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The Rise of American Industry. Gross National Product (GNP). The total value of all goods and services that a country produces. Consumer. A person who buys what is produced in an economy. Entrepreneur. People who risk their money/capital to organize and run businesses. Tariff.
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Gross National Product(GNP) The total value of all goods and services that a country produces.
Consumer A person who buys what is produced in an economy.
Entrepreneur People who risk their money/capital to organize and run businesses.
Tariff A tax on imported goods.
Laissez-Faire Philosophy for government that believes in little government regulation in business. “Hands off” government.
Industrial Revolution • Began in England in the late 1700’s. • Reached the United States in the early 1800’s. • Even so, most Americans still live on farms at the start of the Civil War. We are still a rural based nation. • Out of more than 30 million people in the U.S., only 1.3 million work in industry.
Post Civil War • American industry quickly expands. • Factories grow larger and more complex. Machines replace hand tools. • By 1914, America’s Gross National Product (GNP) is EIGHT X’s!! greater than it was at the end of the civil war.
Natural Resources • America is blessed with natural resources. • Timber, coal, iron, copper, and oil. • Abundance of natural resources means industries can get everything they need cheaply without importing from foreign countries. • Settlers/miners out west accelerate industrialization, as well as the expansion of the railroad. • Government policies supporting railroad construction allowed the United States to industrialize very quickly following the Civil War.
Oil! • Edwin Drake • Drilled first oil well near Titusville, Pennsylvania. • Oil industry is built on the demand for kerosene which is made from petroleum. • Kerosene fueled lanterns to light homes and factories, and stoves to heat them.
An Industrial Sized Workforce • Between 1860 and 1910, the American population nearly tripled. • Two-fold effect of this population boom. 1.) Abundant workforce 2.) More consumers demanding goods
Why the Population Boom? • Larger families • Better living conditions lead to lower mortality rate and therefore a higher population. • Flood of immigrants • Poor economic conditions in eastern Europe and China convince many people to move to America in hopes of having a better life. • Religious persecution and oppressive governments also bring immigrants here looking for freedom. • Between 1870 and 1910, more than 17 million people moved to the United States.
New Inventions/Technology • Three-fold effect of technology on Industrial growth. • Improved productivity • Thomas Edison- Light Bulb • Automatic looms • Improved transportation • George Westinghouse- Airbrakes for trains • Improved communication • Alexander Graham Bell – Telephone • Cyrus Field – Stretched a telegraph cable across the Atlantic ocean.
Free Enterprise/Laissez-Faire • Laissez-Faire • French phrase which means “let people do as they choose”. • Also known as “Hands off” government. • Supporters of Laissez-Faire philosophy believe the government should not interfere in the economy other than to protect private property rights and maintain peace.
Main argument for “Laissez-Faire” • government regulation leads to increased costs which eventually hurts society more. • Relies on supply and demand to decide prices and wages. • Competition leads to greater efficiency and more wealth for all. • The “Laissez-Faire” approach by the United States government in the late 1800’s led to an explosive expansion in industry.
Entrepreneurs • New industrial opportunities for profit lured many new investors into these new industries. • Many bright industrialists built financial empires in the favorable conditions caused by the “laissez-faire” government approach.
Tariffs • A tax placed on imported/foreign goods in an attempt to protect local manufacturers/producers. • Morrill Tariff • Passed during the Civil War • Nearly tripled tariffs in the U.S. • Meant to be a positive for Americans, but was it? • How do you think foreign governments reacted?
Overarching Question???? • What government economic policies allowed industries to expand after the Civil War? • The American government’s laissez-faire, hands off approach to regulating industry allowed for industries to expand quickly without regulation. Also, the government’s promotion of the railroads opened up the resources in the west for eastern industry. In addition, tariffs limited foreign competition.
Corporation An organization owned by many people but treated by law as though it were a separate person.
Trust A legal arrangement that allows one person to manage another person’s property (stocks).
Economies of Scale Achieved when the cost of manufacturing is decreased by producing goods quickly and in large quantities.
Monopoly When a single company achieves control of an entire market.
Vertical Integration Occurs when a company owns all of the different businesses on which it depends for its operation.
Horizontal Integration Occurs when a company grows by buying up its competitors.
Changing the Face of Business • Following the Civil War, large Corporations developed which consolidated various business functions (steps) to produce goods more efficiently. • Manufacturing moved from small partnerships to big businesses which operated vast complexes of factories, warehouses, and distribution facilities.
Corporations • Made big businesses possible. • Considered to be its own entity (like its own person). • Because of this, corporations can…… • Own property • Pay taxes • Make contracts • Sue and be sued • (however it is the business being sued, not the owners, therefore the owners personal finances and or property cannot be harmed)
Stockholders • People who own a corporation. • Own shares of ownership called stock. • Issuing stock allows a corporation to raise large amounts of capital (money) for big projects while spreading out the financial risk. • The stock market is where businesses peddle their stocks to interested investors.
Economies of Scale • Achieved when the cost of manufacturing is decreased by producing goods quickly and in large quantities. • Money raised from the sale of stocks allowed corporations to invest in • new technologies • large workforces • new machines which greatly increased their efficiency.
Making Businesses Work • Fixed Costs • Costs a company has to pay, whether or not it is operating. • Loans, mortgages, taxes, rent. • Operating Costs • Costs that occur when a company is operating. • Wages, supply costs. • (Chart, page 195)
Intense Competition • Companies lower prices to beat competitors. • This hurts profits and so businesses organized pools which agreed to keep prices at a certain level. • Pools only last until one member cuts their prices to steal business away from everyone else. • By the 1870’s, competition had reduced many industries to just a few large and highly efficient corporations.
Vertical Integration • Occurs when a company owns all of the different businesses on which it depends for its own product/operation. • Saves money. • Made many companies bigger.
Horizontal Integration • Occurs when one company grows by buying up its competitors. • Leads to Monopolies, where a single company achieves control of an entire market.
New Business Organizations • By the late 1800’s, the government was seeking to stop monopolies, which they felt hurt fair competition and as a result prices. • Many anti-monopoly laws were passed to prevent companies from buying out their competition.
Trusts • First formed in 1882 by John D. Rockefeller with his Standard Oil company. • A legal arrangement that allows one person to manage another person’s property. • Stockholders would give their stocks to a group of trustees who would then manage those stocks from various companies as if they were one large, merged company. • New way of merging businesses that did not violate anti-monopoly laws because trustees didn’t actually own the stocks they managed.
Holding Company • In 1889, a New Jersey law allowed corporations chartered in New Jersey to own stock in other businesses. • This leads to formation of holding companies. • Holding companies don’t produce anything themselves, instead their business is holding (owning) stock in companies who do produce goods.
Union A group of workers who organize for the purpose of advancing its members’ interests.
Deflation A decline in the amount of available money or credit that results in lower prices, and therefore an increase in the buying power of money.
Why did unions form? • Industrial workers faced • Difficult/unsafe working conditions • Low wages • Long hours • This led them to form unions in the hope of forcing change.
What were their problems? • Dull, repetitive tasks. • Workers breathed in dust, lint, and toxic fumes. • Many injuries caused by new heavy machines without safety devices. • Long hours led to worker exhaustion and poor family life.
