T2 Economic Flashcards
(14 cards)
1
Q
The ‘Robber barons’
A
- Big businessmen, not politicians, controlled the new industrialised America of the Gilded Age.
- These so-called ‘captains of industry’ were not regulated by the government and did whatever
they could to make as much money as possible. - These industrialists’ business practices were sometimes so unscrupulous that they were given the
name ‘robber barons’. - These men were able to gain direct political influence, especially within the Republican Party and
over the emerging mass newspapers. They benefited from the prevailing belief in laissez-faire. - The methods used by these ‘robber barons’ seemed justified by a new philosophy, Social
Darwinism. Remember that one of the key questions you have to consider is ‘How important were
ideas and ideology in change and continuity?’ - The leading exponent of Social Darwinism was an English journalist, Herbert Spencer.
- As early as 1850, nine years before Charles Darwin published his revolutionary theory of
evolution, Spencer’s Social Statics publicised laissez-faire. - Spencer opposed state aid to the poor and disapproved of tariffs to aid agriculture or industry.
- ‘Robber barons’ were being told what they wanted to hear by Spencer who toured the USA in
1882 – how a political system that claimed all men were equal could also include economic
inequality. - In time, many wealthy American businessmen, inspired by biologist Charles Darwin’s new theories
of natural selection, began to believe that they had become rich because they were literally
superior human beings compared to the poorer classes. - The wealthy applied Darwin’s idea of ‘survival of the fittest’ to society.
2
Q
‘Survival of the fittest’
A
- This is the belief that individuals that are best equipped to survive and reproduce perpetuate the
highest frequency of genes to descendant populations. - This is the principle known popularly as ‘survival of the fittest’, where fitness denotes an
individual’s overall ability to pass copies of his or her genes on to successive generations. - The theory of evolution by natural selection was proposed by Charles Darwin and Alfred Russel
Wallace in 1858. - They argued that species with useful adaptations to the environment are more likely to survive
and produce progeny than are those with less useful adaptations, thereby increasing the
frequency with which useful adaptations occur over the generations.
3
Q
Cornelius Vanderbilt and the Railroads
A
- Cornelius Vanderbilt and his son, William, were perhaps the most famous railroad tycoons.
- Cornelius made his fortune through steamboat operations which were worth $11 million by 1862.
- He ploughed his profits into the great railroad boom and during the 1860s he bought out and
consolidated many of the rail companies in the East, enabling them to cut operations costs. - The Vanderbilts also established a standard track gauge and were among the first railroaders to
replace iron rails with lighter, more durable steel. - The Vanderbilt fortune swelled to more than $100 million during these boom years. When he died
in 1877, at the age of 83, he was the richest man in America. - The bulk of his fortune went to his son, William, who, by ruthless manipulation of capital and
labour alike, increased the family fortune so that when he died in 1885, he was the richest man
in the world. - His brutal handling of strikes made him one of the most unpopular men in America.
4
Q
Andrew Carnegie and the Steel Industry
A
- Arriving in America as a poor Scottish immigrant, Carnegie started work in a railroad company and
by the Civil War was selling iron, the profits from which he invested in an ironworks. - He began to use the new, British-invented Bessemer Converters to make better and cheaper steel
from iron. - In addition, Carnegie brought all the processes of steel manufacturing together – smelting,
refining, rolling – in his Homestead Steelworks in Pennsylvania. - Initially, he mainly manufactured rails but, as the demand for these decreased, he changed
production to provide for new markets in cities and industries such as bridges, machinery, wire,
pipes and armour plating for the US navy. In 1900, he sold his empire to the banker J. P. Morgan
for $480 million. - Carnegie rarely tried to buy out his competitors. He preferred to concentrate on production of
good steel at a lower cost than others, selling at such prices as would give him the best
advantages. - He was able to monopolise steel production through vertical integration – in other words
controlling all processes in production from extraction of iron ore to the making of finished
products which, in turn, brought lower costs and greater profits. - In 1889, he published a collection of his writings, The Gospel of Wealth, in which he explained his
philosophy of philanthropy. - This is another new idea linked to the key question ‘How important were ideas and ideology in
change and continuity?’ - Carnegie was typical of many self-made millionaires prepared to help those who helped
themselves. Carnegie made donations to universities, hospitals, free libraries, parks, swimming
baths and churches. - He set up the Carnegie Endowment for International Peace for research and the advancement of
knowledge. - On the one side, he was criticised by other businessmen for being a socialist because he gave
money to help various people and societies. - On the other hand, he was also criticised for making his fortune by exploiting his workforce
through paying low wages and demanding long hours as well as being too ruthless in destroying
rival businesses.
5
Q
John D. Rockefeller and the Oil Industry
A
- John D. Rockefeller first visited the Venango oil fields in 1860, acting as a business agent for
Cleveland investors. - He was appalled by the disorganisation and confusion he found in the oil industry.
- He studied the industry carefully and realised that it could have the same universal scale as steel
or copper. - He realised that the best way to get control of the industry was not by producing oil but by refining
and distributing it, as well as undercutting his rivals through cost-cutting measures such as
securing cheap transport. - His methods led to a public outcry and he was as much hated for his secrecy as his ruthlessness.
- For example, when he bought out his competitors in Cleveland, he kept it secret, so that
companies associated with him pretended to be separate and competing. - Rockefeller bought his first oil refinery in 1862 and, eight years later, he set up the Standard Oil
Company in Ohio. - He ruthlessly eliminated competitors, used fixed prices, paid fierce attention to manufacturing
processes and negotiated with immense skill. - By the 1880s, he controlled 85 per cent of all American oil production and, by 1899, had a fortune
of $200 million. He expanded into iron, copper, coal, shipping and banking. - By 1913, he was the world’s first billionaire.
- He also became a philanthropist, giving away an estimated $550 million to medicine, African
American educational institutions and the Baptist Church. - The defenders of Rockefeller suggest that the creation of a monopoly of the oil industry through
the setting up of the Standard Oil Company rescued the industry from disaster. - His critics claim that his secret arrangements with railroads and others prevented free and fair
competition and brought ruin to those people not associated with Rockefeller.
6
Q
J. P. Morgan and Finance
A
- J. P. Morgan was a skillful financier who inherited $12 million but increased his fortune through
his skill as a financier. - He was the major force behind the creation of large companies such as the US Steel Corporation,
which was the first billion-dollar corporation in history. - In 1871, Morgan began his own private banking company, which later became known as J. P.
Morgan & Co., one of the leading financial firms in the country. - During his career, his wealth, power and influence attracted a lot of media and government
scrutiny. - He was criticised for creating monopolies by making it difficult for any business to compete against
his. - He was also criticised for his love of the high life and the way that he appeared to flaunt his wealth,
often being seen in public in the company of actresses.
7
Q
Technological Inventors & Entrepreneurs
A
- American technology made rapid progress in these years and did much to encourage further
economic growth. - A contemporary editor, Mark Sullivan, put this down to ‘intellectual curiosity about the new, the
instinct of the American mind to look into, examine, and experiment – a willingness to scrap not
only old machinery but old formulas and ideas’. - Two such inventors of the period were Thomas Edison, inventor of the light bulb and Alexander
Bell, inventor of the telephone.
8
Q
The Depression of 1873
A
- The Depression of 1873 was partly due to a major economic reversal in Europe as well as the poor
state of the American banking system. - Anyone could set up a bank and operate it independently.
- Local banks generally kept their deposits in larger privately owned banks, especially in New York
banks. - The New York banks would invest these deposits, often unwisely, such as Jay Cooke and Company,
a railroad speculator that went bankrupt. - It was the principal investor of the Northern Pacific Railroad and its failure led to the collapse of
hundreds of other companies and banks. - The New York Stock Exchange was closed for ten days and credit dried up.
- Factories closed their doors and thousands were laid off.
- One in four labourers in New York were out of work in the winter of 1873–74 and nationally a
million became unemployed. - Many of the major railroads failed and construction of new railroad lines declined drastically from
7,500 miles in 1872 to 1,600 miles two years later.
9
Q
Gilded Age Urbanisation
A
- Industrial development also brought massive changes to towns and cities.
- Before 1860, there were only sixteen cities in the USA with a population of 50,000 or more.
- This was to change rapidly. Chicago, which had 30,000 inhabitants in 1850, had over a million by
1890. - It had been a railroad centre that served the upper-Midwest as a shipping hub for lumber, meat
and grain; by 1870 it had taken the lead in steel production as well as meatpacking. - Previously, cities had served as commercial centres for rural hinterlands and were frequently
located on rivers, lakes or oceans. - Manufacturing occurred outside their limits – usually near power sources, such as streams, or
natural resources, such as coal. - As industry grew, cities changed. Post-Civil War Atlanta, another railroad hub and commercial
centre, also developed a diverse manufacturing sector. - Cities quickly became identified with what they produced – Troy, New York, made shirt collars;
Birmingham, Alabama, manufactured steel; Minneapolis, Minnesota, produced lumber; Paterson,
New Jersey, wove silk; Toledo, Ohio, made glass; Tulsa, Oklahoma, favoured the oil industry; and
Houston, Texas, produced railroad cars.
10
Q
Gilded Age Living conditions
A
- However, two problems emerged due to this rapid urban growth – the spread of slums and the
corrupt systems of running these new cities. - The rapid influx of workers often led to the hasty construction of poor quality housing, often
overcrowded and polluted slums. - Those with wealth soon moved away from these slum areas into the suburbs.
- Moreover, many of these industrial cities were run by what became known as the ‘Boss’ system
with the ‘Boss’ being the local mayor. - He was often corrupt and would sell the rights to the highest local bidder to provide housing,
transport and other basic utilities with all city employees, including the police, owing their job to
the Boss. - He would provide jobs and employment for immigrants or African Americans from the South who,
in turn, would vote for him in future elections.
11
Q
Gilded Agriculture
A
- Agriculture did not prosper in the same way as industry in the years after the Civil War.
- For most farmers it was a life of subsistence farming and debt.
- The Homestead Act of 1862 opened up huge areas of the West to settlement and farming.
However, many farmers faced hardships for several reasons. - They incurred debts due to borrowing for the purchase of land and mechanisation as well as being over-dependent on unreliable overseas markets.
- Many small farmers tried, unsuccessfully, to compete with big ‘agribusinesses’ and some,
especially in the South, were too dependent on a single cash crop, such as cotton. - In addition, as prices kept dropping in the years after the Civil War, so did profits which, in turn,
affected the ability to repay loans. - For example, the price of a bushel of wheat fell from $1.45 in 1866 to only 76 cents three years
later. - Trade unions emerged during this period due primarily to rapid industrialisation. However, much of the struggle for trade union and labour rights was focused on the right of trade unions to exist at all, to be recognised as representing their membership and to do so in negotiations with
employers for improvements in pay and working conditions. They campaigned for appropriate
structures to be put in place that obliged employers to bargain with the representatives of the workforce and that established systems for mediation, conciliation, and arbitration as well as the right to strike.
12
Q
The Knights of Labor (1869 - 1886)
A
- In the decade following the railroad strike, unions grew rapidly.
- The most ambitious of these was the Knights of Labor. Founded in 1869, the Knights sought to
build a comprehensive organisation uniting workers of all races, genders, ethnicities and
occupations. They lobbied government for the eight-hour day and child labour restrictions. - They also campaigned for the initiative and referendum – electoral processes through which
common citizens could draft and vote upon laws but most fundamentally, and most radically, they
sought to build more cooperative labour–management relations. - They aimed for industries governed by councils of workers and managers within genuinely
democratic, and ultimately collectively-owned, enterprises. - During the 1880s, the Knights grew rapidly and by 1885, the organisation claimed 100,000
members and, in the same year, it experienced its greatest success. - When the Wabash Railroad, one of the railroads within Jay Gould’s Southwest System, tried to
break a local union, the Knights walked out in sympathy. - Within days, the entire Southwest System was paralysed, and the Wabash was forced to negotiate with its workers.
- Flush with victory, the Knights drew in thousands of new members; within a year, 750,000 workers
were united under the comprehensive umbrella of the Knights of Labor. - To a certain extent, the Knights’ rapid success was also the cause of their downfall.
- In 1886, tens of thousands of newly-joined workers-initiated labour actions – but only occasionally were the other members willing to walk out in support.
- Even more damaging, when an eight-hour-day rally in Chicago’s Haymarket Square turned violent, all supporters of the eight-hour day were blamed.
- The Knights of Labor, because of their size and visibility, were condemned the most vehemently.
Within a year of the Haymarket riot, the Knights’ membership had been cut in half; within a
decade, the Knights were all but extinct.
13
Q
The Haymarket Bomb Outrage (1886)
A
- A strike at the McCormick Harvester Works in Chicago in May 1886 precipitated a tragedy.
- On 3rd May 1886 a pitched battle took place between strikers, strike-breakers and police
protecting them in front of the plant. When police fired into the crowd several people were killed
and many injured. - In protest, anarchists of the Black International, a revolutionary organisation set up in Chicago in
1881, called a meeting in Haymarket Square, the centre of the lumber yards and packing houses. - The mayor attended the meeting, discovered it was peaceful and left. When it began to rain, the
crowd dispersed. - Someone then threw a bomb that killed a policeman and wounded more than 60, six of whom
died later. The police retaliated, firing into the crowd, wounding more than a hundred, some
fatally. - Public opinion was very hostile towards the anarchists, seven of whom were arrested, tried, found
guilty and executed in 1887. The case was a public sensation at home and abroad. - Largely because of the Haymarket affair, the eight-hour movement of 1886 was a substantial
failure. Of the many workers who took part in the movement, only 15,000 retained their gains at
the end of the year. Once again, organised labour had failed.
14
Q
The American Federation of Labor (1885 - Present)
A
- The union that now played a central role in the labour movement was the American Federation
of Labor (AFL) set up by Samuel Gompers in 1885. - Less a single union than a federation of semi-independent craft associations, the AFL admitted
only skilled white men. - Its objectives were also comparatively limited; the federation focused only on achieving higher
wages and shorter workdays for its members, forsaking the larger social objectives that had
motivated the Knights. - But the AFL did grow – by 1892 it claimed more than a quarter of a million members.
- The AFL acknowledged the discontent provoked by the Knights and determined to avoid its
mistakes. - It recognised the autonomy of each trade within it and the executive council could not interfere
in the internal affairs of member unions. It levied a tax on member unions to create a strike fund
and maintain a secretariat. - To promote labour legislation in the cities and states, it formed central and state federations.
- The policy of the AFL was to support unions in winning recognition and securing agreements from
employers by collective bargaining, and to strike, and to strike hard, only when these failed. - Gompers was elected as its first president in 1896 and served in that capacity until his death in
1924.
