AP Ch. 17Industrial Supremacy

Big Question: Was the economic growth of the U.S. between 1860-1900 due to laissez faire government policy or rather sustained

and direct governmental intervention?

Industrial Supremacy

• America had been moving toward an industrial economy for decades. This remarkable growth did much to increase the wealth and improve the quality of life for many Americans. But not for everyone-the industrial moguls and a growing middle class were enjoying a prosperity without precedent while the workers' (immigrants), farmers and others were experiencing an often painful transition.

The Rise of Industry

• After the Civil War there were 30 million people living in the US –1.3 million worked in Industry.

• Only 40 years later, by 1900, US was the largest Industrial country in the world.

How did the US become the largest Industrial country in the World?

Many factors contributed to the Industrial Revolution

The 5 factors that Contributed to Industrialization

Cheap Labor Plenty of Raw Materials-Natural Resources

TransportationRailroads

GovernmentPolicies

New Technologies &Entrepreneurs

The Inventions

• A flood of important inventions helped increase the nation’s productive capacity and improved the network of transportations and communications

New Technology

• Patents up to 1860- 36,000• Between 1860-1890—440,000

Alexander Graham Bell

• Invented the telephone

• Christopher Sholes-typewriter• James Ritty-cash register• William Burroughs-calculating or adding

machines

Thomas Alva Edison

• Perhaps the most famous inventor of the late 1800’s

• Phonograph• Perfected the light bulb-the incandescent

lamp• Later the battery, the Dictaphone, the

mimeograph and the motion picture

• Charles Brush-electrical wiring 1870’s• Henry Bessemer & William Kelly—Bessemer

Process-blowing air through molten iron to burn out the impurities

• Abram C. Hewitt-open hearth process—made steel available in large quantities

New Industries

• Steel Industry-Pittsburgh, Pennsylvania center of the steel world.

• Andrew Carnegie

Carnegie

Andrew Carnegie and Steel

• He became a multi-millionarie by a practice known as Vertical Integration—a vertically integrated company owns all of the different businesses on which it depends for its operation.

• For example-he bought coal mines, limestone quarries and iron ore fields.

Oil Industry

• First thought to be useful for lubrication of machines, then discovered it could be used to burn in lamps.

• First oil well near Titusville, Penn.• In 1901 oil was discovered in Texas—

Spindletop-Beaumont Texas

Rockefeller

John D. Rockefeller--Oil• Rockefeller made his millions by a practice

called Horizontal Integration-buying up the same type of business into one.

• He gained control of about 90% of all oil companies in the US.

• When a single company achieves control of an entire market, it becomes a monopoly-to have total control of an industry or company

• What potential problems exist if one large business buys all its competitors?

Standard Oil monopoly

• Radio (Marconi), Airplanes (Wright Brothers), and Automobiles (Henry Ford) all were developed around the turn of the century. The automobile began to reshape the American landscape.

What was the Government Doing?• Nothing!!!• The Government practiced Laissez-Faire

economies• Kept taxes low and imposed no regulations

Science of Production-How to increase Production??

• Frederick Winslow Taylor— “Taylorisms”--increase production by subdividing tasks, human beings could be trained to do one thing and be interchangeable.

• Many companies began to implement his theory—most notably Henry Ford in 1914 that coupled with the assembly line method of production.

Production of Cars

• From 12 ½ hours to 1 ½ hours• Increased production meant lower prices• The Model T 1914-$950 to $290 in 1929

The Railroad• Main method of transportation• By linking the nation, railroads helped increase

the size of markets for many products-creating a national economic market-and sources of raw materials

• The Nations biggest business-Railroads itself stimulated the economy by spending extraordinary amounts of money on steel, coal, timber and other necessities.

Railroad

• Cornelius Vanderbilt

James J. Hill

The Corporation

• When entrepreneurs realizes that no single person or group of limited partners, no matter how wealthy, could financed their great ventures, the modern corporation emerged.

• The purchase of stocks in a company and “limited liability” made investments attractive.

• Trusts• Holding Companies

J. P. Morgan

??????????????

• As a result of all this corporate consolidation, 1% of the corporations in America were able to control more than 33% of the manufacturing—enormous power in the hands of a very few men.

Was this consolidation a good thing?

• Stimulate substantial economic growth• Cutting costs• Creating an industrial infrastructure• Stimulating new markets• Creating new jobs for the unskilled• Creating mass production

Capitalism and its Critics

• Does corporate power threaten the ideals of a republican society in which wealth and authority should be widely spread?

• A lot of criticism at the time…

• Captains of Industry (Robber Barons) Moguls, needed to defend this new corporate economy-- that it WAS compatible with ideology of individualism and equal opportunity that had long been central to the American self –image.

• They claimed this WAS the result of individualism – anyone could do the same thing—this new industrial economy was expanding opportunity to all.

• “Self- Made Man”

Some rags to riches—hard work and ingenuity Some began careers from wealth and powerSome use Machiavellian instinctsSome modest entrepreneurs Also politicians were bought and sold

Survival of the Fittest-Social Darwinism

• The effect of Charles Darwin and his “survival of the fittest” influenced the mind set of the businessman of this time.

• Moguls applied Darwin’s ideas of the animal kingdom to human beings, natural selection chose those who would be successful and weeded out those who would not.

• Herbert Spencer –proponent of Social Darwinism “society benefited from the elimination of the unfit and the survival of the strong and talented”

• Rockefeller “The growth of a large business is merely the survival of the fittest…This is not an evil tendency in business. It is merely the working out of the law of nature and a law of God”

• What does this type of thinking do for the businessman?

• Legitimized this success• Confirms his virtues• It justified their tactics—economic life was

controlled by natural law-law of competition-supply and demand

Paradox

• As businessmen were extolling the virtues of competition and the free market, they were at the same time protecting themselves from competition.

The Gospel of Wealth

• To soften their image many businessmen accepted the notion that people with great wealth had great responsibilities—it was their duty to use their riches to advance social progress.

• Carnegie “The Gospel of Wealth”—philanthropy spread as a result.

• “Acres of Diamonds”-Russell H. Conwell –preacher “ought to get rich”

• Horatio Alger—ex minister, wrote over 100 novels that celebrated the rags to riches notion.