Industry, Invention, and Labour, c. 1870–1900

This is Unit Three, part one, on invention and the great industrial fortunes. Unit Two closed with the census announcing that the frontier line was gone, and pointed to the industry the railroads and the West helped build. This unit is that industry. Carry two columns through it. For each great enterprise, write what it produced in one column, and what it cost, and whom, in the other. At the last entry the course asks whether these men were robber barons or captains of industry, and it answers with both columns. By the end you will be able to explain what the steel figures show when read together. To distinguish horizontal from vertical integration. To describe how trusts and holding companies concentrated control. To explain where Morgan's power came from. And to weigh the two labels for the industrialists without adopting either.

Five entries on invention becoming an industry, from the patent office to the power line.

The patent boom.

USH2 0301 The Patent Boom

American inventors registered two hundred seventy-six inventions in the patent system's first decade, and about sixty thousand in total by eighteen sixty. Nearly four hundred fifty thousand followed between eighteen sixty and eighteen ninety alone, and another two hundred thirty-five thousand in the eighteen nineties. Invention was becoming an industry of its own.

The invention that changed communication most.

USH2 0302 Bell's Telephone

Alexander Graham Bell patented the telephone in eighteen seventy-six and, with investors, built the company that became the American Telephone and Telegraph Company. Fifty thousand telephones were in use by eighteen eighty, one of them in the White House, and more than a million by nineteen hundred; the anchor's two totals for that year disagree.

The inventor who turned invention into a laboratory.

USH2 0303 Edison at Menlo Park

Thomas Edison built a research laboratory at Menlo Park, where about twenty-five scientists worked on invention as a team. His inventions included the storage battery, the dictaphone, the mimeograph, the phonograph, announced in eighteen seventy-seven, and a film projector. Digital History counts one thousand ninety-three patents in his name.

The invention that made him famous.

USH2 0304 The Light Bulb

Edison invented a practical incandescent light bulb in eighteen seventy-nine, after reportedly testing thousands of materials before choosing a carbonized cotton filament. The patent followed in eighteen eighty, so both dates are right for different events. His Illuminating Company lit New York in eighteen eighty-two, and Edison General Electric formed in eighteen eighty-nine.

The rival system for sending power.

USH2 0305 Alternating Current

George Westinghouse founded an electric company in eighteen eighty-six to promote alternating current, a new way to send power across long distances from a single plant. Nikola Tesla developed the alternating current system for Westinghouse. Unit four follows electricity into the growing city.

Four entries: the metal the age was built from, its fifty years in four numbers, and the machines that changed the desk and the table.

Two ways to make steel.

USH2 0306 Two Ways to Make Steel

Two new methods, the Bessemer process devised by the Englishman Henry Bessemer and the open-hearth process, turned iron into steel on an industrial scale, in quantities no earlier method could produce. Steel was stronger than iron and, once cheap, went into railroads, bridges and buildings.

Fifty years of steel in four numbers.

USH2 0307 Steel's Fifty Years

In eighteen sixty American mills produced about thirteen thousand tons of steel a year. By eighteen seventy-nine output passed one million tons, by nineteen hundred ten million, and by nineteen ten twenty-four million, while the price of steel fell by eighty percent. Read the two lines together. Output rose nearly two thousand times while the price fell by four-fifths, and cheap steel is what let cities build upward and railroads reach every region. Unit four shows the skyscraper it made possible. These are the anchor's national totals, not the output of any one company.

The machines that changed the office.

USH2 0308 Machines for the Office

New office machines arrived in quick succession: the typewriter in eighteen sixty-seven, the cash register in eighteen seventy-nine, the adding machine in eighteen eighty-five. Each sped the paperwork that ever-larger businesses produced, from invoices to payrolls.

The inventions that changed the table and the home.

USH2 0309 Machines for the Table

Inventions changed how Americans ate and lived: refrigerated rail cars, tin cans, corrugated rollers for milling wheat, and sewing machines for garments, with meat, fruit and grain moving to distant markets. The flush toilet and the vacuum cleaner changed the home as well. Digital History credits the refrigerated rail car to the meatpacker Swift.

Three entries on Andrew Carnegie: his rise, his methods, and what he believed wealth was for.

The steelmaker who began as a bobbin boy.

USH2 0310 Carnegie's Rise

Andrew Carnegie came from Scotland to Pennsylvania in eighteen forty-eight and started work at thirteen as a bobbin boy, then as a telegraph messenger. An oil investment of eighteen sixty-four returned more than a million dollars in dividends. The anchor calls his rise the model rags-to-riches story, while noting that such stories were mostly myth.

How he built his steel empire.

USH2 0311 Carnegie's Methods

Carnegie ran his steel mills thriftily, bought rivals' plants cheaply during the recessions of the eighteen seventies to nineties, and insisted on the newest machinery, controlling the J. Edgar Thomson works and later the Homestead works. By the end of the century his annual profits exceeded forty million dollars. Buying in bad years is how he grew.

What he believed wealth was for.

USH2 0312 The Gospel of Wealth

In an eighteen eighty-nine article Carnegie argued that the wealthy were trustees whose duty was to give their fortunes back to the public, and his fortune funded libraries, hospitals, colleges and concert halls. He used social Darwinism to justify his success, and by his death in nineteen nineteen had given away most of his fortune.

Four entries on Rockefeller, and on the two strategies the course keeps apart.

The oilman who built the largest trust.

USH2 0313 Rockefeller and Standard Oil

John D. Rockefeller, born in eighteen thirty-nine to modest means, founded the Standard Oil Company of Ohio in eighteen seventy, valued at one million dollars. By eighteen seventy-nine it controlled nearly ninety-five percent of the country's oil refining and, the anchor says, ninety percent worldwide. He grew by two strategies the next entries separate.

The first strategy.

USH2 0314 Horizontal Integration

Horizontal integration means merging with or buying up competing companies in the same industry, until a single firm dominates that stage of the business, as Standard Oil absorbed rival refineries. Discounted freight rates and price wars forced competitors to sell. The Yawp calls this Rockefeller's characteristic strategy.

The other way to grow.

USH2 0315 Vertical Integration

Vertical integration means controlling every stage of production and distribution, from raw materials and transport to manufacturing and sale, as Standard Oil owned its own barrels, pipelines, tanker cars and railroads. The Yawp names Carnegie as the first to use it in steel. Standard Oil's version helped cut kerosene prices by about eighty percent by century's end.

How to tell the two apart.

USH2 0316 Two Ways to Grow

The two are often confused because both build giant firms. Horizontal integration grows sideways: a company buys its competitors at the same stage of business, as Standard Oil bought rival refineries. Vertical integration grows along the chain: a company buys its suppliers and its distributors, as Carnegie controlled everything from raw materials to the finished product. One removes rivals; the other removes the need to deal with anyone else at all. So ask which way the company grew, across its own industry or up and down the chain that supplies it. Standard Oil did both, which is why it serves as the standard example of each.

Two entries on the legal forms that held such combinations together.

The trust.

USH2 0317 The Trust

A trust, as Standard Oil used it in eighteen eighty-two, let a board of trustees control several companies as if they were one; nine trustees managed the interests of thirty-seven Standard Oil stockholders. The word trust came to mean any giant combination, and Congress would take aim at trusts, as unit five shows.

What replaced the trust.

USH2 0318 The Holding Company

When the trust form was challenged in court, businesses turned to the holding company, a corporation that owns a majority of stock in other firms. Digital History says holding companies supplanted trusts after the Sherman Anti-Trust Act declared trusts illegal. The legal form changed while control stayed concentrated.

Four entries on the banker who financed the giants, and on how concentrated the economy became.

The banker.

USH2 0319 J. P. Morgan

J. Pierpont Morgan, the son of a London banker, moved to New York in eighteen fifty-seven and founded J. Pierpont Morgan and Company, taking seats on the boards of the companies he financed. Congressional investigators called his web of influence a money trust. His power came from finance, not from making a product.

His largest creation.

USH2 0320 U.S. Steel

In nineteen oh one Morgan bought Carnegie's steel holdings for five hundred million dollars and combined them with other firms as the United States Steel Corporation, capitalised at one point four billion dollars. The anchor and the Yawp both call it the first billion-dollar company, and the Yawp says one firm now controlled the steel market.

How far Morgan's reach extended.

USH2 0321 Morgan's Reach

By nineteen twelve Morgan's firm and its partners held three hundred forty-one directorships across one hundred twelve of the country's corporations, which controlled more than twenty-two billion dollars in assets. The anchor sets that figure beside the value of all American land west of the Mississippi.

The wave of mergers.

USH2 0322 The Merger Wave

More than three hundred mergers had taken place by nineteen oh five, folding thousands of small firms into a few hundred giants and leaving about one percent of businesses in control of over forty percent of the economy. Digital History agrees: in nineteen oh four, firms under one percent of the total made forty percent of the nation's goods.

Three entries: the railroad network, the most successful of its owners, and the question of what to call men like these.

The industry that led the consolidation.

USH2 0323 The Railroad Network

America's railroad track, thirty-five thousand miles when the Civil War ended, passed two hundred thousand miles by nineteen hundred, built with federal and state support of one hundred fifty million dollars in loans and one hundred eighty-five million acres of land. Traffic tripled from eighteen seventy-seven to eighteen ninety, and by nineteen hundred seven tycoons controlled most lines.

The most successful of them.

USH2 0324 Vanderbilt

Commodore Cornelius Vanderbilt consolidated separate trunk lines into the New York Central Railroad, one system under one owner, and left a fortune of more than one hundred million dollars at his death in eighteen seventy-seven. The anchor sets Vanderbilt, who built working railroads, against Jay Gould, whose profits came from financial manipulation. Both were called robber barons.

What to call men like these.

USH2 0325 Robber Barons or Captains of Industry

The sources answer this question on both sides. On one side, Standard Oil's integration cut the price of kerosene by about eighty percent, cheap steel remade the country's building and transport, and Carnegie gave most of his fortune to libraries, colleges and concert halls, arguing that the rich were trustees for the public. On the other, Standard Oil's rivals were driven out by price wars and discounted freight rates, Morgan's reach drew the charge of a money trust, and the Yawp reports that by eighteen ninety the wealthiest one percent of Americans owned a fourth of the nation's assets. Two misreadings sit on either side. One treats the industrialists as villains whose fortunes produced nothing but misery, which cannot account for cheaper kerosene, cheaper steel, and the libraries. The other treats them as heroes whose success proves they deserved it, which cannot account for the lockout at Homestead, the price wars, or a distribution of wealth this narrow. Those are your two columns. The course adopts neither label, because the anchor carries both readings, and the same man can fit both descriptions in the same decade.

Look at what you can now do. You can explain what the steel figures show read together: output rising from thirteen thousand tons to twenty-four million while the price fell by eighty percent, which let cities build upward and railroads reach every region. You can distinguish the two ways to grow. Horizontal integration buys competitors at the same stage; vertical integration buys the suppliers and distributors along the chain. You can describe how control was held together: the trust, a board running many companies as one, and then the holding company, which kept control concentrated when the form changed. You can explain where Morgan's power came from: finance, not a product, with three hundred forty-one directorships by nineteen twelve. And you can weigh the two labels for the industrialists, giving the evidence for each column, and adopting neither.