Nation of Nations 3/e Davidson, Gienapp, Heyrman, Lytle, and Stoff
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THE CHAPTER IN PERSPECTIVE

The new industrial order arose in the late nineteenth century. Machine-driven productivity, mass manufacturing, nationwide marketing, and factory workers replaced the old market economy of farmers, local merchants, and small factory owners. A new network of industrial systems linked the economy as never before. New business strategies and structures coordinated and controlled it. And workers struggled to adjust. In a pattern that would mark the twentieth century, they, too, began to organize. The new industrial order changed life in America and launched the United States as a major world power.

OVERVIEW

This chapter begins, appropriately enough, with railroads. They are America's first big business and a key to the new nationwide industrial order. An abortive journey along the "Great Southern Mail Route" from the Mississippi River to Washington, D. C. gives a sense of just how difficult rail travel was in 1866. A scant twenty years later, a more ambitious "scamper across America" takes place in relative comfort from one end of the country to the other. The world of difference between the two trips reflects the changes brought on by a maturing industrial economy. The changes involved not just the comfort afforded passengers. A complex system of transportation was needed to carry people quickly and efficiently across the country, just as a complex network of industrial systems was required to create the new industrial order.

The Development of Industrial Systems

Transportation by rail was only one dimension of the new industrial order, which involved the emergence of interlocking industrial systems. Communication by telegraph and other devices, resource development and new industrial technologies, systematic invention, finance capital, the rise of the corporation, and a growing pool of labor were slowly stitched together. Many processes, all linked, all acting together, forged an industrial nation.

Such development came at a price. Smokestack industries began to foul the environment. The scramble for raw materials grew frantic. More and more workers found themselves in jobs that were monotonous, alienating, and sometimes deadly.

Railroads: America's First Big Business

At the core of the new industrial order were the railroads. They moved people and freight, stimulated economic growth, and, just as important, sparked a managerial revolution that would be copied by other big businesses.

Because they brought together shorter branch or "feeder" lines, "trunk" lines were forced to pioneer new techniques of management to control their growing operations. "Central offices" served as corporate nerve centers, with a new class of "middle managers" heading divisions responsible for purchases, production, transportation, sales, and accounting. Even so, huge fixed costs, together with massive overexpansion and savage competition, led to rate wars and consolidation in the form of cooperative pools, purchases, leases, and outright mergers. Investment bankers such as J. P. Morgan played a prominent role, whether in raising the large amounts of capital required to build and run railroads or in helping to reorganize troubled firms.

The Growth of Big Business

The process of system-building continued to spread as businesses grew bigger and bigger through combination--a loose affiliation of enterprises--and consolidation--a blend of companies in a single corporate entity. Some industries, like salt producers in Michigan, adopted a horizontal strategy for growth by allying with competitors. Others, such as meat packer Gustavus Swift, adopted a vertical strategy, acquiring both outlets to consumers and sources of raw materials.

Andrew Carnegie moved both horizontally and vertically in building a fully integrated steel empire, while oil-magnate John D. Rockefeller moved beyond integration to develop the trust, a quasi-legal arrangement in which stockholders surrendered their shares "in trust" to a central board of directors. In 1901 J. P. Morgan bought out the Carnegie steel interests to form the United States Steel Corporation, a giant holding company, or corporation of corporations, worth more than $1 billion. Similar holding companies sprang up in the 1890s as a wave of mergers swept through American industry in the wake of the depression of 1893. Bigness helped to reduce competition and bring down prices as "economies of scale" (the reduced price of each item that resulted from the production of many) increased profits. Competition diminished, though scarcely disappeared.

Industrialization helped to create a visible new class of multi-millionaires and subjected the economy to enormous disruptions. A vicious cycle of boom and bust developed, in which precipitous declines were followed by slow recoveries. Corporate defenders justified the system by applying Darwin's theories of evolution to society at large, claiming that "Social Darwinism" dictated the survival of the fittest. Meanwhile critics such as Henry George, Edward Bellamy, and Julian West attacked corporate capitalism as a greedy promoter of poverty and class exploitation. Radicals such as Daniel DeLeon and the Socialist Labor Party tried unsuccessfully to win a sizable political following among working class Americans.

The Workers' World

The new industrial order created a new culture of work. Factories required people to work in novel ways. Unlike the farm, the factory was not governed by the changing seasons or the movement of the sun. Instead, the harsh discipline of productivity dictated the rhythm of work. Wage earners were often on the job for 6 days a week for 10 hours a day. The use of heavy machinery increased the dangers as well as the tedium of factory work. The Taylor system of scientific management, which studied the most efficient ways to get work done, boosted output but added to a growing sense that workers were cogs in the vast industrial system.

Workers struggled to maintain control of their lives and work. They took unauthorized days off or limited their output or simply quit. In these and other ways, they strained to balance their obligations as wage earners, family members, and citizens. Women and children worked at countless factory jobs, generally earning less than men. Overall, however, workers enjoyed modest gains in real wages. Most believed in the American dream of success. Yet it was they who bore the brunt of the new industrial order. Most workers suffered the ravages of unemployment and industrial accidents on their own.

The Systems of Labor

Workers responded to the industrial culture as more and more of them found employment in industry. Often divided by race, gender, and ethnicity, a minority of workers attempted to organize by creating unions. Some were radical like the Knights of Labor. Others, such as the American Federation of Labor, accepted the wage system and tried to improve conditions within it. At the turn of the century, however, less than one worker in ten belonged to a union.

Discontent boiled over in the 1880s and 1890s as a wave of strikes crippled industry. Managers fought back with blacklists, "yellow dog" contracts, strikebreakers, and Pinkerton police. When all else failed, they relied on court injunctions and federal troops to crush strikes and keep order. By 1900, employers had weathered the disruptions to emerge as the masters of the mightiest industrial economy on earth.

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