1. CAPITALISM- THE AMERICAN
EXPERIENCE 1907-1941
Modern History ATAR- Unit 1, elective 7

2. The main causes of the rise of capitalism in the USA, including the expansion of the
railways; post-Civil War reconstruction; immigrant labour; discovery of oil; and mass
production.
• What is capitalism?
• Why did it develop in America?
• Expansion of railways.
• Post- Civil War reconstruction.
• Immigrant labour
• Discovery of oil.
• Mass production
Who where the key individuals involved in the
rise of capitalism?
What was their role and impact?
- Andrew Carnegie
- John P Morgan
- Henry Ford
- John Rockefeller
- Thomas Edison
- William R Hearst
- Theodore Roosevelt
- William Taft

3. Capitalism is not just an economic system it is a philosophy.
It is a fundamental belief that the wealthy deserve their wealth and that this wealth
entitles them to a privileged position.

4. Characteristics of capitalism
Short History of American Capitalism
Meyer Weinberg.
(1) private ownership of the means of production,
(2) a social class structure of private owners and free wage-earners, which is organized to facilitate
expanding accumulation of profit by private owners;
(3) the production of commodities for sale.
Conditioning elements are:
(a) a certain division of labour;
(b) institutional arrangements to insure a dependable supply of wage labor;
(c) a degree of social productivity sufficient to permit sustained investment;
(d) commercial organization of the market—including banks—whose scope is adequate to the
productivity of the community;
(e) a political process whereby economic power can become translated into governmental policy;
(f) a legal structure that is protective of private property; and
(g) a certain toleration—at the least—of new ways of making a living.

5. Some background- The Railways
1st Railway- 1828 (Ballimore and Ohio railroad)
Transcontinental railroad- Central Pacific and Union Pacific (1869)- travel across country.
• Originally, because railroading was such an expensive enterprise at the time, the federal government
provided subsidies by the mile to railroad companies in exchange for discounted rates. Congress also
provided federal land grants to railroad companies so that they could lay down more track.
• With this free land and tens of thousands of dollars per mile in subsidies, railroading became a highly
profitable business venture.
• Tens of thousands of Irish and Chinese labourers laid the track.
• As the railroad industry grew, it became filled with corrupt practices. Unhindered by government
regulation, railroaders could turn enormous profits using any method to get results, however
unethical.
• Moreover, tycoons such as the Vanderbilt's were notorious for their lack of regard for the common
worker. Although some states passed laws to regulate corrupt railroads, the Supreme Court made
regulation on a state level impossible with the 1886 Wabash case ruling, which stated that only the
federal government could regulate interstate commerce.

6. Background- Post Civil war reconstruction.
• In the twelve years after the Civil War—the era of Reconstruction—there were massive changes
in American culture, economy, and politics. These were the years of the “Old West,” of cowboys,
Indians, and buffalo hunts, of cattle drives, railroads, and ranches. It was also the beginning of
the “Gilded Age” in the North, the age of big fortunes, enormous businesses, struggle over labor
unions, and the burgeoning of cities filled with immigrants, all of it given an air of desperation
by the largest economic depression in United States history beginning in 1873. The events in the
West and the North interwove with those in the South, where the central struggles of
Reconstruction unfolded.
• Congress continued to pursue a version of reform in the West, however, as part of a Greater
Reconstruction. The federal government sought to integrate the West into the country as a
social and economic replica of the North. Land redistribution on a massive scale formed the
centerpiece of reform. Through such measures as the Homestead and Railroad Acts of 1862, the
government redistributed the vast majority of communal lands possessed by American Indian
tribes to railroad corporations and white farmers.

7. Background- immigrants
• Immigrants entered the United States through several ports. Those from Europe generally came
through East Coast facilities, while those from Asia generally entered through West Coast
centres. More than 70 percent of all immigrants, however, entered through New York City, which
came to be known as the "Golden Door." Throughout the late 1800s, most immigrants arriving in
New York entered at the Castle Garden depot near the tip of Manhattan. In 1892, the federal
government opened a new immigration processing centre on Ellis Island in New York harbor.
• Although immigrants often settled near ports of entry, a large number did find their way inland.
Many states, especially those with sparse populations, actively sought to attract immigrants by
offering jobs or land for farming. Many immigrants wanted to move to communities established
by previous settlers from their homelands.
• Once settled, immigrants looked for work. There were never enough jobs, and employers often
took advantage of the immigrants. Men were generally paid less than other workers, and women
less than men. Social tensions were also part of the immigrant experience. Often stereotyped
and discriminated against, many immigrants suffered verbal and physical abuse because they
were "different."

8. Background- Immigrant Labour
• Between 1850- 1914 over 40 million people left Europe to migrate to America.
• The population of the country increased by about 27 million people, from about 49 million in
1880 to 76 million in 1900. Before 1880 the immigrants came largely from Western Europe and
China. In the period between 1860 and 1900 as a whole, Germans comprised 28 percent of
American immigrants; the British comprised 18 percent, the Irish 15 percent, and Scandinavians
11 percent. Together they made up 72 percent of the total immigration. At the end of the
century, the so-called “New Immigration” signalled the rise of southern and eastern Europe as
the source of most immigrants to America.
• Minimum wage was kept low.
• Working and living conditions for the poor were unsanitary and unsafe.
• Little protection through the law.
• Inequality in health, education and employment (Only 5% of eligible students attended high
school in 1900)
• Little political power.

9. Background- Oil
• Although there was very little need for oil prior to the Civil War, demand surged during the
machine age of the 1880s, 1890s, and early 1900s. Seemingly everything required oil during this
era: factory machines, ships, and, later, automobiles.
• The biggest names in the oil industry were John D. Rockefeller and his Standard Oil
Company—in fact, they were the only names in the industry. Rockefeller used horizontal
integration, essentially buying out all the other oil companies so that he had no competition
left. In doing so, Rockefeller created one of America’s first monopolies, or trusts, that cornered
the market of a single product.
• The Standard Oil Company, by 1899, was a holding company which controlled the stock of many
other companies. The capital was $110 million, the profit was $45 million a year, and John D.
Rockefeller's fortune was estimated at $200 million. Before long he would move into iron,
copper, coal, shipping, and banking (Chase Manhattan Bank). Profits would be $81 million a year,
and the Rockefeller fortune would total two billion dollars.

10. Background- Agriculture
• The expansion of agricultural lands led to what superficially seems a paradox: the more farmers
there were—and the more productive farmers became—the smaller was agriculture’s share of
the economy.
• Farmers had the largest share of the dollar value of American economic output until 1880 when
commerce’s 29 percent of the gross national product edged out their 28 percent. In 1890
manufacturing and mining at 30 percent share of the GNP both exceeded agriculture’s 19
percent share. During the same period, the percentage of workers employed in agriculture fell. A
majority of the nation’s workers were farmers or farm labourers in 1860, but by 1900 the figure
had declined to 40 percent.
• Farmers produced more than the country could consume with less labor. They exported the
excess, and the children of farmers migrated to cities and towns. Where at the beginning of the
century exports composed about 10 percent of farm income, they amounted to between 20 and
25 percent by the end of the century.
• American agricultural productivity allowed it to remain the world’s greatest agricultural
economy while it became the world’s largest industrial producer.

11. Reasons for America’s second industrial revolution (End of Civil War to the
beginning of the 20th century.)
Also called ‘The Gilded Age’
• Lots of natural resources
• Increased population- between 1860- 1900 the population went from 31.5 million to 76 million.
This then stimulated demand.
• 14 million people migrated to US.
• Improved transport systems (canals – railways)
• Technological innovations improving communication and production e.g. cheaper cost of steel.
• Increased capital investment in industry.
• Level of government assistance

12. Some dates
• 1869 Transcontinental Railroad is completed
• 1870 Standard Oil Company forms
• 1883 Pullman Strike
• 1877 Railway Strike
• 1886 Supreme Court issues verdict in Wabash
case
• 1887 Congress passes Interstate Commerce
Act
• 1890 Congress passes Sherman Anti-Trust Act
• 1892 Homestead Strike.
• 1901 U.S. Steel Corporation forms
• 1893-1897 economic depression
• 1898-1901 economic boom

13. Gilded Age
• Key Points
• America's economy grew by more than 400% between 1860 and 1900.
• "Titans of Industry" like John D. Rockefeller, Andrew Carnegie, and J.P. Morgan built monopolies
and revolutionized business practices
• Laissez faire ideology called for little or no government regulation of economic affairs.
• Unskilled urban workers did not share in economic gains, instead enduring great poverty.
• America's cities exploded. By 1900, America's 30 million city dwellers represented 40% of the
American population—up from 20% in 1860.
• About half of these new urban residents were immigrants, the vast majority of them from
Europe.

14. Gilded Age
• Railroads even used standardized time; at the stroke of noon (Eastern Standard Time) on 18
November 1883, the railroads introduced a carefully devised system of new time zones.
• Trusts and holding companies formed- the merger movement of the late 1890s.

15. Gilded Age- The period's label, "Gilded Age," comes close to capturing the juxtaposition
of enormous wealth alongside crushing poverty.
• The courts weakened unions by insisting that employers had a right to replace striking
workers while at the same time denying that strikers had a right to organize boycotts.
• The Gilded Age was a period of horrific labor violence, as industrialists and workers
literally fought over control of the workplace.
• Workers organized the first large American labor unions during the Gilded Age.
• Employers were generally just as determined to stop unionization as workers were to
organize unions, leading to frequent conflict.
• Constant strikes and violence eventually caused the middle class to become fed up
with both union and businessmen.

16. Gilded age
• The court strengthened rules increasing the
sanctity of the contract. State laws that
attempted to regulate the workplace, such as
restrictions on work hours and safety
requirements, were repeatedly struck down
by state courts with the argument that they
violated the rights of employers and
employees to enter into contracts freely.
Courts also increasingly applied the ‘fellow
servant’ rule, which relieved employers of
responsibility for workplace injury if a
contributing cause was the negligence of
another employee.

17. Key Individuals- brief overview.
Andrew Carnegie - Expanded the steel industry making steel cheap through mass production; owner
of the Carnegie Steel Company in Pittsburgh; used vertical integration to maintain market dominance,
gave away 90% of fortune- called on rich to improve society.
John D. Rockefeller - Founder of the Standard Oil Company; used horizontal integration to effectively
buy out his competition; first US business trust; revolutionised petroleum industry, philanthropist.
Cornelius Vanderbilt - Steamboat and railroad tycoon; laid thousands of miles of railroad track and
established standard gauge for railroads; bought real estate in Manhattan and Staten Island; established
the Staten Island Ferry.
Theodore Roosevelt - 26th U.S. president; launched a collection of progressive domestic policies
known as the ‘Square Deal’; youngest president at 42; involved in ’trust busting’ and regulation of
industry.
Robert La Follette - Wisconsin governor and one of the most prominent progressives in the early
1900s

18. Key Individuals- brief overview.
William Howard Taft - 27th U.S. president; involved in ‘trust busting’; strengthened Interstate
Commerce Commission; passed 16th Amendment and handpicked successor to Roosevelt in 1908.
JP Morgan- financier; banker; formed General electric; created US Steel; stopped the panic of
1907 and modernised US business.
W.H Hearst- Newspaper publisher who built the nations largest newspaper chain.
Other names
Oliver Payne, Henry Rogers- Oil
Henry Frick, Henry Phipps- Steel
Russel Sage, E.H Harriman- Railroads
R. Mellon, Hetty Green- Finance
Peter Widener, Thomas Fortune Ryan- Municipal transit
Frederick Weyerhauser (lumber), Marshall Field, Frank Woolworth (Retail), James Duke (Tobacco), J
Ogden Armour (meat packing) and William Weightman (pharmaceuticals).

19. End of the Gilded Age
• By end of 19th century, middle-class reformers were pursuing Progressive policies aimed at forcing
workers and businessmen to compromise.
• The Gilded Age challenged long-established American social ideals.
• Vast new wealth and giant industrial corporations undermined old Jeffersonian ideas about America
as an egalitarian nation of small independent farmers and artisans.
• Corrupt new politics challenged the old Republican ideal of civic-minded public service.
• Americans from all over the social and political spectrum were dissatisfied with the state of Gilded
Age society; calls for reform were pervasive but Americans disagreed strongly over what kinds of
reforms should be enacted.
• Huge industrial monopolies did not fit into old American ideology of small producers, forcing
Americans to develop new economic philosophies.
• Social Darwinists like Herbert Spencer argued that cutthroat competition was natural and that
embodied "survival of the fittest“.
• Socialist Daniel De Leon argued that government coordination of the economy was necessary to
provide stability

20. Trust busters

21. Progressive Era 1900-1917
• Progressivism was a U.S. reform movement based on the belief that society could make progress
against the abuses of the Industrial Revolution. Urban poverty and slums, child labor, dangerous
working conditions and low wages, unsanitary factory food processing, and immigrant ghetto
conditions were several of the most prominent concerns.
• Progressives often identified trusts or monopolies as the cause of American economic evils. As
they controlled markets and held great influence over government, business monopolies of the
late 1800’s also easily controlled wages, hours, and working conditions in factories, almost
universally to the detriment of the workers.
• Ultimately, politicians, labor unions and social reformers changed the nature of the U.S.
government’s role in business regulation – during the progressive era the government began to
referee and assume a more powerful regulatory role over big business.

23. Some dates
• 1902 Anthracite Strike
• 1903 Elkins Act, to punish railroad companies that issued uncompetitive rebates and the
merchants who accepted them.
• 1904 Supreme court sides with Roosevelt re JP Morgan monopoly.
• 1904-1907 economic boom
• 1906 Congress passed the Hepburn Act to strengthen the Interstate Commerce Commission and
give it more power to control the railroads.
• 1911 Triangle Shirtwaist Company fire.
• 1911 Standard Oil anti-trust case U.S. Steel Corporation anti-trust case.
• 1909- 1912 Taft presidency

24. • 1912 Wilson president.
• 1913 Underwood Tariff, which drastically reduced duties on foreign goods from an average rate
of 40 percent to an average rate of 25 percent.
• 1913 Congress compensated for the loss of revenue by creating a national income tax under the
Sixteenth Amendment.
• 1913, Wilson and Congress passed the Federal Reserve Act to create a decentralized national
bank.
• 1914 Clayton Anti-Trust Act