The 1910s Business and the Economy: Topics in the News

ECONOMIC FOUNDATIONS OF TWENTIETH-CENTURY AMERICA

In the early years of the decade, most Americans lived in rural areas, where farming and self-employment in small businesses were common means of support. The world of big business—railroads, banks, insurance companies, steel, meatpacking, and oil refining—was controlled by trusts (combinations of companies run by a powerful few that discouraged competition in the marketplace). At this time, the government did not play a large role in American business policies, and the nation remained relatively isolated from international trade. But World War I (1914–18), fought in Europe and known at the time as "The Great War," marked a new era in international relations and business.

In July 1914, Austria declared war on Serbia. In August, Germany declared war on Russia and France and invaded Belgium. The same month, Great Britain declared war on Germany. The United States decided to remain neutral—that is, it declared that it wouldn't take sides—in the conflict. By the end of that year, Great Britain had been attacked by Germany, and within the coming year, virtually all of Europe was engulfed in "The Great War." The "Triple Entente," later known as the Allied Powers, or simply the Allies (Great Britain, France, and Russia), fought against the Central Powers (originally known as the "Triple Alliance" of Germany, Austria-Hungary, and Italy; Italy would drop out of the alliance, and was replaced by Turkey and Bulgaria). Despite the American desire to remain uninvolved, the country officially entered the fighting in 1917 due to Germany's use of unrestricted submarine warfare. The United States sided with the Allied Powers and had become the main source of supplies for the nations fighting against the Central Powers, as well as the world's largest creditor (lender of money to governments and businesses).

Woodrow Wilson (1856–1924) was a Democrat who became the twenty-eighth president of the United States in 1913. He had campaigned as an opponent of big business. He and other politicians with similar philosophies appealed to many Americans who saw the greedy powers of big business as threats to the American economy and the American way of life that valued initiative and determination on the part of the individual, and the opportunity to work in an atmosphere of fair competition.

Wilson's reform program was called the "New Freedom." With this program, he hoped to eliminate the corporate trusts, open the economic market to international trade through reforms on tariffs (taxes paid on imports and exports), and use the power of the federal government to protect the American people from price gouging and unfair labor practices of big business. During his eight years in the White House, Wilson enacted policies and legislation to strengthen America's position in the world market and make big business more mindful of American ideals.

The War Industries Board

One of the most ambitious and controversial concepts to come from Woodrow Wilson's administration was the War Industries Board (WIB), created in July 1917. Originally, it was a subordinate body to the Council of National Defense, but in March 1918, the WIB became a separate agency with Wall Street financier Bernard M. Baruch (1870–1965) as its head. The purpose of the WIB was to mobilize the nation's resources for war, while protecting the economy's basic structure and character for the upcoming peace. For example, the agency implemented modern business methods to streamline the production of war materials. The agency vanished as soon as the war ended. Its most lasting legacy is that it brought industry into close and regular interaction with congressional committees, cabinet departments, and executive agencies.

As early as 1913, the Wilson administration backed the Underwood-Simmons Tariff Act to promote free trade on an international basis. Until its passing, the United States placed a 40 percent tax on imports (goods produced in other countries). This made the purchase of lower-priced foreign goods impractical and difficult for average Americans. The act lowered tariffs on incoming goods to an average of 29 percent. In 1914, the Clayton Antitrust Act was passed as a supplement to the Sherman Antitrust Act of 1890, which had been passed to keep large companies in any particular business or industry from banding together and controlling the market, forcing up prices. The Clayton Antitrust Act outlawed monopolies (companies that had complete ownership of a product or service, and thereby controlled supply and price of that product or service). Also, the act legalized peaceful strikes, picketing, and organized boycotting (publicly refusing, as a group, to buy from a company as a means of showing disapproval of its practices, and encouraging the public to do so as well) on the part of the unions. Next, Wilson's administration set up the Federal Trade Commission as an investigative body to help prevent unfair business practices and to maintain fair competition in the marketplace.

This program, which was supported by those in favor of the Progressive movement, threatened the interests of a handful of economically powerful men such as John D. Rockefeller (1839–1937), who had ruthlessly gained control of the oil industry in the form of Standard Oil Trust. But Wilson's New Freedom reforms benefited both the general public and the corporations by balancing corporate interests and the well being of workers. To accomplish his goal, Wilson sought input from advisors representing big business, despite the fact that they were not in favor of any kind of regulation. This turned out to be a good strategy; the government was able to accomplish its goals, yet businesses believed they had protected their interests.

No Progressive agenda could succeed without reforming the nation's banking system, which had not been changed since the Civil War (1861–65). The Federal Reserve Act of 1913 established twelve Federal Reserve Banks to hold the reserve money of member banks across the United States. Member banks were nationally chartered banks that held stock in the new centralized Federal Reserve. The new U.S. banking authority stabilized the nation's monetary system and was overseen by the Federal Reserve Board. The Federal Reserve could create currency and expand or tighten credit by establishing interest rates. During World War I, the Federal Reserve made it possible for the United States to create new currency in order to finance war expenses. However, by doing this without a comparable increase in consumer goods and services, the inevitable result was economic inflation (an increase in the volume of money and credit that leads to a rise in prices of products and services). Wilson's administration believed controlling inflation was better than raising income taxes. Eventually, some taxes were raised to offset the costs of war.

The first graduated federal income tax, imposed in 1913, was a means of replacing monies that previously had been gained through tariffs. Anyone with an annual income of $4,000 or more had to pay a percentage of his or her income to the federal government. That exempted most farmers and factory workers, who made less than $4,000 per year. Those who made between $4,000 and $20,000 paid 1 percent of their income to the government. There was a step increase for workers who made more than $20,000, and the maximum tax was a payment of 6 percent by those who earned annual wages of more than $500,000. When the United States officially entered World War I in 1917 the government needed to raise more money to support the war effort. Congress passed the War Revenue Acts of 1917 and 1918. As a result of this legislation, the tax obligations of the wealthy increased, while lowwage earners and farmers still paid little or no income tax.

On the whole, the World War I years were advantageous to American industrial workers, whose wages rose substantially. For the wealthy, the purchase of war bonds resulted in profits; however, for the first time the rich endured substantial taxation on their incomes. The political and financial developments of the decade established a framework for twentieth-century American economics.

The Rockefeller Foundation Is Born

On May 14, 1913, John D. Rockefeller (1839–1937), oil entrepreneur and one of the founders of the modern corporation, donated $100 million to the Rockefeller Foundation. It was the single biggest philanthropic act in American history to that date. The Rockefeller Foundation was created, according to its charter, "to promote the well being of mankind throughout the world." Foundations such as the Rockefeller Foundation provide financial support for causes deemed worthy by the board of directors who oversee the distribution and management of a foundation's funds. Foundations also provide wealthy donors with tax-exempt ways to spend money on programs that they wish to support.

By the time Rockefeller retired from active work in the oil industry (circa 1890), he was making $10 million per year when the average American was earning $10 per week. At one time, Rockefeller earned 2.5 percent of the total national income.

THE MODERN FACTORY AND SYSTEMATIC MANAGEMENT OF LABOR

As the decade progressed, Americans were moving away from a rural, agricultural lifestyle of farming and self-employment in small enterprises in order to take steady-paying jobs in urban industrial plants. These modern factories were being run with new scientific techniques. The rise of the modern corporation and its factories was creating millions of new jobs in manufacturing industries that stressed the workers' reliance on machinery. Instead of a single foreman overseeing many employees who tended to work at their own pace, the newly designed plants relied on scientific studies of management and output. One of the most influential studies for efficiency in the modern, high-tech workplace was designed by a Philadelphia engineer, Frederick W. Taylor (1856–1915). His concept of "Taylorism" restructured the factory by measuring and extracting the maximum output for each worker with a stopwatch and time-and-motion studies. By these means he devised a work standard to match an hourly pay scale. For employees who succeeded in working above the set standard, there was higher pay. Taylor's studies were among the first notable scientific studies of efficiency in the corporate world. His work was followed by sophisticated efficiency studies by Frank Gilbreth (1868–1924) and Lillian Gilbreth (1878–1972), who set out to subdivide a worker's function into a series of necessary movements, thus avoiding extra exertion for the worker while providing maximum efficiency for the employer.

Meanwhile, Henry Ford (1863–1947) worked from 1910 through 1914 to formulate the most efficient means of building automobiles in a factory setting. Ford was a skilled mechanic who started the Ford Motor Company in the early twentieth century. In 1908, he introduced the Model T automobile to the public. It was Ford's intention to make as many Model Ts as possible in the most productive manner, in order to sell the maximum number of Model Ts at a price the public could afford. So great was the demand for motor cars that, between 1914 and 1916, the number sold in the United States tripled. The Ford Motor Company alone sold 730,041 cars between 1916 and 1917. Henry Ford pioneered the idea of mass production at his plant in Highland Park, Michigan. He did this with the assembly line, an arrangement of machines and laborers in which work passes from operation to operation until a completed product emerges.

In 1914, Ford instituted the "five-dollar day" at a time when the average daily wage was less than half that amount. Part of this was paid in regular wages, but in order to earn the full amount promised, workers were expected to meet standards of efficiency, maintain an acceptable lifestyle, and stay on the job for a set length of time, usually six months. Through a series of manuals that stressed what Ford called "Americanism," he encouraged sobriety, education, and clean living in the home. He guided many immigrant workers to U.S. citizenship through English lessons and other organized assimilation programs.

To oversee the progress of the workers, the Ford Motor Company established a Sociological Department that investigated the home life of each Ford employee. If some aspect of an employee's marriage or domestic lifestyle did not meet Ford standards, then a portion of his wages would be withheld until the situation was corrected. Although the system was intrusive to the employees and expensive to run for the company, the results

proved beneficial to both sides, for a while. At its core, the program favored workers of Anglo-Saxon heritage and discriminated against Eastern European and Middle Eastern immigrants, who not only had a hard time conforming to "Americanism" but were given the most dangerous jobs on the assembly line. Furthermore, African Americans and women were not hired by Ford until the outbreak of World War I, when jobs became harder to fill. During the war, the mood of the country changed, as Americans became more suspicious of blind authority, and Ford's program failed as disgruntled workers rejected the company's intrusions into their personal lives.

The First African American Woman to Become a Self-Made Millionaire

Sarah Breedlove "Madame C. J." Walker (1867–1919) began life as a most unlikely future millionaire. The daughter of former slaves, she was orphaned at the age of six. She married when she was fourteen and bore a daughter, A'Lelia, at seventeen. A few years later her husband was murdered. A widow at the age of twenty, Sarah worked as a cook and a housecleaner to support herself and her child.

In the early 1900s, Sarah Breedlove developed some hair products for her personal use. When she realized how few hair and beauty products were available for black women, she decided to market and sell her first three products: Wonderful Hair Grower, Glossine, and Vegetable Shampoo. In 1906, as the product sales were increasing steadily, she married Charles Joseph Walker. Soon she expanded her renamed line of "Madame C. J. Walker's" cosmetics and hair care products. In 1910, she established a manufacturing plant in Indianapolis, Indiana, for her beauty products; six years later, she opened an elegant beauty salon in Harlem, along with many Walker Schools of Beauty throughout the country.

In addition to being the first African American self-made woman millionaire, Walker became a major philanthropist and human rights activist. In 1917, she was part of a delegation that petitioned President Woodrow Wilson to make lynching a federal crime.

THE RISE OF THE LABOR UNIONS

While the inhumanity of the assembly line served to diminish the self image of the worker, labor unions provided a way for an employee to regain a sense of worth. For a number of reasons, workers joined labor unions during the 1910s. They sought increased wages and job security through collective bargaining. They wanted to be a proud part of a community of workers. This was feeling that prevailed among employees at old-style factories, where human skills were more important than machinery. Unions also provided workers with education and recreation, including baseball teams, lectures, picnics, and dances; some even provided funerals when necessary.

One of the most influential of the era's union leaders was Samuel Gompers (1850–1924), who served as president of the American Federation of Labor (AFL) from 1886 to 1924. Although he asserted that the AFL was open to all workers, his organizing efforts focused on skilled workers in selected trades and excluded immigrants and female workers, at least during his period of leadership. A man with a practical approach to the concept of a union, Gompers kept the AFL on a mainstream course even when militant socialists tried to gain control of the union (socialists believed in the overthrow of the capitalist system and the distribution of all profits to the workers). Gompers allied his union with the Democratic Party, and he accepted several appointments to presidential advisory committees during World War I.

Just prior to the war, union leaders had difficulty attaining basic rights for their members, who seemed hopelessly vulnerable in modern factory settings. Entering the struggle was the Socialist Party and its dynamic leader, Eugene V. Debs (1855–1926). Debs led the Socialistoriented International Workers of the World (IWW) into several bitter and violent strikes, first in Lawrence, Kansas, in 1912, and then in Paterson, New Jersey, and Akron, Ohio, the following year. The IWW membership focused on recruiting immigrants, women, and unskilled laborers: groups that the AFL deliberately excluded from its ranks. The government disapproved of the activities of the IWW, whose membership approached the one hundred thousand mark by late in the decade, because of the union's Socialist Party connections. From 1917 to 1921, Debs was imprisoned under the Espionage Act for his opposition to World War I. The Espionage Act had been passed to restrict any public or private activity that the government classified as harmful to the United States during a time of war. Socialism was considered a dangerous political philosophy, therefore, the activities of groups and individuals who believed in socialist principles were monitored and restricted by the government.

Between 1917 and 1920, the AFL prospered as union membership in the United States increased by two million, reaching an all-time high of just over five million workers, or close to 20 percent of the American labor force. During the war, the AFL supported the government's policies and joined the federal crackdown on socialist groups. At the same time, the union won for its workers such concessions as the eight-hour workday and the right for labor to organize without fear of employers taking punitive action against them. The United Mine Workers was the largest union in the country, with five hundred thousand members. As the decade ended, even such powerful antiunion industries as meatpacking, steel, and the railroads were beginning to organize labor unions. After the war, however, the unions encountered less cooperation from the government. After the antilabor Republican Party took control of Congress in 1918, President Wilson was forced to pull back from his prolabor stance in an attempt to gain the cooperation of the legislators in approving the Treaty of Versailles, a multinational peace settlement drawn up in Versailles, France, after World War I. From then on, Wilson tempered his support of the unions, and for fifteen years after the war the power of the unions experienced a period of decline. Even the tough-minded AFL had to accept weaker labor-management relations.

Nevertheless, the unions remained active, flexing their muscle by calling 2,665 strikes—organized refusal to work—involving four million workers, in 1919. One of the year's principal protests was the national steel strike, which began with a concerted effort to sign up thousands of steelworkers as union members. After more than one hundred thousand steel laborers joined the union, a committee was formed to negotiate terms of employment with Elbert H. Gary (1846–1927), founder and chairman of the United States Steel Corporation. The group demanded increased salaries, an eight-hour workday, and the right to collective bargaining; otherwise, the union would strike on September 22. Even though President Wilson asked representatives of U.S. Steel to meet with the union spokesmen, Gary disregarded the demands. Then, he brought in thousands of strikebreakers (people to do the jobs of those participating in the strike) and deputized guards to break up union meetings. When the strike was called, 350,000 steelworkers in nine states walked off their jobs. In retaliation, police in several states attacked strikers who were holding peaceful meetings. A total of eighteen striking steelworkers were killed as federal and state troops attempted to break up picket lines.

To soothe public tensions, the steel companies ran a self-serving media campaign of newspaper advertisements, which put a pro-management face on the situation. To save their image, they depicted the labor action as a battle between the United States and a rabble-rousing gang of foreign revolutionaries. They portrayed the strikers as immigrant radicals seeking to bring down the American way of life. They also depicted the strikebreakers as African Americans and Hispanics, exploiting underlying prejudice along ethnic and racial lines. Soon, back-to-work movements formed among native-born Americans who wanted to save their jobs from foreign and minority elements, and the strike was called off in January 1920. It was a major defeat for the unions, but it was useful as a trial run for the union actions that would follow in the 1930s.

WOMEN LABOR ORGANIZERS AND THE GARMENT INDUSTRY

By the late 1910s, the International Ladies' Garment Workers Union had 82,000 members and was one of the largest affiliates of the American

Federation of Labor (AFL). The fact that more than half the members were women is impressive, considering that the AFL shunned female membership. AFL president Samuel Gompers (1850–1924) and the majority of male union members viewed women as unworthy competitors for most industrial jobs, and saw them as casual workers who would quit their jobs as soon as they married. Throughout the decade, women had to struggle to make a place for themselves in the labor movement. Despite opposition, they pushed for the right to join unions and they aggressively sought leadership positions wherever they could. Middle-class female activists worked hand-in-hand with working women to create a strong alliance, one that was looked on with suspicion by many men.

Triangle Shirtwaist Factory Fire

Afire swept the Triangle Shirtwaist Factory on the Lower East Side of Manhattan in New York City on March 25, 1911. One-hundred-forty-six women workers were killed when they were trapped in the cramped building that housed the sweatshop (a factory where people work long hours for little pay, usually in poor physical conditions). In the aftermath of the tragedy, laws were passed to improve building codes and the working conditions of factory workers. Despite the reforms, to this day, hazardous sweatshops and oppressive working conditions continue to be linked to the garment industry.

One of the reasons that women were hired for factory jobs was their willingness to work for low wages in poor environments. When women began organizing for improved working conditions and higher salaries, their employers responded with harassment through police intervention and hired thugs. The company owners persuaded judges to levy fines against women for trumped-up infractions and for actions undertaken in pursuit of better working conditions. In 1910, women led strikes in the garment industries of New York City, Chicago, and Cleveland; they were defeated in violent skirmishes. Three years later, the women had much better results in four strikes, winning better pay and shorter hours. Among the strongest union activists were Jewish immigrants whose families had fought oppression in Eastern Europe. Agnes Nestor, Rose Schneiderman, Pauline Newman, Dorothy Jones, and Fannie Cohn were a few of the early labor organizers who encouraged female workers to unionize. Some of these leaders were members of the middle class and did not actually

work in factories. Their involvement was questioned by some laborers who resented the emphasis they placed on educating workers about unionism and their advocacy of the women's suffrage (the right to vote) movement. Gompers himself questioned the participation of these women and was bothered by the growing number of socialists among them. During his leadership of the AFL, Gompers fought against the presence of women in both the union and the workplace in general.

THE RISE OF THE RETAIL INDUSTRY

Twentieth-century America has been characterized as a society of consumers of mass-produced goods. By the early 1910s, U.S. factories had begun manufacturing an array of consumer goods, and President Wilson's success in lowering importation tariffs meant that items from many parts of the world were becoming available to the American public. Meanwhile, the advertising and public relations industries worked hard to persuade the public to buy and use all varieties of products. In 1910, businesses spent $600 million on advertising, which totaled 4 percent of the national income for that year. With such an emphasis on consumerism, if the department store had not yet existed, it would have had to have been invented!

In 1910, John Wanamaker (1838–1922), the creator of the modern department store, opened a twelve-story emporium in the heart of Philadelphia. President William Howard Taft (1857–1930) led the dedication of the store in late 1911. Within this palatial structure, Wanamaker redesigned the retail sales business. This store was not only a place for customers to buy goods, it was also a fashioner of taste and style. Billboards with electric lights and colorful window displays brought potential customers into the store. Once inside, they were lured into buying products that represented modern trends in consumption, products chosen by professional buyers who scoured the world to bring customers the most appealing merchandise. Decorators used color, glass, and light to create a stress-free, enticing environment for shoppers, displaying goods as though the articles were priceless museum pieces. As women became more independent, the store tailored its campaigns to attract female shoppers. There were fashion shows to give customers a sense of the latest clothing styles and colors; a restaurant provided a place for weary customers to enjoy refreshments after a hard day of shopping. In the atrium sat the "Grand Court Console" theater organ, with its ten thousand pipes. Between 1911 and 1917, eight thousand additional pipes were added. Whether one wanted to purchase a dress pattern or a piece of fine Italian sculpture, Wanamaker's could satisfy the request. The store even boasted a Ford dealership!

Along with R. H. Macy's Herald Square store in New York City, Marshall Field's in Chicago, Dayton's in Minneapolis, and Filene's in Boston, all of which were built in the heart of major cities just after the turn of the twentieth century, John Wanamaker and Company pioneered techniques of advertising and selling practices for the modern department store. According to Wanamaker, "The time to advertise is all the time."

Self-Service at the Piggly Wiggly

While shopping at a supermarket or discount store, Americans today do not expect to rely on a sales clerk to help us pick out goods. Yet the concept of self-service shopping was unheard of in 1916 when Clarence Saunders introduced the idea in his Memphis, Tennessee-based Piggly Wiggly chain of small grocery stores. Saunders's clever innovation made it possible for storeowners to concentrate on the presentation of merchandise. Self-service shopping became one of the principal scientific management theories utilized by retailers to increase sales and profits.