The Rise of Industrialization 1865-1900

Two major changes occur in U.S. in last half of 1800’s

A.  Population shifting from rural to urban

1870’s population: 40 million (75% live in rural areas

1900 population: 76 million (60% live in rural areas

1920 population: 100 million (40 % live in rural areas

Why is the population shifting? •  The closing of the frontier (no more free land

opportunities in the west)

•  New frontier becomes the eastern cities

(opportunities to work in factories, mines, plants, etc.)

•  Immigrants pouring into America (big demand for unskilled labor)

B. Shift from Agriculture to Industry

  1870’s: U.S. is primarily an Agrarian society

  1900: U.S. has emerged as the leading industrial power in the WORLD.

  Even surpasses three largest rivals: Great Britain, France, and Germany

What attributed to the Industrial Boom?

  A wealth of natural resources: coal, iron ore, copper, lead, timber, oil, zinc

  An abundant labor force (between 1865 and 1914--25million Immigrants came to America)

  Explosion of inventions. New technology increased productivity

(440,000 new patents were granted by fed. Government from 1860-1890)

Significant Inventions   Edwin Drake: 1859 successfully drilled for

Oil

 Henry Bessemer: Bessemer Process used to make steel

  Thomas Edison: 1,093 patents: incandescent light bulb, distribution of electricity, phonograph, etc.

 Menlo Park, New Jersey: research lab

Thomas Edison

Bessemer Furnace

Significant Inventions   Christopher Sholes: 1867 typewriter

  Alexander G. Bell: 1876 telephone

  Cyrus Field: 1866 transatlantic cable

(could send messages across the ocean)

  George Westinghouse: 1869 airbrakes

Ten Patents that changed the world

  What is a patent?

  Gives an inventor a monopoly (usually 17 years)

  Then must disclose the workings of their inventions for the well-being of society

  What do you think they are??

Top 10 Patents   Cotton gin (1794)

  Sewing machine (1846)

  Barbed wire (1874)

  Telephone (1876)

  Light bulb (1880)

  Machine gun (1890)

  Automobile (1895)

Top 10 Patents   Airplane (1906)

  Xerox Copier (1942)

  Transistor (1950)

  Should the internet be in the top 10?

Other factors: Industrial Boom   Improvements in transportation and

communication:

a. Railroads were first million dollar business in America

b. 1865: 35,000 miles of RR track

1900: 200,000 miles of RR track

c. Efficiency increased (standard gauge

and standard time zones--1883)

First Transcontinental Railroad 1865-1869

Pacific Railroad Act   1862: Incentive program by gov’t. to build

transcontinental railroad

  20 million acres of land given to 2 railroad companies to build the TC RR

  Issued 2 contracts: 1.  Union Pacific RR: From Omaha to Ogden (1,086

miles). Irish and German immigrants

2.  Central Pacific RR: From Sacramento to Ogden (689 miles). Rough mountain ranges. Chinese immigrants

Other factors…..   Communication improvements like the telegraph,

telephone, type writer

  Improvements in transportation and communication created a national market for goods

  Led to improvements like mass production of goods

Other factors…..   Big businesses benefited greatly from friendly

government policies that did not regulate (laissez faire policies) or heavily tax corporate profits.

(No federal income taxes until 1916: the Sixteenth Amendment to the Constitution)

(Laissez faire—French term “allow to do”)

Railroad consolidation   Railroad industry was overbuild by 1880’s. Too

much competition (350 different companies), mismanagement and outright fraud!

  Can you think of an example in your chapter that points to a huge railroad scandal?

Credit Mobilier Scandal   Stockholders for the Union Pacific railroad formed

a “dummy” construction company and skimmed off RR money for themselves. (44 million)

  Headquarters in France. Existed only on paper. Didn’t even own a bulldozer

  Paid off congressmen to look the other way by donating shares of stock .

Railroad monopoly

  Railroad began to consolidate. Bigger companies bought out smaller companies.

  By 1900, seven giant railroad systems controlled two-thirds of the nation’s railroads

  1901: Northern Securities Company formed a monopoly (4 men owned all but one of the T.C. Railroads)

J.P. Morgan

William Vanderbilt

Railroad corruption   High prices (formed pools: competing companies

agreed to fix rates and share traffic)

  Short hauls vs. Long hauls

  Charged different rates for different customers (rebates)

  Misuse of land grants from federal government

No government regulation   The railroad had no rules or laws to regulate them.

Why not??

  Laissez faire economy: leave big business alone.

1867: The Grange organizes

  Founded by Oliver Kelley.

  4 million members

  Social outlet for farmers.

  Educational forum for new inventions and methods of farming

  1870’s: took on the Railroads. Became politically active (Illinois)

Munn vs. Illinois   After Illinois passed laws to regulate the railroad,

the railroad fought back

  Supreme court heard the arguments over government regulations of the railroad.

  Ruling in 1877: states had the right to regulate the railroads to serve the public interests

Interstate Commerce Act   1887: first federal act passed to regulate the

railroads.

  Established a five man commission to investigate abuses.

  Not much success until early 1900’s

Who was George Pullman?   Built a factory for manufacturing sleeping cars

(luxury train cars)

  Built a “company town” outside of Chicago

  Workers lived, worked, worshipped, shopped, sent children to school, all within the company town.

Pullman Sleeper

Andrew Carnegie   Self made billionaire

  Scottish immigrant: came to America in 1848 at age 12

  Cotton mill. Earned $1.25 week

  Messenger for telegraph service

  Pennsylvania railroad (private secretary)

  Steel business 1873. First Billion dollar company in America

Andrew Carnegie

Andrew Carnegie   Carnegie Steel employed over 20,000 workers

  By 1899 his company produced more steel than all of Great Britain

  Paid workers about $1.00 day for 12 hour day, seven days a week. (84 hour workweek) Today’s work week is 40 hours)

  One day off a year--July 4th

Business strategies   Incorporated new technology (Bessemer Process)

  Detailed accounting system tracking every dollar in operational costs

  Encouraged competition to increase production and cut costs (remember the “steel broom”)

Business Strategies   Attempted to control the entire steel industry by

buying out all his suppliers (Vertical Integration)

  Attempted to buy out competing steel producers (Horizontal Consolidation)

  1901: his company produced 80% of the nation’s steel. (more than all of Great Britain)

John D. Rockefeller   1870 Standard Oil Company processed 2-3% of the

country’s crude oil

  1881 Standard Oil Company processed 90% of the country’s crude oil

  Paid his workers very low wages and drove out his competition by selling oil at lower prices than cost until he had a monopoly on oil

Laissez-Faire Capitalism   Economist Adam Smith argued that the

government should not regulate businesses. The government should keep their “hands off” and let the law of supply and demand guide business practices.

  The growth of monopolies in the 1880’s led to less competition and higher prices

Government Regulation   The Sherman Anti-Trust Act was passed in 1890 to

break up monopolies and trusts.

  Very difficult to enforce. Courts sided with big business.

  Even used the act against strikes saying that they were restraining the flow of trade.

  Role of government was slowly changing!!

Social Darwinism   English Philosopher Herbert Spencer

applied Charles Darwin’s ideas of natural selection and survival of the fittest to the business world.

  The Protestant work ethic was the belief that hard work and material success are signs of God’s favor. Therefore, the poor must be lazy or inferior people who deserve their lot in life

“Gospel of Wealth”   Capitalists like Carnegie and Rockefeller believed

people should be allowed to make as much money as they could and then pass it along to worthy causes.

  Philanthropy (donations to worthy causes) became another justification for wealth.

  Altruism: selfless concern for well-being of others (what was their motive? Altruism or Legacy?)

Philanthropists

  Carnegie: $325 million. Carnegie Hall, Carnegie foundation, 3,000 libraries across the nation, Carnegie Mellon University

  Rockefeller: $500 million. $80 million to University of Chicago

  Bill and Melinda Gates Foundation: $23 billion

  Mark Zuckerberg: $100 million