1. The Industrialization of America

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

3. 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

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

5. 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

6. 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

7. 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”

8. 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

9. The Interstate Commerce Act