The Industrial Economy: Crash Course US History #23 — Transcript

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1. 0:00Episode 23: The Rise of the Industrial Economy
2. 0:01Hi I’m John Green this is Crash Course U.S. History and today we’re going to discuss
3. 0:04economics and how a generation of- Mr. Green, Mr. Green, is this going to be
4. 0:07one of those boring ones no wars or generals who had cool last words or anything?
5. 0:11Alright, Me From The Past, I will give you a smidge of Great Man history.
6. 0:14But only a smidge.
7. 0:15So today we’re gonna discuss American industrialization in the decades after the Civil War, during
8. 0:19which time the U.S. went from having per capita about a third of Great Britain’s industrial
9. 0:22output to becoming the richest and most industrialized nation on earth.
10. 0:27Libertage Meh, you might want to hold off on that Libertage,
11. 0:31Stan because this happened mostly thanks to the Not Particularly Awesome Civil War, which
12. 0:35improved the finance system by forcing the introduction of a national currency and spurred
13. 0:39industrialization by giving massive contracts to arms and clothing manufacturers.
14. 0:43The Civil War also boosted the telegraph, which improved communication, and gave birth
15. 0:47to the transcontinental railway via the Pacific Railway Act of 1862, all of which increased
16. 0:52efficiency and productivity.
17. 0:54So thanks, Civil War!
18. 0:58Intro If you want to explain America’s economic
19. 1:06growth in a nutshell chalk it up to G, D, and L: Gerard, Depardieu, and Lohan.
20. 1:12No, Geography, Demography and Law.
21. 1:14However, while we’re on the topic, when will Gerard, Depardieu, and Lindsay Lohan
22. 1:17have a baby?
23. 1:18Stan, can I see it?
24. 1:19Yes.
25. 1:20Yes.
26. 1:21Geographically, the U.S. was a huge country with all the resources necessary for an industrial
27. 1:25boom.
28. 1:26Like, we had coal, and iron and, later, oil.
29. 1:28Initially we had water to power our factories, later replaced by coal.
30. 1:31And we had amber waves of grain to feed our growing population which leads to the Demography.
31. 1:37America’s population grew from 40 million in 1870 to 76 million in 1900 and 1/3 of that
32. 1:43growth was due to immigration.
33. 1:44Which is good for economies.
34. 1:46Many of these immigrants flooded the burgeoning cities, as America shifted from being an agrarian
35. 1:51rural nation to being an industrial, urban one.
36. 1:54Like, New York City became the center of commerce and finance and by 1898 it had a population
37. 1:58of 3.4 million people.
38. 2:00And the industrial heartland was in the Great Lakes region.
39. 2:02Chicago became the second largest city by 1900, Cleveland became a leader in oil refining,
40. 2:07and Pittsburgh was a center of iron and steel production.
41. 2:10And even today, the great city of Pittsburgh still employs 53 Steelers.
42. 2:14Last but not least was the Law.
43. 2:16The Constitution and its commerce clause made the U.S. a single area of commerce – like
44. 2:20a giant customs union.
45. 2:21And, as we’ll see in a bit the Supreme Court interpreted the laws in a very business friendly
46. 2:26way.
47. 2:27Also, the American constitution protects patents, which encourag4B-es invention and innovation,
48. 2:30or at least it used to.
49. 2:31And despite what Ayn Rand would tell you, the American government played a role in American
50. 2:36economic growth by putting up high tariffs, especially on steel, giving massive land grants
51. 2:41to railroads and by putting Native Americans on reservations.
52. 2:44Also, foreigners played an important role.
53. 2:46They invested their capital and involved Americans in their economic scandals like the one that
54. 2:49led to a depression in 1893.
55. 2:51The U.S. was at the time was seen by Europeans as a developing economy; and investments in
56. 2:56America offered much higher returns than those available in Europe.
57. 2:59And the changes we’re talking about here were massive.
58. 3:01In 1880, for the first time, a majority of the workforce worked in non-farming jobs.
59. 3:05By 1890 2/3 of Americans worked for wages, rather than farming or owning their own businesses.
60. 3:10And, by 1913 the United States produced 1/3 of the world’s total industrial output.
61. 3:17NOW bring out the Libertage, Stan.
62. 3:19Libertage Awesome.
63. 3:21And even better, we now get to talk about the perennially underrated railroads.
64. 3:26Let’s go to the Thought Bubble.
65. 3:27Although we tend to forget about them here in the U.S., because our passenger rail system
66. 3:31sucks, railroads were one of the keys to America’s 19th century industrial success.
67. 3:35Railroads increased commerce and integrated the American market, which allowed national
68. 3:38brands to emerge, like Ivory Soap and A&P Grocery Stores.
69. 3:42But railroads changed and improved our economy in less obvious ways, too: For instance, they
70. 3:46gave us time zones, which were created by the major railroad companies to make shipping
71. 3:50and passenger transport more standard.
72. 3:52Also because he recognized the importance of telling time, a railroad agent named Richard
73. 3:56Warren Sears turned a $50 dollar investment in watches into an enormous mail order empire,
74. 4:00and railroads made it possible for him--and his eventual partner Roebuck--to ship watches,
75. 4:05and then jewelry, and then pretty much everything, including unconstructed freaking houses throughout
76. 4:10the country.
77. 4:11Railroads were also the first modern corporations.
78. 4:13These companies were large, they had many employees, they spanned the country.
79. 4:17And that meant they needed to invent organizational methods, including the middle manager--supervisors
80. 4:22to supervise supervisors.
81. 4:24And for the first time, the owners of a company were not always day-to-day managers, because
82. 4:28railroads were among the first publicly traded corporations.
83. 4:31They needed a lot of capital to build tracks and stations, so they sold shares in
84. 4:34the company in order to raise that money, which shares could then be bought and sold
85. 4:38by the public.
86. 4:39And that is how railroads created the first captains of industry, like Cornelius “They
87. 4:43Named a University after Me” Vanderbilt and Andrew “Me Too” Carnegie (Mellon)
88. 4:47and Leland “I Named a University After My Son” Stanford.
89. 4:50The Railroad business was also emblematic of the partnership between the national government
90. 4:54and industry.
91. 4:55The Transcontinental Railroad, after all, wouldn’t have existed without Congressional
92. 4:58legislation, federal land grants, and government sponsored bond issues.
93. 5:02Thanks, Thought Bubble.
94. 5:03Apparently it’s time for the Mystery Document.
95. 5:06The rules here are simple.
96. 5:07I guess the author of the Mystery Document and if I’m wrong, which I usually am, I
97. 5:10get shocked.
98. 5:11Alright.
99. 5:12“The belief is common in America that the day is at hand when corporations far greater
100. 5:17than the Erie – swaying such power as has never in the world’s history been trusted
101. 5:21in the hands of mere private citizens, controlled by single men like Vanderbilt...– will ultimately
102. 5:27succeed in directing government itself.
103. 5:29Under the American form of society, there is now no authority capable of effective resistance.”
104. 5:36Corporations directing government?
105. 5:37That’s ridiculous.
106. 5:38So grateful for federal ethanol subsidies brought to you by delicious Diet Dr. Pepper.
107. 5:42Mmm I can taste all 23 of the chemicals.
108. 5:45Anyway, Stan, I’m pretty sure that is noted muckraker Ida Tarbell.
109. 5:49No!
110. 5:51Henry Adams?
111. 5:52HOW ARE THERE STILL ADAMSES IN AMERICAN HISTORY?
112. 5:54That makes me worry we’ll never escape the Clintons.
113. 5:56Anyway, it should’ve been Ida Tarbell.
114. 5:58She has a great name.
115. 5:59She was a great opponent of capitalism.
116. 6:01Whatever.
117. 6:02AH!
118. 6:03Indeed industrial capitalists are considered both the greatest heroes and the greatest
119. 6:06villains of the era, which is why they are known both as “captains of industry” and
120. 6:10as “robber barons,” depending on whether we are mad at them.
121. 6:13While they often came from humble origins, took risks and became very wealthy, their
122. 6:16methods were frequently unscrupulous.
123. 6:18I mean, they often drove competitors out of business, and generally cared very little
124. 6:22for their workers.
125. 6:23The first of the great robber barons and/or captains of industry was the aforementioned
126. 6:26Cornelius Vanderbilt who rose from humble beginnings in Staten Island to make a fortune
127. 6:31in transportation, through ferries and shipping, and then eventually through railroads, although
128. 6:35he once referred to trains as “them things that go on land.”
129. 6:38But the poster boy of the era was John D. Rockefeller who started out as a clerk for
130. 6:42a Cleveland merchant and eventually became the richest man in the world.
131. 6:46Ever.
132. 6:47Yes, including Bill Gates.
133. 6:48The key to Rockefeller’s success was ruthlessly buying up so many rivals that by the late
134. 6:521880s Standard Oil controlled 90% of the U.S. oil industry.
135. 6:56Which lack of competition drove the price of gasoline up to like 12 cents a gallon,
136. 7:00so if you had one of the 20 cars in the world then, you were mad.
137. 7:03The period also saw innovation in terms of the way industries were organized.
138. 7:07Many of the robber barons formed pools and trusts to control prices and limit the negative
139. 7:11effects of competition.
140. 7:12The problem with competition is that over time it reduces both prices and profit margins,
141. 7:17which makes it difficult to become super rich.
142. 7:19Vertical integration was another innovation – firms bought up all aspects of the production
143. 7:23process – from raw materials to production to transport and distribution.
144. 7:27Like, Philip Armour’s meat company bought its own rail cars to ship meat, for instance.
145. 7:30It also bought things like conveyor belts and when he found out that animal parts could
146. 7:33be used to make glue, he got into the glue-making business.
147. 7:36It was Armour who once proclaimed to use “everything but the squeal.”
148. 7:40Horizontal integration was when big firms bought up small ones.
149. 7:43The best example of this was Rockefeller’s Standard Oil, which eventually became so big
150. 7:46incidentally that the Supreme Court forced Standard Oil to be broken up into more than
151. 7:51a dozen smaller oil companies.
152. 7:53Which, by the way, overtime have slowly reunited to become the company known as Exxon-Mobil,
153. 7:57so that worked out.
154. 7:58U.S. Steel was put together by the era’s giant of finance, J.P. Morgan, who at his
155. 8:02death left a fortune of only $68 million – not counting the art that became the backbone
156. 8:07of the Metropolitan Museum of Art – leading Andrew Carnegie to remark in surprise, “And
157. 8:11to think he was not a rich man.”[1] Speaking of people who weren’t rich, let
158. 8:15us now praise the unsung heroes of industrialization: workers.
159. 8:17Well, I guess you can’t really call them unsung because Woody Guthrie.
160. 8:22Oh!
161. 8:23Your guitar!
162. 8:24And my computer!
163. 8:25I never made that connection before.
164. 8:27Anyway, then as now, the benefits of economic growth were shared...mmm shall we say...a
165. 8:32smidge unevenly.
166. 8:33Prices did drop due to industrial competition, which raised the standard of living for the
167. 8:36average American worker.
168. 8:37In fact, it was among the highest in the world.
169. 8:40But due to a growing population, particularly of immigrant workers, there was job insecurity.
170. 8:44And also booms and busts meant depressions in the 1870s and 1890s, which hit the working
171. 8:49poor the hardest.
172. 8:50Also, laborers commonly worked 60 hours per week with no pensions or injury compensation,
173. 8:55and the U.S. had the highest rate of industrial injuries in the world: an average of over
174. 8:5935,000 people per year died on the job.
175. 9:02These conditions and the uncertainty of labor markets led to unions, which were mostly local
176. 9:06but occasionally national.
177. 9:08The first national union was the Knights of Labor, headed by Terence V. Powderly which
178. 9:12grew from 9 members in 1870 to 728,000 by 1884.
179. 9:17The Knights of Labor admitted unskilled workers, black workers, and women, but it was irreparably
180. 9:22damaged by the Haymarket riot in 1886.
181. 9:23During a strike against McCormick Harvesting Company, a policeman killed one of the strikers
182. 9:28and in response there was a rally in Chicago’s Haymarket Square at which a bomb killed seven
183. 9:33police officers.
184. 9:34Then, firing upon the crowd, the police killed four people.
185. 9:37Seven anarchists were eventually convicted of the bombing, and although Powderly denounced
186. 9:40anarchism, the public still associated the Knights of Labor with violence.
187. 9:44And by 1902, its membership had shrunk considerably--to 0.
188. 9:47The banner of organized labor however was picked up by the American Federation of Labor
189. 9:52under Samuel L. Gompers.
190. 9:54Do all of these guys have great last names?
191. 9:56They were more moderate than the anarchists and the socialist International Workers of
192. 9:59the World, and focused on bread and butter issues like pay, hours, and safety.
193. 10:03Founded in 1886, the same year as the Haymarket Riot, the AFL had about 250,000 members by
194. 10:081892, almost 10% of whom were iron and steel workers.
195. 10:12And now we have to pause to briefly mention one of the most pernicious innovations of
196. 10:15the era: Social Darwinism: a perversion of Darwin’s theory that would have made him
197. 10:19throw up.
198. 10:20Although to be fair, almost everything made him throw up.
199. 10:22Social Darwinists argued that the theory of survival of the fittest should be applied
200. 10:25to people and also that corporations were people.
201. 10:27Ergo, big companies were big because they were fitter and we had nothing to fear from
202. 10:31monopolies.
203. 10:32This pseudoscience was used to argue that government shouldn’t regulate business or
204. 10:35pass laws to help poor people.
205. 10:36It assured the rich that the poor were poor because of some inherent evolutionary flaw,
206. 10:41thus enabling tycoons to sleep at night.
207. 10:44You know, on a big pile of money, surrounded by beautiful women.
208. 10:46But, despite the apparent inborn unfitness of workers, unions continued to grow and fight
209. 10:51for better conditions, sometimes violently.
210. 10:53There was violence at the Homestead Steel Strike of 1892 and the Pullman Rail strike
211. 10:57of 1894 when strikers were killed and a great deal of property was destroyed.
212. 11:01To quote the historian Michael Lind: “In the late 1870s and early 1880s, the United
213. 11:05States had five times as many unionized workers as Germany, at a time when the two nations
214. 11:10had similar populations.”[2] Unions wanted the United States and its citizens
215. 11:13to imagine freedom more broadly, arguing that without a more equal economic system, America
216. 11:18was becoming less, not more, free, even as it became more prosperous.
217. 11:22If you’re thinking that this free-wheeling age of fast growth, uneven gains in prosperity,
218. 11:26and corporate heroes/villains resembles the early 21st century, you aren’t alone.
219. 11:31And it’s worth remembering that it was only 150 years ago that modern corporations began
220. 11:35to form and that American industry became the leading driver in the global economy.
221. 11:38That’s a blink of an eye in world history terms, and the ideas and technologies of post
222. 11:43Civil War America gave us the ideas that still define how we--all of us, not just Americans--think
223. 11:48about opposites like success and failure, or wealth and poverty.
224. 11:53It’s also when we people began to discuss the ways in which inequality could be the
225. 11:56opposite of freedom.
226. 11:58Thanks for watching.
227. 11:59I’ll see you next week.
228. 12:00Crash Course is produced and directed by Stan Muller.
229. 12:02Our script supervisor is Meredith Danko.
230. 12:03The associate producer is Danica Johnson.
231. 12:05The show is written by my high school history teacher, Raoul Meyer, Rosianna Halse Rojas,
232. 12:08and myself.
233. 12:09And our graphics team is Thought Café.
234. 12:10Each week there’s a new caption for the Libertage.
235. 12:12You can suggest captions in comments where you can also ask questions about today’s
236. 12:15video that will be answered by our team of historians.
237. 12:17Thanks for watching Crash Course.
238. 12:18Make sure you’re subscribed.
239. 12:19And as we say in my hometown, don’t forget to be awesome.
240. 12:20Industrial Economy - ________________
241. 12:21[1] Brands, American Colossus p 6.
242. 12:22[2] Lind, Land of Promise 171