Big Business in the Industrial Age
Business ruled during the years after the Civil War. Just
before the Civil War, Congress passed legislation allowing businesses
to form corporations without a charter from the U.S. government.
After the Civil War, these corporations came to dominate much of American
business, and, in the process, to define American life.
The era of Big Business began when entrepreneurs in search
of profits consolidated their businesses into massive corporations,
which were so large that they could force out competition and gain
control of a market. Control of a market allowed a corporation to
set prices for a product at whatever level it wanted. These corporations,
and the businessmen who ran them, became exceedingly wealthy and
powerful, often at the expense of many poor workers. Some of the
most powerful corporations were John D. Rockefeller’s
Standard Oil Company, Andrew Carnegie’s Carnegie Steel,
Cornelius Vanderbilt’s New York Central Railroad System, and J.P.
Morgan’s banking house. These corporations dominated almost
all aspects of their respective industries: by 1879, for example,
Rockefeller controlled 90 percent of the country’s oil refining
capacity. Much of the public saw the leaders of big business as
“robber barons” who exploited workers in order to amass
In 1882, Rockefeller further solidified this control by
establishing a monopoly or trust, which centralized
control of a number of oil-related companies under one board of
trustees. As a result, Rockefeller owned nearly the entire oil business
in the United States, and he could set prices at will. Companies
in other industries quickly imitated this trust model and used their
broad market control to push prices higher.
Trusts integrated control of many companies,
both horizontally by combining similar companies, and vertically
by combining companies involved in all stages of production.
Trusts were used to gain control of markets and force out competition.
The Government and Big Business
In the early years of the Industrial Revolution, the government
maintained a hands-off attitude toward business. The government,
and much of the nation, believed in the principles of laissez-faire economics,
which dictated that the economic market should run freely without
government interference. According to the theory, free, unregulated
markets led to competition, which in turn led to fair prices of
goods for consumers. The government did not want to interfere in
the free market.
Any concern for the plight of the poor during this time
was minimized by the tenets of social Darwinism, which
became popular in the late 1800s. Social Darwinism adapted Charles
Darwin’s theory of evolution, “survival of the fittest,” to the
business world, arguing that competition was necessary to foster
the healthiest economy (just as competition in the natural world
was necessary to foster the healthiest, or fittest, species). Proponents
of social Darwinism adhered to a “help those who help themselves”
philosophy: government shouldn’t invest in programs for the poor,
because the poor had no positive impact on the nation’s financial
health. The rich, meanwhile, were strong, hard working citizens
who contributed to national progress, and, as such, should not be
subject to government regulation. Prominent social Darwinists included
Herbert Spencer and Andrew Carnegie, whose essay promoting free
market economy, “The Gospel of Wealth,” was published in 1889.
The Move Toward Regulation
By the 1880s, however, it was beginning to become clear
that markets were not free. Corporations had grown
so big and powerful that they controlled markets entirely. Consumers
grew enraged over the high prices that monopolies had set, while
small businesses demanded protection from being squeezed out of
the market. Railroad monopolies were overcharging small-time customers,
especially farmers, while giving rebates to powerful politicians
and favored clients.
State legislatures tried to limit the abuses of the railroads
by issuing maximum rate laws, which set a ceiling on the prices
a railroad could charge. Congress struck these laws down, claiming
they were unconstitutional. But as public anger continued to grow
over the practices of corporations, the federal government began
to change its tune. Congress passed the Interstate Commerce
Act in 1887 to try to stop railroads from price discrimination.
Later, in 1888, legislative committees in Congress began investigations
into the business practices of the “robber barons.”
Two years later, Congress passed the Sherman Antitrust
Act, which outlawed trusts and any other contracts that restrained
free trade. Though this act eventually became extremely important
in regulating business, in its early years it was rarely enforced.
In fact, the act was so loosely phrased that it sometimes had the
opposite of its intended effect: instead of regulating business
monopolies, it regulated the labor unions that challenged these monopolies.
In the 1890s, courts invoked the Sherman Antitrust Act to restrain
laborers’ right to strike, ruling that strikes violated the act’s
prohibition against “a conspiracy in restraint of trade.” Big business
thus benefited from the judiciary’s (in particular the Supreme Court’s)
pro-business stance and its unwillingness to restrict commercial
behavior. It was not until the early 1900s that government began
to enforce the Sherman Antitrust regulatory policies in full.
The Growth of Unions
Although labor unions began forming in the early
1800s, they did not gain any significant membership base or bargaining
power until the 1860s and 1870s. The harsh, even hazardous, working
conditions arising from industrialization drove laborers to organize
into unions. One of the first major unions was the Knights
of Labor, founded in 1869. The Knights demanded equal
pay for women, an end to child labor, and a progressive income tax,
among other reforms. The union claimed a substantial membership,
including women, blacks, and immigrants. In 1885, the group staged
a successful strike against railroad “robber baron” Jay Gould. The
strike so severely crippled Gould’s operation that he had no choice
but to fold. On the strength of this victory, the Knights’ membership
and political power grew. The Knights successfully supported a number
of politicians for election and forced laws favorable to workers through
The Knights’ power waned, however, after the leadership
lost control of the local chapters and a series of unauthorized
strikes grew violent. The bloody Haymarket riot in
Chicago in 1886 sounded the union’s death knell. The riot, intended
to protest police cruelty against strikers, got out of hand when
one member of the Knights of Labor threw a bomb, killing a police
officer. In the resultant chaos, nine people were killed and close
to sixty injured. Prominent leaders of the Knights of Labor were
convicted of inciting the riot, and public support for the union
To salvage the labor movement, craft laborers who had
been members of the Knights of Labor broke off and formed the American
Federation of Labor (AFL). Whereas the Knights of Labor had
boasted an open membership policy and sweeping labor goals, the
AFL catered exclusively to skilled laborers and focused on smaller,
more practical issues: increasing wages, reducing hours, and imposing
safety measures. Samuel Gompers, the AFL’s leader from
1886 to 1924, proved a master tactician who united many labor groups in
a federation of trade unions.
More radical labor organizations also emerged, most notably
the Industrial Workers of the World, nicknamed the
Wobblies, founded in 1905. More famous for their militant anticapitalism
than for being large or influential, the Wobblies never grew to
more than 30,000 members before fading away in about 1920.
Between 1880 and 1905, union activity in the
the United States led to well over 35,000 strikes. As evidenced
by the Haymarket riot, these demonstrations at times erupted in
violence. This violence alienated much of the American public and
the popular support for unions plunged, and employers were free
to exact severe retribution on striking workers. As a result, strikes
proved largely ineffective at advancing the labor cause.
Major strikes and outbreaks of stike-related
violence during the later nineteenth century tended to impair the
labor cause instead of advance it. Public sympathy for unions plummeted,
companies imposed anti-union hiring policies, and the Supreme Court
authorized the use of injunctions against strikers.
In addition to the Haymarket riot, some of the more notable
- The railroad strike followed
the onset of a national economic recession in 1877. Railroad workers
for nearly every rail line struck, provoking widespread violence
and requiring federal troops to subdue the angry mobs. The strike prompted
many employers to get tough on labor by imposing an antiunion policy:
they required workers to sign contracts barring them from striking
or joining a union. Some employers even hired private detectives
to root out labor agitators and private armies to suppress strikes.
- Workers staged the 1892 Homestead strike against
Carnegie Steel Company to protest a pay cut and seventy-hour workweek.
Ten workers were killed in the riot. Federal troops were called
in to suppress the violence, and non-union workers were hired to
break the strike.
- In the 1894 Pullman strike, Eugene
Debs led thousands of workers in a strike against the Pullman
Palace Car Company after wages were slashed. The courts ruled that
the strikers violated the Sherman Antitrust Act and issued an injunction
against them. When the strikers refused to obey the injunction,
Debs was arrested and federal troops marched in to crush the strike.
In the ensuing frenzy, thirteen died and fifty-three were injured.
The Supreme Court later upheld the use of injunctions against labor
unions, giving businesses a powerful new weapon to suppress strikes.
Organized labor began to fade in strength, and did not resurge until