The Industrial Economy: Crash Course US History #23

Summary

In this episode of Crash Course US History, John Green explores the rise of the American industrial economy following the Civil War. During this era, the U.S. transformed into the richest and most industrialized nation in the world through factors like the Civil War's impact on finance and transportation, geography, demography, and supportive laws. Key individuals like Vanderbilt, Carnegie, and Rockefeller emerged, playing significant roles in shaping the industrial sector. The period also witnessed the formation of labor unions addressing harsh working conditions, while concepts like Social Darwinism influenced societal attitudes. Green highlights parallels between this historical period and the modern era's economic dynamics.

Highlights

• The U.S. transformed post-Civil War into the richest, most industrialized nation. 🏭
• Influential industrial figures like Carnegie and Rockefeller shaped U.S. industry. 💼
• Labor unions formed due to poor working conditions and wage issues. 👷
• Social Darwinism influenced societal views on wealth and poverty. 📜
• Significant economic growth paralleled with modern American economic trends. ⏳

Key Takeaways

• Post-Civil War America rapidly industrialized, growing into an economic powerhouse. 🌟
• Vanderbilt, Rockefeller, and Carnegie played pivotal roles in the industrial boom. 🏆
• Labor movements emerged in response to exploitative work environments. 🤝
• The era fostered ideologies like Social Darwinism, affecting views on wealth disparity. 🧬
• Lessons from this industrial age echo in today's global economic landscape. 🌍

Overview

In the decades following the Civil War, the United States underwent a dramatic transformation characterized by rapid industrialization. The country's economic landscape shifted as national infrastructure like railroads improved, and innovations in communication and manufacturing took hold. Key figures such as Vanderbilt and Rockefeller amassed great wealth and power, shaping industries like oil and steel, and paving the way for modern corporations.

Despite economic growth, this period was marked by stark inequalities and challenging working conditions which led to the rise of labor unions. Organizations like the Knights of Labor sought to improve pay and safety for workers, even as events like the Haymarket Riot tainted public perceptions. The era was also marked by ideologies like Social Darwinism which rationalized wealth disparities and corporate monopolies.

This American industrial revolution not only reshaped the U.S. on a global scale but also left a lasting impact on how we view economic success and individual prosperity. The sweeping changes of this era created the foundation for modern economic systems and continue to influence contemporary discussions about wealth, poverty, and the role of corporations in society.

Chapters

• 00:00 - 00:30: Episode Introduction: The Rise of Industrial Economy In this chapter titled 'Episode Introduction: The Rise of Industrial Economy,' the focus is on the transformative period of industrialization in the United States following the Civil War. The narrator, John Green, with an entry from his alter ego 'Me From The Past,' introduces the episode by setting the stage for a discussion on economics and industrial growth, while acknowledging a break from ‘Great Man’ history featuring famous military figures. The U.S. during this era transitions from a nation with industrial output significantly less than Great Britain to becoming the richest and most industrialized country by the end of the period. The episode emphasizes the massive economic developments that reshaped the American economy and laid the foundation for its emergence as a global industrial leader.
• 00:30 - 01:00: Impact of the Civil War on Industrialization The chapter discusses the positive impact of the Civil War on the industrialization process in the United States. It highlights how the war led to the improvement of the financial system, primarily through the introduction of a national currency. Additionally, it spurred industrial growth by offering substantial contracts to arms and clothing manufacturers.
• 01:00 - 02:00: Geography, Demography, and Law: Driving Economic Growth The chapter titled 'Geography, Demography, and Law: Driving Economic Growth' discusses the factors contributing to economic development in a lighthearted and humorous tone. It emphasizes the importance of geography, demography, and law (referred to humorously as G, D, and L) in driving economic growth, drawing an analogy to celebrities Gerard Depardieu and Lindsay Lohan for comedic effect. The transcript highlights how the U.S., with its vast resources such as coal, iron, and oil, as well as water for powering factories, facilitated an industrial boom.
• 02:00 - 03:00: Urbanization and Industrial Centers This chapter discusses the shift of America from an agrarian rural society to an industrial urban nation between 1870 and 1900. During this period, America's population nearly doubled from 40 million to 76 million, largely due to immigration. Immigrants primarily moved to cities, which were becoming industrial centers. New York City, for instance, emerged as the center of commerce and finance, with its population reaching 3.4 million by 1898.
• 03:00 - 04:00: Legal and Governmental Influences on Economy This chapter discusses the Industrial heartland in the Great Lakes region at the turn of the 20th century and highlights key cities like Chicago, Cleveland, and Pittsburgh for their roles in commercial and industrial development. Chicago became the second-largest city by 1900, Cleveland was pivotal in oil refining, and Pittsburgh excelled in iron and steel production. The chapter underscores the lasting legacy of these industrial capacities, highlighting Pittsburgh's continued relevance with '53 Steelers.' It ties economic progress to legal frameworks, notably the U.S. Constitution's commerce clause which unified the nation into a single commercial zone, akin to a customs union. The chapter also notes the Supreme Court's business-friendly legal interpretations and constitutional protections for patents, fostering innovation and invention.
• 04:00 - 06:00: The Role of Railroads in Economic Transformation The chapter titled 'The Role of Railroads in Economic Transformation' discusses the significant influence railroads had on the economic development of the United States. The government supported this growth by imposing high tariffs and providing large land grants to railway companies, while relocating Native Americans to reservations. Additionally, foreign investments played a key role, as European investors were attracted to the high returns available in the U.S. compared to Europe, although this sometimes led to economic scandals. The transformative impact of these factors on the U.S. economy was substantial.
• 06:00 - 08:00: Rise of Major Corporations and Industrial Leaders The chapter 'Rise of Major Corporations and Industrial Leaders' explores the transformative period in American history during the late 19th and early 20th centuries, when the workforce significantly shifted from agriculture to industry. By 1880, most people worked in jobs unrelated to farming, and by 1890, two-thirds of Americans worked for wages rather than owning businesses or farms. By 1913, the U.S. was responsible for a third of the world's industrial output, highlighting its rapid industrialization and economic growth. This era marked the rise of major corporations and industrial magnates who played pivotal roles in shaping America’s industrial landscape. The chapter also emphasizes the importance of railroads, which were crucial to this industrial expansion, though often overlooked in historical narratives.
• 08:00 - 10:00: Working Class Challenges and the Rise of Unions In this chapter, the focus is on the influence of railroads on America's 19th-century industrial growth. Railroads were crucial for boosting commerce and unifying the American market, leading to the rise of national brands like Ivory Soap and A&P Grocery Stores. They introduced time zones for consistency in shipping and transport, significantly impacting the economy. Additionally, the chapter highlights how Richard Warren Sears capitalized on the importance of time by transforming a small investment in watches into a massive mail-order company.
• 10:00 - 12:00: Social Darwinism and Labor Movements The chapter discusses the impact of railroads on business and the development of modern corporations in the United States. Railroads enabled entrepreneurs like Roebuck to distribute products nationwide, including a vast array of goods from watches to unconstructed houses. This expansion necessitated the creation of new organizational strategies and the concept of middle management. Additionally, railroads were pioneers as publicly traded corporations, marking a shift where company owners were no longer involved in day-to-day management.
• 12:00 - 13:00: Reflection on Industrialization and Its Modern Parallels The chapter explores the significant role of capital and investments in the development of the railroad industry during the industrial era. It highlights how railroads were instrumental in creating the first 'captains of industry' such as Vanderbilt, Carnegie, and Stanford, who contributed to shaping modern corporate economies by issuing company shares to the public to raise funds. Additionally, the chapter discusses the critical partnership between the national government and industry, exemplified by initiatives like the Transcontinental Railroad, which required Congressional support, federal land grants, and government-sponsored bond issues.
• 13:00 - 14:00: Conclusion and Credits In this chapter titled 'Conclusion and Credits', the narrator thanks Thought Bubble and introduces the segment of the show called the Mystery Document. The narrator explains the rules of this segment: they have to guess the author of a document, and if they guess wrong, they receive a shock. The narrator reads the document aloud, which discusses the growing power of corporations in America. It mentions the fear that these corporations, controlled by individuals like Vanderbilt, will exert unprecedented influence over the government, highlighting the absence of an authority that can resist such power under the American societal structure.

The Industrial Economy: Crash Course US History #23 Transcription

• 00:00 - 00:30 Episode 23: The Rise of the Industrial Economy Hi I’m John Green this is Crash Course U.S. History and today we’re going to discuss economics and how a generation of- Mr. Green, Mr. Green, is this going to be one of those boring ones no wars or generals who had cool last words or anything? Alright, Me From The Past, I will give you a smidge of Great Man history. But only a smidge. So today we’re gonna discuss American industrialization in the decades after the Civil War, during which time the U.S. went from having per capita about a third of Great Britain’s industrial output to becoming the richest and most industrialized nation on earth. Libertage Meh, you might want to hold off on that Libertage,
• 00:30 - 01:00 Stan because this happened mostly thanks to the Not Particularly Awesome Civil War, which improved the finance system by forcing the introduction of a national currency and spurred industrialization by giving massive contracts to arms and clothing manufacturers. The Civil War also boosted the telegraph, which improved communication, and gave birth to the transcontinental railway via the Pacific Railway Act of 1862, all of which increased efficiency and productivity. So thanks, Civil War! Intro If you want to explain America’s economic
• 01:00 - 01:30 growth in a nutshell chalk it up to G, D, and L: Gerard, Depardieu, and Lohan. No, Geography, Demography and Law. However, while we’re on the topic, when will Gerard, Depardieu, and Lindsay Lohan have a baby? Stan, can I see it? Yes. Yes. Geographically, the U.S. was a huge country with all the resources necessary for an industrial boom. Like, we had coal, and iron and, later, oil. Initially we had water to power our factories, later replaced by coal.
• 01:30 - 02:00 And we had amber waves of grain to feed our growing population which leads to the Demography. America’s population grew from 40 million in 1870 to 76 million in 1900 and 1/3 of that growth was due to immigration. Which is good for economies. Many of these immigrants flooded the burgeoning cities, as America shifted from being an agrarian rural nation to being an industrial, urban one. Like, New York City became the center of commerce and finance and by 1898 it had a population of 3.4 million people.
• 02:00 - 02:30 And the industrial heartland was in the Great Lakes region. Chicago became the second largest city by 1900, Cleveland became a leader in oil refining, and Pittsburgh was a center of iron and steel production. And even today, the great city of Pittsburgh still employs 53 Steelers. Last but not least was the Law. The Constitution and its commerce clause made the U.S. a single area of commerce – like a giant customs union. And, as we’ll see in a bit the Supreme Court interpreted the laws in a very business friendly way. Also, the American constitution protects patents, which encourag4B-es invention and innovation,
• 02:30 - 03:00 or at least it used to. And despite what Ayn Rand would tell you, the American government played a role in American economic growth by putting up high tariffs, especially on steel, giving massive land grants to railroads and by putting Native Americans on reservations. Also, foreigners played an important role. They invested their capital and involved Americans in their economic scandals like the one that led to a depression in 1893. The U.S. was at the time was seen by Europeans as a developing economy; and investments in America offered much higher returns than those available in Europe. And the changes we’re talking about here were massive.
• 03:00 - 03:30 In 1880, for the first time, a majority of the workforce worked in non-farming jobs. By 1890 2/3 of Americans worked for wages, rather than farming or owning their own businesses. And, by 1913 the United States produced 1/3 of the world’s total industrial output. NOW bring out the Libertage, Stan. Libertage Awesome. And even better, we now get to talk about the perennially underrated railroads. Let’s go to the Thought Bubble. Although we tend to forget about them here in the U.S., because our passenger rail system
• 03:30 - 04:00 sucks, railroads were one of the keys to America’s 19th century industrial success. Railroads increased commerce and integrated the American market, which allowed national brands to emerge, like Ivory Soap and A&P Grocery Stores. But railroads changed and improved our economy in less obvious ways, too: For instance, they gave us time zones, which were created by the major railroad companies to make shipping and passenger transport more standard. Also because he recognized the importance of telling time, a railroad agent named Richard Warren Sears turned a $50 dollar investment in watches into an enormous mail order empire,
• 04:00 - 04:30 and railroads made it possible for him--and his eventual partner Roebuck--to ship watches, and then jewelry, and then pretty much everything, including unconstructed freaking houses throughout the country. Railroads were also the first modern corporations. These companies were large, they had many employees, they spanned the country. And that meant they needed to invent organizational methods, including the middle manager--supervisors to supervise supervisors. And for the first time, the owners of a company were not always day-to-day managers, because railroads were among the first publicly traded corporations.
• 04:30 - 05:00 They needed a lot of capital to build tracks and stations, so they sold shares in the company in order to raise that money, which shares could then be bought and sold by the public. And that is how railroads created the first captains of industry, like Cornelius “They Named a University after Me” Vanderbilt and Andrew “Me Too” Carnegie (Mellon) and Leland “I Named a University After My Son” Stanford. The Railroad business was also emblematic of the partnership between the national government and industry. The Transcontinental Railroad, after all, wouldn’t have existed without Congressional legislation, federal land grants, and government sponsored bond issues.
• 05:00 - 05:30 Thanks, Thought Bubble. Apparently it’s time for the Mystery Document. The rules here are simple. I guess the author of the Mystery Document and if I’m wrong, which I usually am, I get shocked. Alright. “The belief is common in America that the day is at hand when corporations far greater than the Erie – swaying such power as has never in the world’s history been trusted in the hands of mere private citizens, controlled by single men like Vanderbilt...– will ultimately succeed in directing government itself. Under the American form of society, there is now no authority capable of effective resistance.”
• 05:30 - 06:00 Corporations directing government? That’s ridiculous. So grateful for federal ethanol subsidies brought to you by delicious Diet Dr. Pepper. Mmm I can taste all 23 of the chemicals. Anyway, Stan, I’m pretty sure that is noted muckraker Ida Tarbell. No! Henry Adams? HOW ARE THERE STILL ADAMSES IN AMERICAN HISTORY? That makes me worry we’ll never escape the Clintons. Anyway, it should’ve been Ida Tarbell. She has a great name. She was a great opponent of capitalism.
• 06:00 - 06:30 Whatever. AH! Indeed industrial capitalists are considered both the greatest heroes and the greatest villains of the era, which is why they are known both as “captains of industry” and as “robber barons,” depending on whether we are mad at them. While they often came from humble origins, took risks and became very wealthy, their methods were frequently unscrupulous. I mean, they often drove competitors out of business, and generally cared very little for their workers. The first of the great robber barons and/or captains of industry was the aforementioned Cornelius Vanderbilt who rose from humble beginnings in Staten Island to make a fortune
• 06:30 - 07:00 in transportation, through ferries and shipping, and then eventually through railroads, although he once referred to trains as “them things that go on land.” But the poster boy of the era was John D. Rockefeller who started out as a clerk for a Cleveland merchant and eventually became the richest man in the world. Ever. Yes, including Bill Gates. The key to Rockefeller’s success was ruthlessly buying up so many rivals that by the late 1880s Standard Oil controlled 90% of the U.S. oil industry. Which lack of competition drove the price of gasoline up to like 12 cents a gallon,
• 07:00 - 07:30 so if you had one of the 20 cars in the world then, you were mad. The period also saw innovation in terms of the way industries were organized. Many of the robber barons formed pools and trusts to control prices and limit the negative effects of competition. The problem with competition is that over time it reduces both prices and profit margins, which makes it difficult to become super rich. Vertical integration was another innovation – firms bought up all aspects of the production process – from raw materials to production to transport and distribution. Like, Philip Armour’s meat company bought its own rail cars to ship meat, for instance.
• 07:30 - 08:00 It also bought things like conveyor belts and when he found out that animal parts could be used to make glue, he got into the glue-making business. It was Armour who once proclaimed to use “everything but the squeal.” Horizontal integration was when big firms bought up small ones. The best example of this was Rockefeller’s Standard Oil, which eventually became so big incidentally that the Supreme Court forced Standard Oil to be broken up into more than a dozen smaller oil companies. Which, by the way, overtime have slowly reunited to become the company known as Exxon-Mobil, so that worked out. U.S. Steel was put together by the era’s giant of finance, J.P. Morgan, who at his
• 08:00 - 08:30 death left a fortune of only $68 million – not counting the art that became the backbone of the Metropolitan Museum of Art – leading Andrew Carnegie to remark in surprise, “And to think he was not a rich man.”[1] Speaking of people who weren’t rich, let us now praise the unsung heroes of industrialization: workers. Well, I guess you can’t really call them unsung because Woody Guthrie. Oh! Your guitar! And my computer! I never made that connection before. Anyway, then as now, the benefits of economic growth were shared...mmm shall we say...a
• 08:30 - 09:00 smidge unevenly. Prices did drop due to industrial competition, which raised the standard of living for the average American worker. In fact, it was among the highest in the world. But due to a growing population, particularly of immigrant workers, there was job insecurity. And also booms and busts meant depressions in the 1870s and 1890s, which hit the working poor the hardest. Also, laborers commonly worked 60 hours per week with no pensions or injury compensation, and the U.S. had the highest rate of industrial injuries in the world: an average of over 35,000 people per year died on the job.
• 09:00 - 09:30 These conditions and the uncertainty of labor markets led to unions, which were mostly local but occasionally national. The first national union was the Knights of Labor, headed by Terence V. Powderly which grew from 9 members in 1870 to 728,000 by 1884. The Knights of Labor admitted unskilled workers, black workers, and women, but it was irreparably damaged by the Haymarket riot in 1886. During a strike against McCormick Harvesting Company, a policeman killed one of the strikers and in response there was a rally in Chicago’s Haymarket Square at which a bomb killed seven
• 09:30 - 10:00 police officers. Then, firing upon the crowd, the police killed four people. Seven anarchists were eventually convicted of the bombing, and although Powderly denounced anarchism, the public still associated the Knights of Labor with violence. And by 1902, its membership had shrunk considerably--to 0. The banner of organized labor however was picked up by the American Federation of Labor under Samuel L. Gompers. Do all of these guys have great last names? They were more moderate than the anarchists and the socialist International Workers of the World, and focused on bread and butter issues like pay, hours, and safety.
• 10:00 - 10:30 Founded in 1886, the same year as the Haymarket Riot, the AFL had about 250,000 members by 1892, almost 10% of whom were iron and steel workers. And now we have to pause to briefly mention one of the most pernicious innovations of the era: Social Darwinism: a perversion of Darwin’s theory that would have made him throw up. Although to be fair, almost everything made him throw up. Social Darwinists argued that the theory of survival of the fittest should be applied to people and also that corporations were people. Ergo, big companies were big because they were fitter and we had nothing to fear from
• 10:30 - 11:00 monopolies. This pseudoscience was used to argue that government shouldn’t regulate business or pass laws to help poor people. It assured the rich that the poor were poor because of some inherent evolutionary flaw, thus enabling tycoons to sleep at night. You know, on a big pile of money, surrounded by beautiful women. But, despite the apparent inborn unfitness of workers, unions continued to grow and fight for better conditions, sometimes violently. There was violence at the Homestead Steel Strike of 1892 and the Pullman Rail strike of 1894 when strikers were killed and a great deal of property was destroyed.
• 11:00 - 11:30 To quote the historian Michael Lind: “In the late 1870s and early 1880s, the United States had five times as many unionized workers as Germany, at a time when the two nations had similar populations.”[2] Unions wanted the United States and its citizens to imagine freedom more broadly, arguing that without a more equal economic system, America was becoming less, not more, free, even as it became more prosperous. If you’re thinking that this free-wheeling age of fast growth, uneven gains in prosperity, and corporate heroes/villains resembles the early 21st century, you aren’t alone.
• 11:30 - 12:00 And it’s worth remembering that it was only 150 years ago that modern corporations began to form and that American industry became the leading driver in the global economy. That’s a blink of an eye in world history terms, and the ideas and technologies of post Civil War America gave us the ideas that still define how we--all of us, not just Americans--think about opposites like success and failure, or wealth and poverty. It’s also when we people began to discuss the ways in which inequality could be the opposite of freedom. Thanks for watching. I’ll see you next week.
• 12:00 - 12:30 Crash Course is produced and directed by Stan Muller. Our script supervisor is Meredith Danko. The associate producer is Danica Johnson. The show is written by my high school history teacher, Raoul Meyer, Rosianna Halse Rojas, and myself. And our graphics team is Thought Café. Each week there’s a new caption for the Libertage. You can suggest captions in comments where you can also ask questions about today’s video that will be answered by our team of historians. Thanks for watching Crash Course. Make sure you’re subscribed. And as we say in my hometown, don’t forget to be awesome. Industrial Economy - ________________ [1] Brands, American Colossus p 6. [2] Lind, Land of Promise 171