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, 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 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. 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. 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, 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. 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 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, 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. 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. 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.”

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. 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

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, 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. 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 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 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. 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 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. 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 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