Handout 1: Late Nineteenth- and Early Twentieth-Century Economic Trends

The U.S. economy changed dramatically during the late nineteenth and early twentieth centuries, as the country transformed from a rural agricultural nation to an urban industrial giant, the leading manufacturing country in the world. A number of important trends and developments characterized this tumultuous period.

1. The Creation of a National Market

The early American economy was characterized by smaller, local markets, centered around big cities. The vast expansion of the railroads in the late 1800s changed this, tying the country together into one national market, in which goods could be shipped for sale across the country. The railroads also provided a tremendous impetus to economic growth because they themselves provided such a massive market for goods – steel and lumber, for example. In the late nineteenth century the railroads represented the first "big business." The railroad industry was the largest single employer of labor in the U.S., and helped standardize America economically, socially, and culturally.

2. Territorial Expansion

The rapid expansion of the railroads made vast areas of land available for commercial agriculture, with 430 million acres coming under cultivation between 1860 and 1900 (more than doubling the available acreage). Twelve new western states were added to the union between 1867 and 1912. 1890 was a significant turning point, bringing both an end to Indian resistance (symbolized by massacre at Wounded Knee, South Dakota) and the "closing" of the American frontier – the West had become so populated by this point that there were no longer any unsettled frontier regions.

3. Technological Innovation

An astounding rush of inventions and technological innovations transformed America and its economy in the late nineteenth century. In the entire period up to 1860, the government issued 36,000 patents. But 440,000 were issued in the 30 years between 1860 and 1890. Some of these inventions, such as the refrigerated railroad car and the cigarette-rolling machine, formed a basis for new industries and fortunes. Other inventions, such as the typewriter (1867) and adding machine (1888), mechanized office work and allowed record keeping to keep up with the flow of products and the vastly expanding volume of sales. The telephone (1876) revolutionized social and economic life. Even more important were the invention of the gasoline engine (1878), and the spread of electricity (the light bulb was invented in 1879).

4. Mass Production

As the country expanded and industrialized, increasing emphasis was placed upon mass production and mass distribution. By speeding up production and increasing the output of goods, an industry could lower costs and maximize profits. In 1913 Henry Ford installed the world’s first assembly line, with dramatic results. In 1910 it took 12 hours to build a Ford Model-T. In 1914 it took 1½ hours. Ford was able to cut the cost of his autos from $950 in 1909 to $295 in 1923. He sold 79,000 autos in 1912 -- in 1921 he sold 1,250,000. As a result of mass production, factory owners often found themselves able to produce more goods than the market would absorb. They therefore needed to increase consumer demand, and to do so they turned to the growing industry of advertising, which worked untiringly to convince consumers that they needed the new products that were pouring off factory assembly lines. Brand names, trademarks, guarantees, slogans, celebrity endorsements, and other gimmicks were used to entice potential customers. Estimated expenditures on advertising rose from $682 million in 1914 to almost $3 billion in 1929.

5. Consolidation and Centralization – the Rise of Trusts

This period witnessed the growth of gigantic corporations – referred to as "Trusts" – that dominated key industries. Through strategies such as vertical integration, horizontal integration, and cutthroat competition, industrialists such as Andrew Carnegie in steel and J.D. Rockefeller in oil built enormous economic empires, with control centralized in their hands. Numerous industries were affected by this trend, as more and more economic power was wielded by fewer and fewer people. This concentration of power alarmed many Americans and sparked cries for reform, but Rockefeller defended the trend toward consolidation, stating that "The day of the combination is here to stay. Individualism is gone, never to return."

6. Industrialization, Deskilling, and an Increasing Demand for Unskilled Labor

The nineteenth century witnessed a shift away from small workshops run by independent and highly skilled craftsmen (artisans) and toward large mechanized factories employing increasing numbers of semi-skilled or unskilled laborers -- a process known as "deskilling." The Ford Motor Company, for example, was founded in 1903 with a few hundred employees. By 1924, one of Henry Ford’s plants employed 42,000 workers, and another – the River Rouge Plant – employed 68,000 (around three times the population of Carrollton), making it the largest factory in the world. As the need for skilled workers decreased, increasing numbers of women and children – who could be paid lower wages – entered the workforce; women’s employment doubled between 1880 and 1900, and by 1900 1/5 of manufacturing workers were women. In addition, millions of rural Americans and immigrants poured into American cities to obtain work as unskilled laborers. Wages gradually climbed, but at the price of long work weeks (which averaged 59 hours, with 12-hour days in some industries), a high rate of on-the-job injuries and fatalities, and frequent periods of unemployment. As a result, during the 1890s only 45% of American workers earned yearly wages above the "poverty line" of $500.

7. Labor Conflict

The severest labor conflict in U.S. history occurred during the last third of the nineteenth century. Between 1881 and 1905, 37,000 strikes occurred, involving nearly 7 million workers. Some workers joined the new union organizations that sprang up during the period, including the Knights of Labor (established 1869), the American Federation of Labor (1886), and the Industrial Workers of the World (1905). But as late as 1910 fewer than 10% of workers belonged to unions. The bloodiest and most famous strikes of the period were the Great Strike of 1877, the Homestead Strike (1892), and the Pullman Strike (1894). In each case either the federal government or state governments intervened on the side of employers and used force to help crush the strike.

8. Urbanization

The late nineteenth and early twentieth centuries were periods of tremendous urban growth that radically changed the country. Between 1860 and 1910, the population of cities with 2,500 or more residents climbed from 6 million to 46 million. Some of this new urban population came from the American countryside – between 1880 and 1910, about 11 million Americans moved to cities from rural areas. Millions more were immigrants. But in any case, American society, culture, politics, economics – in short, everything -- was changed in the transformation from rural, agricultural country to urban, industrial nation. And this urbanizing trend has continued – by 1990, fewer than 1 in 4 Americans lived in a rural area.

9. Immigration

Between 1880 and 1921, more than 23.5 million immigrants entered the United States. This was the period of what were known as the "New" Immigrants. Prior waves of immigrants had come primarily from northern and western Europe – England, Ireland, Germany, Scandinavia, etc. But after 1880, increasingly large numbers of immigrants came from southern and eastern Europe – Italy, Greece, the Balkan countries, Russia, Poland, etc. The majority of these immigrants settled in the cities of the Northeast and Midwest, where they took jobs as unskilled factory workers and at the same time dramatically changed the ethnic makeup of urban America. These new immigrants, many of whom were Catholic or Jewish, were viewed by many native-born Americans as being racially and culturally inferior, and Nativism became an increasingly potent force in American society and politics..

***It is important to remember that all of these developments were interlinked – none stood in isolation from the others. Take the meatpacking industry, for example. A technological innovation – the invention of the refrigerated railroad car – made it possible – using the national network of railroads – to transport perishable meat products across great distances. This also allowed for the centralization and consolidation of the meatpacking industry in Chicago -- railroads shipped the cattle and hogs in and the processed meat back out to consumers all over the country. Giant slaughterhouses displaced local butchers, and required vast numbers of unskilled workers. As a result, successive waves of immigrants from different parts of Europe swelled the population of Chicago, where extremely harsh working conditions, crippling periods of unemployment, and low wages sparked recurrent labor conflict.