Industrialization and the “Gilded Age”

Emergence of the Modern Industrial Economy in the U.S.

Causes of Economic Growth and Industrialization:

1)Technological Innovations2)The Growth of the Railroads3)Development of a National Market4)Population Growth5)New Types of Business Organization

Emergence of Modern Industrial Economy in U.S.

Technological Progress: Bessemer Process in

steel production (made steel production more efficient)

Electricity gave birth to new industries

Light Bulb (Thomas Edison-1879)

Communication through telegraph wires

Oil industry replaced whale oil

The Transcontinental Railroad

Expansion of Railroads: Development of the

Transcontinental Railroad – first completed in 1869- made train travel to California possible.

Development of a national market from coast to coast

Created a demand for steel

A National Market

In the late 19th century, railroads, canals, telegraphs, and telephones linked the different parts of the United States for the first time.

New sales methods developed: department stores, mail order (Sears and Roebuck), chain stores

Advertisements for goods in newspapers and magazines

Between 1850 and 1900, the population more than tripled! 1850 – 23 million Americans1900 – 76 million Americans

Causes for Population Growth:

High birth rate

Large number of European immigrants

New Business Organization: The Corporation

A corporation issues shares in the company known as “stocks”. Owning more stocks in a company represents more ownership in the corporation.

A corporation is a company chartered by a state. Corporation raised huge sums of money through the sale of stocks which enabled them to build railroad lines, mines, steel mills, and large mass-production factories that made industrialization possible.

Did you know???Owners of stock share in the corporations profits in the form of dividends.

Entrepreneurship and Philanthropy

An entrepreneur is a person who starts a business in the hope of making a profit.

Benefits:Lowered prices of

goodsImproved the quality of

goods

Concerns:Made huge profits for

themselvesOften exploited workersDestroyed competition

Robber Barons or Captains of Industry?

“Captains of Industry” Favorable term used to

describe the businessmen who helped build the modern industrial economy and devoted money to philanthropy.

“Robber Barons” Critics term for these

businessmen who sometimes used ruthless tactics to destroy competition and to keep workers wages low.

Andrew Carnegie

Founded Carnegie Steel in Pittsburgh

Paid workers low wages and forced them to work 12 hour shifts

Crushed workers attempts to form labor unions

Gave over $350 million to build libraries and universities

John D. Rockefeller

Successful entrepreneur who made his fortune refining oil.

Controlled about 90% of the oil refining in the United States by 1879.

He obtained secret, beneficial rates from railroad companies

Gave millions to education, science.

The Pros and Cons of Big Business

Pros:Large business are

more efficient, and lead to lower prices.

A large number of workers can be hired.

Goods can be produced in large quantitites

They can support new inventions and new research.

Cons:They have an unfair

competitive advantage against smaller businesses.

Workers are sometimes treated unfairly.

Pollution Unfair influence over

government policies affecting them

Problems Faced by Workers

Difficult conditions in Industrial America

Most workers were unskilled

Boring, repetitive tasks

Long hours, low wages

Poor, sometimes dangerous working conditions

Child laborLack of job security

Rise of Labor Unions

Knights of Labor: Terrence Powderly-tried to unite all American workers, both skilled and unskilled-not successful

American Federation of Labor: begun by Samuel Gompers; a national federation of different craft unions of skilled workers-fought for higher pay, 8 hour work day and better working conditions

By 1910, less than 5% of American workers were union members

Workers tried to bargain collectively by forming unions, which sometimes went on strike-temporarily refusing to work

Government Attitude towards Unions

Political Influence of Big Business:

Business leaders contributed to political campaigns and saw worker demands as greedy.

Protector of Economy: Over 20,000 strikes between 1880 and 1900; government used troops to put down strikes and restore order

Public Opinion: Most people were in favor of

laissez-faire policies. Many people associated unions with violence.

Video:

Haymarket Affair of 1886

Contribution of Government

Protection of property and enforcement of contracts

Passing of protective tariffs (taxes on foreign goods to protect American business/farmers)

Regulate currency and interstate commerce

System of patents fostered new inventions

The Interstate Commerce Act (1887)

Problem: Railroads often

charged farmers more to haul crops short distances than they charge large companies for national routes

Solution:This federal law

prohibited unfair practices by railroads, such as charging higher rates for shorter routes

Created the Interstate Commerce Commission to enforce the act.

The 1st time Congress stepped in to regulate business in America.

Sherman Anti-Trust Act (1890)

Problem:Monopolies were

using unfair practices that prevented fair competition in business.

Solution:Congress passed this

law signaling a change in the attitude of Congress towards the abuses of big business.

The Key to America’s Industrialization: Free Enterprise

Economic questions:What should be

produced?How should it be

produced?Who gets what is

produced?

Individuals in a free enterprise system decide what to make and sell, and are free to buy and use what they can afford.

Individual business owners hope to make a profit.

Consumers have choices of what to buy.

Free Enterprise System

Individuals are free to produce and sell whatever they wish

People go into business to make a profit

Prices are set by supply and demand

Inefficient companies that are unable to compete are driven out of business