American Industrial Revolution
The American Industrial Revolution (1877–1919) was an era in which the nation was transformed from its agrarian, rural roots to an increasingly urban, mechanized, and innovative power. Marked by the escalating use of machines to perform work, expansion of transportation services and available markets, and the birth of labor unions, the Industrial Revolution shaped the future face of American business.
During this period, deposit banking was born and delivered the funds necessary to bankroll technological improvements in transportation, agriculture, and manufacturing, which provided increased production at reduced costs. Profits were reinvested into each sector and paid for future innovations and technological changes. Meanwhile the labor movement was born in an effort to keep workers’ needs in balance with big business’s power. In all, five pillars evolved to bring about the foundations of U.S. business today.
Banking
capital fueled the Industrial Revolution. The roots of change in the banking industry were planted by the federal government’s search for Civil War financing, which led to the National Banking Act of 1863 and the revised act of 1864. The 1863 act established a uniform national currency of federally chartered bank notes, backed by federal government bonds to be sold to state banks. The revised act of 1864 created a tax on state bank-issued notes and led to the virtual elimination of state bank notes. However, the currency of national bank notes failed to adequately provide for the growing nation’s need for flexible currency. Ten years later, loans in the form of bank notes gave way to deposit banking, in which banks delivered loan proceeds by crediting a depositor’s account. Greenbacks, also known as paper money, were first issued as non-gold–backed legal tender in 1862 as part of the federal government’s effort to raise money for the Civil War. Greenbacks became a permanent part of U.S. currency with the 1875 Resumption Act as well as 1878 congressional compromise that provided for paper money to be redeemable in gold and limited resumption of silver dollars, as proposed in the Bland-Allison Act. Multiple monetary panics closed the 19th century and led to the 1913 creation of the Federal Reserve System: 12 regional, relatively independent banks to oversee regional monetary needs.
The increasing availability of loans allowed the nation’s railroads to expand and add additional tracks between important cities and to invest in better equipment and technology. The expansion served to open new markets for agricultural products and industry, in addition to enhancing further development of the country’s natural resources, including gold, silver, pig iron, and coal.
Railroads
America’s first transcontinental railroad was completed by the Union and Central Pacific railroads in 1869. The nation boasted of 79,082 miles of railroad in 1877, and with the addition of five cross-country routes and extensive building of secondary and feeder tracks, railroad track mileage tripled to 240,293 miles by 1910. When completed, travel time from New York to Chicago was reduced from almost a month to two days. England’s industrial accomplishments heavily influenced America’s rail industry. Steel rails, available because of the steel manufacturing improvements by the Bessemer and openhearth processes in England, were an improvement over the pre–Civil War rails. Steam locomotives (made practical by Englishman George Stephenson), air brakes, and automatic couplers to link cars together lengthened trains and, in turn, increased the tonnage each could carry. Additionally, the introduction of the refrigerated cargo car allowed for the transportation of perishable goods over longer distances. These improvements in technology increased individual freight train cargoes from 20 tons in the 1880s to 80 tons by 1914.
Farmers’ dependence on railroads to get products to regional and urban markets led to increasing government regulation and consolidation of the railroad companies.
Agriculture
While the Industrial Revolution signalled America’s decreasing reliance on agriculture for its wealth, agriculture nevertheless remained prominent. Wheat, cotton, flour, and meat products held the greatest export value for farmers and were the bulk of U.S. exports, which rose in annual value from $590 million in 1877 to $1.37 billion in 1900. Technology again played an important role, as the “sodbuster,” designed to break up virgin land, allowed farmers to plant crops on their new western farms, as encouraged by the Homestead Act of 1862. Refrigerated railcars carried perishables from local markets into regional markets and urban areas; fruit and vegetables from the Great Lakes, Florida, and California; dairy products from Michigan, Minnesota, New York, and Wisconsin; cattle to Chicago; and meat products from Chicago. Further mechanization occurred as farmers ploughed earnings into more land and newer equipment in an attempt to increase profitability.
Manufacturing
Improved railroad transportation allowed inexpensive coal delivery, which fueled steam-powered factories and freed factories from waterpower restrictions. As a result, factories spread throughout the Northeast. Manufacturing gained the largest benefit from technology, as business insisted on new processes, machines, products, and distribution methods. New products created new industries, as the period saw the successful installation of the gasoline internal-combustion engine (1893); automobile manufacturing (1900); aircraft production (1903); the electric light, patented by Thomas A. Edison (1890); and the telephone, radio, typewriter, phonograph, and cash register.
As productivity grew, the price of producing goods dropped, and improved mechanization increasingly accelerated the process of America’s shift to manufacturing as a source of wealth. In 1860 leading manufacturing industries were, in order of rank, flour and meal, cotton goods, lumber, boots and shoes, and iron founding and machinery. By 1919 technology’s influence had altered the top five industries to slaughtering and meatpacking, iron and steel, automobiles, foundry and machine shop products, and cotton goods. That same year the wealth derived from manufacturing was three times that of agriculture’s wealth.
As industries grew so did competition, as many companies operated with varying levels of success and product quality. This situation resulted in overproduction, which led to lower prices and profits. To better control financial outcomes, industries began to operate collectively as trusts. One of the earliest and most famous trusts was John D. Rockefeller’s Standard Oil Company (1882), which was created when Rockefeller and associates bought nearly 90 percent of the country’s kerosene industry. Similarly, James B. Duke invited competitors to join his American Tobacco Company or watch their markets be taken over by successful American Tobacco advertising campaigns.
As big business pooled the resources and interests of competing parties, by 1919 it was employing 86 percent of America’s wage earners and created 87.7 percent of the value of goods manufactured. Additionally, the annual value of manufactured goods ballooned from $5.4 billion in 1870 to $13 billion in 1899.
Trusts faced opposition by state and federal governments. In 1911, the Supreme Court used the 1890 Sherman Antitrust Act to decree Standard Oil and American Tobacco as monopolies, and further ruled the two companies be broken into smaller companies.
Labor
In the face of the overwhelming power of trusts and big business, the labor movement took root as tensions between workers and employers increased. The Knights of Labor was the earliest influential group, founded in 1869 and designed to unify producers’ interests. At its height (1884–85), the Knights claimed 700,000 members nationwide and backed successful strikes against the Southwest System, Union Pacific, and Wabash railroads, which prevented a reduction in wages and gained public sympathy. But the union’s influence waned after 1886, when only half of 1,600 strikes involving 600,000 workers were successful. Additionally, strife within the union between skilled and unskilled workers weakened the Knights’ membership and influence. As the Knights’ power declined, the American Federation of Labor (AFL) gained the mantle of trade union leadership. Organized in 1881, the AFL had 548,000 members by 1900 and focused its efforts on economic gain for the membership, including better hours, wages, and working conditions. While the Knights attempted to meet goals through political influence and education, the AFL used economic means to meet its goals.
