Industrialization

Industrialization and the Gilded Age

Railroads, steel, oil and electricity, and who paid the price, 1865 to 1900

In 1865 most Americans lived on farms and lit their homes with candles or oil lamps. By 1900 the United States made more steel than any other country, its railroads crossed the continent several times over, and electric lights glowed in city streets. A few business owners became richer than anyone in American history. Millions of workers, many of them children, put in ten- or twelve-hour days to make it happen.

In this unit we look at why industry grew so fast, how the biggest companies worked, and why Americans argued about the men who ran them. You will read laws and essays from the time, then decide for yourself and back up your view with evidence.

Why Industry Boomed After 1865

Resources. The country had huge deposits of coal, iron ore, copper and timber, and in 1859 oil was struck at Titusville, Pennsylvania. Millions of immigrants, along with Americans leaving farms, supplied workers. A growing population supplied customers.

Railroads. The United States had about 35,000 miles of track in 1865 and nearly 200,000 by 1900. Congress helped with land grants and loans under the Pacific Railway Act of 1862. On May 10, 1869, the Central Pacific, built east from California largely by Chinese workers, met the Union Pacific, built west from Nebraska largely by Irish immigrants and Civil War veterans, at Promontory Summit in Utah Territory. Railroads were the first giant businesses. They bought enormous amounts of steel and coal, and they let a factory in one city sell to the whole country. In 1883 the railroads even set up the time zones Americans still use.

Inventions. The Bessemer process, patented in Britain by Henry Bessemer in 1856, made steel cheaply by blowing air through melted iron. Alexander Graham Bell patented the telephone in 1876. In 1879 Thomas Edison’s lab produced a practical, long-lasting light bulb, and in 1882 his Pearl Street Station began sending electricity to customers in lower Manhattan. Edison’s real invention may have been the research lab itself, where teams of workers turned out new products on purpose.

Big Business

Carnegie Steel

Andrew Carnegie, a Scottish immigrant, built his first big steel mill in 1875. He used vertical integration: he bought the iron mines, coke ovens, ore ships and rail lines that fed his mills, so no one could raise his costs. He also cut wages and pushed for long shifts. By 1900 Carnegie Steel made about a quarter of all American steel, and the United States as a whole out-produced Britain.

Standard Oil

John D. Rockefeller used horizontal integration, buying or crushing rival oil refiners until Standard Oil controlled about 90 percent of American refining by around 1880. In 1882 its owners formed a trust: they handed control of about 40 companies to nine trustees, who ran them as one. “Trust” soon became the word for any giant combination.

J. P. Morgan

Morgan made his fortune in banking, not in making things. He lent to railroads and governments and reorganized failing companies, often merging competitors. In 1901 he bought Carnegie Steel and combined it with other firms to form U.S. Steel, the first company valued at more than a billion dollars.

Robber Barons or Captains of Industry?

Americans at the time could not agree on what to call these men, and historians still argue. Critics called them robber barons, comparing them to medieval lords who robbed travelers on the roads through their land. The label spread widely after Matthew Josephson’s 1934 book The Robber Barons. Critics point to secret rebates, bribed lawmakers, crushed rivals, broken strikes and dangerous workplaces.

Defenders called them captains of industry, a phrase from the British writer Thomas Carlyle. They point out that these companies cut prices sharply, built the railroads, steel and power systems of the modern economy, and created millions of jobs, and that several of the owners gave away huge fortunes. Historians today often find that both labels apply, sometimes to the same person. The activity below asks you to weigh the evidence yourself.

Social Darwinism and the Gospel of Wealth

How did the wealthy explain their place at the top? Some borrowed the British writer Herbert Spencer’s phrase “survival of the fittest” and applied it to people. Yale professor William Graham Sumner argued that helping the poor through government only rewarded weakness. Critics later called this thinking Social Darwinism, though Charles Darwin wrote about nature, not economics. It gave support to laissez-faire, the idea that government should leave business alone.

Carnegie agreed that competition was natural and that inequality was the price of progress. In his 1889 essay “Wealth,” later known as “The Gospel of Wealth,” he added a duty: a rich man should live modestly and spend his fortune on the public good while he was still alive. Carnegie followed his own advice, giving away about $350 million. Critics, including some of his own workers, replied that fair wages would have done more good than libraries.

Working Conditions and Child Labor

Factory work was steady compared with farming, but it was hard and dangerous. Many factory workers worked ten hours a day, six days a week, and many steelworkers worked twelve-hour shifts. There was no workers’ compensation for injuries, no unemployment pay and no minimum wage. Machines set the pace, and a worker who was hurt could simply be replaced.

Children worked too. The 1900 census counted about 1.75 million children aged 10 to 15 at work, nearly one in five children that age, in textile mills, coal mines, canneries, street trades and family farms. Reformers such as Jacob Riis, who photographed New York tenements in the 1880s, and Lewis Hine, who photographed child workers for the National Child Labor Committee from 1908, used cameras to make the public look.

Workers organized to push back, through the Knights of Labor, the American Federation of Labor and huge strikes such as those in 1877, 1892 and 1894. That story is the subject of the Labor and Unions unit.

Government Responds

Interstate Commerce Act, 1887

Farmers were angry that railroads charged small shippers far more than big ones. The act required rates to be “reasonable and just,” banned secret rebates and created the Interstate Commerce Commission, the first federal regulatory agency. At first the commission had little power, and courts often sided with the railroads.

Sherman Antitrust Act, 1890

The act made it illegal to form trusts or other combinations “in restraint of trade.” It passed the Senate 51 to 1. But it was vague, and in United States v. E. C. Knight (1895) the Supreme Court ruled that it did not cover manufacturing. Stronger enforcement came in the Progressive Era, including the 1911 breakup of Standard Oil.

Why “Gilded”?

In 1873 Mark Twain and his neighbor Charles Dudley Warner published a novel called The Gilded Age: A Tale of To-day. It made fun of get-rich-quick schemes and politicians who sold their votes. Something gilded is covered with a thin layer of gold over cheaper metal. Decades later, historians borrowed the title for the whole period from the 1870s to about 1900: shiny on the surface, with corruption and poverty underneath.

Timeline, 1859 to 1911

Click or tap (or Tab to) an event and press Enter to open it. Use the buttons to show only one kind of event.

Dot colors: inventions and railroads big business workers government and ideas

  1. 1859 Oil at Titusville big business

    Edwin Drake’s well in Titusville, Pennsylvania, strikes oil (August 27). Refiners soon turn crude oil into kerosene for lamps.

  2. 1862 Pacific Railway Act government and ideas

    Congress gives railroad companies land grants and loans to build a line to the Pacific (July 1).

  3. 1869 The golden spike inventions and railroads

    The Union Pacific and Central Pacific meet at Promontory Summit, Utah Territory, completing the first transcontinental railroad (May 10).

  4. 1870 Standard Oil founded big business

    John D. Rockefeller and his partners incorporate the Standard Oil Company in Ohio (January 10).

  5. 1873 The Gilded Age is published government and ideas

    Mark Twain and Charles Dudley Warner publish The Gilded Age: A Tale of To-day, a novel that mocks greed and political corruption.

  6. 1873 Panic of 1873 big business

    The banking firm Jay Cooke and Company fails in September, setting off a depression that lasts for years.

  7. 1875 Edgar Thomson Steel Works inventions and railroads

    Andrew Carnegie opens a steel mill in Braddock, Pennsylvania, built around the Bessemer process.

  8. 1876 The telephone inventions and railroads

    Alexander Graham Bell receives his telephone patent on March 7 and makes his first call three days later.

  9. 1877 Great Railroad Strike workers

    Railroad workers strike over wage cuts in July. Federal troops are sent in, and about 100 people are killed across several states.

  10. 1879 Edison’s light bulb inventions and railroads

    Thomas Edison’s lab at Menlo Park, New Jersey, makes a long-lasting carbon-filament bulb and shows it to the public on December 31.

  11. 1882 The Standard Oil Trust big business

    Standard Oil’s owners hand their shares to nine trustees, who run about 40 companies as one (January 2).

  12. 1882 Pearl Street Station inventions and railroads

    Edison’s first central power station begins lighting part of lower Manhattan (September 4).

  13. 1886 Haymarket and the AFL workers

    A bomb at a labor rally in Chicago’s Haymarket Square kills police officers and others (May 4). In December, Samuel Gompers helps found the American Federation of Labor.

  14. 1887 Interstate Commerce Act government and ideas

    Congress requires railroad rates to be “reasonable and just” and creates the Interstate Commerce Commission (February 4).

  15. 1889 Carnegie’s “Wealth” government and ideas

    Carnegie argues in the North American Review that the rich should give their fortunes away while they live (June).

  16. 1890 Sherman Antitrust Act government and ideas

    Congress outlaws combinations “in restraint of trade” (July 2).

  17. 1890 How the Other Half Lives workers

    Jacob Riis publishes his study of New York tenements, with photographs of crowded rooms and children at work.

  18. 1892 Homestead Strike workers

    A battle between locked-out steelworkers and Pinkerton guards at Carnegie’s Homestead mill leaves at least ten people dead (July 6).

  19. 1894 Pullman Strike workers

    A national railroad strike is broken by a federal court order and federal troops.

  20. 1895 United States v. E. C. Knight government and ideas

    The Supreme Court rules that the Sherman Act does not cover manufacturing, letting the sugar trust stand.

  21. 1901 U.S. Steel big business

    J. P. Morgan buys Carnegie Steel for about $480 million and forms U.S. Steel, the first company valued at more than $1 billion.

  22. 1908 Lewis Hine’s camera workers

    The National Child Labor Committee hires Hine to photograph children working in mills, mines and fields.

  23. 1911 Standard Oil broken up government and ideas

    The Supreme Court orders Standard Oil split into 34 separate companies (May 15).

Activity: Captain or Robber Baron?

Either answer can be defended with evidence. For each piece of evidence, decide whether it makes the man look more like a captain of industry, more like a robber baron, or whether it could support either view. You can change your mind at any time.

Primary Sources

5 short excerpts from public-domain texts, checked word for word against the online copies listed below. Ellipses (…) mark skipped text.

“The problem of our age is the proper administration of wealth, so that the ties of brotherhood may still bind together the rich and poor in harmonious relationship.”
Andrew Carnegie, “Wealth,” North American Review 148, no. 391 (June 1889), opening sentence

Carnegie later called this essay “The Gospel of Wealth.” He accepted that great fortunes and great inequality came with industry. His question was what the rich owed everyone else.

“The man who dies thus rich dies disgraced.”
Andrew Carnegie, “Wealth,” North American Review, June 1889

Carnegie said the public would judge a millionaire who hoarded his money until death this way. He urged the rich to fund libraries, parks, universities and concert halls during their lifetimes. Critics asked why workers should depend on a rich man’s charity rather than higher wages.

“Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal.”
Sherman Antitrust Act, Section 1, July 2, 1890

The law never defined “restraint of trade,” so the courts had to decide what it meant. Many historians note that in its early years the act was used more often against labor unions than against big corporations.

“All charges made for any service rendered or to be rendered in the transportation of passengers or property … shall be reasonable and just …”
Interstate Commerce Act, Section 1, February 4, 1887

Farmers and small shippers complained that railroads charged them far more than big customers like Standard Oil. It was the first major federal regulation of an industry, but the new commission had little power to enforce its rulings at first.

“In it the child works unchallenged from the day he is old enough to pull a thread. There is no such thing as a dinner hour; men and women eat while they work, and the ‘day’ is lengthened at both ends far into the night.”
Jacob A. Riis, How the Other Half Lives: Studies Among the Tenements of New York (New York: Charles Scribner’s Sons, 1890), chapter 11, “The Sweaters of Jewtown”

“It” is the tenement workshop, where families sewed clothing at home for contractors. New York’s factory law banned work by children under fourteen, but it did not reach these home workshops. Riis was a reformer who wanted readers to be shocked, and some of his descriptions of immigrants rely on stereotypes. Read him as a witness with a point of view.

Key Terms

Industrialization
The shift from making goods by hand in homes and small shops to making them by machine in factories.
Transcontinental railroad
A rail line linking the eastern network to the Pacific coast. The first was completed in 1869.
Bessemer process
A method of making steel by blowing air through melted iron to burn off impurities. It made steel cheap enough for rails, bridges and buildings.
Vertical integration
Owning every step of making a product, from raw materials to shipping. Carnegie owned iron mines, coke ovens, ships and rail lines.
Horizontal integration
Buying up or combining with competitors in the same business. Standard Oil did this with oil refineries.
Trust
A legal arrangement in which owners of several companies hand control to a board of trustees, who run them as one business.
Monopoly
Control of a whole market by one company, which then faces no competition on price.
Laissez-faire
French for “let it be”: the idea that government should not regulate business.
Social Darwinism
The idea, popularized by writers such as Herbert Spencer and William Graham Sumner, that competition among people sorts out the “fittest,” so poverty and wealth are natural. The label itself was mostly applied later, by critics.
Gospel of Wealth
Carnegie’s argument that the rich have a duty to use their fortunes for the public good during their lives.
Philanthropy
Giving money to causes that benefit the public, such as libraries, schools and hospitals.
Robber baron / captain of industry
Two opposite labels for the era’s business leaders: one says they got rich by cheating and crushing others, the other says they built the modern economy.

Discussion Questions

  1. Carnegie argued that inequality was the price of progress, and that philanthropy could make up for it. Do you agree? What would a Homestead steelworker have said?
  2. Standard Oil drove down the price of kerosene and also drove rivals out of business. Was it good or bad for ordinary Americans? Can it be both?
  3. Twain and Warner chose “gilded,” not “golden.” What does a thin coat of gold over cheaper metal suggest about the era?
  4. Why do you think the Sherman Act was used against unions more often than against corporations in its early years?
  5. Name a company today that some people call a monopoly. Which arguments from this page would its defenders and critics use?

Test Yourself

10 questions on industrialization and big business. Click an answer to check it.

Steel, Oil and Rails

Sources and Further Reading

Primary sources quoted

  1. Andrew Carnegie, “Wealth,” North American Review 148, no. 391 (June 1889). Text from Swarthmore College.
  2. Sherman Antitrust Act, July 2, 1890. National Archives, Sherman Anti-Trust Act.
  3. Interstate Commerce Act, February 4, 1887. National Archives, Interstate Commerce Act.
  4. Jacob A. Riis, How the Other Half Lives (1890). Project Gutenberg #45502.
  5. Mark Twain and Charles Dudley Warner, The Gilded Age: A Tale of To-day (1873). Project Gutenberg #3178.

Further reading

Interpretation

  1. Richard White, The Republic for Which It Stands: The United States during Reconstruction and the Gilded Age, 1865–1896 (2017).
  2. David Nasaw, Andrew Carnegie (2006).
  3. Ron Chernow, Titan: The Life of John D. Rockefeller, Sr. (1998).
  4. Richard Hofstadter, Social Darwinism in American Thought (1944).