Contemporary American History, 1877-1913

by Charles A. Beard

In terms of social life, this increase in wage workers meant, in the first place, a rapid growth of city populations. In 1860, the vast majority of the people were agriculturists; in 1890, 36.1 per cent of the population lived in towns of over 2500; in 1900, 40.5 per cent; in 1910, 46.3 per cent. In the forty years between the beginning of the Civil War and the close of the century, Chicago had grown from 109,260 to 1,698,575; Greater New York from 1,174,779 to 3,437,202; San Francisco from 56,802 to 342,782.

In the next place, the demand for labor stimulated immigration from Europe. It is true there was a decline during the Civil War, and the panic of 1873 checked the tide when it began to flow, but by 1880 it had nearly touched the half-a-million mark, and by 1883 it reached the astounding figure of 788,992. Almost all of this immigration was from Germany, Ireland, Great Britain, and Scandinavian countries, less than one in twenty of the total number coming from Austria-Hungary, Italy, and Poland in 1880. On the Pacific coast, railway building and industrial enterprise, in the great dearth of labor, resorted to the Orient for large supplies of Chinese coolies.

This industrial development meant the transformation of vast masses of the people into a proletariat, with all the term implies: an immense population housed in tenements and rented dwellings, the organization of the class into trades-unions, labor parties, and other groups; poverty and degradation on a large scale; strikes, lockouts, and social warfare; the employment of large numbers of women and children in factories; the demand for all kinds of legislation mitigating the evils of the capitalist process; and finally attacks upon the very basis of the industrial system itself.

This inevitable concomitant of the mechanical revolution, the industrial proletariat, began to make itself felt as a decided political and economic factor in the decade that followed the War. Between 1860 and 1870, the railway engineers, firemen, conductors, bricklayers, and cigar makers had formed unions. In the campaign of 1872 a party of Labor Reformers appeared; and a few years later the Knights of Labor, a grand consolidated union of all trades and grades of workers, came into existence as an active force, conducting an agitation for labor bureaus, an eight hour day, abolition of contract labor systems, and other reforms, and at the same time engineering strikes.

In 1877 occurred the first of the great labor struggles in that long series of campaigns which have marked the relations of capitalists and workingmen during the past four decades. In that year, trouble began between the management of the Baltimore and Ohio railway and its employees over a threatened reduction in wages—the fourth within a period of seven years. From this starting point the contest spread throughout the East and Middle West, reaching as far as Texas. Inasmuch as there was already considerable unemployment, the strikers saw that only by violence and intimidation could they hope to prevent the companies from moving their trains. Troops were called out by the governors of several states and Federal assistance was invoked. Pittsburgh fell almost completely into the hands of the strikers; railway buildings were burned and property to the value of more than ten million dollars destroyed. Everywhere the raw militia of the states was found to be inefficient for such a serious purpose, and the superior power of the Federal Government's regular troops was demonstrated. Where railways were in the hands of receivers, Federal courts intervened by the use of injunctions and the first blood in the contest between the judiciary and labor was drawn.

The last, but perhaps most significant, result of the industrial revolution above described has been the rise of enormous combinations and corporations in industry as well as in transportation. An increasing proportion of the business of the country has passed steadily into corporate, as contrasted with individual, ownership;[10] and this implies a momentous change in the rights, responsibilities, and economic theories of the owners of capital. Moreover, it involves the creation of a new class of men, not entrepreneurs in the old sense, but organizers of already established concerns into larger units.

The industrial revolution had not advanced very far before an intense competition began to force business men to combine to protect themselves against their own weapons. As early as 1879 certain oil interests of Cleveland, Pittsburgh, Philadelphia, and other centers had begun to control competition by making agreements through their officers. Three years later, they devised an excellent scheme for a closer organization in the formation of a "trust." They placed all their stocks in the hands of nine trustees, including John D. Rockefeller, who issued in return certificates representing the proportionate share of each holder in the concern, and managed the entire business in the interests of the holders.

The trust proved to be an attractive proposition to large business concerns. Within five years combinations had been formed in cotton oil, linseed oil, lead, sugar, whisky, and cordage, and it was not long before a system of interlocking interests began to consolidate the control of all staple manufactures in the hands of a few financiers. Six years after its formation the Standard Oil Company was paying to a small group of holders about $20,000,000 annually in dividends on a capital of $90,000,000, and the recipients of these large dividends began to invest in other concerns. In 1879, one of them, H. M. Flagler, became a director of the Valley Railroad; in 1882, William Rockefeller appeared as one of the directors of the Chicago, Milwaukee, and St. Paul; in 1887, John D. Rockefeller was connected with a syndicate which absorbed the Minnesota Iron Company, and about the same time representatives of the Oil Trust began to figure in the Northern Pacific, the Missouri, Kansas, and Texas, and the Ohio River railways. Thus a perfect network of financial connections throughout the country was built up.

But on the whole the decades following the Civil War were characterized by economic anarchy, laissez faire with a vengeance. There were prolonged industrial crises accompanied by widespread unemployment and misery among the working classes. In the matter of railway management the chaos was unparalleled.

Shortly after 1870 a period of ruinous competition set in and was followed by severe financial crises among the railways. Passenger and freight rate "wars" for the "through" traffic brought many roads to the verge of bankruptcy, in spite of their valiant efforts to save themselves by exorbitant charges on subsidiary branches where they had no competition. Crooked financiering, such as the watering of stocks, misappropriation of construction funds by directors, and the purchase of bankrupt lines by directors of larger companies and their resale at great advances, placed a staggering burden of interest charges against practically all of the lines. In 1873 nearly half of the mileage in the country was in the hands of court receivers, and between 1876 and 1879 an average of more than one hundred roads a year were sold under the foreclosure of mortgages. In all this distress the investors at large were the losers while the "inside" operators such as Jay Gould, Cornelius Vanderbilt, and Russell Sage doubled their already over-topping fortunes.