Industrialization1865-1901 Chapter 9
Section 1: The Rise of Industry • I Can… • Identify the effects of expanding population on industry. • Explain the effects of technological innovations such as the telephone and telegraph on American development.
The Rise of Industry • The Industrial Revolution began in the United States in the early 1800s; however, the nation was still largely a farming country when the Civil War erupted. • In 1860 out of a population of 30 million, only 1.3 million Americans worked in industry. • After the Civil War, industry greatly expands and millions of Americans left farms to work in mines and factories. • The Civil War challenged industries to make products more quickly and efficiently than ever before. • By 1900 the U.S. was the leading industrial nation.
The United States Industrializes after the Civil War How? 1. Plenty of raw materials needed for industry: water, wood, coal, iron, copper 2. Large workforce: population tripledbetween 1860-1910 • Due to large families and high immigrationlevels. • Larger population also increased demand for manufactured goods. 3. The transcontinental railroad brought settlers and miners to the west and moved resources to the factories in the east.
The Rise of Industry • In 1859, Edwin Drake drilled what became the world’s first oil well in Titusville, Pennsylvania. • Before this, whale blubber had been used for light and fuel. • Whaling had become time-consuming and the whales were becoming scarce. • Drilled oil was cheap to produce and easy to transport. The oil industry will grow quickly and encourage such industries as kerosene and gasoline.
The Rise of Industry First oil well in Titusville, Pennsylvania.
The Rise of Industry • What is Free Enterprise? • Capitalism • an economic system that functions without government interference • Laissez-Faire-popular concept in the 1800s (“Let people do as they choose”) • Supply and demand determine prices and wages, not government. • Encouraged foreign investment in the U.S. • What was the government’s role in industrialization? • Laissez-faire attitude-kept taxes low, encouraging investment. • Few regulations on industry • Gave land grants to spur RR growth • High tariffs designed to protect American companies from foreign competition. • Ex. Morrill Tariff- one of the highest in U.S. History.
What was the impact of New Inventions? • 1865: No electric lighting, ice was expensive, and mail took weeks to get from east to west. • Between 1860-1890: Patent and Trademark Office issued 500,000 patents for innovations. • 1900: There were inventions such as the sewing machine, typewriter, phonograph, and vacuum cleaner.
The Rise of Industry • Industrialization makes mass production possible. • Mass production is the process of producing goods in large numbers. • By selling more, producers can charge consumers less money and still make a profit. • Depends upon machinery to carry out tasks that were once done with hand tools.
Advances in Communication • Telegraph: perfected by Samuel F.B. Morse; Morse code-short impulses to represent letters of the alphabet. • 1896-Guglielmo Marconi; invented the wireless telegraph. • Telephone: 1871 Alexander Graham Bell • In 1877 Bell and others organized the Bell Telephone Company • eventually became the American Telephone and Telegraph Company (AT&T). • These inventions made it possible for individuals and businesses to communicate much easier and on a much broader scale.
Electric Power • Thomas A. Edison- “Wizard of Menlo Park” • inventor of the phonograph, electrical lighting, and power station and much more. • Supported by wealthy industrialists like J.P. Morgan • Received more than 1,000 patents on new inventions.
Electric Power • Symbol of the new age of technology. • The light bulb enabled factory work to continue after sunset. • In 1882 the Edison Electric Illuminating Company supplied electric power to customers in New York City. • In 1889 several of Edison’s companies merged to form the Edison General Electric Company, today known as GE. • As a result people worked longer hours, the number of US factories increased, and industries produced more goods.
Electric Power • Other inventions also revolutionized society. • Thaddeus Lowe-ice machine (basis of the refrigerator). • Gustavus Swift- refrigerated railcar; reduced food spoilage. • Bessemer Process- process for purifying iron, resulting in strong, but lightweight steel. Made it cheaper and easier to remove impurities. • Allowed for construction of new buildings. • Along with elevators made it possible for building skyscrapers. • Suspension bridges- bridges in which the roadway is suspended by steel cables. The first suspension bridge was the Brooklyn Bridge.
Railroads • I Can… • Discuss ways in which the railroads spurred industrial growth. • Analyze how the railroads were financed and how they grew.
Railroads • By the 1900s the US had over 200,000 miles of track. • 1862: President Lincoln signed the Pacific Railway Act that provided for the construction of a transcontinental railroad by two corporations, the Union Pacific and the Central Pacific. • To encourage rapid construction, the government offered each company land along the right-of-way. • Land Grants
Railroads • 1863: the Central Pacific started laying track eastward from Sacramento, California, while the Union Pacific headed westward from Omaha, Nebraska. • Construction was difficult and expensive. • Laborers faced harsh and dangerous conditions. • Many that worked on the railroad were immigrants. • Irish • Chinese • Met at Promontory Point, Utah.
Railroads • Railroad expansion spurred industrial growth, by increasing markets for new products. It was also a huge consumer itself. • Many railroads started to consolidate in larger companies. • Cornelius Vanderbilt was one of the most famous consolidators. • In 1781, he began construction on NY’s Grand Central Station. • Eventually there will be seven giant systems with terminals in major cities.
Railroads • To make rail service safer, the country was divided into 4 time zones. • Before time was kept independently, so scheduling and safety became a huge concern. • In 1884, delegates from 27 countries divided the globe into 24 time zones. • Railroads played a key role in transforming American industries and business. • They could transport large amounts of goods quickly, cheaply, and efficiently. • Because they linked the nation, they allowed businesses to obtain raw materials easily and to sell finished goods to a larger number of people.
Railroads: Robber Barons v. Captains of Industry • 2 views: • “Robber Barons”: built their fortunes by stealing from the public. • They used bribery, insider-trading, cheating, and ruthlessness to make their fortunes. (Jay Gould)
Railroads: Robber Barons v. Captains of Industry • “Captains of Industry”: served their nation in a positive way by increasing supply of goods, building factories, raising productivity, and expanding markets. • Robber Baron or Captain of Industry?
Railroads: Credit Mobilier Scandal • It was a railroad construction company formed by Union Pacific owners that contracted themselves to build the new railroad at highly inflated prices. • It gave or sold stock at cheap prices to politicians to influence legislation. • Showed the corruption and the power of the Robber Barons. • Many politicians in Washington including Speaker of the House Blaine and future president Garfield were implicated in accepting bribes.
Railroads • James J. Hill was clearly not a robber baron; he built the Great Northern Railroad from St. Paul Minnesota, to Everett, Washington, without any federal land grants. • It became the most successful transcontinental railroad and the only one not eventually forced into bankruptcy.
Big Business • I Can… • Analyze how large corporations came to dominate American business. • Evaluate how Andrew Carnegie’s innovation transformed the steel industry.
Big Business: The Rise • By 1900 big business dominated the economy • Big business would not have been possible without the corporation. • A corporation is owned by many people but treated as though it were a single person. • They can : • own property • pay taxes • make contracts and • sue and be sued. • Stockholders are those who own the corporation. They own shares of ownership called stock. • By issuing stock this allows a corporation to raise large amounts of money while spreading out the financial risk.
Big Business: The Rise • They worked to maximize profit in several ways. • Ex., paying workers the lowest possible wages or paying as little as they could for raw materials. • With the money raised from the sale of stock they could invest in new technologies, hire a larger workforce, and purchase new machines. • Economies of scale: means the corporation makes goods more cheaply because they produces so much so quickly using large manufacturing facilities.
Big Business: The Rise • All businesses have two kinds of costs: • Fixed- costs a company has to pay, whether or not it is operating. (loans, mortgages, taxes) • Operating- costs that occur when running a company. (wages, shipping, raw materials) • Big corporations had the advantage because of their low operating costs-they could continue to operate in poor economic times by cutting prices to increase sales. • The changing nature of business organizations and the new importance of fixed costs caused competition to become so severe it forced many small companies out of business.
Big Business: The Rise • Many corporate leaders did not like the intense competition that had been forced on them. • Many tried to organize pools, or agreements to maintain the prices at a certain level. • However, they broke apart whenever one member cut prices to steal the market share from another, and allow competition to resume. • By the 1870s, competition had reduced many industries to a few large and highly efficient corporations.
Big Business: The Players • Railroads are the first industry to take off in the years following the Civil War. • Key figure in the railroad industry was Cornelius Vanderbilt (the Commodore). • In 1869, he extended his New York Central Railroad to reach Chicago.
Big Business: The Players • Andrew Carnegie • Born in Scotland, the son of a poor hand weaver who immigrated to the US in 1848. • Later he will become supervisor of the Pennsylvania Railroad. • He will start to invest in companies that serve the railroad industry.
Big Business: The Players • He will travel to Europe and come into contact with Henry Bessemer. • Bessemer had developed a new method for making steel known as the Bessemer process. • Using this process, manufactures could make steel much cheaper than ever before. • This increased production of steel meant faster expansion of railroads and more construction of buildings. • After meeting Bessemer, Carnegie decided to concentrate his investments in the steel industry. • He opens his company in Pittsburgh and implemented the Bessemer process.
Big Business: The Players • He will also use vertical integration as a way to increase manufacturing efficiency. • A vertically integrated company owns all of the different businesses on which it depends for its operation. • He owned not only the steel mills, but also the necessary iron ore, coal mines, railroads, and ships used in transport. • .
Big Business: The Players • Some businessmen like Carnegie also used horizontal integration. • This is combining many firms engaged in the same type of business into one large corporation. • This takes place as companies compete.
Big Business: The Players • John D. Rockefeller became one of the nation’s richest and most powerful businessmen. • Standard Oil was the nation’s first trust. • A trust is a business arrangement under which a number of companies unite into one system.
Big Business: The Players • Trusts serve to destroy competition and create monopolies. • At one time he owned 90% of the oil refining industry. • Manages the companies as a single unit. • Through the trust, Rockefeller was able to dictate prices, eliminate competition, and control the US oil industry. • Much of his success was due to his use of vertical integration. • Rather than pay other producers to supply the materials he needed, Rockefeller’s company made what it needed itself (i.e., its own barrels, cans, and so on). • Rockefeller- “pay nobody a profit.”
Big Business: The Players • With the expansion of business came a new kind of business leader: the finance capitalist. • Bankers who exert economic influence through companies’ stocks and bonds. • The most powerful and influential of the early finance capitalists was J.P. Morgan.
Big Business: The Players • Morgan eventually exercised control over banks, insurance companies, and various stock market operations. • He was so rich he eventually bought out Carnegie’s steel company to form a new company—US Steel. • He paid nearly 5 hundred million dollars for the company. • Supported Edison in his invention of the light bulb.
Big Business: The Rise • Many companies start to create a new organization called a holding company. • does not produce anything itself. • It owns the stock of companies that do produce goods. • By 1904 the US had 318 holding companies. • These giant corporations controlled 5,300 factories and were worth more than $7 billion.
Selling the Product • As vast new products were produced by American industry, retailers looked for new ways to market and sell goods. • New forms of advertisements: • Large display ads with illustrations • Mass advertising in newspapers and magazines.
Big Business: Selling the Product Early Ads New Ads
Big Business: Selling the Product • Advertising is used to attract customers to new retail businesses, the department store. • This changed the idea of shopping by bring a huge array of different products together in a large elegant building.
Selling the Product • Chain stores, a group of similar stores owned by the same company first appeared in the mid-1800s. • They focused on thrift, offering low prices. • Woolworth’s opened in 1879, and became one of the most successful retail chains in America.
Big Business: Selling the Product • To reach millions of people who lived in rural America, retailers began issuing mail-order catalogs. • Montgomery Ward and Sears, Roebuck were the two largest mail-order companies.
Unions • I Can… • Describe industrial working conditions in the United States in the late 1800s. • List the barriers to labor union growth.