The Second Industrial Revolution: Chemicals, Electricity, and Steel

Second IR While the First IR (1750-1850)centered mostly on steam, coal, and textile production in Britain, the Second IR (1870-1914) focused primarily on Germany After the unification of Germany, the new German government invested heavily into industrializing to catch and surpass Britain in several categories Prussia had been the most industrially developed of the German states, and spread its policies and attitude towards industrialization throughout Germany The state invested in the expansion of railroads, to connect the new German Empire, and provide transportation for passengers and economic cargo They also focused heavily on the development of chemicals, like sulfuric acid, bleaches, petroleum (gas), and developed the Bessemer process for cheaper, solid steel

Mechanization While the British has mechanized the textile industry in the 18th century, the bulk of manufacturing was still done by human labor Labor was organized into the factory system—where all steps of production are done by specialized workers and departments to complete one product Germany however revolutionized production by harnessing and developing electricity to mechanize the factory system even further Larger, more complex equipment reduced or eliminated human workers, who were limited, and could be unfocused or ineffective Reduction of human workers cut accidents and costs, and helped produce more, cheaper goods faster than before

Economic Connectivity By the 1880s and 1890s, Europe looked far different than it had 100 years ago, even during the First IR Telegraphs and telephones connected people and businesses, and made communication and economic transactions far quicker Railroads made passage around countries faster, cheaper, and safer than before, helping make costs cheaper, as well as giving militaristic advantages Germany, for example, showcased this advantage during the Franco-Prussian War, when superior railroad development allowed better troop and supply movement Additionally, new concepts like cars and planes began to emerge from Germany and the United States, and the internal combustion engine was created in the late 19th century Lastly, steel steam ships would allow large amount of supplies and passengers to cross the ocean, making the transportation of people and goods far cheaper, faster, and safer

Criticisms of Free Trade While free trade certainly could benefit companies and consumers with cheaper products, it also created economic crashes and downturns One of the key components of capitalism was market prices—supply and demand—rather than gov or guilds controlling prices However, this also meant prices would rise and fall wildly based on demand, and with free trade, any drop or increase is prices affected all nations For example, when the Austria stock market crash caused several Austria banks to fail, its unemployment rippled and resulted in a massive economic downturn called the Panic of 1873 As a result, the Panic of 1873 caused prices drops and unemployment in the US and Europe for 10 years This economic drop in prices and wages resulted in large amounts of unemployment across Europe, and caused countries to question Free Trade

Protectionism After several market failures, crashes, and famines, the governments of Europe began to abandon laissez-faire policies between one another in the 1870s Still firm believers in capitalism, they began to focus on protectionism—the protecting of their own, domestic businesses, rather than volatile (unstable) free trade This meant the return of many tariffs that had disappeared in the early-mid 19th century, starting mostly with Bismarck in Germany, and soon including all of Europe but Britain One example was in Germany in 1879, when Bismarck and German land owners established the Tariff Agreement of 1879 This tariff was a tax on imported grain to protect German agriculture, as grain prices on imports from the US and Russia were driving German farms out of business

Monopolies One of the policies held by governments in the mid-19th century was the support of large monopolies—companies that controlled an entire industry As governments began to support tariffs in the 1870s to prevent the negative impact of free trade, so too they begin to support monopolies Governments and corporations believed that one (or a few) strong, consistent companies controlling an industry would make it more stable When economic downturns occurred, smaller businesses went out of business, and made the problems worse while many large businesses survived Examples of state-supported monopolies can best be seen in the U.S., with companies like Standard Oil to control and stabilize oil prices and quantities