Industry’s Golden Age The Second Industrial Revolution & Rise of Big Business

Industry’s Golden Age

The Second Industrial Revolution

& Rise of Big Business

Factors Encouraging Industrial Growth

Effects of War Constitution & Governmental Policies Growing Population (Immigration) Natural Resources New Sources of Power Introduction of Machinery American Inventors & Inventions Improved Means of Transportation &

Communication

Constitution Coining money- made possible a stable

currency for business transactions Regulating interstate commerce – made

possible nationwide laws to regulate industry & transportation

Levying a tariff on imports – made possible protections against foreign competition

System of patents – encouraged inventors Ensures nationwide “common market”

without man-made barriers to movement of goods

Effects of War Government needed war materials Farmers & city workers had more

money to spend – consumer goods were in greater demand

Not enough workers for industry – look to laborsaving machines

Effects of Civil War Spurred industrial growth Secession of South left the federal

government in hands of Republican Party – favored business

Congress provided: Land & loans for transcontinental

railroads Established national banking system Enacted high protective tariffs

Growing Population American population in the 19th

century almost doubled every 25 years 5 million in 1800 to 76 million in 1900

Steady increase meant sufficient workers for industry & expanding markets for goods

Government Policies Government spurred industrial

growth: Granting land & cash subsidies to

railroad builders Levying high tariffs to protect

manufacturers Maintaining policy of laissez-faire (leave

business alone & let economy regulate itself) until end of the 19th century

Natural Resources Abundance of raw materials

Coal Iron Lumber

Fertile soil for raising foodstuffs, cotton, & tobacco

Swift-running streams for waterpower

New Sources of Power Electricity – communication,

lighting, & driving motors Petroleum – 1859 – Edwin Drake

drilled oil in PA First used for lubrication & lighting Late 19th century – gasoline & diesel

oil used in internal combustion engines

Contributions of Steel

Spurred industrialization in the late 1800s Used for heavy

machinery Rails for trains Bridges to span

rivers Tall buildings

Bessemer Process – 1850s New method of turning

iron into steel Produce more steel in one

day than older techniques could turn out in a week

Annual steel production grew from 15 thousand tons to 28 million tons by 1910

Prices dropped as steel production increased

Cheaper Steel = Railroads Cheaper steel encouraged

railroads to lay thousands of miles of new tracks across the Great Plains to the Pacific Coast

Steel safer and more economical since it could carry a heavier load

Railroad companies are major employer in country

Spurred growth in other industries

Cornelius Vanderbilt Popularized the steel rail

Significance of Railroad Building

Spurred industrialization of the post-Civil War years

Linked entire continent via railroad Created enormous domestic market for U.S.

raw materials & manufactured goods Paved way for incredible growth of Great West

Mining, agriculture, & ranching Great citywide movement Facilitated trade with Orient Seen by Americans as monumental

achievement

Significance of Railroads

Facilitated large influx of immigrants Spurred investment from abroad Created concept of “time zones” Maker of new railroad aristocracy Native Americans displaced &

herded into ever-shrinking reservations

Contributions of Communications

Samuel F.B. Morse’s telegraph began to be used by businesses to send business orders to distant locations 1866 Western

Union had over 2,000 offices

Contributions of Communications

Alexander Graham Bell “talking telephone” had greater impact By end of 1800s, more

than a million telephones had been installed in U.S. offices & homes

Telephone becomes indispensable

Contributions of energy Innovations require

new forms of energy: oil and electricity

Benjamin Sillman releases a report noting that oil could be refined to kerosene – when burned it produces light

Inexpensive fuel source

Electricity’s Potential Thomas Alva Edison &

team of researchers worked to find uses for electricity

Produced many innovations – ranging from incandescent light bulb to phonograph to a central power plant

Lewis Latimer – worked for Edison – contributed to light bulb design

ELECTRICITY Edison’s To Do

List

Edison’s Inventions

Edison’s Inventions

Edison's Patents

Results of Industrial Growth

New industrial products and services Machine – and factory – made products Investors financed new industries to satisfy demand Railroad transportation Telegraph & telephone communication Steel Oil

Higher standard of living – average American enjoyed an increasing array of material comforts

Results of Industrial Growth

Great fortunes Business leaders accumulated great wealth Exercised tremendous economic power Exerted considerable influence upon gov’t Finance philanthropies

Growth of cities Increased world trade & imperialism Serious economic problems – preventing

monopolies, protecting consumers, improving standards for workers, banking system, levying fair taxes, leveling out the business cycle

FREE ENTERPRISE (business that is free from government involvement)

+

NEW TECHNOLOGICAL DEVELOPMENTS

+

NEW FORMS OF BUSINESS ORGANIZATION

=

INDUSTRIES’ PRODUCTIVITY & PROFITS

The Growth of Big Business

Stronger Organization

Pool – agreement, usually secret, among competing companies to fix prices & output or to divide sales territory Declared illegal by Interstate Commerce Act

Trust – group of companies turn their control over to a Board of Directors Board runs the companies as a single enterprise A trust can turn into a monopoly when a trust

gains total control over an industry Holding Company – buys sufficient voting

stock in different companies in order to control them

Key Figures New technologies, industries, and changes in

society lead to the emergence of key figures in the Second Industrial Revolution Railroads

Cornelius Vanderbilt James J. Hill

Oil John D. Rockefeller

Steel Andrew Carnegie J. P. Morgon

John D. Rockefeller 1870 formed Standard Oil

in Cleveland OH By 1877 – controlled 95% of

oil refineries in U.S. Nation’s largest oil refiner Created a monopoly –

trust that gains exclusive control of an industry

Worth $900 million in in 1897($189.6 billion today) Bill Gates: $60 billion

Horizontal Integration Owning all the businesses in a particular field

Standard Oil Controlled 90% of U.S.

Refining Business

Barrels

PipelinesTank Cars

Storage

Facilities

Andrew Carnegie Immigrant from Scotland

to U.S. in 1848 1873 – concentrated on

steel and built an empire that controlled every aspect of production process Pioneered use of Bessemer

process for making steel

Vertical Integration

To lower cost of production, purchase iron ore mines, coal mines, railroads & shipping, and steel mills

Improve efficiency by making supplies more reliable, controlling the quality of the product at all stages of production, and eliminate middlemen’s fees

U.S. Steel By turn of century, U.S. Steel produced

more steel than all of Great Britain ¼ of all steel in the United States

Estimated worth in 1901 without income taxes: $250 million (today: $100.5 billion)                                                                                  

J. Pierpoint Morgan Owned a Wall Street

banking house which financed the reorganization of railroads, insurance companies, & banks

In 1901, launched the enlarged U.S. Steel Corp. America’s first billion

dollar corporation

“Nouveau Rich” Arrogant class of “new rich” after

Civil War Older American aristocracy losing

power and prestige in the face of “new rich” Economic liberty and community

involvement being overshadowed by monopoly and political machines

Antitrust crusaders

Philosophy Social Darwinism

Charles Darwin – Origin of Species – “survival of the fittest”

Used theory as foundation of promoting the virtues of free-market capitalism

Others argued divine providence was responsible for winners and losers in society God granted wealth as He had given grace for

material and spiritual salvation of the select few Those who stayed poor must be lazy and lacking

in enterprise

Philosophy Carnegie’s Gospel of Wealth

Justified uneven distribution of wealth by industrialists

Stated money should be given away for public good but not to individuals in want

Advantages of Big Business Mass Production

Offered the public new, improved, & less expensive products

Wide Distribution Increased profits by using large-scale

advertising & by selling their products to entire nation

Efficient management Could afford to hire most capable

executives, maintain costly research laboratories, & raise capital for expansion

Abuses by Big Business Elimination of Competition – destruction

of small businessman Power Over the Consumer – force

consumer to pay high prices & accept inferior quality

Exploitation of Workers – pay low wages & keep workers from forming unions

Influence Over the Gov’t – bribing politicians & buying votes

Government Regulation of Trusts Sherman Anti-Trust Act of 1890

Created in response to public demand for curbing excesses of trusts

Provision Forbade combinations in restraint of

trade Provided penalties for corporations &

individuals that violated the act

Weaknesses of Sherman Antitrust Vague language of the law Ability of business leaders to use

forms of combination other than the trust

Lack of sufficient funds, personnel, & executive determination for enforcement

Interpretations by Supreme Court favoring big business

Impact of 2nd Industrial Revolution

Standard of living rose sharply

Urban centers mushroomed as factories increasingly demanded more labor

American agriculture eclipsed by industrialism

Foreign trade developed as high U.S. productivity threatened to flood American market

Free-enterprise eclipsed by monopoly

Workplace became regimented & impersonal

Women achieved social & economic independence

Social stratification more pronounced