Challenges of the Industrial

Revolution
New Social Organizations, 1877-1901
Key Terms
• Business Cycle
• Overproduction
• Currency system
• GDP
• Political Machines
• Party Boss
• Spoils System
• Party Discipline
Business Cycle
• The recurring cycle of economic growth interrupted by depression in
the industrial market economy.
• The great mystery of this new market/industrial economy, however, is
that it is all built on speculation, or predictions of future growth. 
People continued to speculate on growth, making more and more
goods by hiring more and more people who in turn would have more
money to spend in turn driving more demand and more growth
until. . .one day, suddenly, everyone realizes we've made too much,
more than demand! 
Market & Economic Volitility
• Three Depressions: 1873-79; 1882-85; and 1893-97
• The problem of how much is too much: Overproduction
• Additional issue of Currency volatility:  Long Depression of 1873-79   
• -German stopped minting silver coins1871/drop in silver price/Coinage Act 1873 (strict
US gold standard)/deflation/bond market collapse/rail road collapse.
• Almost no government regulation/study of economics still in its
infancy
US Gross Domestic Production (GDP or total
wealth of the nation)
New Forms of Thinking to Explain and
Understand All These Changes
Wall Street: “Greed is Good”
 Social Darwinism
• Humans exist in an environment of competition
• The New Reality of Change and Understanding Change
• Evolution & the Price of Progress:  This is how history happens
Charles Darwin:  Two different ways of
seeing social evolution in human history
• On the Origin of Species, 1859:  "Natural Selection" or Survival of the
fittest.
• On the Descent of Man, 1871: new thinking on History as a force
bringing people together
• "As man advances in civilisation, and small tribes are united into larger
communities, the simplest reason would tell each individual that he ought to
extend his social instincts and sympathies to all the members of the same
nation, though personally unknown to him. This point being once reached,
there is only an artificial barrier to prevent his sympathies extending to the
men of all nations and races.
On the Descent of Man: History as a force of
competition pitting people against people
• “With savages, the weak in body or mind are soon eliminated; and
those that survive commonly exhibit a vigorous state of health. We
civilised men, on the other hand, do our utmost to check the process
of elimination; we build asylums for the imbecile, the maimed, and
the sick; we institute poor-laws; and our medical men exert their
utmost skill to save the life of every one to the last moment. 
• In other words, evil is good.
 Social Darwinism:  Applying
Darwin's Ideas about Evolution and
Natural Section to Human History
• Robber Barons and Business Empires:
 "The weak must perish."
Laissez-fair Economic Policy
• Do not interfere with market forces
• Let prices rise and fall/businesses succeed and fail
• Market is self-corrective
• Natural Law & Natural Selection
• Failure is good or a necessary evil
Enlightened Self-Interest

• Profit motive and competition produce greater efficiency and innovation and
increased wealth for society
• Lower prices and increased wealth for everyone
• Everyone must pursue their own interest
• "Greed is good"
"Gospel of Wealth," Andrew The responsibility of the
Industrial Elite to social
Carnegie (1889) philanthropy
Unlimited Creative Destruction could lead to
the collapse of the Social Order
• Too much competition undermines the crucial ability of humans
beings to be able to work together
• Industrial Revolution requires cooperation to produce wealth as much
as it requires capital & competition
Volatility & Social Turmoil
Political Instability: Disputed Election of
1876
• Ohio Gov. Rutherford B. Hayes (R), Samuel Tilden (D) of NY 
• Tilden had majority of votes but not in the electoral college 
• widespread fraud and disputed results in SC, Florida, and Louisiana 
• Compromise of 1877:
• withdraw fed. Troops and not oppose new Democratic state governments
• dems accepted Hayes and promised to respect Af. Am. Rights.  
Political Machines: The New Political
Reality
• the 'broker state' where interests organize to form factions within
parties to pursue interests
• Factions compete with other factions, organize into Political
Machines, and begin to consolidate control
• Top-down organization: a Political Machine is a tightly run system
operating around the ‘spoils system,’ or the dissemination of political
favors and contracts
• Top-down authority structure run by the party boss, representing
many hands washing each other
Gangs of New York: “Political Machine”
Political
Machines
• Party Boss:  enforces party
discipline and rewards good party
'soldiers,' became often the most
powerful man in government
• Party Discipline:  All party
representatives voting the same
way thereby addressing constituent
needs and achieving results
Political Machines
• lubricated by money and political influence, the spoil system
• organization around class and ethnicity:  common and particular
interests of those with money and those without it
• Massive organization designed to 'get out the vote,‘ party ‘soldiers’
and ground game
• Locked out of the elite circles of Anglo-Saxon men who controlled the
Industrial Revolution, Political Machines offered best possibility of
advancement for the poor and immigrants to gain access to power
National Politics
• Both parties embraced liberalism so there was little that separated
the Democratic and Republican Parties when it came to national
elections
• At this time, it was the Republican Party that supported a slightly
larger role of government in society to promote economic
development and a national economy and also to regulate in favor of
reforms favored by evangelicals
• National Politics avoided the major issues related the creative-
destruction unleashed by Industrial Revolution
 Democrats were largely the party of 'smaller'
government:  keep government out of
personal and religious issues like Catholic
schools or beer distilleries, as well as keep
the federal government out of the Jim Crow
south.
National
Politics Strange bedfellows:  big business and
reformers (Republican Party);  immigrants,
industrial laborers and Southern Plantation
owners (Democratic Party).
Workers Strike Back:  Unions
and Labor Organization
 • Unions/strikes
• Robber Baron
• Craft Union
• Fraternal Order
Key Terms • Communism
• Balkanization
Anatomy of a Strike
• Workers first organize into unions at their factory in order to redress
the power imbalance they suffer from at the hands of owners.
• Collect money—union dues—in order to prepare for a strike
• Strike:  workers must occupy the factory to prevent owner from hiring
'scabs,' replacements, and to prevent any production until their terms
are met.
 • Started on the Baltimore-
Ohio Railroad owned by the
railroad 'baron' Jay Gould
who was famous for
squeezing out the maximum
profit from his businesses.
• Ohio Railroad cut wages by
20% in response to the
depression of 1873-1879.
• Railroad workers across the
nation joined the strike,
essentially shutting down
railway transportation in the

Great Railroad Strike of nation and paralyzing the

economy

1877
Great Railroad Strike of
1877
• Massive demonstration of the power of labor in
the modern economy
• Show down between property (capital) interest
and labor interest, between individual rights and
equal rights.
• President Hayes sent federal troops to enforce a
court order to end strike.
• Constitution clear:  Individual liberty (property
rights) overrule democratic interest.
Class War
 • Lyndhurst Overlooking the
Hudson River in Tarrytown,
New York, is Gould's
family home

The New Elite of Industry &

Capital:  the "Robber Barons"
Vanderbilt's Chateau
Wealth and Power in History:  French King’s Chateau
Wealth & Power in History:  French Revolution, 1793
Moral Crisis

• Creative-destruction, market forces, and

competition begin threatening people’s
confidence in the social order
• Traditional patterns of behavior that
dictated human relations based in common
manners, customs, and mutual obligations
and beliefs under challenge by behaviors
dictated by market interests
• Business leadership only factors profit into
business decisions
 Creative Destruction

Threatened:  Traditional
Created:  Modern Market
social and moral
Economy, or human Solution:  national
obligations that regulate
relations based around the organizations for collective
behavior and bind men
exchange of money & action 
together in a common
creatoin of wealth
society
New Social & Political Organizations
• Must be clearly organized to pursue specific interests.
• Social power is a necessity of survival for the working American and
the only means of achieving it is through effective organization.
• Power is the new social order:  in America everyone is free to organize
and pursue power through collective action
• Organization without money requires trust formulated through
common values or common social/political interests
• Only the rich can afford to think and act as individuals because they
can pay people to do the things they need
 • K of L, 1869-1890: Philosophical and moral
Big Labor theory of labor—Terrence Powderly
• K of L seal: "That is the most perfect
Challenges government in which an injury to one is the
Big Business concern of all"
The Knights of Labor,
1880s
• First National Labor Union
• Attempted to organize all American laborers across
class, ethnic, and gender lines
• Transform industrial America into a 'Commonwealth
of Laborers'
K of L Philosophy:  Old mixed with New
• Kings of Capital and Knights of Labor, 1886
• New:  "Dangers from three sources imperil our American Institutions": 
one, "political corruption"; two, "social dangers. . .crowded cities"
wherein "capital and labor [are engaged] in open war" and the US is
threatened by "enormous fortunes in the hands of the few and to the
injury of  the many.“ Social and policy related issues
• Old:  and three,"Bible [euphemism for Protestant] Christianity"
corrupted by churches that sell 'themselves to the world" and "has to be
purified“  Moral dilemma posed by the new values of the Market
Economy (social Darwinism)
Kings of Capital and
Knights of Labor
• Industrial growth via cooperation:   "requires
Capital.  And there must be a head to do our
great work. .  .This our American working man
ought to understand" but when the head is
perverted and 'power has been abused'
workingmen 'have the right of REVOLUTION.‘
• Out of touch with business management:  No
clear understanding here of how ‘abuse’ relates
to business decisions and following the bottom-
line;  Should moral responsibility have priority
over profit?  How would that work in the
competitive market?
Kings of Capital and Knights of Labor
• Divisions among workers:  "Strikes are in manufacturies what
revolutions are in government" but strikes must be controlled by good
skilled workers who 'own their own house' and are 'steady' and
'shrewd' while 'idle', 'reckless' and 'dissolute' workmen must be held
in check and instructed in self-improvement.
• Union organization is not clear.  Purpose of the organization is not
clear: is it moral improvement or increased power?  Are they fighting
the capitalist class or looking to cooperate?
Kings of Capital and Knights of Labor
• Interesting solution to the social problems posed by Ind. Revolution: 
"Let labor turn to profit the cooperative system until it becomes
Capitalist!. . .Let now a community of workingmen unite their savings
and earnings!. . . When the Knights of Labor have accumulated a
sufficient sum, they will be sought after by the Kings of Capital. . .“
• Unrealistic:  Not possible for laborers to accumulate enough capital
and ownership to control the market economy as equals with
capitalists.
American Federation
of Labor
• Only successful national union of the 19th century
• Craft Union: Skilled workers only, initially mostly
Anglo-Saxon protestants
• "Bread and Butter Issues" Only (wages, hours,
conditions):  no moral foundation, no attempt to
transform US society
 First Attempt to ‘Clean-up Government’
• James Garfield wins presidential election promising ‘civil service reform’
• Government jobs were a key element of the ‘spoils’ system by which
Political Machines functioned.
• Government bureaucrats were party hacks you got their jobs by working
for the Party.
• Garfield promised an new era of government bureaucrats and works who
were trained professionals, competent, impartial, and trustworthy
• Pendelton Act, 1883:  Government jobs should be awarded on the basis of
merit (experience, training and skill)
Garfield
Assassination,
July 2, 1881
Deathbed
 • National political
organization of farmers
• 1870s
• Promote farmer's interests in
local politics in rural
America:  railway rate &
grain elevator rate regulation
• Same division:  property
rights vs public interest
• 'Granger Laws' limiting rates
eventually overturned by
federal courts in the 1880s

Grangers
 • Shriners (Ancient Arabic Order of the Nobles of
the Mystic Shrine), 1870, off-shoot of
Freemasons
Fraternal • Knights of Columbus, 1882, Catholic answer to
Orders/Benefit Shriners
• B’nai B’rith, 1843, Jewish fraternal order
Societies • Serve community needs, charity, a kind of life
insurance for families that loose their fathers
• Key place to network and organize politically
Federal Government Looks to Get more
Involved:  Sherman Anti-Trust Act, 1890

• banned restraint of trade by forming trusts or cartels (price fixing) 

• Banned monopolies and Holding Company (a corporation of corporations or crypto
monopoly)
•  The term usually refers to a company that does not produce goods or services
itself; rather, its purpose is to own shares of other companies. Holding companies
allow the reduction of risk for the owners and can allow the ownership and control
of a number of different companies.
• Passed largely to calm public fears about the power of the wealthy
• Underenforced in 1890s, mostly used against union organizing
• Beginning of end of liberalism (classical liberalism)
Class War Becoming
More Violent, 1886-
1894
Haymarket Riot, Chicago 1886
Homestead Strike,
1892
• Carnegie's main steel plant
• Robert Fricke locked up the plant in order to break
the Union
• Violent stand-off between paid mercenaries
(Pinckerton Guard) and armed workers
• Governor of Pennsylvania was able to play the role
of neutral party using state militia to come
between the opposing sides
Pullman Strike
• Strike over rents in Pullman town

• Strike organized by socialists/communists

(Chicago), 1894
• Became a national strike paralyzing all rail transport when rail workers supported the
strike by refusing to load or unload Pullman railcars (60% of railcars)

• Broken up by federal troops after two weeks of street fighting with armed workers
 Modern World

Social
Volatility/Creative
Destruction

Loss of
Business Cycle Strikes/Riots
Independence/control
 Modern World

New Social
Order/organization
s

Political Machines Unions Fraternal Orders

 Some argued that these thrown
together, ad-hoc, responses to the
creative destruction unleashed by
the Modern World were
insufficient:  Workers needed a
Plan, needed to be serious: 
Revolution!
• Karl Marx & Communism, 1883
• The power of capital (money) and
capitalists (those who make money
from money, i.e. investment) is the
dominant and overwhelming force in
Modern Society
• Only a radical restructuring of society
where ownership of large-scale
industry (super corporations) is
transferred over to the People by way
of government ownership will allow for
the modern principles of freedom and
democracy to be preserved.
Others feared the
‘balkanization’ of the US
• The breaking up of American society along ethnic,
religious, and class lines
• Threat of internecine violence or the interruption of national
markets and national industrial growth
• Looked to preserve the 'old spirit of cooperation & trust' by
way of increased government authority and the promotion
of nationalism