Titans of Industry and Robber Barons
The 19th century witnessed the rise of several industries that became the engines of the U.S. economy—steel, railroads, manufacturing, meatpacking, oil, and banking. With large-scale industrialization came a dramatic change in the way businesses were overseen. Industries were far more complicated to run than a family business or farm. They involved multiple operations—mines, factories, manufacturing plants, refineries, mills—often in different locations and employing thousands of employees. Most industries were therefore run by corporations that could centralize control and raise funding from large groups of investors.
At the head of these corporations were the titans of industry, individuals who benefited greatly from industrialization. Among these enormously powerful and wealthy corporate leaders were Andrew Carnegie, owner of Carnegie Steel; Henry Ford, founder of the American automotive industry; J.P. Morgan, railroad financier and banker; and John D. Rockefeller, head of Standard Oil. These men amassed great fortunes for themselves and their corporations by creating monopolies.
A monopoly is a market structure in which one company is the only supplier of a good or service for which there are no close substitutes. Those who control a monopoly dictate the market price of a good or service because there is no competition. Everyone must buy from the monopoly. The titans of industry practiced two forms of monopoly: vertical integration and horizontal integration. Vertical integration occurs when a corporation owns and controls every part of the manufacturing process, from its source materials, to its factories, to its transportation. For example, U.S. Steel owned the mines the iron ore was taken from as well as the mills that transformed the ore into steel and the ships that transported the ore and steel. Horizontal integration is a strategy for monopolizing a market by forming mergers and forcing out competitors. Both forms of integration enabled men such as Carnegie and Rockefeller to wield control over entire industries.
Vertical Integration versus Horizontal Integration
| Vertical Integration | Horizontal Integration |
|---|---|
| Involves obtaining businesses that produce different needed goods, with the goal of controlling all aspects of production | Involves buying out or taking over other businesses in the same industry that make the same product |
| Secures the chain of supply and eliminates the middleman | Enlarges the business |
| Controls costs, increases production efficiency, and reduces waste | Cuts down on competition and increases market share |
Labor Disputes
During the Second Industrial Age, there was plenty of work for American laborers. Most workers, however, had no say over their low salaries or the long hours they worked. Many worked in dangerous environments, such as mines, railroads, steel mills, and factories. They had no safety net if they were to become injured or disabled. While industries depended on a large workforce, industry leaders considered workers easily replaceable.
Individual workers were powerless to make demands, but unionization was slow. There were obstacles to organizing worker unions, including language barriers in workplaces where many immigrants were employed. Often, workers did not think the gains were worth the risk of losing a needed job. Industries made it difficult for unions to form. Many prohibited unions outright and employed violent tactics to stop unionists from organizing. Despite this, several unions did form during the late 19th century, including the National Labor Union in 1866, the Knights of Labor in 1869, and the American Federation of Labor in 1886. Once organized, workers had the collective power to strike or walk off the job. However, the industry leaders still held most of the power, and they wielded it.
When workers began a strike, industry leaders hired strikebreakers, known as scabs. The industry leaders would send lawyers to court to get federal injunctions that declared the strike illegal and turned the strikers into lawbreakers who could be jailed. They would even send in armed troops to use deadly force to protect property and put down demonstrations.
Labor disputes in the 19th century often turned violent. The Homestead Strike of 1892 began when negotiations between unionized steelworkers and the company they worked for failed. When unionists refused to accept the company terms when it came time to renegotiate their contracts, the management of U.S. Steel built a fence around the steel mill and locked the workers out. It also hired 300 armed private detectives to protect the property from the agitated steelworkers. Violence broke out, leaving seven workers and three detectives dead. A similar situation unfolded during the Pullman Strike of 1894, when railroad workers walked off the job to protest a pay cut, leaving railroad cars stranded on tracks across the country. When President Grover Cleveland dispatched armed troops to Chicago to control the scene, strikers erupted in violence. Dozens died, and millions of dollars' worth of property was destroyed. After the strike, workers were rehired only if they agreed never to form or join a union again. Corruption was rampant in the Gilded Age, and the federal government was prone to supporting businesses rather than unions, as unions were viewed as a threat to businesses. Government officials were often paid or bribed by businesses to support their interests.