Big Business and Organized Labor - Document Overview
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During the half century after the Civil War, the United States experienced an economic transformation that catapulted the nation into the front rank of industrial nations. The reconstruction of the South and the settlement of the West created an unceasing demand for goods and services. At the same time, the growing national economy created job opportunities that served as a powerful magnet luring millions of immigrants from foreign lands. The need to feed, clothe, and shelter such a rapidly growing population added more fuel to industrial expansion, and, in turn, fostered a dramatic increase in the number and size of cities, especially in the East and Midwest. By the end of the nineteenth century, the United States was no longer a decentralized agrarian republic. It was increasingly a nation of cities and factories.
A key development facilitating the urban-industrial revolution was the maturation of a national market. What had been local or regional economies before the Civil War assumed national proportions with the advent of the transcontinental railroad network, the telegraph system, and other innovations that enabled entrepreneurs to manufacture products for distribution across the country. Such a national market helped give rise to larger corporations and huge individual fortunes.
During this turbulent period of industrial expansion and consolidation, many business leaders engaged in unethical and even illegal practices in an effort to gain advantages in the marketplace. Critics charged that some of the most domineering corporate buccaneers, men such as railroad tycoons Jay Gould and Daniel Drew, oil baron John D. Rockefeller, banking magnate J. P. Morgan, and steel giant Andrew Carnegie, were "robber barons" who ruthlessly eliminated their competitors, gouged consumers, and rode roughshod over employees. In their defense, the business leaders pointed out the new jobs that they were creating, the growing volume of goods and services they were making available to the public, the rising standard of living for the country as a whole, and the philanthropic contributions they were making to help improve the general welfare of their communities.
The rise of big business and its attendant excesses helped spawn a new era in the development of an organized labor movement. The first major national union, the Knights of Labor, was founded in 1869. It included all types of laborers, skilled and unskilled, and embraced a wide array of reform initiatives, ranging from the eight-hour working day to the increased use of paper money. Terence Powderly and other leaders of the Knights of Labor sought to gain their objectives through negotiation rather than strikes.
In the 1880s, however, such broad objectives and conciliatory tactics created fissures within the Knights that led to its demise by the end of the century. In its place emerged a new organization, the American Federation of Labor (AFL). Unlike the Knights of Labor, the AFL was a federation of many separate unions, each organized by special craft. Unskilled workers were not allowed in the AFL, nor were women workers. The founder of the AFL, Samuel Gompers, disdained the comprehensive reform agenda of the Knights of Labor in favor of sharply focused "bread-and-butter" issueshigher wages, shorter working hours, and better working conditions. And unlike Powderly, he embraced the strike as the union's most effective weapon in wrenching concessions from recalcitrant corporate leaders. By the turn of the century, the AFL was the largest union in the United States, claiming over 500,000 members.
The AFL did not challenge the basic premises of capitalism. Its aim was simply to gain for its members a larger slice of the economic pie. A few labor leaders, however, grew enamored of the socialist ideas of Karl Marx. In the 1890s a West Indian immigrant, Daniel DeLeon, and a railway union organizer, Eugene Debs, organized separate labor movements grounded in socialist philosophy. Of the two, Debs proved to be the more successful. In 1901 he organized the Socialist party of America, and three years later he garnered over 400,000 votes as a candidate in the presidential election. Eight years later he ran again and gained over 900,000 votes.
At the same time that Eugene Debs was mobilizing a socialist-based working-class movement, militant labor leaders in the West were forming a parallel organization, the Industrial Workers of the World (IWW). Like the defunct Knights of Labor, the IWW sought to organize all types of workers into "One Big Union." But the "Wobblies," as IWW members were called, sought the complete destruction of the capitalist system and its replacement by autonomous workers' unions ("syndicates"). This apocalyptic objective helped fuel a militant agenda. The IWW used confrontational strikes and tactics to assault the capitalist system. Its efforts in turn led to a violent counterattack by the police. During World War I, government officials used emergency powers to crack down on the IWW and arrest its leaders.
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John D. Rockefeller on Industrial Combinations (1899)
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Q. What are, in your judgment, the chief advantages from industrial combinations(a) financially to stockholders; (b) to the public?
A. All the advantages which can be derived from a cooperation of persons and aggregation of capital. Much that one man can not do alone two can do together, and once admit the fact that cooperation, or, what is the same thing, combination, is necessary on a small scale, the limit depends solely upon the necessities of business. Two persons in partnership may be a sufficiently large combination for a small business, but if the business grows or can be made to grow, more persons and more capital must be taken in. The business may grow so large that a partnership ceases to be a proper instrumentality for its purposes, and then a corporation becomes a necessity. In most countries, as in England, this form of industrial combination is sufficient for a business coextensive with the parent country, but it is not so in this country. Our Federal form of government, making every corporation created by a State foreign to every other State, renders it necessary for persons doing business through corporate agency to organize corporations in some or many of the different States in which their business is located. Instead of doing business through the agency of one corporation they must do business through the agencies of several corporations. If the business is extended to foreign countries, and Americans are not to-day satisfied with home markets alone, it will be found helpful and possibly necessary to organize corporations in such countries, for Europeans are prejudiced against foreign corporation as are the people of many of our States. These different corporations thus become cooperating agencies in the same business and are held together by common ownership of their stocks.
It is too late to argue about advantages of industrial combinations. They are a necessity. And if Americans are to have the privilege of extending their business in all the States of the Union, and into foreign countries as well, they are a necessity on a large scale, and require the agency of more than one corporation. Their chief advantages are:
- Command of necessary capital.
- Extension of limits of business.
- Increase of number of persons interested in the business.
- Economy in the business.
- Improvements and economies which are derived from knowledge of many interested persons of wide experience.
- Power to give the public improved products at less prices and still make a profit for the stockholders.
- Permanent work and good wages for laborers.
I speak from my experience in business with which I have been intimately connected for about 40 years.
11. Q. What are the chief disadvantages or dangers to the public arising from them?
A. The dangers are that the power conferred by combination may be abused; that combinations may be formed for speculation in stocks rather than for conducting business, and that for this purpose prices may be temporarily raised instead of being lowered. These abuses are possible to a greater or less extent in all combinations, large or small, but this fact is no more of an argument against combinations than the fact that steam may explode is an argument against steam. Steam is necessary and can be made comparatively safe. Combination is necessary and its abuses can be minimized; otherwise our legislators must acknowledge their incapacity to deal with the most important instrument of industry. Hitherto most legislative attempts have been an effort not to control but to destroy; hence their futility.
12. Q. What legislation, if any, would you suggest regarding industrial combinations?
A. First. Federal legislation under which corporations may be created and regulated, if that be possible. Second. In lieu thereof, State legislation as nearly uniform as possible encouraging combinations of persons and capital for the purpose of carrying on industries, but permitting State supervision, not of a character to hamper industries, but sufficient to prevent frauds upon the public.
[From U.S. Industrial Commission,
Preliminary Report on Trusts and Combinations, 56th Cong., 1st sess. (30 Dec. 1899) Document no. 476, Part 1, pp. 79697.]
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Henry D. Lloyd on the Lords of Industry (1894)
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Last July Messrs. Vanderbilt, Sloan, and one or two others out of several hundred owners of coal lands and coal railroads, met in the pleasant shadows of Saratoga to make "a binding arrangement for the control of the coal trade." "Binding arrangement" the sensitive coal presidents say they prefer to the word "combination." The gratuitous warmth of summer suggested to these men the need the public would have of artificial heat, at artificial prices, the coming winter. It was agreed to fix prices, and to prevent the production of too much of the raw material of warmth, by suspensions of mining. In anticipation of the arrival of the cold wave from Manitoba, a cold wave was sent out all over the United States, from their parlors in New York, in an order for half-time work by the miners during the first three months of this year, and for an increase of prices. These are the means this combination uses to keep down wagesthe price of men, and keep up the price of coalthe wages of capital. Prices of coal in the West are fixed by the Western Anthracite Coal Association, controlled entirely by the large railroads and mine-owners of Pennsylvania. This association regulates the price west of Buffalo and Pittsburgh and in Canada. Our annual consumption of anthracite is now between 31,000,000 and 32,000,000 tons. The West takes between 5,000,000 and 6,000,000 tons. The companies which compose the combination mine, transport, and sell their own coal. They are obliterating other mine-owners and the retailer. The Chicago and New York dealer has almost nothing to say about what he shall pay or what he shall charge, or what his profits shall be. The great companies do not let the little men make too much. Year by year the coal retailers are sinking into the status of mere agents of the combination, with as little freedom as the consumer.
The coal combination was . . . investigated by the New York legislature in 1878, after the combination had raised the prices of coal in New York to double what they had been. The legislature found that private mine-operators who were not burdened like the great companies with extravagant and often corrupt purchases of coal lands, heavily watered stock, and disadvantageous contracts, forced on them by interested directors, and who have only to pay the actual cost of producing the coal, "can afford to sell at a much less price than the railroad coal-producing companies, and would do so if they could get transportation from the mines to the market." This is denied them by the great companies. "The private operators," says the report, "either find themselves entirely excluded from the benefits of transportation by reason of the high freights, or find it for their interest to make contracts with the railroads, by which they will not sell to others, and so the railroads have and will keep the control of the supply of the private operators." To those who will not make such contracts, rates are fixed excluding them from the market, with the result, usually, of forcing them to sell their property to the lords of the pool. "The combination," the committee declared, "can limit the supply, and thereby create such a demand and price as they may deem advisable." The committee found that coal could be laid down on the dock in New York, after paying all charges, for an average of $3.20 a ton. It was at that time retailing in the city for $4.90 to $5.25 a ton. "The purposes of the combination are solely to advance the price of coal, and it has been successful to the amount of seventy-five cents to one dollar a ton. Its further advance is only a question whether the combination can continue to repress the production." An advance of only twenty five cents a ton would on 32,000,000 tons be $8,000,000 a year, which is not a bad thingfor the combination. [If] any individual or corporate producer, show[s] any backwardness about accepting the invitation to join "the pool," they are whipped in with all the competitive weapons at command, from assault and battery to boycotting and conspiracy. The private wars that are ravaging our world of trade give small men their choice between extermination and vassalage. Combine or die! Competitors swear themselves on the Bible into accomplices, and free and equal citizens abandon their business privacy to pool commissioners vested with absolute power, but subject to human frailties. Commerce is learning the delights of universal suffrage, and in scores of trades supply and demand are adjusted by a majority vote. In a society which has the wherewithal to cover, fatten and cheer every one, Lords of Industry are acquiring the power to pool the profits of scarcity and to decree famine. They cannot stop the brook that runs the mill, but they can chain the wheel; they cannot hide the coal mine, but they can close the shaft three days every week. To keep up gold-digging rates of dividends, they declare war against plenty. On all that keeps him alive the workman must pay them their prices, while they lock him out of the mill in which alone his labor can be made to fetch the price of life. Only society can compel a social use of its resources; the man is for himself.
[From Henry D. Lloyd, "Lords of Industry,"
North American Review 138 (June 1894): 53553.]
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The American Federation of Labor (1883), Samuel Gompers
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The American Federation of Labor supplanted the Knights of Labor, and it developed a quite different philosophy. Rather than trying to abolish the wage-labor system, it sought to use strikes to gain higher wages, lower working hours, and better working conditions for its members. Unlike the Knights of Labor, the AFL organized only skilled workers into unions defined by particular trades. The AFL also emphasized relatively high dues in order to create a treasury large enough to sustain the members during a prolonged strike. Under the leadership of Samuel Gompers (1850Ð1924), a London-born cigarmaker, the AFL became not only a powerful force serving the interests of its members but also a conservative defender of capitalism against the appeal of Socialism and Communism. In 1883 Gompers testified before a Congressional committee about his organization.
. . . There is nothing in the labor movement that employers who have had unorganized workers dread so much as organization; but organization alone will not do much unless the organization provides itself with a good fund, so that the operatives may be in a good position, in the event of a struggle with their employers, to hold out. . . .
Modern industry evolves these organizations out of the existing conditions where there are two classes in society, one incessantly striving to obtain the labor of the other class for as little as possible, and to obtain the largest amount or number of hours of labor; and the members of the other class, being as individuals utterly helpless in a contest with their employers, naturally resort to combinations to improve their condition, and, in fact, they are forced by the conditions which surround them to organize for self-protection. Hence trades unions. Trade unions are not barbarous, nor are they the outgrowth of barbarism. On the contrary they are only possible where civilization exists. Trade unions cannot exist in China; they cannot exist in Russia; and in all those semi-barbarous countries they can hardly exist, if they can exist at all. But they have been formed successfully in this country, in Germany, in England, and they are gradually gaining strength in France. . . .
Wherever trades unions have organized and are most firmly organized, there are the rights of the people most respected. A people may be educated, but to me it appears that the greatest amount of intelligence exists in that country or that state where the people are best able to defend their rights, and their liberties as against those who are desirous of undermining them. Trades unions are organizations that instill into men a higher motive-power and give them a higher goal to look to. . . .
The trades unions are by no means an outgrowth of socialistic or communistic ideas or principles, but the socialistic and communistic notions are evolved from the trades unions' movements. As to the question of the principles of communism or socialism prevailing in trades unions, there are a number of men who connect themselves as workingmen with the trades unions who may have socialistic convictions, yet who never gave them currency. . . . On the other hand, there are mennot so numerous now as they have been in the pastwho are endeavoring to conquer the trades-union movement and subordinate it to those doctrines, and in a measure, in a few such organizations that condition of things exists, but by no means does it exist in the largest, most powerful, and best organized trades unions. There the view of which I spoke just now, the desire to improve the condition of the workingmen by and through the efforts of the trades union, is fully lived up to. . . . I believe that the existence of the trades-union movement, more especially where the unionists are better organized, has evoked a spirit and a demand for reform, but has held in check the more radical elements in society.
[From U.S. Senate, Testimony of Samuel Gompers, August 1883,
Report of the Committee of the Senate upon the Relations between Labor and Capital (Washington, D.C., 1885), 1:365-70.]
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John D. Rockefeller
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Carnegie Plant at Homestead, PA
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''Commodore'' Cornelius Vanderbilt
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Samuel Gompers, head of the American Federation of Labor
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Troops guarding the railroads during the Pullman Strike
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Nast vulture cartoon
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What a funny little government!
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Sears, Roebuck and Company Catalogue
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