The Industrialization of America

The Second Industrial Revolution was fueled by 3 industries: railroads, steel, & oil

The Railroad Industry America’s first “big business” was the railroad industry: Railroads stimulated the coal, petroleum, & iron/steel industries Large companies bought small railroads, standardized gauges & schedules, & pooled cars Small lines in the east acted as tributaries to the 4 great trunk lines into the West 3

Cornelius “the Commodore” Vanderbilt was the most powerful figure in the railroad industry Jim Fisk

Problems of Growth Speculators like Jay Gould built & bought rail lines to profit with little concern for efficient use But, the railroad industry faced problems due to overbuilding in the 1870s & 1880s: Mass competition among RRs RR lines offered special rates & rebates (secret discounts) to lure passengers & freight on their lines Pooling & consolidation failed to help over-speculation 8

Problems of Growth RR bosses asked bank financier J.P. Morgan to save their industry: Morgan created a traffic-sharing plan to end wasteful competition “Morganization” fixed costs, cut debt, stabilized rates, issued new stock, & ended rebates Created a “board of trustees” By 1900, 7 giant (centralized & efficient) rail systems dominated 8

Gov’t Regulation of Industry From 1870 to 1900, 28 state commissions were created to regulate industry, especially RRs: In 1870, Illinois declared RRs to be public highways; this was upheld by Munn v. Illinois (1876) But, was overturned in Wabash v. Illinois (1886): “only Congress can regulate interstate trade” Munn case “ private property affecting public interest” can be “controlled by public for the common good”

Tariffs & Trusts Congress responded by creating: This was the 1st attempt by the federal gov’t to regulate big business The ICC became the model for future regulatory agencies Congress responded by creating: The Interstate Commerce Commission (ICC) in 1887 to regulate the railroad industry

The Interstate Commerce Act