Rise of Industrial America Notes
I. Introduction
By 1900, America was the top industrial power, exceeding Great Britain, France, Germany.
US economy had 4% yearly growth rate
II. Causes
Abundance of natural resources essential to industry- coal, iron ore, copper, lead, timber, oil
Abundant labor supply, supplemented yearly by immigrants; this combined with advanced transportation methods made America the biggest market in the world
Railroads led to economic expansion
Development of labor saving technology
Businesses benefitting from friendly government policies such as protective tariffs and low regulations for business
Talented entrepreneurs were able to build and manage vast enterprises- men went into business rather than politics
III. The Business of the Railroads
Business + capitol + tech + markets + labor + gov. support led to development of first big business- rail roads
Nationwide network had greatest impact on American economy and encouraged mass production, mass consumption, and economic specialization.
Resources used promoted growth of other resources- coal, etc.
Helped divide the country into 4 timezones
Creation of the modern stockholder corp, development of complex structures of finance, business management, regulation of competition.
EASTERN RAIL ROAD
Former inefficiencies of antebellum US were combated by consolidation of railroads into integrated trunk lines
Cornelius Vanderbilt used millions from steam boat business to merge railroads into NY Central Railroad, 400 miles of track.
Eastern lines connected all the way to Chicago, setting the standard for future efficiency
Chicago seen as window to the west for railroad industry
WESTERN RAIL ROAD
Coincided with the development of the Last Frontier, expansion and settling
RR played a critical role by encouraging settlement of Great Planes and linking the midwest to the East, providing the first connection of markets there
Government encouraged this by granting loans and subsidies, as well as federal land grants- received more than 170 million acres of land
Expected that the rr would sell land to settlers to finance construction, and completed rr would make it easier to send troops around, etc.
Pacific Railway Act allowed gov to grant this
Promoted hasty and poor construction, led to widespread corruption in every level of government
Protests against grants mounded in the 1880s in response to a huge Credit Mobile scandal
Corruption led to the Farmers Alliance and Populist Party
TRANSCONTINENTAL RAILROAD
Thought up during the Civil War, wanted to tie California to the rest of the Union
Divided into Union Pacific to build west across great planes and Central Pacific to lay track eastward across Sacramento to the midwest
Used 1000s of war veterans, Chinese immigrants, and Irish immigrants to complete
Charles Crocker recruited 6,000 Chinese immigrants
May 10th: the tracks came together and linked the Atlantic to the Pacific
IV. Competition and Consolidation
New technologies such as railroads tend to be overbuilt, and they frequently suffered fraud and corrupt management, who made millions in water stock (inflating value before selling to the public).
Railroads competed by offering rebates to favor shippers while charging huge rates to smaller buyers like farmers- led to Farmers Alliance
Financial panic in 1893 forced 25% of all railroads into bankruptcy, where Morgan and other bankers took control of them and consolidated the rail system in order to stabilize rates and control debts
Consolidation led to more efficient railroads, but was problematic because it was controlled only by a few very, very, very wealthy. Interlocking directors: the same directors of competing companies created regional railroad monopolies, tackled by Teddy Roosevelt.
Railroads captured imagination of America and many invested in development, while customers also felt they were victims of corrupt business
"The public be Damned"- William Vanderbilt. Railroad mongers cared little for their customers.
Laws attempted to regulate this (ie Granger Law and Interstate Commerce Act) were ineffective, despite government attempts to control monopolies
Supreme Court always ruled in favor of monopolies- exemplifies the pro business attitude of Gilded Age
V. Steel and Oil Industry
Key monopolists: Vanderbilt's (railroads), Carnegie (steel), Rockefeller (oil).
Tech breakthrough that launched industry was new process for making steel- more durable than iron. Called the Bessemer Process: blasting air through molten iron
Carnegie focused steel industry in Great lakes region for it's iron and coal resources
Leadership passed through Carnegie (rags to riches story); he outdistanced competitors through vertical integration: a company controls every aspect of a product's life, through creation all the way to distribution. Paid no middle man, every step goes up.
By 1900, Carnegie was top of steel industry and produced more steel than all of Britain. Devoted himself to philanthropy- gospel of wealth
Sold his business to JP Morgan for $400 million
First US oil well in 1859, Rockefeller's Standard Oil Trust would control almost all oil refineries by eliminating competition through A. new technology and B. efficient practices. As the company grew, he extorted rebates from railroads to force companies to sell out- he controlled 90% of oil refineries. Implemented horizontal integration: all former competitors were brought under a single cooperate umbrella. He controlled both supply and profits- his fortune was 900 million dollars when he retired.
Other companies emulated his success in sugar, tobacco, etc. trusts.
Because of these industries, there was a growing anti-trust movement heightened in 1880s. Citizens feared unchecked power of trusts and the control of the urban elite- the new rich.
1890: Sherman Antitrust Act passed, but the problem was that it "had no teeth", too vague to stop trusts. Court always ruled on the Side of monopolies (ie US vs, EC Night Company).
First president to enforce this will be Teddy Roosevelt
VI. Laissez-Faire Capitalism
LF Capitalism: government should not interfere with industries; hands off.
Stems from Adam Smith's The Wealth of Nations- businesses are regulated by the "invisible hand" of the law of supply and demand. Natural competition would keep prices and qualities good. Used to justify business practices such as h. and v. integration.
However, despite saying there should be no interference, businesses did accept subsidies and protective tariffs from the gov.
Out of this came Social darwinism: natural selection of businesses. Herbert Spencer applies survival of the fittest to contemporary society and markets. The concentration of wealth is in the hands of the fittest and was a benefit to the entire human race- it was natural.
Religion started to play a role in Americans lives and they found this more convincing in justifying the wealth of the few.
Rockefeller concluded that God gave him his riches; everyone had a duty to become rich.
Carnegie: has the Gospel of Wealth, argues that the wealthy had a god given responsibly to use wealth to better society and lives of those around him. He gave 350 million dollars to libraries, universities, etc.
VII. Technology and Impacts of Industrialization
Technology: vital to all progress happening. Inventions led to larger productivity and more mass produced goods. Important things: telegraphs, typewriter, cash register, kodak camera, fountain pen, etc.
Thomas Edison: early successes allowed him to create the first research lab in NJ where inventors worked as a team. Video cameras, phonographs, first practical electrical light bulb were invented there.
George Westinghouse produced high voltage electric current.
America moves away from a schedule and lifestyle dictated by sun; now dictated by man- the "day" lasts longer.
Impacts of Industrialization: concentration of wealth in the hands of monopolizers. 10% of the population owned 90% of the wealth- lavish lifestyles were showcased.
Growing gap between rich and poor was ignored because the Horatio Alger myth- coined the "rags to riches" idea that citizens clung to and eventually recognized as the American Dream.
Expansion of the middle class, jobs being created (accountants, etc.), increased demand for services such as doctors, lawyers, etc,
Most people are now wage earners- income is dictated by hours per week, usually 10 hours per day, 6 days per week.
Immigrants, women, and children's wages were barely enough to get by at all. No set minimum wage, no move to protect the workers conditions or payments. Led to the rise of the labor movement- Knights of Labor and American Federation of Labor, especially.
Abundant labor supply, supplemented yearly by immigrants; this combined with advanced transportation methods made America the biggest market in the world
Railroads led to economic expansion
Development of labor saving technology
Businesses benefitting from friendly government policies such as protective tariffs and low regulations for business
Talented entrepreneurs were able to build and manage vast enterprises- men went into business rather than politics
III. The Business of the Railroads
Business + capitol + tech + markets + labor + gov. support led to development of first big business- rail roads
Nationwide network had greatest impact on American economy and encouraged mass production, mass consumption, and economic specialization.
Resources used promoted growth of other resources- coal, etc.
Helped divide the country into 4 timezones
Creation of the modern stockholder corp, development of complex structures of finance, business management, regulation of competition.
EASTERN RAIL ROAD
Former inefficiencies of antebellum US were combated by consolidation of railroads into integrated trunk lines
Cornelius Vanderbilt used millions from steam boat business to merge railroads into NY Central Railroad, 400 miles of track.
Eastern lines connected all the way to Chicago, setting the standard for future efficiency
Chicago seen as window to the west for railroad industry
WESTERN RAIL ROAD
Coincided with the development of the Last Frontier, expansion and settling
RR played a critical role by encouraging settlement of Great Planes and linking the midwest to the East, providing the first connection of markets there
Government encouraged this by granting loans and subsidies, as well as federal land grants- received more than 170 million acres of land
Expected that the rr would sell land to settlers to finance construction, and completed rr would make it easier to send troops around, etc.
Pacific Railway Act allowed gov to grant this
Promoted hasty and poor construction, led to widespread corruption in every level of government
Protests against grants mounded in the 1880s in response to a huge Credit Mobile scandal
Corruption led to the Farmers Alliance and Populist Party
TRANSCONTINENTAL RAILROAD
Thought up during the Civil War, wanted to tie California to the rest of the Union
Divided into Union Pacific to build west across great planes and Central Pacific to lay track eastward across Sacramento to the midwest
Used 1000s of war veterans, Chinese immigrants, and Irish immigrants to complete
Charles Crocker recruited 6,000 Chinese immigrants
May 10th: the tracks came together and linked the Atlantic to the Pacific
IV. Competition and Consolidation
New technologies such as railroads tend to be overbuilt, and they frequently suffered fraud and corrupt management, who made millions in water stock (inflating value before selling to the public).
Railroads competed by offering rebates to favor shippers while charging huge rates to smaller buyers like farmers- led to Farmers Alliance
Financial panic in 1893 forced 25% of all railroads into bankruptcy, where Morgan and other bankers took control of them and consolidated the rail system in order to stabilize rates and control debts
Consolidation led to more efficient railroads, but was problematic because it was controlled only by a few very, very, very wealthy. Interlocking directors: the same directors of competing companies created regional railroad monopolies, tackled by Teddy Roosevelt.
Railroads captured imagination of America and many invested in development, while customers also felt they were victims of corrupt business
"The public be Damned"- William Vanderbilt. Railroad mongers cared little for their customers.
Laws attempted to regulate this (ie Granger Law and Interstate Commerce Act) were ineffective, despite government attempts to control monopolies
Supreme Court always ruled in favor of monopolies- exemplifies the pro business attitude of Gilded Age
V. Steel and Oil Industry
Key monopolists: Vanderbilt's (railroads), Carnegie (steel), Rockefeller (oil).
Tech breakthrough that launched industry was new process for making steel- more durable than iron. Called the Bessemer Process: blasting air through molten iron
Carnegie focused steel industry in Great lakes region for it's iron and coal resources
Leadership passed through Carnegie (rags to riches story); he outdistanced competitors through vertical integration: a company controls every aspect of a product's life, through creation all the way to distribution. Paid no middle man, every step goes up.
By 1900, Carnegie was top of steel industry and produced more steel than all of Britain. Devoted himself to philanthropy- gospel of wealth
Sold his business to JP Morgan for $400 million
First US oil well in 1859, Rockefeller's Standard Oil Trust would control almost all oil refineries by eliminating competition through A. new technology and B. efficient practices. As the company grew, he extorted rebates from railroads to force companies to sell out- he controlled 90% of oil refineries. Implemented horizontal integration: all former competitors were brought under a single cooperate umbrella. He controlled both supply and profits- his fortune was 900 million dollars when he retired.
Other companies emulated his success in sugar, tobacco, etc. trusts.
Because of these industries, there was a growing anti-trust movement heightened in 1880s. Citizens feared unchecked power of trusts and the control of the urban elite- the new rich.
1890: Sherman Antitrust Act passed, but the problem was that it "had no teeth", too vague to stop trusts. Court always ruled on the Side of monopolies (ie US vs, EC Night Company).
First president to enforce this will be Teddy Roosevelt
VI. Laissez-Faire Capitalism
LF Capitalism: government should not interfere with industries; hands off.
Stems from Adam Smith's The Wealth of Nations- businesses are regulated by the "invisible hand" of the law of supply and demand. Natural competition would keep prices and qualities good. Used to justify business practices such as h. and v. integration.
However, despite saying there should be no interference, businesses did accept subsidies and protective tariffs from the gov.
Out of this came Social darwinism: natural selection of businesses. Herbert Spencer applies survival of the fittest to contemporary society and markets. The concentration of wealth is in the hands of the fittest and was a benefit to the entire human race- it was natural.
Religion started to play a role in Americans lives and they found this more convincing in justifying the wealth of the few.
Rockefeller concluded that God gave him his riches; everyone had a duty to become rich.
Carnegie: has the Gospel of Wealth, argues that the wealthy had a god given responsibly to use wealth to better society and lives of those around him. He gave 350 million dollars to libraries, universities, etc.
VII. Technology and Impacts of Industrialization
Technology: vital to all progress happening. Inventions led to larger productivity and more mass produced goods. Important things: telegraphs, typewriter, cash register, kodak camera, fountain pen, etc.
Thomas Edison: early successes allowed him to create the first research lab in NJ where inventors worked as a team. Video cameras, phonographs, first practical electrical light bulb were invented there.
George Westinghouse produced high voltage electric current.
America moves away from a schedule and lifestyle dictated by sun; now dictated by man- the "day" lasts longer.
Impacts of Industrialization: concentration of wealth in the hands of monopolizers. 10% of the population owned 90% of the wealth- lavish lifestyles were showcased.
Growing gap between rich and poor was ignored because the Horatio Alger myth- coined the "rags to riches" idea that citizens clung to and eventually recognized as the American Dream.
Expansion of the middle class, jobs being created (accountants, etc.), increased demand for services such as doctors, lawyers, etc,
Most people are now wage earners- income is dictated by hours per week, usually 10 hours per day, 6 days per week.
Immigrants, women, and children's wages were barely enough to get by at all. No set minimum wage, no move to protect the workers conditions or payments. Led to the rise of the labor movement- Knights of Labor and American Federation of Labor, especially.
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