Notes 1: Industrialization in America Unit 4: Immigration and Industrialization

Rapid Industrialization in America After the Civil War, the United States was mainly an agricultural nation. By the 1920’s, less than 60 years later, it was the leading industrial power in the world.

America Becomes Industrialized

Rapid Industrialization in America The industrial boom was fueled by three main factors: A wealth of natural resources The increasing power of big business A growing urban population that provided both labor and markets for industry. The railroads that began crisscrossing the continent in 1869 and waterways such as rivers, lakes, and canals allowed for large factories to base themselves in one location while dispersing goods across the country.

Natural Resources - Oil Oil– Some Native Americans used oil found on the surface for fires, but American settlers did not find a use for oil until the 1840’s when they discovered how to distill kerosene from oil and burn it for light. In 1859, the first steam engine was used to remove deposits of underground oil – this finally made oil a practical fuel source.

Natural Resources - Oil At this time oil was distilled into kerosene to light lamps; gasoline was used as fuel only after the automobile was invented around 1885. 1904 Oldsmobile – first mass marketed automobile in the United States

Natural Resources: Steel Steel– Coal and iron deposits were rich in America. While iron was a stronger metal than most at the time, it was brittle and rusted easily. In the 1850’s, the Bessemer process was invented in England to efficiently convert iron to steel. Steel was lighter, more flexible, and rust- resistant. Bessemer Converter

Natural Resources: Steel Steel quickly became important to railroads; it also made barbed wire and new farm machinery. Because of steel, innovative architectural designs could also be implemented – the Brooklyn Bridge connected Manhattan and Brooklyn while skyscrapers could be constructed to make urban space more efficient.

Natural Resources Geography

Questions about Geography Slide: Where are most of the industrial cities located? What city is surrounded by the most steel mills? Why?

Big Business Gets Bigger Darwin’s thesis on natural order was translated into the business world – business leaders began to practice survival of the fittest. Large companies tried to take over the market by creating monopolies. Monopoly: when one business controls the entire market for a product (also known as horizontal integration)

Horizontal Monopoly If a company has a monopoly on an industry it can regulate the wages and prices within that industry. Rockefeller’s Standard Oil paid his employees extremely low wages and then charged less for the oil than it cost to produce. This drove smaller oil companies out of business. Once Rockefeller had control of the market, he raised oil prices far above their original levels. By following these tactics, Standard Oil went from refining 2-3% of the country’s crude oil in 1870 to processing 90% of it only ten years later.

Monopoly (Horizontal Integration) Simulation Acme Oil Oil R Us Rockefeller’s Standard Oil 100 barrels Price per barrel: Total income: Amt due : In Bank: -$100 (+$10,000) Status after 1 year? Year 2

Monopoly (Horizontal Integration) Simulation How does this affect a poor family? Joe and Jane consumer have $100 to feed and heat a family of 5. Each person needs 20 barrels of fuel per year to survive. Year 1: One barrel costs __________. You can buy _________ barrels for a total of $_____________. You have $_____________ left for food. ___________ family members live. Year 2: One barrel costs __________. You can buy _________ barrels for a total of $_____________. You have $_____________ left for food. ___________ family members live.

Monopoly (Horizontal Integration) Why is it called a horizontal monopoly? By lowering his prices and causing all of his competitors to go bankrupt, Rockefeller is able to take over the entire oil refining business. Because his monopoly takes over other businesses that produce the same product, it is called a horizontal monopoly.

Monopoly (Horizontal Integration) Rockefeller drives his competition out of business and buys their oil refineries Rockefeller owns one oil refinery Rockefeller owns most of the oil refinery industry and can charge what he wants for oil.

Vertical Integration Other companies such as Carnegie’s Steel Company worked to make large profits by controlling as much of their industry as possible. Known as vertical integration, Carnegie tried to buy out his suppliers and distributors (coal fields, iron mines, ore freighters, and railroad lines). With this he could make steel for less money. After driving competitors out of business with his low prices, Carnegie could then charge more for his steel.

Vertical Integration Simulation Year 1: Carnegie Steel pays $100 for ore from Mines Inc. and $100 for shipping on WV Railroad for each 50 lbs of steel. His total cost is $______. Carnegie Steel sells 50 lbs of steel for $5 lb for $____ - $_____ = $_______ profit Steel R Us pays $100 for ore from Acme mines and $100 for shipping on LO Railroad for each 50 lbs of steel. His total cost is $_____. Steel R Us sells 50 lbs of steel for $5 lb for $_______ - $_____ = $_______ profit

Vertical Integration Simulation Year 2: Carnegie steel owns Mines Inc. and WV Railroad. Carnegie steel pays $50 for ore from Acme mines and $50 for shipping from WV Railroad for a total cost of $______ per 50 lbs of steel. Carnegie steel sells 50 lbs of steel for $3 lb for a total of $____ -$______ = $___ profit Steel R Us pays $100 for ore from Acme mines and $100 for shipping on LO Railroad for each 50 lbs of steel. His total cost is $____. Steel R Us only sells 10 lbs of steel for $5 lb for $________ - $_____ = $______ profit.

Vertical Integration Simulation Steel R Us goes bankrupt and Carnegie Steel controls the market Why is it called a vertical monopoly or vertical integration? Carnegie saved money by purchasing his own suppliers and distributors. Therefore he controlled all of the inputs to his factory.

How does a vertical monopoly turn into a horizontal monopoly? Vertical Integration How does a vertical monopoly turn into a horizontal monopoly?   After Carnegie decreases his cost to make steel, he can then drop the price of his steel and follow the same process that Rockefeller did for a horizontal monopoly.

Vertical Integration Carnegie buys the coal and iron mines that supply his factory Carnegie’s factory makes steel Carnegie buys the railroad that ships his steel around the country

Do you think that this type of behavior should be allowed in a capitalist country?

Big Business Gets Bigger The rich and powerful businessmen that ran these large companies were soon named “robber barons.” This period of time in the late 1800’s, where the gap between the few rich and the many poor widened, was called the “Gilded Age” by Mark Twain – shiny on the outside, junk on the inside. vs.

Big Business Gets Bigger The government became concerned that monopolies would crush free competition in America. In 1890, the government enacted the Sherman Anti-Trust Actwhich made it illegal to form a trust that interfered with free trade between states or other countries. This act was difficult to enforce since it was very broad and companies like Standard Oil just restructured if they felt pressure from the government.

“Bosses of the Senate”

Question about Political Cartoon: Who are the bosses of the Senate? Why are they so big?   What do you know about the cartoonist’s attitude from the signs at the top? What law do you think this cartoon helped to influence?

Growing Urban Population The boom of industrialization required large numbers of unskilled laborers to work in the factories. Many farm workers lost their jobs as steel farm equipment took their place – these people often moved to the cities and worked in the factories. Along with the change from rural to urban, thousands of people flooded into America during this time as they left Europe and immigrated to the United States.

Growing Urban Population These people settled in urban centers where they could find unskilled work in factories. Not only did these new urban residents provide a workforce for the factories, but they also bought goods produced in the factories at a higher rate than their rural counterparts. L: Philly 1897 R: New York City 1900