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Chapter 22: Section 3. New Methods and Business Organizations. Terms to Know. Capitalism Economic system in which individuals, rather than governments, control the factors of production Commercial capitalism
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Chapter 22: Section 3 New Methods and Business Organizations
Terms to Know • Capitalism • Economic system in which individuals, rather than governments, control the factors of production • Commercial capitalism • Early economic system in which most capitalists were merchants who bought and sold goods • Industrial capitalism • Term for changes beginning in the 1700’s, when power-driven machines began to do much of the work that people had done before. • Interchangeable parts • Identical parts that can replace each other • Mass production • System of producing large numbers of identical items • Corporations • Businesses that allow people to buy stock in the company
The Main Idea • Improved production methods helped to speed industrialization during the late 1800’s.
Capitalism • Capitalism • Describes an economic system in which individuals or corporations, rather than governments, control the factors of production. • Businesses and the means of production are privately owned and operated. • Factors of Production • 1) Land • 2) Capital • 3) Labor
Capitalism • Commercial Capitalism • Before Industrial Revolution • Capitalists were merchants who bought and sold goods. • Merchant-a person who buys and sells commodities for profit; dealer; trader. • Industrial capitalism • During the Industrial Revolution (late 18th and early 19th centuries) • Capitalists were more involved in producing and manufacturing goods.
Division of Labor • Factory owners divided the manufacturing process into steps. • This increased production • Called DIVISION OF LABOR- divides the tasks among the employees • Use of machines in many of the steps • helped the workers produce more in a shorter time. • The lowered cost of production • made more profit for the owners.
Interchangeable Parts • Eli Whitney • Used division of power to make muskets in the late 1700’s. • PRIOR TO WHITNEY: an entire gun was made by skilled artisans • Each gun was slightly different • If a part broke, a new one had to be handmade • Whitney invented machines that made parts that were all alike. • INTERCHANGEABLE PARTS • Made it easy to repair • Other factory owners saw this and adopted the idea.
The Assembly Line • Mass Production- the system of producing large numbers of identical items. • Mass Production needs: • Division of labor • Interchangeable parts • Assembly line
1800’s • Parts were made in a different location in the factory • Parts were then brought together and assembled at a single location • Manufacturers then devised theASSEMBLY LINE • The parts were carried from worker to work. • Each worker performed a certain task on the part.
The Assembly Line • Henry Ford • Founded one of the largest industries in the world • FORD • Saw potential in the assembly line • Used a conveyor belt to carry automobile frames from one worker to the next. • Each worker added one or more of the numerous parts in the finished automobile
Discussion • These images show a Ford assembly line in the early 1900’s. • Question: • How do you think the assembly line might have made work easier for these Ford employees? • Answer: The assembly line allowed the workers to perform a task in less time and with less energy.
Discussion • In about 1914 Henry Ford found himself facing a high turnover rate in his labor force. Rather than continue to hire new employees to offset these turnovers, Ford doubled the daily wage of his workers from about $2.50 to $5.00. His tactic paid off in more ways than one. Not only did his labor force stabilize, his operating costs also decreased. These positive factors allowed Ford to increase production. • Why was it a good tactic for Ford to double the daily wages to the workers. • Answer: Skilled and reliable workers stayed, reducing operating costs.
Rise of the Corporation • Before the Industrial Revolution, most businesses were very small. • Sole proprietorship- business owned and run by just one person • Partnership- two or more people ran and owned a business • Small Companies and few workers could not afford mass-production methods or machinery for large-scale production.
Corporations • As business grew during the 1800’s, another form of business became common. • Corporations • Businesses that allow people to buy stock in the company • Stocks • Allowed people to buy stock in their companies • Easier to raise money needed to run and expand a business. • Stock holders share profits • Depended on how many shares of stock they owned • Financial responsibility was limited to the amount he or she had invested.
