A New Look at Great Depression

Stock Market Crash/Great Depression 1929 While the stock market crash of 1929 did not cause the Great Depression, it is the most remembered harbinger of America’s worst financial crisis. The depression that followed would be a decade of unemployment and hard times. Unemployment became a way of life for as many as 25 percent of the American workforce. National gross product 30 percent and industrial production dropped by 40 percent. The nation’s steel mills worked a 2-3 day weeks for years. Corporate investment went negative with capital investment being below depreciation. The depression also exhibited a “double dip” returning in 1937 after some improvement. Unemployment from 1929 to 1941 was above 10 percent and underemployment was as high as 50 percent. The homeless estimated in New York city alone was 15,000. The stock market dropped over 50 percent. The depression changed American psyche and economic thinking to this day. The Keynesian economic approach, named after John Maynard Keynes, which emphasized government spending and consumers, became the dominant approach. Tariff policy would be changed after centuries of tariff protection because of fear of trade wars. The Depression would also initiate a decade of social and economic legislation to build a safety net. Banking laws were strengthened to protect consumers, and the union movement was strengthened to help workers. The depression also changed the political landscape of the nation into this century. An endless array of laws was implemented to address the causes and effects of the depression, including stock market controls. The stock market crash did contribute to it. Stock market losses did cause a pull back in consumer spending and the Federal Reserve to increase interest rates. The roots of the Great Depression go back to a few years earlier and resulted from what many consider the perfect economic storm. Factors included the business cycle, over-speculation, a stock bubble, massive crop failures; trade wars, and government intervention. Still most would agree that the taproot and beginning of the Great Depression was the stock market crash of 1929. The beginning of 1929 saw a nation in a boom economy with a record GNP. Car production had doubled in 1929 from its 1923 level. Real income per capita had reached new highs and the newspapers were filled with stories of excessive spending. Speculation was also at an all time high. Margin leveraged accounts were at record highs as well. To facilitate investment, the Federal Reserve for years had been following a strategy of easy money. Consumer credit was rising dramatically. Interest rates for margin accounts were moving higher reaching over 20 percent. Many small investors were speculating as many stock were selling over 30 times earnings. People were talking of a new economic model were all would become rich in the endless growth of the American economy. Clearly there was a stock market bubble. On September 3, 1929 the Dow Jones industrial average hit a record high of 381. The Federal Reserve had issued warnings of over speculation and had started to tighten money, unfortunately, the New York Federal Reserve broke ranks injecting massive amounts of cash for margin stock accounts (this type of rogue behavior would be addressed after the depression). The availability of call money made big investors over confident about the stock markets setbacks in September of 1929. Market started to show true signs of instability in October of 1929. On Black Thursday, October 24, the market moved lower on record thirteen million shares traded. The big and mostly widely traded companies lost an average of over 10 percent, triggering the first wave of calls on margin loans. The President and major industrialists jumped in with positive statements. Then on Black Tuesday, October 29, 1929, the market crashed to 40 percent of its high a month earlier. As banks recalled loans panic set in and the great crash entered into American legend. The Federal Reserve, business leaders, and politicians made the right moves to stop the economy from going over the cliff. Things did stabilize as the economy moved into 1930. The quick easing of money put off the banks till later 1930. There was even a brief recovery in the first six months of 1930. However, the indicators were showing a decline in economic activity. By the end of 1930 and into 1931, bank failures and panics started with the now famous lines of panicked depositors. Bank failures were 659 in 1929, 1,350 in 1930, and 2,293 in 1931. The banking problems spread in 1931 with a doubling of bank failures and mortgage bankruptcies. The New York money crisis had once again spread across the country and Europe as seen in previous panics. Deflation rapidly lowered house prices and reduced grain prices, which hurt farmers. Farm prices had dropped 40 percent from their 1926 high. The government tried to pour money into creating demand. Social problems started to mount as unemployment hit 17 percent in 1931. Congress passed the Smoot-Hawley Tariff Act creating historic tariff rates. Still, it was not the American tariff rates so much as a rush by all countries to protect their home markets. The combination of deflation, low farm prices, and tariffs cut imports 40 percent. In 1932 as the Dow hit 95, America looked for a political solution with the election of Franklin Roosevelt and the New Deal Democrats. Roosevelt in 1933 imposed a bank holiday to stop panics and build new confidence in the banking system. More dramatic was the creation of the National Recovery Administration, which had sweeping powers to control wages and prices. The NRA created a national industry, similar to that of Stalin in Russia. The NRA would be found unconstitutional in 1935. In hindsight, most economics today see it as ineffective and a mistake. Still it at least stabilized unemployment and confidence. The Dow moved up from a low of 58. The Civilian Conservation Corps hired over 250,000 young men and at least prevented social unrest in the worst of the depression. From 1933 to 1934, Roosevelt used the time to implement sweeping social legislation such as National Labor Relations Board, which enforced the use of collective bargaining. Roosevelt tried a long array of approaches moving off and on the gold standard, credit regulation, mortgage aid, work projects, trade laws, reduced tariffs, increasing taxes, new banking regulations, and expand credit programs. In 1935, the New Deal Democrats looked for long-term social safety net, enacting the Social Security. The National Labor Relations Act of 1935 created unionization of the steel, rubber, and automotive industries, and wide spread collective bargaining. The government had successfully moved into energy production with the Hoover Dam and the Tennessee Valley Authority. Things never really improved and in 1937, the economy slipped into a “depression within a depression.” This set back came as the multitude of social programs took large amounts of money out of circulation. Taxes slowed capital investment. And union-creating laws had caused wages to jump 11 to 33 percent, making things costly and bringing down demand. Another complication was the devastation of American agriculture by the Dust Bowl. The climb out of this second dip was slow. Unemployment went from 18 percent in 1938 to 14 percent in 1940, as war production would finally bring American industry back to life. Arguments and analysis of the causes and solutions for the Great Depression continue to this day. Its impact on the nature of American business was however deep and lasting. see NEW BOOK!! http://www.amazon.com/Most-Significant-Events-American-Business/dp/0313398623/ref=sr_1_10?ie=UTF8&qid=1339505966&sr=8-10&keywords=skrabec

Lessons from America's Golden Years

My twenty years of research and literary pantheon of books on American industry begs the question – can we return to the glory days of the industrial barons? Are there any young barons out there? The following characterization is based on the historical facts. It will not please Democrats or Republicans nor liberals or conservatives. The answer is yes there are young Firestones and Carnegies, but that’s not the real question. The question is America capable of bringing out these young barons, and the answer is no. So what changes would be needed to return and why aren’t we trying. The solution is not as many suggest political, in fact, neither party has the whole answer and that is what limits us. Each party has part of the components of the age of barons but is so polarized that no one can bring the necessary segments together. First we would need to create the early educational environment of the barons. Surprisingly, the educational system of the barons lacked hard science and advanced math, but was rich in the basics and American and heroic history. Education was a local community responsibility and tended to be one-room, poorly lighted, and cold, lacking many physical amenities of today. The only wall decorations were pictures of Washington and Lincoln. Homework seemed endless. Men like Firestone while not great students found inspiration their in McGuffey Readers. It was a highly competitive classroom and playground. Much of the discipline and playground behavior would be banded today! The other characteristic of the educational system was endless stories of the greatness of America. Self-reliance and the need to help the less fortunate, which seemed to build a foundation for paternal capitalists was the basic lesson plan. What of the government and society? Society was self-reliant and competitive reflecting the training of the educational system. The political system was low taxation and highly protective. While they detested government involvement in unionization, they relied on tariffs and government efforts in a national road or transportation systems. The government favored a nationalistic, paternal, and regulated approach to capitalism. Tariffs were as high as 40 percent but that came with heavy, daily regulation by a standing committee of congress. The industries of the barons were protected as long as profits were put back in the expansion of factories, job creation, and to some degree community improvements. The barons themselves were highly patriotic and while expanding internationally, no effort was made to be transnational; in fact, they were more typical of the “ugly” American bringing American methodology to other countries. They believed fully in American exceptionalism. It would be difficult to close an American factory and move off shore for two reasons: (1) they were nationalists above all and (2) Congress would strip them of protective tariff status. Politically, they were Whigs, believing all political platforms should be based solely on the growth of America economically. There was also a belief that America was too unique to be considered as a mere member of an international community, and we didn’t play well with other countries. The barons while expanding internationally for more profits tended to be isolationists. They tended to be pacifists such as Harvey Firestone, Henry Ford, and Andrew Carnegie. Another somewhat surprising characteristic was their hatred of bankers and in particular, the international bankers of New York. They preferred to finance through stock and bond issues. Of course, at least the first part of their careers was in a world of no personal or corporate taxes. They were religious and charitable. Many espoused Christian principles in their management styles. In the workplace, they believed in loyalty and results over higher education. They even forced their sons to at least work through the various levels and departments. While they reflected society’s biases of the time, they generally put results of the person above all else. Youths were given as much responsibility that they demonstrated they could handle. They preferred paternalism to unionism, although, they came to at least tolerate unions while reluctantly giving up authority. Finally, they were flawed humans, requiring government regulations and over site (often demanding it). See the pantheon of books on amazon search SKRABEC http://www.amazon.com/s/ref=nb_sb_noss_1?url=search-alias%3Dstripbooks&field-keywords=skrabec

The Delince of American Manufacturing is due to the great myth

American Capitalism today was become the object of political debate but its meaning, history, and nature has been lost, co-opted, and distorted by both sides of the debate. Capitalism came from the marketplaces of democratic societies, not from philosophers, political parties or economic professors at universities. It, like democracy itself, is of the people. It is at the heart of our history of our nation and it has its share of the good, the bad, and the ugly just like the people of this nation. Our theoretical debates on capitalism are at the very root of our indecision and lack of progress. To understand capitalism requires an objective look at its history. Some of these premises of capitalism have been made truth by both the left and right in recent decades must be overcome. The FREE Trade myth seems accepted by all!If you can’t get by the fact that American capitalism is not interchangeable with tariff free trade like many on the right, you will not understand capitalism. In fact, the greatest years of American capitalism came under decades of protectionism. Similarly on the left, you must realize immigration of cheap labor not only reduces local wages, but impedes innovation. And yes we need regulation, but the real question is what kind and how much. Capitalism has been defined by freedom and bound by the regulation of its abuses just as our society itself. Is wealth distribution the real source of unrest with Americans? History shows Americans tolerate inequality in wealth distribution as long as class mobility is high and the playing field level. Inequality of wealth distribution is the very much the touch mark of all human society, but what made America different was class mobility and opportunity with a foundation of free education. Is government inefficient in the market place? Not always, the national road, Erie Canal, our railroad system, Panama Canal, Hoover Dam, and space program tell a different story. What we need to understand is the history of these successful government programs, so we can emulate them.

IS THERE A MANUFACTURING CANIDATE?

Mitt Rommey-- kicked of his campagin at the very symbol of American manufacturing-- Greenfield Village
he is the first true manufacturing canidate since William McKinley

As President, he pushed for reciprocity arrangements through treaties in the 1897 Dingley tariff. Debated at the time, reciprocity gave protectionist America a perception of fairness. Many conservatives were concerned that McKinley’s reciprocity arrangements would lead to an erosion of protectionism, but McKinley believed it was necessary for the future. American surplus was becoming an issue, and McKinley wanted to allow for a boom in exports. In his last speech at Buffalo, McKinley defined his vision: “A system which provides a mutual exchange of commodities is manifestly essential to continued and healthful growth of our export trade. . . Reciprocity is the natural outgrowth of our wonderful industrial development under the domestic policy now firmly established . . . The expansion of our trade and commerce is a pressing problem. Commercial wars are unprofitable. A policy of good will and friendly trade relations will prevent reprisals. Reciprocity treaties are in harmony with the spirit of the times; measures of retaliation are not.”
Statistics for the 1890 to 1900 decade support the conclusion of McKinley’s success that prices came down, profits rose, capital investment went up, and wages held or slightly increased (real wages clearly rose). Average annual manufacturing income went from $425.00 a year and $1.44 a day in 1890 to $432.00 a year and $1.50 a day in 1900. The average day in manufacturing remained around 10 hours a day. Heavily protected industries such as steel fared slightly better with wages. The cost of living index fell during the decade from 91 to 84 or about 8 percent. The clothing cost of living dropped even more from 134 to 108 or 19 percent. Food stayed about the same but the cost of protected sugar dropped around 25 percent. The bottom line is that real wage (adjusted for cost of living) index rose from $1.58 a day to $1.77 a day in 1900 or about a 12 percent increase. Invention flowered during the period as companies invested in research and development to meet congressional oversight of profits. The success of this period of managed trade depended on government oversight, business cooperation, and labor support. The list of companies that built their foundation and expanded included Libbey Glass, United States Steel, Standard Oil, ALCOA, H. J. Heinz (there was a 40 percent tariff on pickles) and Bethlehem Steel to name a few.
http://www.amazon.com/William-McKinley-Apostle-Protectionism-Quentin/dp/0875865771/ref=sr_1_17?ie=UTF8&qid=1320587757&sr=8-17

Al Gore created the interent is closer to truth than man-made global warming

ARPAnet (Earliest Internet) Formed 1969
The Advanced Research Projects Agency Network (ARPAnet) set the infrastructure that would become the Internet. ARPAnet began as a network of connected university computers. The ARPAnet was funded by the Defense Advanced Research Projects Agency. The original basis was to develop a network for military command and control after a nuclear attack. The computer network was based on telephone lines and required a new technology known as packet switching to move data on telephone lines between computers. After its startup in 1969, ARPAnet evolved into several innovations in the early 1970s such as email, a file transfer protocol, which allows data to be sent in bulk, and a remote connecting service for network computers. This network grew to connect universities across the nation with defense funding. When the Defense Department pulled out of the project in 1990, it had laid the groundwork for today’s worldwide Internet. Universities continued the old network as NSFnet as it expanded to individuals with the advent of the Personal Computer.
The roots of the ARPAnet go back to the funding of the Defense Advanced Research Projects Agency (DARPA) formed in 1957 as a response to the launching of Sputnik. DARPA was created as a very special research group for the Department of Defense. The name was changed in 1958 to Advanced Research Projects Agency (ARPA). ARPA had an annual $12 million budget and much flexibility on spending it. Its first project was to look at a communications network that could operate after a nuclear attack on the United States. This bombproof network would allow distant military centers to communicate. ARPA adapted the early work of the 1960s of Paul Baran of the Rand Institute. This early network research had been financed by the Air Force. Baran’s work was on a packet switching system that would allow information to be routed on any available electronic lines such as telephone lines. The packet switching concept of Paul Baran was a revolutionary idea of breaking data or messages in packets to flow along available lines and then be reassembled at the designation machine. This differed from a traditional phone call that used circuit switching to form a dedicated circuit for the duration of the communication session. Packet switching allows data to flow on a fractured network unable to develop a dedicated or “direct” hook up. Packet switching is a special computer protocol allowing computers to exchange information (network control protocol).
Baran’s packet switching network offered another possibility of connecting universities involved in research for the Defense Department. At the time computers even in the same room could not talk to each other let alone at different universities. Packet switching along telephone lines would be a necessity to move large blocks of research data. These connections would allow huge amounts of data to be transported between universities. Beyond packet switching, some hardware to handle the messages had to be developed. Since ARPA was a small core group, it contracted out the work to BNN Technologies. To connect distance computers, each location required a gateway computer known as an Interface Message Processor (IMPs or routers as they are known today). The first IMP was built by Honeywell and could service four local computers. The first network connected computers at UCLA and the Stanford Research Institute in September of 1969. UCLA and Stanford both had SDS computers. Initially after typing “login,” the system shutdown, taking another month to work out the bugs for a message, which was ultimately sent at 10:30 p.m. October 29, 1969.
By the end of 1969, an IBM 360 at the University of California, Santa Barbara, and a DEC at the University of Utah were added to the network. MIT was added to the network in March of 1970. In 1971, the first e-mail was sent; and by 1973 with over 40 sites, e-mail made up 75 percent of the traffic, which augured the future of the Internet. To send a message on the ARPAnet required a computer to break the message into packets using an Internet Protocol (IP). The packets also received a digital identification because individual packets might take different paths. Individual packets are routed based on traffic. When the individual packet envelopes reach the destination computer, Transmission Control Protocol (TCP) reassembled the message in correct order. The network was slow running at 50 to 200 kbit/second. The year 1971 also brought the use of a Terminal Interface Processor (TIP) capable of adding over 60 slave terminals to the host computer. By the mid-1970s, huge databases were being passed between universities using File Transfer Protocol (FTP). The ARPAnet had achieved its goal and was supporting both military and civilian research applications. In 1983, the ARPAnet was split into National Science Foundation network (NSFnet) and the classified military network (MILnet).
ARPAnet continued as a communication system between certain research pockets at various universities until most of the IMP routers became obsolete in 1989.
The NSFnet used Local Area Networks (LANs) to link whole universities internally and externally. The NSFnet started to look for more funding as the ARPAnet shutdown in 1990. In 1991, Senator Albert Gore crafted and the Congress passed the High Performance Computing and Communication Act. The bill created and funded a super information highway for research, which evolved into the Internet of today. Today’s Internet is made up of the same infrastructure of routers and protocols. The Internet, regardless of its government origins, remained firmly rooted in the private industry.

American Capitalism is not exceptional but Different

Much has been written of the source of capitalism, but that was the capitalism of the Great Enlightenment and Scottish philosophers such as Adam Smith, not American capitalism. American capitalism was that of the Scottish bastards known as the Scotch-Irish. American capitalism was never an ideology or philosophy; it was a quest for opportunity and economic rewards. It embodied furs, ginseng, tobacco, and whiskey for cash and required rivers and trails to bring these resources and cash together. It brought the Indians, frontiersmen, bankers, plantation owners, and Europe into a global market. For them the exploitation of nature created money, not the other way around. They wanted this exchange to be unfettered by government. It was similar to the capitalism of Smith in that it was self-serving on an individual level, but it differed in that it was also self-serving on a national level. American capitalism was not anti-government, but viewed government as a facilitator not as a regulator or generator. A simple democratic thought that government should serve the people, in this case frontier capitalists and plantation owners.
These Scotch-Irish and other colonists saw capitalism not as part of democracy but a result of it. Few knew of Adam Smith and likewise Adam Smith knew little of these frontiersmen, colonists, and settlers. Smith saw capitalism through the profitable British merchants and wholesalers of Glasgow, which had the world’s best resources of finance, technology, and education. The American capitalists were hands on forced to create their own finances, technology, and education. They wanted the freedom to prosper and were self reliant for their needs and government was to aid in obtaining these goals. It is not surprising that the capitalism of aristocratic Europe evolved differently that of democratic America. American cared little for theory, philosophy, or economic policy and would change all for prosperity. The early New England colonists had shown this flexibility in government to support prosperity. To that extend it was even more greedy than that of European capitalism.
American capitalism not only absorbed the politics of the country but its religion as well. They were greedy but not heartless. The pursuit of prosperity was elevated to a right. It challenged the rights of kings to inherit prosperity. If you had the right to prosper, it appeared that all other rights had to be in place. The right to prosperity runs so deep that some used religion as a justification for their unabashed pursuit of money. This view of economic freedom was the real idea of America. It would put individual motivation above the mechanics of economics. Allow Americans to prosper and they would build their government on that foundation. They not only broke from England but also within the first years of the new American government challenged it with resistance on a tax on whiskey, known as the Whiskey Rebellion. Americans with all their virtues to this day vote more often their pocketbooks.

The World's Most Forgotten Major Invention

The Owens Automated Glass Bottle making Machine 1904

Edward D. Libbey’s Toledo Glass Company was the developer of the automated bottle machine. Michael Owens gets the credit (rightfully so for the invention), but its full development and implementation required the organization of Toledo Glass, and Libbey gets credit for that. Glass making had hardly changed in three thousand years until the invention of the bottle-making machine. The automatic bottle-making machine would be a true manufacturing revolution compared to the Eli Whitney’s cotton gin in the cotton industry. Even more, the bottle machine changed society and culture. A fifteenth century Venetian would have felt right at home in an 1870 glass house prior to the automation of Libbey and Owens. The automatic bottle machine led to a revolution of packaging such as milk bottles, beer bottles, pop bottles, baby bottles, and glass jars. Business friends, Libbey Adolphus Bush and H. J. Heinz, were pioneering glass packaging in beer and vegetables but lacked volume glass bottle suppliers. The first costs of production using the bottle machine was around 10 cents a gross (144 bottles) versus $1.52 per gross for hand production of bottles. The lowered costs quickly opened up new markets for the use of glass bottle and jars. The automated bottle machine led to automated filling machines in industries such as ketchup making. The bottle machine guaranteed standard and equivalent weights and measures, paving the way for the Pure Food and Drug Act of 1906. An ancillary effect was the eventual elimination of child labor in the glass industry.
Libbey built Toledo Glass to do development work, and without it, Michael Owens could not have made the bottle-making machine commercial. Libbey hired the draftsmen, mechanics, and engineers needed to build the machine. Michael Owens, working from a model he developed while at the Chicago World Fair of 1893, functioned as project manager. The bottle machine was every bit an organizational triumph as an engineering triumph. It required an army of technical experts and Libbey’s leadership.
The bottle machine had near 10,000 individual parts, while the 1907 Model T had less than 3,000 parts. These parts had to be designed and manufactured. Every part required a two-dimensional blueprint, so it could be machined or cast. Amazingly, Michael Owens could not read blueprints. If more than one machine was to be made, it would require standardized parts, blueprints, and processes. Blueprints allowed Libbey to standardize his parts supply chain. Owens was incapable of such an engineering task, but Libbey supplied the necessary engineering backup. It was a huge undertaking beyond that of any individual. It was Libbey’s organization and Edward Libbey the CEO that allowed for the invention of the bottle machine to progress. Libbey not only held the organization together but also funded the vision when the board of directors wavered. The bottle machine as well as later inventions were the first real team inventions. It marked the end of the lone Victorian scientist making a breakthrough. Edison had an organization as support, while Libbey had a true developmental organization integrated into the effort. Libbey approached research and development as a craft, with engineers being innovation craftsmen. Libbey’s developmental company would become the model for corporate development in years to come.
The development of the automated bottle took years from 1898 with Michael Owens’s first semi-automated machine. The semi-automatic process could make bottles at 75 cents a gross (144 bottles). The commercial version in 1905 known as machine A could produce twelve beer bottles per minute or 17,280 in a 24-hour period. Compare this to hand production of 2,880 per day using a crew of six men and boys. Such production capacity and lower costs quickly opened up the beer and ketchup bottles markets. The national market in 1900 was about three million bottles of ketchup alone. These were hand blown bottles, and since ketchup was sold in barrels as well, the potential market was probably near seven million bottles. The beer bottle market in 1900 was about twice that size. Libbey made the decision not to become a machine manufacturer or bottle manufacturer, but developed a different business of forming a company manufacture and lease machines to end users. Leasing was a revolutionary business model, which Libbey perfected.
The first license of the machine was with Baldwin-Travis (Thatcher Manufacturing) in September of 1904. Thatcher was licensed to make milk bottles only. It cost Thatcher $250,000 for the license. The payment was made in $150,000 cash, $50,000 in preferred stock, and $50,000 in common stock. Royalties were based on a per bottle calculation of labor savings from the machine. One-half of the savings would go to the Owens Bottle Machine Company. Libbey would select companies exclusively for beer bottles, ale bottles, wine bottles, soda pop bottles, brandy bottles, etc. The royalties in 1904 were 50 cents a gross for Thatcher. The Thatcher machine required modifications for their thick walled square bottle. In addition, Libbey would supply Michael Owens to help in the machine start-up and installation. Owens quickly became a thorn in the side to a broad segment of the glass industry.
Licensing was the most important of these strategic issues of Libbey. Libbey personally took to selling licenses. Robotics companies are using the Libbey model of licensing and leasing today. Libbey and Owens believed the machine had a major advantage in longneck bottles favored by beer bottles. Iron City Brewing in Pittsburgh had been one of the first to come to Toledo to see the machine. In 1903, Libbey was in negotiations with a group of Pittsburgh beer bottle manufacturers but was getting nowhere. The group had negotiated as a group, fearing that the machine would give anyone of them an unfair advantage. Libbey secretly approached one of them, Edward Everett, after negotiations broke down. He started a secret letter exchange of letters using fictitious names. Libbey and Edward Everett joined together to take over three bottle plants in Ohio (Newark, Massillon, and Wooster). The new company became Ohio Bottle Company. Ohio Bottle Company was then given exclusive license for beer, porter, ale, and soda bottle bottles. This company would be the major supplier to Pittsburgh Brewing Company (Iron City Beer). So by 1905, Libbey controlled a complex web of glass companies, which had avoided the image of a monopoly.
Libbey would become America’s most adept monopolist, controlling the bottle market, while the government seemed unable to understand his control. Leasing gave him market control, which he could sell as a premium to companies. Once a company had first leasing rights such as Thatcher in milk bottles and Heinz in Ketchup bottles, Libbey refused to lease to their competitors. With Kent Machine as his manufacturing company, Libbey had started a process of vertical integration controlling the supply chain, but his horizontal integration of markets was overwhelming. In 1905, Libbey had control of the cut glass, bottle, and container markets. In the bottle and container markets, he was in a position to control pricing and production. He realized that the automatic bottle machine had the potential to cause disarray in the marketplace. Libbey chose to slowly change the market while maintaining price levels. This would also allow for an orderly transfer of skilled glass blowers and gathers to machine operators. Still, Libbey’s tactics were every bit as monopolistic in nature as those of J. P. Morgan. Libbey, in fact, had the power to decide segment winners because he sold exclusive rights in segments such as beer bottles, vegetable jars, milk bottles and other segments.
Libbey also moved quickly on expanding licensing to Europe with trips in 1904 and 1905. Owens European Bottle Machine was formed to sell licenses. Beer King Adolphus Busch who had first seen the machine in 1903 became a stockholder in the European Bottle Machine. Other than Busch and Julius Prince of Germany’s Apollinaris Company, the board of Owens European Bottle was the same as Toledo Glass. Owens European had exclusive rights for Europe, Central America, South America, Africa, Cuba, and Australasia. One of the unexpected results of the Owens bottle Machine was a huge reduction in child labor. A typical glass factory might have 100 boys working at low wages to make bottles. Wages were from 30 to 50 cents a day, often with room and board not included. While a boy might make $3 to $6 a week, he might be charged $2 to $3 a week for room and board. Company boarding houses were common in Ohio. Orphans were often shipped from eastern cities to take the jobs in the glasshouses of Ohio where labor was in short supply. The Owens Bottle machine effectively reduced the process to high paid machine operators. In 1910, Libbey would repeat the developmental and marketing process with the invention and application of an automated flat glass machine.
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