HST 112 LA
The Other Side of Big Business
In America in the 1880s, big business began to flourish due to the likes of J.P. Morgan and Andrew Carnegie. They established this by being very successful businessman themselves, and doing what they had to do to be successful, such as cut corners, whether it be in the likes of sanitation and working conditions, or pay lower wages because of the resources provided. Naturally, some sacrifices needed to be made in order to achieve this goal. But in the long run, I believe that it was well more then worth it. Many historians and big business critics argue that they did this in selfish and corrupt ways that only hurt America. I am going to argue that what was done was necessary for the prosperity of this nation, and that this was the best alternative.
Before the 1880s, all of America was mainly independent upon themselves for the resources they needed to survive. Our economy was based on farming and livestock. Then along came the idea of big business. The changes that took place after the civil war involved more then just a change of technique and productivity. By the beginning of the twentieth century, the nations major sectors, like banking, oil refining, railroads, and steel, were controlled by a small number of larger corporations. This rise was also accompanied by an increase in the number of millionaires. At the beginning of the Civil War, there were only 400 millionaires in the United States. By 1892, the number had risen to 4,047.1 The emergence of the modern corporation was accompanied by many positive developments. Between 1890 and 1929, the average urban worker put in one less day of work a week and brought home three times as much in pay. The proportion of families confined to the drudgery of farm life declined by half. By 1929, nine out of ten Americans had electricity and indoor plumbing, four-fifths had automobiles, two-thirds had radios, and nearly half refrigerators and phonographs. At the same time, infant mortality fell by two-thirds, and life expectancy increased by twenty years.2
There were many differences between smaller businesses before the 1870s and the larger ones after. The most obvious, involved the corporation’s larger size and capitalization. The typical business establishment before the 1870s was financed by a single person or by several people bound together in a partnership. As a result, most businesses represented the wealth of only a few individuals. As late as 1880, the average factory had less than $1,800 in investment. Even the largest textile factories represented less than a million dollars in investment. In contrast, John D. Rockefeller’s Standard Oil Company was worth $600 million and U.S. Steel was valued at $1 billion.2 Another contrast between the new corporate enterprises of the late nineteenth century and earlier businesses lies in the systems of ownership and management. Before the Civil War, almost all businesses were owned and managed by the same people. In the modern corporation, actual management was increased and turned over to professional managers. Within corporations, a management revolution took place. Yet another sweeping change in business operation was the corporation’s increased size and geographical scale. Before the 1880s, most firms operated in a single town from a single office or factory. Most sales were made to customers in the immediate area. But the new corporate enterprises carried out their functions in widely scattered locations.
J.P. Morgan was one who stood out in this revolution of business. His banking house established the structure of some of the most prominent American industries in history, beginning with the railroad. Believing that aggressive competition had to give way to order, he consolidated competing railroad lines and many other industries. He organized syndicates to propose bond and stock issues that gave rise to such companies as AT;T, General Electric, and U.S. Steel. His critics considered him a ruthless capitalist pirate, the personification of the oppressive power of Wall Street that would crucify mankind on a cross of gold.3 But his goal was to replace cutthroat competition with economic stability. Morgan was instrumental in helping to create the modern American economy. After the Panic of 1893, he reorganized many bankrupt railroads and industrial companies. He assembled U.S. Steel, the world’s first billion-dollar corporation, and helped establish International Harvester and General Electric. He believed that the combination of rival interests into rational systems was necessary to stabilize the U.S. economy and to prevent harmful price wars.
By 1873, Andrew Carnegie had recognized America’s need for steel and, concentrating on steel production, he began his acquisition of firms, which were later consolidated into the Carnegie Steel Company. His success was due in part to efficient business methods, to his able partners, and to close alliances with railroads. By 1900, the Carnegie Steel Company was producing one quarter of all the steel in the United States and controlled iron mines, coke ovens, ore ships, and railroads. Under the law of competition, states Carnegie, the employer of thousands is forced into the strictest economies, among which the tares paid to labor figure prominently, and often there is friction between employer and the employed, between capital and labor, between rich and poor.4 His benefactions, totaling about $350 million, included Carnegie Hall (1892) in New York City, the Carnegie Institution of Washington (1902), the Carnegie Hero Fund Commission (1904), the Carnegie Foundation for the Advancement of Teaching (1905), the Carnegie Endowment for International Peace (1910), and over 2,800 libraries.5
But big business’ critics accused the captains of industry of financial trickery, such as cornering and watering stock, and of political corruption and the bribing of legislatures. They attacked them for the inhumane treatment of labor, including the imposition of heavy hours, wage cuts, lockouts and the suppression of trade unions. They also condemned them for using cheap immigrant contract labor to undercut wage rates and defeat strikes and the imposing monopoly prices. From an excerpt in The Jungle, it states, And for this, at the end of the week, he would carry home three dollars to his family, being his pay at the rate of five cents per hour-just about his proper share of the total earnings of the million and three-quarters of children who are now engaged in earning their livings in the United States.6 This suggests that the big business owners used what they had in order to provide for their employees. If the immigrant employees felt they were not making enough money, they needed to increase their efficiency and effort. According to a system introduced by Frederick Winslow Taylor, It takes each workmans interests the same as his employer, pays a premium for high efficiency, and soon convinces each man that it is for his permanent advantage to turn out each day the best quality and maximum quantity of work.7
These accusations I disagree with. The average low-class worker of these times did not endure these conditions. These conditions were rare to find, and if found, were necessary in the process to make this country prosper. And if unqualified immigrants came over here thinking they were going to automatically strike it rich without having any experience, they were obviously wrong. In all situations, there is always going to have to be sacrifices made, whether it be poor working conditions, low pay, or long hours. Its just a natural part of life that the one most fit for the job, is going to have it easier and get paid more. In a way, its survival of the fittest in life. There is always going to be a bottom to everything, whether it be a little league baseball coach to a major baseball coach, or a CEO to a factory worker, not everyone can have the success. With hard work, dedication, and chance taking, we can all at least make the best out of what we are capable of. So maybe we should stop teaching and learning about the negative aspects of the history of business, and look at what all it has brought us in the positive aspect.
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