of overproduction?
  3. Thorstein Veblen, in Absentee Ownership and Business Enterprise in Recent Times: The Case of America (1923), argued that after the middle of the 19th century, because "the leading industries were beginning to be inordinately productive, as rated in terms of what the traffic would bear... it became ever more imperative to observe a duly graduated moderation, and to govern the volume of output, not by the productive capacity of the plant or the working capacity of the workmen, nor by the consumptive needs of the consumers, but by what the traffic would bear." This came to mean "a modicum of unemployment both of the plant and the available manpower." This unemployment , Veblen called "sabotage," and he concluded that it was the task of the employer "to keep a restraining hand on employment and output, and so administer a salutary running margin of sabotage on production, at the cost of the underlying population." [Quoted from pp. 107-108 of Gail Kennedy, ed., Democracy and the Gospel of Wealth, Lexington, Mass.: 1949.] In light of the interpretations of Porter, Solganick, and my introduction, try to come to some judgment about the validity of Veblen’s argument. What leads Veblen to label unemployment "sabotage?" Is his apparently extreme position defensible?
  4. Porter seems to argue that the development of big business was inevitable. Can you imagine some alternative development in the late 19th century: you must try to imagine what was historically possible - what social and political forces could have supported an alternative, given the basic structure of society in the period, and also given a certain realism about human nature. (For example, it is not an alternative to argue that if only people would have loved one another, something different or better could have happened. A certain amount of self-interest must be taken as a constant in history, but that self-interest can issue in different forms, and be organized individualistically, or directed into collective self-interest.)
  5. Have your readings changed whatever impression, however vague, you had of the Captains of Industry in the late 19th century? Were they pioneers? Great Innovators? Did they perform the function often attributed to capitalists of being risk-takers and innovators? In what ways?
  6. Where do you stand on the debate over great inequalities of wealth in the late 19th century? Which is more important: growing inequality between rich and poor, or the fact that, along with that inequality, the whole economy advanced, lifting the poorest up? How radically would you apply the American principle of equality in this respect? (For more on this, see Carnegie’s "Wealth".) (Neither Porter nor Solganick nor my overview give you a true sense of the incredible poverty of most Americans at the turn of the century. The majority of Americans were poor by any definition. You can get a very graphic sense of this by looking at the photos of Jacob Riis, which appear in several paperback additions or reading a novel like The Jungle by Upton Sinclair. Each gives a good sense of what life was like for working-class people, except the most skilled workers.)
  7. Both Solganick, Porter, and my introduction deal with problems of discontent and resistance to big business. Did Americans easily accept new economic order? If not, why didn’t they vote in a new one? Your judgment here will be influenced by your general knowledge of American politics and the choices offered by the two-party system, as well as the evidence presented in Solganick, Porter, and my introduction.
  8. A related but broader question: the inequalities of incomes aside for the moment, how radically would you apply the American principle of democracy to the economy? It was not only that the rich got personally richer, but that they controlled the economy, and controlled society’s economic surplus (in the form of profits) to consume or invest where they saw fit, i.e. where the best profit opportunities lay. Is there a contradiction between capitalism and democracy? Is that contradiction resolved or softened if we can show that consumers exercise control over corporate decisions by the choices they make in purchasing?

SUGGESTED READINGS

(* = Paperback, although some may be out of print.) None of the following is required.

A useful commentary is:

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