Causes of Rapid Industrialization 1.Steam Revolution of the 1830s-1850s. 2.The Railroad fueled the growing US economy:  First big business in the US.  A magnet for financial investment.  The key to opening the West.  Aided the development of other industries. 1.Steam Revolution of the 1830s-1850s. 2.The Railroad fueled the growing US economy:  First big business in the US.  A magnet for financial investment.  The key to opening the West.  Aided the development of other industries.

Causes of Rapid Industrialization 3.Technological innovations.  Bessemer and open hearth process  Refrigerated cars  Edison o “Wizard of Menlo Park” o light bulb, phonograph, motion pictures. 3.Technological innovations.  Bessemer and open hearth process  Refrigerated cars  Edison o “Wizard of Menlo Park” o light bulb, phonograph, motion pictures.

4.Unskilled & semi-skilled labor in abundance. 5.Abundant capital. 6.New, talented group of businessmen [entrepreneurs] and advisors. 7.Market growing as US population increased. 8.Government willing to help at all levels to stimulate economic growth. 9.Abundant natural resources. 4.Unskilled & semi-skilled labor in abundance. 5.Abundant capital. 6.New, talented group of businessmen [entrepreneurs] and advisors. 7.Market growing as US population increased. 8.Government willing to help at all levels to stimulate economic growth. 9.Abundant natural resources. Causes of Rapid Industrialization

2 nd Revolution1 st Revolution R ailroads T extiles O il R ailroads S teel I ron E lectricity C oal These are the BIG ones 2 nd Revolution1 st Revolution R ailroads T extiles O il R ailroads S teel I ron E lectricity C oal These are the BIG ones Causes of Rapid Industrialization

Industrialization brings positives effects: Inventions are created-  More products--  produced faster--  produced cheaper Jobs are created---  people have money to buy more goods-  economy gets better for everyone Rich people get richer--  create more factories or businesses --  create more jobs--  economy gets better for everyone Immigration-  when jobs are available  people move to the location of jobs-  industrialization causes immigration--  Factories are built where people live  cities grow Industrialization brings positives effects: Inventions are created-  More products--  produced faster--  produced cheaper Jobs are created---  people have money to buy more goods-  economy gets better for everyone Rich people get richer--  create more factories or businesses --  create more jobs--  economy gets better for everyone Immigration-  when jobs are available  people move to the location of jobs-  industrialization causes immigration--  Factories are built where people live  cities grow Pros of Industrial Revolution

Industrialization brings negative effects: Industrialization causes--  pollution-  air, water Industrialization causes---  poverty-  government doesn’t protect workers at first-  workers compete with other workers for low skill jobs-  workers work long hours-  get low pay-  unsafe working conditions Poverty is so bad-  children need to work Massive wealth is created by factory owners-  causes corruption-  business owners use money to influence government officials Industrialization brings negative effects: Industrialization causes--  pollution-  air, water Industrialization causes---  poverty-  government doesn’t protect workers at first-  workers compete with other workers for low skill jobs-  workers work long hours-  get low pay-  unsafe working conditions Poverty is so bad-  children need to work Massive wealth is created by factory owners-  causes corruption-  business owners use money to influence government officials Cons of Industrial Revolution

The Railroads

Why did the RR industry grow so quickly? √Govt. subsidized building of transcontinental RR due to so much of the plains being unsettled √By 1900, the U.S. had 192,556 miles of track or roughly 1/3 of all the tracks in the world √RR companies given million acres by the Govt. √Govt. received discount on postal delivery rates and military traffic in return √Cities grew where the RR went

Consolidation and Mechanization √Cornelius Vanderbilt- RR tycoon who amassed a fortune in the shipping industry; in 1867, he obtained the New York Central RR and soon after began acquiring other companies and merging them into one large company. √By 1877, he controlled 4500 miles of tracks between NY and the Midwest and was worth over $100 million √started replacing old iron tracks with new steel tracks √Others who consolidated included Jay Gould, Russell Sage (West) and Tom Scott (Midwest) √“trunk lines” (long distance rail lines) became HUGE business

Railroad Outcomes ….good and bad √Spurred industrialization √United nation √Created 3 western frontiers- mining, farming, and ranching √Led to great exodus from rural to urban √Brought in HUGE number of immigrants √Created domestic market for US raw materials and manufactured goods √Brought in foreign investment √Created time zones √Made many millionaires √Caused Native American displacement √CORRUPTION!

RR Business Abuses √Wealthy RR owners stopped competing with other by the 1880’s and worked together to charge excessive rates √Called “pools” the RR companies agreed to divide the market and establish prices √Gave rebates or kickbacks to larger corporations √Bribed judges, legislatures, employed lobbyists, and had their own people elected to office √Gave free passes to journalists and politicians √Slashed rates on competing lines and made up the difference on other lines √Long haul/short haul tactics- charging more per mile for a short distance than a long distance √“Law! What do I care about the law? I have the power!”- Cornelius Vanderbilt √RR Tycoons became the most powerful people in the US for a time

Govt. Reactions to Railroad Abuses √Slow to react- goes against Jeffersonian ideas of the constitution √Dedicated to free enterprise and competition √American dream that anyone can become a millionaire √The wealth of nations by Adam Smith (1776) was the bible of capitalism and it warned against Laissez Faire

Govt. Reactions to Railroad Abuses √Slaughterhouse cases Court ruled labor is not a federal issue, but a state one; Federal government cannot regulate companies engaged in intrastate trade √Munn v. Illinois Public has the right to regulate business when there is a public interest involved √Wabash case individual states had no power to regulate interstate commerce- only Federal Govt. could; nullified Munn case

Interstate Commerce Act 1887 √1st large scale legislation passed by federal Govt. to regulate corporations in the interest of society √Set up ICC √Prohibited rebates and pools √Required RR to publish their rates openly √Forbade discrimination against shippers √Outlawed long haul/short haul √Passed mostly to appease the public- never really accomplished much as the ICC didn’t have much power or support

Railroad Tycoons Vanderbilt James Hill Jay Gould Russell Sage Tom Scott

STEEL

√Cornerstone of 2 nd industrial revolution √Held together skyscrapers, railroad tracks, bridges √By 1900, US produced as much steel as Britain and Germany combined √Made possible by the Bessemer process in the 1850’s √Allowed steel to be produced cheaper and more efficiently √3-5 tons per day prior and 3-5 tons in 15 minutes after

Andrew Carnegie and U.S. Steel √First giant of the steel industry √Scottish immigrant born into poverty √Made a fortune through investments √1864- saw the Bessemer process in action on a visit to England- returned home and bought steel companies √By 1890, he produced about ¼ of all steel in the nation √Disliked monopolies and trusts √His organization was more of a partnership with other steel tycoons (up to 40 at one point)

Andrew Carnegie and U.S. Steel √Used railroads to lower his rates and drive out competition √Bought freighters, railroads, and coal companies to create a monopoly √Required workers to work hours per day and hired armed guards to break strikes (homestead) √Company managed by Henry Clay Frick √In 1901, he sold his company, U.S. Steel, to JP Morgan for $400 million √JP Morgan enlarged the company and brought total assets to $1.4 billion- the first billion dollar corp. in history (greater than the sum of the entire U.S. in 1800)

Andrew Carnegie and JP Morgan

Iron & Steel Production

Oil

√First oil well drilled by E.L. Drake in Titusville, PA. in 1859 √Oil would soon dwarf the wealth generated by gold extracted in the West √Kerosene emerged as the standard for lamps; destroyed whale oil industry

Rockefeller √Rockefeller began buying oil wells in 1850’s as the industry was just starting √By 1870, he was worth over $1,000,000 √Because of the sheer volume he had to ship, RR companies competed for his business- he would only use them if they gave him great deals and raised the rates of competitors; he would then use the savings to crush competition √Depression of 1873 caused many companies to go bankrupt- Rockefeller bought them and increased his holdings √Eventually starting buying pipelines, freighters, ships, docks, and even barrelmakers √By 1879, he controlled 90% of all oil refineries

TECHNOLOGY

Thomas Alva Edison “Wizard of Menlo Park”

The Light Bulb

The Phonograph (1877)

The Ediphone or Dictaphone

The Motion Picture Camera

Alexander Graham Bell Telephone (1876)

Alternate Current George Westinghouse

Alternate Current Westinghouse Lamp ad

The Airplane Wilbur Wright Orville Wright Kitty Hawk, NC – December 7, 1903

Model T Automobile Henry Ford I want to pay my workers so that they can afford my product! Henry Ford I want to pay my workers so that they can afford my product!

“Model T” Prices & Sales

U. S. Patents Granted 1790s  276 patents issued. 1990s  1,119,220 patents issued.

NEW PHILOSOPHIES AND IDEAS

Business Culture Laissez Faire  the ideology of the Industrial Age.  Individual as a moral and economic ideal.  Individuals should compete freely in the marketplace.  The market was not man-made or invented.  No room for government in the market!  Individual as a moral and economic ideal.  Individuals should compete freely in the marketplace.  The market was not man-made or invented.  No room for government in the market!

Free Enterprise: Capitalism “Business and Government don’t mix.” In the United States this statement has been argued for over for many years. Do they Mix? What do you think? √The Market System: Laws of supply and demand regulate business- (The Invisible Hand) √According to Adam Smith’s ideas: √Business should be free of government interference. √Smith understood that: √Business owners or Entrepreneurs, as a rule, want to make as much money or profit as possible. √They don’t want to pay taxes.

Capitalism √They want to provide goods or services at the lowest possible price and creating the most profit. √According to Smith a Pure Market Economic System would achieve the maximum good for society: √Characteristics: √No government control √Freedom of choice √Private Property √Profit √Competition √The IR brings Changes in Business

Social Darwinism × British economist. × Advocate of laissez-faire. × Adapted Darwin’s ideas from the “Origin of Species” to humans. × Notion of “Survival of the Fittest.” × British economist. × Advocate of laissez-faire. × Adapted Darwin’s ideas from the “Origin of Species” to humans. × Notion of “Survival of the Fittest.” Herbert Spencer

New Business Culture: “The American Dream?” Protestant (Puritan) “Work Ethic”  Horatio Alger [100+ novels] Protestant (Puritan) “Work Ethic”  Horatio Alger [100+ novels] Is the idea of the “self-made man” a MYTH??

% of Millionaires in 1900

% of Millionaires in 1918

The Gospel of Wealth: Religion in the Era of Industrialization Russell H. Conwell $ Wealth no longer looked upon as bad. $ Viewed as a sign of God’s approval. $ Christian duty to accumulate wealth. $ Should not help the poor. $ Wealth no longer looked upon as bad. $ Viewed as a sign of God’s approval. $ Christian duty to accumulate wealth. $ Should not help the poor.

“On Wealth” Andrew Carnegie $ The Anglo-Saxon race is superior. $ “Gospel of Wealth” (1901). $ Inequality is inevitable and good. $ Wealthy should act as “trustees” for their “poorer brethren.” $ The Anglo-Saxon race is superior. $ “Gospel of Wealth” (1901). $ Inequality is inevitable and good. $ Wealthy should act as “trustees” for their “poorer brethren.”

The Reorganization of Work Frederick W. Taylor The Principles of Scientific Management (1911) Frederick W. Taylor The Principles of Scientific Management (1911)

The Reorganization of Work The Assembly Line

BUSINESS ABUSE?

New Type of Business Entities 1.Pool 1887  Interstate Commerce Act  Interstate Commerce Commission created. 2.Trust  John D. Rockefeller 1.Pool 1887  Interstate Commerce Act  Interstate Commerce Commission created. 2.Trust  John D. Rockefeller  Standard Oil Co.

Standard Oil Co.

New Type of Business Entities 2.Trust:  Horizontal Integration  John D. Rockefeller 2.Trust:  Horizontal Integration  John D. Rockefeller  Vertical Integration: o Gustavus Swift  Meat-packing o Andrew Carnegie  U. S. Steel  Vertical Integration: o Gustavus Swift  Meat-packing o Andrew Carnegie  U. S. Steel

New Type of Business Entities

U. S. Corporate Mergers

The ‘Bosses’ of the Senate

The ‘Robber Barons’ of the Past

Regulating the Trusts 1877  Munn. v. IL 1886  Wabash, St. Louis & Pacific Railroad Company v. IL 1890  Sherman Antitrust Act  in “restraint of trade”  “rule of reason” loophole 1895  US v. E. C. Knight Co  Munn. v. IL 1886  Wabash, St. Louis & Pacific Railroad Company v. IL 1890  Sherman Antitrust Act  in “restraint of trade”  “rule of reason” loophole 1895  US v. E. C. Knight Co.

Relative Share of World Manufacturing

Changes Caused by Industrial Revolution Technology: New products and inventions consumer and business Business Organizations: Corporation, Trusts Cities Grow: rural to urban migration and immigration, c Labor Protections: unions, working conditions, benefits, safety Reform Movements: the Progressives will react to the changes brought by industrialization, pollution, food and drug regulations, political reforms Government legislation aimed at controlling various aspects of industry