The Rise of Capitalism

Carnegie, Rockefeller, Marx, Spencer, & Labor Unions

TN Curriculum Standards: Standard 1.0>Understand how industrial development affected the United States culture.>Understand how the influx of immigrants after 1880 affected the U. S. culture. Standard 2.0Investigate how the modernization of agriculture and capitalist industrial development affected the economy of the United States.

Standard 5.0:>Investigate the dynamics of the post-Reconstruction era and the people and events that influenced the country.

 Standard 6.0>Appreciate the diversity of various cultures and their influences on the U. S.  Investigate the effect of big business upon the lives of farmers and wage earners.    

       

Capitalism?

The Economy

“Laissez-fare”- French phrase that refers to a hands-off approach by the government.

Capitalism- theory that COMPETITION determines the price of goods and salaries.

Supporters of this approach believed in limited interference by the government unless t deals with protecting private property and maintaining peace.

They believe that government interference hurts the economy and increases prices overall.

Supporters of laissez-fare approach

The Economy

Supporters also believe in letting the rules of supply and demand regulate the economy.

If three companies are selling the exact same product for three different prices, customers are going to generally flock to the store that has it for the cheapest price.

In this case, the government did not have to force the other two companies to lower their price, the loss in sales would cause them to do so automatically.

Supply & Demand

Big Government?

• Opponents of this argument believe that the government has to involve itself in the affairs of private businesses to prevent everyday workers from being taken advantage of.

• They believe(d) that the only way to keep corporations/business owners from taking advantage of their workers was to impose regulations (rules) on those businesses.

Who reaps the benefits?

This is one of the main arguments in our politics

today in 2013.

As it stands, the CEOs of major corporations have seen their profits triple

while the average worker has not seen a substantial increase in pay in 10 years (with

inflation).

Opponents of laissez-fare government will say

that without government interference

“big business” will continue to profit while

the common man struggles to meet their

basic needs.

Let’s Check for Understanding

• Supporters of______ believe that the government should not interfere in the economy other than to protect private property rights.

A. High tariffsB. Laissez-fareC. Industrial regulationsD. High taxes for private

individuals

Andrew Carnegie

Rags to Riches

• Andrew Carnegie was a Scottish immigrant who came to the U.S. at the age of 12.

• He began work in a textile factory where he earned $1.20 a WEEK. He worked his way up to Superintendent of the Pennsylvania Railroad Company.

• He used the money that he earned from his supervisor’s salary to invest in companies that served the RR industry ( iron mills, sleeping car factories, and locomotive factories).

• By the time he reached his 30s, he was earning $50,000 a year.

Carnegie & Bessemer join forces

• Carnegie met Henry Bessemer in Europe.

• Bessemer told him about his new product for producing steel cheaper & faster.

• Carnegie was so impressed with Bessemer that he bought a steel company and began using the Bessemer process.

We’re in the $$$$

Carnegie was able to increase his profits by using vertical integration. He bought all of the companies that owned the resources that he would need to create his products.

This cut out the middle man and allowed him to make and sell his product cheaper than any of his competitors.

Carnegie was extremely generous. He gave the vast majority of his wealth away to charities.

For EXTRA CREDIT, you can research and find at least three charities that he gave freely to. Also, find the amount that he sold his company to J. P. Morgan for. Be sure to cite your sources!!!

Gospel of Wealth

Check for Understanding

Check 4 Understanding

• Laissez-fare relies onA. The government to

regulate wages and prices.B. High taxes and

government debt to fund businesses.

C. High tariffs on foreign goods.

D. Supply and demand to regulate wages and prices.

John D. Rockefeller

Rockefeller & Standard Oil

• John D. Rockefeller was an extremely shrewd businessman.

• He used horizontal integration and bought out all of his competitors. People that refused to sell and become a part of his corporation were run out of business.

• Rockefeller made deals with the middle man (to sell their products higher to his competitors) to make sure that other companies couldn’t compete with him.

Rockefeller & Oil• Rockefeller owned about 90% of

the nation’s oil refineries.• He had a monopoly on the oil

industry (monopoly- a single company achieves control of an entire market).

• For example, When Verizon was the only service that could be picked up in the McKenzie area, residents there had to become Verizon customers. At the time, Verizon definitely had a monopoly on cell phone coverage.

Ida Tarbell

Ida Tarbell (nicknamed the “terror of trusts”) launched a life –long crusade to Expose Rockefeller ‘s corrupt business practices.

Her dad was a former oil refiner that Rockefeller had run out of business with his shrewd business practices.

“Terror of Trusts”- Ida Tarbell

The Philosophers

Herbert Spencer promoted the idea of SOCIAL DARWINISM.  This is a “survival of the fittest type of mentality”. He believed that only the fittest businesses, people, and nations will survive.

Proponents of this argument believed that people were poor because they just weren’t “fit enough”.

Business owners loved this way of thinking.  It gave them an excuse to exploit their workers.  They also believed that having wealth was a sign of being a good Christian.

Social Darwinism

“Spreading the Wealth”

• Karl Marx (German philosopher) believed in the opposite of Herbert Spencer’s theory.

• He believed in having an equal distribution of wealth in a society. He felt that this would put everyone on an equal playing field. His line of thinking became known as “MARXISM”. It is most commonly aligned with Socialism & Communism.

• During the 2008 and 2012 Presidential election, President Barack Obama was repeatedly accused of being a Marxist.

Image circulated during 2008 of German Philosopher Karl Marx with a Obama

“change we can believe in” pin

Theory vs. Real Life

• A popular message during the 19th century was that everyone had the ability to succeed in an economy driven by free enterprise and opportunity.

• By the early 1900s, workers were beginning to have their doubts.

The Working PoorWork conditions were terrible in the late 1800s. Wages were low and the hours were long (the average pay for a white male was $1.50 a day or about $500 a year).

The standard of living for a family of four was about $700 a year ( so the avg. family was already in the hole at least $200). Everyone in the family worked (including women and children- although there are reports of them earning as little as 10 cents a day).

Workers often worked 12 hours a day (sometimes 7 days a week). Work conditions were unsafe. There was no workmen’s compensation (if you got hurt or maimed, you were just out of luck). By 1900, there was an estimated 35,000 deaths in industry alone. Jobs in the RR industry were the most dangerous.

No Rest 4 the Weary

Between 1890 and 1917, there was an estimate

of 230,000 casualties and 2 million injured in

jobs related to railroads.

In the West, many of these groups

were Asian immigrants (this labor group built

most of the RRs in the West).

Workers often held jobs that

caused them to inhale toxic fumes

in unsanitary conditions. They also worked with heavy machinery

without any safety regulations.

In n effort to improve their

working conditions, they

tried to unite and form labor unions.

Conflicts and Unions

Workers routinely went on strike to protest their working

conditions. While the strikes weren’t necessarily new, the level in terns of numbers and

destruction was new.

Between 1878 and 1900, there were tens of thousands of strikes involving millions of

workers.

Cleveland & Ohio were almost completely burned to the ground. Large sections of

Chicago, Pittsburgh, Detroit, and NY were also destroyed. The U.

S. Army had to be called in to put out strikes regularly.

2 Types of Unions

• The main 2 types of labor unions were

Mainstream & Radical.• Mainstream unions wanted: pay raises, shorter

hours, and better working conditions. • They believed in using a process called collective bargaining. This simply meant that instead of everyone who worked for the company going in to complain to the boss about what they were upset about, they sent in representatives.

Samuel Gompers- AFL

• The representatives would negotiate for all of the workers.

• Samuel Gompers was the founder of this technique. He was a part of the mainstream union American Federation of Labor (AFL).

• It was labor adopted by other unions (still used today).

The American Federation of Labor (AFL)

The AFL had 3 main goals:• It tried to convince companies to recognize

unions and to agree to collective bargaining.

• It pushed for closed shops (tried to force companies to hire only union members.

• It promoted an 8 hour workday.

Radical Unions

• Radical Unions: argued that capitalism created exploitation of the masses (believed the rich kept getting richer while the poor kept getting poorer). Many advocated for either a Socialist/Communist economy that would be fair to everyone and help to create a more socially equal structure.

• Mainstream unions hated the way radical unions operated.

The Wobblies• An example of a radical union

would be the IWW (Industrial Workers for the World) or Wobblies.

• They advocated the Communist system and often used arson and mail bombs to scare capitalist judges who ruled against them in labor cases (involving workers who had been arrested for violence during demonstrations).

Trouble on the homefront

The labor movement had a number of problems within their own structure like: ethnic and racial conflicts, jealousy over membership, and sharp divisions between skilled and unskilled labor

Most unions excluded women industrial workers.