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Social Mobility and the New American Dream of the 1880’s in the Twentieth Century

As time elapses there is, a constant, unrelenting force that creates change. To see this force in motion, one must only look back at the history of America, particularly as it entered and progressed through the Twentieth Century. Society underwent a massive amount of change between 1900 and 1970. It grew from a working-class society, where access to upward social mobility described by the New American Dream of Labor for the poor was greatly restricted, to a society where the poor could rise up with less resistance and achieve a higher social status. Attention should be paid that “rising up” at this time was no longer defined as it was in the 19th century, to attain capital ownership, but more so based on the achievement of the worker’s New American Dream of the 1880’s.

In the 1880’s the American Dream, idealized in the Republican Ideology, changed into the Wage Laborer’s New American Dream. With the realization that workers were now restricted to a wage earning class for the entirety of their lives, the definition of the dream was changed to better suit the realities of society at that time. Wage earners wanted to be accepted as partners of the business, as the business could not function without them. The dignity of their labor was also a key portion of the New American Dream, where they wanted to be respected for their labor and be viewed as humans, instead of being demoralized, treated as objects and capital expenses due to the rigors of Cost Based Management. Another aspect of this dream was to achieve a decent standard of living, where the man could be the sole provider, his wife could stay at home and his children could attend school. To achieve this higher standard of living, higher wages were needed in conjunction with job security.

The key to making the New American Dream possible was the formation of unions, where collective bargaining would give power to the workers, and they could achieve their goals. Due to shortcomings in developing well functioning unions prior to 1900, the barrier to achievement was high. By the 1870’s unions such as The Knights of Labor formed to protect all Free Labor. In the first half of the 1880’s membership grew to 700,000 members and in 1886 resulted in 1,500 strikes. Business realized the power of the developing unions and sought to disarm them by keeping blacklists which contained union sympathizers’ names and would send that list to all other employers in the industry, essentially barring union supporters from jobs. Business also used spies and private security forces, such as the Pinkertons, to prevent or end strikes. Government militias were also sent to break strikes, as they were “legally” protecting the right of private property ownership of the business owners.

By 1900, after the Knight’s failure to win key strikes in the railroad and meatpacking industries, membership dropped and only 5% of the workforce were members in trade unions. This severely limited the power of Collective Bargaining, in turn eliminating the power of the workers. Businesses did not join in the new American Dream, and continued to use the system of Cost Based Management to turn profits and demoralize workers.

And all the men of the same rank [workers] were pitted against each other; the accounts of each were kept separate, and every man lived in terror of losing his job, if another made a better record than he. So from top to bottom the place was simply a seething cauldron of jealousies and hatreds; there was no loyalty or decency anywhere about it, there was no place in it where a man counted for anything against a dollar. (Sinclair, p.74)

This led to the essential failure of the New American Dream of Labor, where a permanent working class living within rigid class lines existed in 1900.

With little power residing in the hands of workers, combined with little to no government regulation, businesses had free reign to operate as they saw fit. Using Andrew Carnegie’s model of Cost Based Management, the reduction of all fixed costs were first priority. In Chicago, home of the meatpacking industry, the primary focus of cost reduction was labor and facility design and maintenance. Due to the cost of designing facilities with safety measures in place for employees, safety was cut. In Chicago’s South Works steel factory, 3,272 workers were killed between 1900-1905. By 1913 a total of 25,000 workers died and over one million were injured at work across America. To provide an acceptable working environment also increased costs, so things such as heat in the winter and clean facilities were non-existent.

There was no heat upon the killing beds; the men might exactly as well have worked out of doors all winter…unable to wear gloves, and their arms would be white with frost and their hands would grow numb, and then of course there would be accidents. (Sinclair, p.99)

To add to the poor conditions, meat packing involved considerable amounts of blood being shed, and at such a rapid rate of slaughter (a principle of Cost Based Management) “every hour, they turned four or five hundred cattle into meat” (Sinclair, p.48), there was very little one could do to keep the killing beds clean. “This floor was half an inch deep with blood, in spite of the best efforts of men who kept shoveling it through holes”. (Sinclair, p.49)

Wages were held low and working hours were held high due to a high supply of labor. “Jurgis cleared a dollar seventy-five every day”(Sinclair, p.59) and workers at Erie’s Nagle Boiler Works in 1900 averaged $1.50 a day, over a six-day work week or sixteen cents per hour ($3.49 in 2003). With wages so low, women and children had to join the workforce to ensure the survival of their family. “In those days there had been no law about the age of children-the packers had worked all but the babies.”(Sinclair, p.84) With children entering the workforce, they could not get an education which would allow them to secure higher paying jobs in the future, forever relegating them to rigid boundaries of the working class.

With the realization of the atrocities at hand, the Progressive Movement commenced between 1895 and 1920. The movement spanned both Democrat and Republican parties, and the ranks of its reformers varied from women to businessmen, and from members of the working class to aristocrats. They felt that the very way of American life was threatened and wanted to end the abuses of power. Their goal was to scientifically and efficiently manage the political, social and economic problems, Rationalization, and to keep the avenues of social mobility open.

The main threat to the American way of life was the Trusts or large business that dominate industries. In 1900 one percent of all business firms produced 44% of all goods, a result of Cost Based Management. U.S. Steel produced 66% of the nation's steel, International Harvester produced 86% of the U.S.'s agricultural implements and American Tobacco produced 99% of all cigarettes. The beef trust in Chicago was described by Upton Sinclair in The Jungle as “the greatest aggregations of labor and capital ever gathered in one place” (Sinclair, p.51)

With such dominance in the marketplace, the trusts and cartels could set prices as they felt necessary and even “buy” politicians and corrupt public officials that would turn a blind eye to the atrocities taking place.

After Theodore Roosevelt read The Jungle in 1906, he dispatched government officials to investigate the horrors that were outlined. The officials returned with reports that confirmed the stories told by Sinclair and resulted in legislation to change the government's relation to the food industry. In 1906 the Meat Inspection Act was passed along with the Pure Food and Drug Act, which formed the FDA. These two pieces of legislation improved the public’s health through government regulation and the scientific management of public health. Mandates on sanitary conditions within the meat packing houses allowed for better working conditions, in turn, healthier workers. To clean the plants and filter out the diseased meats increased the demand for labor, creating more jobs. The new American Dream was starting to be realized by the people, as job security increased by way of fewer layoffs, workers were now healthier, and the annual average income was increased.

In 1902 the United Mine Workers went on strike in Pennsylvania, demanding an eight-hour workday. The owners refused to negotiate, resulting in a lockout. As winter approached the costs of coal increased dramatically due to high demand and a low supply. Since coal was the main energy source at the time its impact on the economy was felt. Theodore Roosevelt threatened to seize and reopen the mines and appointed a committee to arbitrate the strike. With their backs against a wall, the owners agreed to arbitration, resulting in the reduction of hours and an increase in pay. The government served as a neutral party, rather than erring on the side of big business. An amount of dignity of labor was forcibly restored.

“Trust Busting” helped to end the predatory pricing and high-profit monopolies such as J.P. Morgan’s Northern Securities Company in 1902. The breaking up of this trust, created competition for railways, in turn lowering the rates to transport goods, which increased farmers and natural resource business profits. In 1914 Woodrow Wilson created the Federal Trade Commission to regulate business, just as the FDA regulated the food industry. This led to the break of the Beef Trust (actually a Cartel) in 1920. These events led to higher job security, higher wages and a higher standard of living, all parts of the new American Dream.

Other events also had significant impacts on the New American Dream. The Child Labor Law of 1916 made workers under the age of 16 illegal. This allowed children to attend school instead of working which was a main factor in the New American Dream. The number of schools rose from 6,000 in 19000 to 14,000 in 1920, with 500,000 to 2,000,000 students respectively. This created a higher demand for labor which meant more jobs for adults at higher incomes. The Adamson Act and LaFollette Seaman’s Acts of 1915 resulted in safety regulations and the 8 hour workday for railroad employees.

Roosevelt’s “Square Deal” and the laws that resulted from it had major effects on the American Dream. In it, he suggested that workers were not getting their fair share of profits and that owners share the wealth in the form of higher wages. This idea lingered in the mind of Henry Ford, the namesake of the Ford Motor Company, and led to the creation of an entirely new way of life and a new way to measure social mobility.

Henry Ford was the Andrew Carnegie for consumers. Using the methods of vertical integration and Carnegie’s Economies of Scale, Ford was able to transform the automobile from a luxury item to an accessible product, costing $850 in 1909 to $300 in 1920. Ford’s major vision was a concept known as Fordism, where high working wages would lead to higher consumption of goods, creating economic growth which yielded higher demand for manufacturing and sales, which meant higher profits for business, and in Ford’s case, those profits were shared with the workers in terms of higher wages.

This process would continue and to cycle and enhance upward social mobility, where the direct connection between wages and prosperity could not be ignored. Ford raised wages by 250%, to $5 a day, and reduced the working day from ten to eight hours per day, six days a week. The reduction in labor hours meant more leisure time and coupled with higher wages, the employees were now able to consume what they were producing. Unfortunately, Fordism failed in the 1920’s due to the fact that other companies did not raise the wages of their employees, which meant that there was mass production of goods, without mass consumption, which is not a sustainable model.

Although Fordism failed at the time, Ford’s impact was a lasting one. He implemented advertising for his products to create the desire for the consumer to purchase the Model T. With other business wages still low, Ford introduced installment plan and finance purchasing, so that people with low wages could pay a little at a time to afford the product. By 1927, 15% of all American goods were purchased on credit. Although credit challenged the Republican idea of thrift, it allowed more people to consume more goods at a faster rate due to their newly discovered purchasing power.

With the increase in population and urbanization, America became an Anonymous Society, where the material goods that one owned displayed their social status. Key to this society was consumerism or the consumption of goods. With more goods or higher quality goods, one’s social status was increased, meaning consumption was now the key to upward social mobility. One would rise up by purchasing on credit instead of using thrift, which opened the gates of social mobility for blue-collar workers to join the ranks of the white collar counterparts, as they could consume at the same rate. Class was based on items, not economic independence.

Wages were still kept low, resulting in 42% of the population living under the poverty line in 1929, however, their purchasing power was boosted due to the installment plans. The limits of borrowing were reached by the end of 1929, which resulted in the sudden decrease in consumption. Companies now had to lay off workers and cut wages, taking a step back in social mobility. With under consumption and speculation building in the stock market, the market started to crash on October 21, 1929, where 13 million shares of stock were sold. With this collapse, banks and creditors could not pay what they owed, resulting in the end of credit purchasing power. Between 1929 and 1932, 5,000 banks closed, 100,00 business went bankrupt and farmers income decreased by 65%.

To curb the depression Franklin D. Roosevelt created The New Deal. Critical to the New Deal was the creation of the “Welfare State”, defined as the state of doing well. This represented a significant expansion of government power in the economy, where the government intervened in the capitalist system to help stabilize the economy. The goal was to provide relief, start the recovery and create reform to prevent future depressions. Immediate relief was provided by the Emergency Relief Act of 1933, which allocated $300million for the unemployed. With the creation of the Public Works Administration, purchasing power was restored from wages and demand for business was created. Public works projects ranged from the Hoover Dam to the installation of brick streets in towns. With government intervention, people were provided with jobs, which increased spending, in turn improving the economy.

For reform, The Wagner Act of 1935 was passed. This gave workers the right to set up unions, which was a key ingredient to the achievement of the new labor American Dream. Through the power of unions the eight-hour workday, five days a week with overtime became the standard. The Fair Labor Standards Act of 1938 guaranteed a national minimum wage along with time and a half for overtime, although it did not include agriculture workers. By 1941, 28% of all workers in the U.S. were unionized. Also, key in reform was the Social Security Act in 1935, which provided old age pensions, unemployment, and welfare assistance to families with dependent children.

Although the New Deal and the Social Security Act did not end the depression, they opened the avenues for the achievement of the American dream. The Social Security Act successfully upheld workers purchasing power through unemployment insurance, which created demand in the private sector for goods and services. Old age pensions also served to increase the spending of the elderly, who were previously very poor, which further increased the private demand. With financial assistance in place, workers could all participate in the consumption of goods, the path to higher social status.

The end of the Great Depression came with the start of the U.S. World War Two effort. The government adopted the economic theory of John Maynard Keynes, known as Keynesian Economics. This theory essential stated that the key to the depression was US Government spending which would create public demand and drive the economy to recovery, by way of deficit spending. With the various items for the war effort needing to be manufactured, planes, tanks, etcetera, the US Government increased their spending and reduced unemployment to levels prior to the Great Depression as demonstrated in the table below.

A massive expansion in manufacturing occurred, mostly driven by the government’s spending. New industries, such as the synthetic rubber industry was started and a large push for research and development efforts occurred.

After the war was over, the economy fully recovered by 1945. Wages were increased and returning soldiers were eager to marry and buy a home to start a family. A construction boom occurred and the economy was booming, as was the birth rate, the great Baby Boom. Fordism became a reality after 1945 and the purchasing power and consumption of goods combined to form the perfect marriage between mass production and mass consumption. The New Deal’s progressive tax reform policy sought to redistribute the wealth in America and did so successfully. In 1940, the wealthiest 5% of Americans owned 23.7% of the national wealth, an improvement from 1900, where 1% owned 40% of the national wealth. Nonetheless, the imbalance was reduced in 1945, as the upper 5% owned only 16.8% of the national wealth. This redistribution of wealth spread more money to the poor by way of public works and other programs, in turn increasing their purchasing power.

The vast expansion of the middle class was in full effect post-1945. The new middle class was not based on capital ownership as is was in the nineteenth century but on consumption of goods. Another difference is that this new middle class was economically dependent. The growth in real wages between 1896 and 1960 was over 340%. With all the talk of the economic boom, it must be noted that 1 in 4 Americans still lived in poverty by 1961. Women only earned 60% of what men did, and racial tensions were starting to unravel.

Lyndon B. Johnson’s “Great Society” aimed to curb the race and poverty issues at hand. In 1964 the Civil Rights Act was passed which legally outlawed discrimination, which was a step in the right direction to open social mobility to all Americans. Johnson also declared a “War on Poverty” and passed the Equal Opportunity Act with $1billion to fight poverty. The Voting Rights Act of 1961 ensured that all Americans could take part in the political system, creating a true democracy.

As the twentieth century progressed, the avenue of upward social mobility for the poor was expanded. The establishment and recognition of labor unions empowered workers the be accepted as partners with business, and the divinity of their labor was increased with less fear of layoffs and higher job security. Scientific Management also improved the ways of business from the cruel system of Cost Based Management, where the workers were treated as expenses, to a system that became more humanistic. Through credit and the economic boom after WWII the standard of living was greatly improved from 1900. Education was available to all children by 1970 and women could stay at home, as their husband’s wages were enough to support a family. By 1970 America was far from a perfect society, however, the labor new American Dream was much more attainable than in 1900 and the avenue for upward social mobility was more like the newly constructed highways.

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The Jungle

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©2017 by Abram Pleta | Machining Researcher