1878-1899: Business and the Economy: Overview

Change. The span between 1878 and 1899 represented a pivotal period for American businesses and the national economy. Over these two dozen years, millions of Americans found themselves caught up in massive, fundamental transformations. The process of industrialization, which had begun decades earlier, reached a dizzying pace as the century came to a dose. As industrialization quickened, new kinds of businesses took hold in the economy—businesses that mass-produced and mass-distributed consumer goods on a scope unimagined by earlier entrepreneurs. This overhaul happened with astonishing speed, within the space of a single generation. It also propelled basic change in daily life: by the beginning of the twentieth century, new workplaces, stores, and products were changing how most Americans made their living, how they were paid, and where and what they bought with their earnings. In addition, overseas markets became more important in the 1890s, as did foreign (especially British) investments in American businesses.

Infrastructure. A key underlying condition for the growth of big business was the completion of a national rail network. Before 1878 railroads had begun to knit the Midwest and the Northeast together, and extended tentatively into other regions. Track construction accelerated from 1878 to 1890, spreading the possibility of reliable, speedy, and relatively inexpensive travel across the continent. Approximately 80,000 miles of railroad track had been laid by 1877; that figure more than doubled during the next dozen years to 163,596 miles of track in 1890. Rail transportation networks were still strongest in the Northeast and Midwest, but important trunk lines and capillary systems had been started in the South and to the West. Bridges spanned the major rivers, and all of the nation’s major urban terminals were hooked into the network.

Railroads and the Growth of Business. The spread of a national rail network had important and far-reaching implications. Railroad growth directly spurred certain industries. The steel industry, for example, grew alongside the railroads: between 1881 and 1890 railroad owners purchased nearly fifteen million tons of rails, making them by far the steel mills’ most important customers. In addition the railroads consumed billions of tons of iron, coal, lumber, and other materials. The railroads were also important as businesses in and of themselves; throughout the period they made up the country’s biggest enterprise (either public or private). The largest lines maintained workforces that far outstripped any other private employer; in 1891 the Pennsylvania Railroad alone employed more than 110,000 workers. All told, the industry employed some 750,000 workers. The completion of a national network made it possible for businesses to ship goods much more efficiently, cheaply, and reliably within the country. Before the railroad, shippers depended on expensive, slow wagon travel over roads that became impassible in muddy and snowy periods or on barge and steamboat travel along rivers and canals that froze in the winter. Trains traveled on schedule, in all seasons and almost any weather, and they were capable of transporting bulky or heavy goods with relative ease and low expense. Producers and consumers could now reach each other across vast distances, across broad regions of the country. In this sense, the advent of mass production and mass consumption hinged directly on railroad expansion.

Immigration. The continued influx of immigrants also fed into economic transformation. The new arrivals swelled cities and provided labor and markets for businesses. However, the character of American immigration changed over the last decade of the 1800s. For example, immigrants before 1890 tended to come from northern and western Europe, from Germany and Ireland. In the 1890s newcomers began arriving in substantial numbers from southern and eastern Europe, Italy, Poland, and Russia. About half of the 3.7 million immigrants reaching the United States over this decade carne from southeastern Europe. Most of these new arrivals made their way to industrial centers, factories, mining camps, and cities where they found economie opportunities in the burgeoning industriai expansion of the period. In 1900 about two-thirds of the “new immigrants” had located to the nation’s largest cities, often crowded into slums and tenements, struggling at low-wage jobs to make new lives for themselves.

Urbanization. The last decades of the nineteenth century also witnessed an acceleration in the pace of urban growth. The majority of Americans continued to live in rural communities into the early twentieth century; however, not for much longer. By 1900 four out of every ten Americans lived in urban communities, and the nation’s three largest cities each held populations of more than a million. Urban growth accompanied industrialization, and the largest cities clustered where industry grew most rapidly—in the Northeast and Midwest. Chicago became a metropolis, growing from 500,000 in 1880 to 1.7 million in 1900; Minneapolis (where much of the nation’s flour-milling industry concentrated) grew from 47,000 to 203,000 over the same period; Buffalo climbed from 155,000 to 352,000. Smaller cities in every region also burgeoned. The steel town of Birmingham, Alabama, mushroomed from 3,000 to 26,000 over the 1870s and 1880s; Kansas City swelled from 3,200 to 38,000 over the same period; and Denver increased from 4,700 to 107,000. The urbanization of much of the nation’s population grew out of, and in turn fed into, an equally far-reaching economie transformation. As social critic Henry J. Fletcher (who deplored the trend) observed in 1895 of Chicago, the metropolis “has swallowed the factories and workshops and work people of villages and minor cities within a radius of many hundred miles. Multitudes flock to the cities because the drift is that way.” Industriai plants needed, and created, concentrations of workers in ever greater numbers. Meanwhile, as people congregated in urban communities and wage-earning jobs, they provided important mass markets for the new industriai economy.

The Ascendancy of Manufacturing. At its base, the new economy rested on industriai manufacturing. By 1899, 4.7 million wage earners were making their living in the nation’s factories, producing goods with a total value of $11.4 billion. Industrialization, like urbanization, was most pronounced in the Northeast and Midwest, where factories produced more than 85 percent of the nation’s total manufactured output. However, manufacturing established itself in several southern and western areas as well. Various specific industries drove this transformation, but to this generation of Americans steel represented the arrival of the United States as one of the world’s leading industriai powers. In 1878 the nation’s steel mills produced 820,000 short tons of raw steel and 2.1 million short tons of hot rolled iron and steel. (By the U.S. system of weights, a ton, or long ton, is 2,240 pounds; a short ton, which carne into use in 1881, is 2,000 pounds.) By 1895 America had outstripped Britain to become the world’s leading steel producer. Four years later production had climbed to nearly 12 million short tons of raw steel and 11.5 million short tons of hot rolled iron and steel. The number of workers in the steel industry, meanwhile, climbed from 130,000 in 1880 to 222,000 in 1900.

The Scale of Doing Business. Until 1880 the largest American factories employed several hundred people—enterprises that were typically capitalized at less than $1 million. (Capitalization is the amount of funding contributed to a business by the owner or stockholders.) Across the economie landscape, only the railroads were larger, with workforces in the thousands and capitalizations in the tens of millions of dollars. The new businesses that grew out of the late-nineteenth century landscape dwarfed their predecessors in scale. By 1890 Andrew Carnegie’s steel plant at Homestead alone employed thousands of workers, while the largest railroad companies maintained workforces of more than one hundred thousand. The emergence of big business was closely connected to the establishment of new mechanisms of capital-building and investing and a domestic financial market that underwrote substantially more than the government and railroad securities had done previously. By 1900 John D. Rockefeller’s Standard Oil Company of New Jersey was worth $300 million, and financial kingmakers like J. P. Morgan were overseeing unprecedented growth and consolidation in corporate, private investment markets.

Earning and Spending. Industriai growth distributed its benefits unevenly among Americans. According to a study conducted by the Illinois Bureau of Labor Statistics in 1883, coal miners in that state earned wages averaging $1.50 per day—when they were working, but employment was rarely steady. Meanwhile the miners reported varying costs for basic necessities. Rent on a two-room tenement for one miner’s family (including a wife and five children) carne to $6 per month, and the family’s annual food bill (for bread, salt, meat, and coffee) cost $80. However, this family managed to grow some of its food; another miner estimated his family’s food bill (for more elaborate fare, including steak, butter, and potatoes) at $90 per year. Workers in other industries had similar statistics. A railroad brakeman, for example, reported earning $360 per year; he, his wife, and eight children lived in a three-room house they rented for $5 per month, and subsisted on meals consisting chiefly of bread, syrup, and potatoes. Children, many of whom worked to help support their families, earned less: as a bobbin boy in a Pennsylvania textile mill in 1848, young Andrew Carnegie earned $1.20 per week. Meanwhile, participating in the new possibilities of mass consumption cost money that seems modest today but dug deeply into the wages of the working classes. The 1897 Sears, Roebuck Catalogue offered an ACME gasoline stove for $8.63; a man’s suit (“Brown Twilled Melton Suit”) for $4.85; a parlor organ for between $38.95 and $56 (a piano was more expensive at $125); a buggy for between $32.98 and $65; and a Colt revolver for between $10 and $12.

Working Hours and Conditions. Working hours and weeks were longer in the late nineteenth century than today. Most industriai workers and miners worked six days a week for between ten and twelve hours a day, and sometimes more. In fact, the implementation of ten- or eight-hour workdays became a major goal of labor, many times provoking bitter confrontations with employers. Meanwhile working conditions in jobs such as coal mining, meatpacking, and various other industries remained largely unregulated and frequently grueling and dangerous. No federal agencies or laws regulated workplaces, and effective state regulation varied, for the most part, from minimal to nonexistent.

Responses to the New Economy. Industrialization, mass production and distribution, and urbanization were revolutionary economie transformations. They represented radical innovations in American life, and Americans adjusted to them uneasily, often painfully. Many Americans became deeply disturbed by the growth of big business; the emergence of national-scale monopolies in a string of industries; the ostentatious wealth of robber barons; the escalating violence between laborers and factory owners; and the growing radicalism of workers as they organized into unions and political parties.

The Spread of the New Economy. The economie and social changes that marked this period traveled beyond the factory and the city. Ultimately, they reached out into the homes of virtually every American. In 1800, when most Americans lived on farms, their material and economie lives tended to focus on local, personal relationships. They usually did business on a small scale and dealt most often with locai artisans, storekeepers, and merchants personally. Some money exchanged hands, but buying and selling just as often took place as face-to-face transactions involving credit or bartering goods and services within the locus of the town or county in which people resided. By 1900 this world was disappearing in all but the poorest and most remote sections of the country. The transformation, as dramatic as it was, occurred gradually: it was already under way before 1878, and it was not yet complete in 1899. However, it was a revolutionary change, and it hit much of mainstream America in the 1880s and 1890s.