1. Industrial Development & The
Growth of Big Business

2. 1.Industrial World Leader
-by 1880, U.S. is world’s leading producer of goods
-Reasons why???
unlimited labor force
Poor whites, freedmen, immigrants
abundant coal supply
iron mining
Iron and oil abundant
discovery of oil - Edwin Drake (“black gold”)
railroad development
Steel production more efficient
More steel = more railroads
The United States, nearing the turn of the century in the 1880s and 1890s, teemed with immigration from many European nations, as well as many Chinese immigrants. These immigrants provided a steady work force, as well as a cheap work force, as employers could get away with paying them less per hour.

3. Edwin Drake’s discovery of oil led many to drill for the “black gold
Edwin Drake’s discovery of oil led many to drill for the “black gold.” At first, the unrefined petroleum brought in money for its producers and refiners. Entrepreneurs began petroleum-refining industries to transform the oil into kerosene for lamps, and they got rid of the by-products, like gasoline. It was not until the production of the car and other mechanized items that oil refining became big business.

4. 1. Industrial World Leader
-laissez-faire government policies
Government does not get involved in business
-unlimited immigration supplied labor
Many workers, low pay
-high tariffs protected American business
Buy American products
-public financing of railroads

5. Growth of towns, new markets, and new opportunities
2.Railroads Lead The Way
-”iron horse”
Growth of towns, new markets, and new opportunities
-Leading consumer of goods
Other industries grow
-better transportation leads to growth
People and businesses expand across the nation
-transcontinental, 1869
-standardization of time
Time zones
Each community still operated on its own time, with noon when the sun was directly overhead. Travelers riding from Maine to California might reset their watches 20 times. On November 18, 1883, railroad crews and towns across the country synchronized their watches. In 1884, an international conference set worldwide time zones that incorporated railroad time. The U.S. Congress, however, didn’t adopt railroad time as the standard until 1918.

6. -Development of Company Towns Owned and run by companies
2.Railroads Lead The Way
-growth of urban areas
-Development of Company Towns
Owned and run by companies
Could always watch employees
Pullman, Illinois makes RR cars
Lived in Pullman homes and followed strict rules
-railroad scandals
Credit Mobilier
Grant’s Presidency, lay track for too much and pocket profit
gov’t land grants
Selling land for profit
The nearby town that Pullman built for his employees provided for almost all of workers’ basic needs. Pullman residents lived in clean, well-constructed brick houses and apartment buildings with at least one window in every room—a luxury for city dwellers. In addition, the town offered services and facilities for the residents’ convenience. However, the town remained firmly under Pullman control. Residents were not allowed to loiter on their front steps or to drink alcohol. Pullman hoped that his tightly controlled environment would ensure a stable work force.

7. 3. Entrepreneurs and Innovations
Late 1800’s saw an explosion of innovation and inventions
-telephone (Alexander Graham Bell)
Really helped businesses
-light bulb (Thomas Edison)
Work longer hours
-electric power-
Nikola Tesla—AC Power
Factories can start anywhere
-Bessemer Process
Steel production cheaper
More railroads
-typewriter
Women in the workplace
Alexander Graham Bell making the first “phone call.” The telephone and electric power revolutionized how businesses operated, and they created an economic boom.

8. Iron is a dense metal, but it is soft and tends to break and rust
Iron is a dense metal, but it is soft and tends to break and rust. It also usually contains other elements, such as carbon. Removing the carbon from iron produces a lighter, more flexible, and rust-resistant metal—steel. The raw materials needed to make steel were readily available; all that was needed was a cheap and efficient manufacturing process. The Bessemer Process increased iron refining into steel by blasting compressed air through molten iron to burn out excess carbon and impurities (which make iron rust). This improved (and cheaper) method of steel production led to a steel boom. Major industries, such as railroads, prospered from this, as well as architectural projects.

9. 3. Entrepreneurs and Innovations
-photography
-phonograph (record player)
-motion pictures
Silent films
-radio (Nikola Tesla)
Not widely used yet
-retail stores (Sears & Roebuck)
Mail-order catalogs
Buy products not make them
-canned foods
Keeps food better longer
People do not have to farm

10. 3.Entrepreneurs and Innovations
-John D. Rockefeller
(Oil)
-Andrew Carnegie
(Steel)
-J.P. Morgan
(Investment Banker)
-Cornelius Vanderbilt
(Railroads)
-Dupont Family
(Gunpowder)
-James B. Duke
(Tobacco)
-George Westinghouse
(Electricity)
Andrew Carnegie
John D. Rockefeller
Cornelius Vanderbilt
J.P. Morgan

11. Born in Scotland to penniless parents, Andrew Carnegie came to this country in 1848, at age 12. Six years later, he worked his way up to become private secretary to the local superintendent of the Pennsylvania Railroad. One morning, Carnegie single-handedly relayed messages that unsnarled a tangle of freight and passenger trains. His boss rewarded Carnegie by giving him a chance to buy stock. Carnegie’s mother mortgaged the family home to make the purchase possible. Soon Carnegie received his first dividend.
Carnegie was one of the first industrial moguls to make his own fortune. His rise from rags to riches, along with his passion for supporting charities, made him a model of the American success story.

12. -corporations develop
4.Big Business
-corporations develop
Investors purchase stock in hopes of receiving dividends
-limited liability leads to public investment
Risk only the amount they personally invest
-mass market selling
People see dividend payoffs and invest more
More people investing
Corporations begin with an idea put forward by an entrepreneur. That person then finds people to invest their money into their company by purchasing stock in that company. The company then uses that money to get started and continue operation. In return, the investor gets paid dividends (a percentage of the profits based on what they paid in) from the company they invested in.

13. Electricity and innovations -economy of scale
4.Big Business
Advantages
-greater efficiency
Electricity and innovations
-economy of scale
The more you produce, the easier and cheaper it is
-manager system
Multiple companies with qualified employees to oversee
Andrew Carnegie perfects production and company organization to make major profits in his steel company.

14. Advantages (continued…) -productivity studies Taylor
4.Big Business
Advantages (continued…)
-productivity studies
Taylor
To increase efficiency
Studied each employee to limit excess movement
To increase productivity in factories, many mangers used Taylor’s productivity studies, which monitored every motion of an employee so that little to no production time was wasted.

15. -unfair competition practices
4.Big Business
Disadvantages
-unfair competition practices
Corporations produce items cheaply, charge less
Difficult for small businesses to compete
-corruption and bribery
Government officials
-destroyed labor union movements
No unemployment or welfare
Many Americans began to distrust the big businessmen and the trusts they set up, claiming that they limited competition and held control over government officials and Congressmen. How is this represented in the cartoon presented above?

16. -mixed public feelings
5.Public Reactions
-mixed public feelings
Some unhappy with rich getting richer and poor getting poorer
-Social Darwinism
-based on Darwin’s theory of evolution
-survival of the fittest
-also applies to the business world (supports laissez-faire)
-the best businesses survive
-justified their wealth
-Gospel of Wealth (Carnegie)
Donate money to society
And while the law of competition may be sometimes hard for the individual, it is best for the race, because it ensures the survival of the fittest in every department.
~Andrew Carnegie

17. “There is no class so pitiably wretched as that which possesses money and nothing else.”
“Surplus wealth is a sacred trust which its possessor is bound to administer in his lifetime for the good of the community.”
~ Andrew Carnegie
Some big businessmen, like Andrew Carnegie, believed in the “Gospel of Wealth,” in which they donated their money back to society. Carnegie was the most generous of these, donating 90% of his profits back to society by building centers for the arts across the country, like Carnegie Hall, pictured above in NYC.

18. 5.Public Reactions
-rags to riches
Poor to very rich
“American Dream”
Wealth and success in America
Horatio Alger dime novels
Famous rags-to-riches stories

19. 6.Types of Big Businesses
-monopoly
Company controls all production and sales (high prices)
-trust (Rockefeller)
Corporations unite to reduce competition
-merger
Joining together two companies
-holding company (Morgan)
A company that buys out the stock of other companies
A merger usually occurred when one corporation bought out the stock of another. A firm that bought out all its competitors could achieve a monopoly, or complete control over its industry’s production, wages, and prices.
One way to create a monopoly was to set up a holding company, a corporation that did nothing but buy out the stock of other companies. Headed by investment banker J.P. Morgan, he owned one of the world’s largest businesses.

20. 6.Types of Big Businesses
-horizontal integration
Buy out similar competing producers to control industry
-vertical integration
Earn more money by buying out your suppliers
Own all phases of production from start to finish
Horizontal and Vertical Integration allowed big businessmen to increase their profits even more by limiting the amount of competition available.

21. 7.Robber Barons -extreme profits made by business owners
Bought/forced out competition; angers Americans
-Philanthropy???
Donate money to society
-big business practices exposed
Ida Tarbell – Standard Oil
Taking advantage of workers
-public calls for regulation
“The man who dies leaving behind him millions of available wealth, which was his to administer during life, will pass away “unwept, unhonored, and unsung’…Of such as these the public verdict will then be: ’The man who dies thus rich dies disgraced.”
~Andrew Carnegie, 1889
Some saw the big businessmen as Robber Barons, who stole from society and took advantage of workers at their own benefit. Others, however, saw them as philanthropic “Captains of Industry.” What do you think?

23. “The only question with wealth is, what do you do with it.”
Although Rockefeller kept most of his assets, he still gave away over $500 million, establishing the Rockefeller Foundation, providing funds to found the University of Chicago (seen below), and creating a medical institute that helped find a cure for yellow fever.
“The only question with wealth is, what do you do with it.”
“Next to doing the right thing, the most important thing is to let people know you are doing the right thing.”
~John D. Rockefeller

24. “What a funny little government!”
7.Robber Barons
The Standard Oil Company took a different approach to mergers: they joined with competing companies in trust agreements. Trusts turned their stock over to a group of trustees—people who ran the separate companies as one large corporation. In return, the companies gained large dividends on profits. Trusts were not legal because they limited competition and free trade.
-Sherman Anti-Trust Act (1890)
Illegal to form a trust that interferes with free trade
-weak law but set a precedent for future regulation
Never really broke up trusts
“What a funny little government!”
“Competition is a sin.”
~John D. Rockefeller

25. Captains of Industry or Robber Barons?
“The man who dies leaving behind him millions of available wealth, which was his to administer during life, will pass away “unwept, unhonored, and unsung’…of such as these the public verdict will then be: ‘the man who dies thus rich dies disgraced.”
Andrew Carnegie
“Charity is injurious unless it helps the recipient to become independent of it.”
John D. Rockefeller
“Next to doing the right thing, the most important thing is to let people know you are doing the right thing.” John D. Rockefeller
“There is no class so pitiably wretched as that which possesses money and nothing else.”