History 1302 U.S. From 1877 Unit 1 Lecture 2 ~ Big Business & Organized Big Business & Organized Labor
Industrialism: Ever evolving and increasing systematic incorporation of machines in the production, logistics and consumption of items for human use. Impact was universal: Daily routines of work & life Technology used in public and private life. Every aspect of modern life was market driven Ever-expanding reach and size of market demand Increasing rhythm and pace of capitalist expansion Growth brings increasing instability Profit becomes the central, driving force for organizations inside a competitive marketplace Welds production with merchandizing Machinery based abundance: Technology was Man s Civilizing Factor driving out superstition, poverty and ignorance? Men as mere feeders of machines? Lives more than mere consumption? Unit 1 Lecture 2 Hollinger 1302 2
Industrialization s impact: Many Americans welcomed Industrialization because it lessened their dependence on mischievous, unpredictable Europeans, boosted farm productivity, exploited natural resources (other than land) and produced d wealth faster than agriculture. Machines, moreover, had a quality that promised to provide jobs and goods in mind-- boggling quantities Livesay in American Made Development & delivery of gasoline & electricity providing cheap, accessible power Application of scientific research & analysis to industrial processes Steel, Electricity & Gasoline engine built an age. Drives class and economic differences & discontent faster Higher American labor costs drives mechanization Population up 300% / Manufacturing up 1400% Unit 1 Lecture 2 3
Industrialization boom 1870 1905: Northern Industry brought victory Massive government spending during war Expansion of transportation infrastructure Tariff of 1865 highly protectionist Massive domestic opportunity: Nationwide market for uniform goods Plentiful resources & exploitable land Expanding population & affluence Expanding media National firms grow exponentially: Massive efficiencies available for systematic use of high-tech solutions to drive down skill need and lower the cost Technology & up-front cost necessitated massive infusions of capital. By 1875 1500 National Banks Re-investment of profits Systematic approach to all points of production, logistics and delivery By 1909 44% goods produced by 1% of firms Unit 1 Lecture 2 Hollinger 1302 4
Important technology advances: 1868 Typewriter Christopher Sholes 1870s Expansion of Electricity & Steam Engines / Refrigeration 1870s Telephone Alexander G. Bell 1879 Cash Register James Ritty 1885 Gasoline 1891 Adding machine Wm Burroughs Railroads: an economic / industrial engine Railroad expansion $360M receipts by 1867 / profit opportunity Debt burden pushed railroads to expand Massive Gov t land grants fuel expansion Pacific Railroad act of 1862 1870 (10% of West) 131M acres First Big Businesses in organization, financing, operations, etc. 30k miles of track 1860 / 193K 1900 Increasing demands coal / steel / infrastructure Corporate integration links between Big Steel & Big RR Unit 1 Lecture 2 5
Railroads lead US economic engine: Remote decisions i based on up-to-date t data Accounting complexity driving costs lower Operations in real time Personnel decisions based on productivity & cost/benefit Systematic scheduling & analysis of all activities Disciplined, interlocked, trained employees Communicated policies transcend supervision Feeding the Steel / Railroad industry Hewitt s Open Hearth System produced bigger, stronger and cheaper steel in 1868 (expands RR) Government instituted time zones by 1883 Great Lakes Steamers / ports & treatment facilities used rail to processing centers Oil for lubrication / Coal for power Massive Capitalization intra-corporate profits turned back into development Unit 1 Lecture 2 6
Expanding impact of industrialization: Gasoline 1885 1905 Revolutionized agricultural labor & production Cheap, safe, protable for tractors, etc. 1896 using gasoline farmer could outharvest 18 men and a team of 8 horses Automobiles in 1903 / Airplanes in 1903 Technology becomes a business force: Large scale, inter-related complex, massproduced and mass-used items (American System) Inter-related development of ancillary technologies Auto> Tires / Glass / Steel > highways, suburbs Wide transport network, widens economic impact Systems of machines replaces machines Typewriters 1873, Telephone 1874 explode communications ($3.6M typewriters in 1890) Unit 1 Lecture 2 7
Expanding technology: Corporate process (Eastman 1890 1910) Factory model of research 1850 2K patents per year / 1880 21K per year Market Driven Development Edison s electric lights 1878 84 Competitive for follow-on on improvement market (Westinghouse development of A/C for longer distances) Unit 1 Lecture 2 8
Henry Ford & Ford Motor Co. Forms Amer. Assoc. of Lic. Auto Man. (ALAM) to keep patent under control Adopts Daimler s German carburetor 1883 1893 Duryea Bros gas auto luxury trade 1899 40 mfg about 2,500 cars / (8K total autos registered in US) 1903 Ford Motor Co. Founded 1905 Model N car designed around mfg efficiency i & cost 1908 Model T introduced at $800 (1916 - $365) Fought patent infringements in court Henry Leland (Ford prod. Engineer) universal use of interchangeable parts Delco s electric starters in 1911 expanded ownership / (Ford bought Delco) 1913 Chassis work drops from 13 hrs to 3 hrs 1911 ALAM dissolved (suits ignored by Ford) 1915 2.5M cars registered in US - fast becoming standard of urban, middle-class Chapter Unit 1 Lecture 20 2 Hollinger 1302 9
Henry Ford & Ford Motor Co. II: Planned obsolescence in car style, features 1920s Capital requirements forces Industry consolidation Restricts new players in auto manufacturing Social and economic ramifications Ford 8 hour/$5 day ~ pay for discipline Sociology Dept furthers control lifestyle Produces the affluent worker Increased consumption aspirations 1920 20M cars registered 55% of families own cars Infrastructure needs cause expansion boom Interlocking technologies explosion Consolidation of rural life & institutions Creation of interlocked urban communities - suburbs Popular culture explosion races, etc. 1916 Fed. HWY act $75M on improved roads Unit 1 Lecture 2 10
Science of modern production: Making more using the same resources means that each one costs less 75K cattle and 300K hogs a day 55% increased use of cow brings costs down - Ancillary uses of by-products (shaving brushes, leather shoes, jello, lard, margarine, upholstery ) Inspectors to implement decisions, Taylorism is the Scientific method to discover and develop human actions that are compatible with the demands of modern industrial tasks. The Principles of Scientific Management 1911 - assisted by Morris L. Cooke Science is neutral there are no value judgments to lower cost Aspects of new, scientific c management. age e Cutting cost is Operational Management s prime responsibility and focus Continuous Flow Production is key to cost control Unit 1 Lecture 2 11
Science of modern production II: Management has total control of workplace Clear responsibilities & centralized direction Rational, end-purpose organization Transmit best knowledge throughout organization by rigorous use of Policy Procedure Practice Technology Division of tasks by Stop-watch studies Attention to detail & uniform standards High quality & high repetition Mass Production / Assembly Line method Interchangeability of parts / sub-systems All business decisions driven by data Supports gender equality Uniform processes and nomenclature means national intra-company - use for products and services 1918 was established as international movement Unit 1 Lecture 2 12
The Rise of the National Corporation: Close ties to banking, production, transportation and engineering advances Massive profits for industry leaders through cost cutting Cut-throat price competition for survival Goal of capturing ( Cornering ) the market Conglomerates or inter-connected organizations prosper Regional & Nationwide organizations Decreasing connection to locality or employees Business leadership divorced from social / political involvement Bottom line management Middle Management control organizations expand Division and hierarchy of responsibilities Cost Accounting through data processing Provided huge standard of living increases for specialists Unit 1 Lecture 2 13
National Corporation II: Careerism: growth of salaried bureaucratic mgt 1890 47% of business leaders hired from within Started in North in 1840s and evolved to raise huge amounts of cash for capital investment No personal liability for legal actions of the corporation 1889 New Jersey Incorporation Laws Companies could buy companies Extended Control unseen management 1% of corporations controlled 33% of Manufacturing Rise of the Barons the American Hero Increased profits raised opportunities for increased corruption Cost reduction schemes of pools, blockbuys, rebates, pushed the line of legality and ethics Unit 1 Lecture 2 14
National Corporation III : Pillsbury flour & other Minneapolis companies flooded America with cheap flour destroying local mills. Heinz condiments 1885 using pressure cookers produced 150 cans/min Campbell s soups, Borden s condensed milk Proctor & Gamble with 1879 Ivory Soap used rationalized advertising by 1890 & 200k cakes a day production Colgate, Eastman Kodak, American Tobacco, Quaker Oats all prospered at the cost of local or regional competition Search for Order & Economy: Depression of 1873 brought massive consolidation Price Wars hurt everyone & market stabilization helps preserve profits Trusts / Pools / Holding Companies / Rate Setting & Fixing Unseen mgt with differing objectives than business success Unit 1 Lecture 2 15
Corporate Control: Proprietary telegraph / telephones (insider information or just good intellegence?) Poors began to publish business statistics in 1900 Investment bankers to capitalize large offerings 1894 Horizontal and Vertical Integration monopoly Control and make marketplace stable Vertical whole process Swift meats, Schlitz beer, etc. Horizontal whole geography g Standard Oil (Rockefeller) Mergers legal in NJ 1889 (where businesses win and consumers lose) US Supreme Court kept states from regulating interstate commerce Unit 1 Lecture 2 16
Cultural reactions - Modern industry: work hard enough lucky enough believe enough One person can make it ~ the Horatio Alger belief Social Darwinism popularized by Herbert Spencer Success goes to the best / Science and Fact Why subsidize the losers? Virtue of competition and the Free Market Gospel of Wealth a evangelical response saying companies should invest in their communities Citi Criticisms: i Public Interest part of the economic model? Cultural and media criticism of the Successful: Haves versus the Have-not-yets Unit 1 Lecture 2 17
Reactions to Industrial concentration: Modern society is not just Natural Selection but can be mitigated by but thought and action Unionization to balance power Socialist Labor parties viewing production from standpoint of participant Bloated economy: Reduced competition & inefficiency through market control Huge profits yet slower growth & innovation Against the public interest (?) Affect on workers: Immigrant absorption into cities 42% were foreign born v 13% of America South and central European 1M Mexicans between 1900-1930 Real Wages fall in latter half of 19 th C Worker class 2.7M in 1860 / 13M in 1900 Workers and owners lived in different worlds Physically / Culturally /Politically Education / Health / Longevity Unit 1 Lecture 2 18
Results of Industrial concentration II: Little to no control of working conditions Little enforcement of existing laws No liability for accidents Misery, disease and vice of bottom classes Increase in number and percentage of unskilled: Illiterate, Women and Children work for less Early attempts at Unionization: Seen as un-american and against the individual Molly Maguires an Irish working fraternity Radical violence against management Railroad strike of 1877 10% wage reduction and lay-offs Broken by State & Federal Government reaction with troops and police Unit 1 Lecture 2 19
Unionization Movement: Cooperative Activity employee ownership of capitalist ventures Idealism of Hearth and Home Fighting Them the enemies of the working man The Idlers bankers and speculators The Corrupt lawyers, liquor dealers, gamblers The Social Parasites purveyors of vice Leadership: intelligentsia of the working class editors of labor press skilled workers with some if not almost total control of their workplace Knights of Labor - Uriah Stephens 1869 Industrialized labor in new world Permanency of wage labor status Destructive ti affect of Industrialized d workplace Unit 1 Lecture 2 20
19 th Century Union organizations: Stressed cooperative gains through united action 1886 strike failures lead to dissolution AFL American Federation of Labor 1881 becoming AFL in 1886 led by Samuel Gompers organizing workers in Crafts / Skills Economic issues of wages / hours / working conditions Haymarket Chicago (General Strike) 1886 Public reaction is negative seen as mixed with Bomb throwing Anarchist Homestead Strike Corporate dispossessing the union Pinkertons and Strike Breakers 1892 Labor Weakness: Culturally negative Governmental opposition Supply & Demand for workers Unit 1 Lecture 2 21