The Age of Innovation and IndustryWas the rise of industry good for the United States?

Thomas Edison

•Inventor▫Phonograph▫Automated telegraph system▫Incandescent light bulb

▫**watch video**

New Inventions and TechnologiesThe United States evolved from a largely agricultural nation into a complex industrial society.

Americans Invest in New Technology

• Capitalism: an economic system in which factories, equipment, and other means of production are privately owned rather than being controlled by government.

• Investors are those who are willing to finance, or fund, the development of new products.▫Provided funds to build railroads and factories and

furnish them with machinery and supplies▫Put money into new technology and scientific

research▫ In return, they hoped to reap rewards if the new

business proved profitable

Americans Invest in New Technology

•Edison received financial support from a group of capitalists led by the wealthy banker, J.P. Morgan▫Formed the Edison Electric Light Company▫1880 – group provided Edison with

$150,000▫Edison gave the company the rights to his

lighting inventions for a 5-year period

Americans Invest in New Technology

•Investors protected their investments by making sure inventors acquired patents.▫A patent gives an inventor the sole legal

right to make or sell an invention for a specified period of time.

▫Edison holds the record for patents issued to one person, with 1,093 in all.

Innovations and Industry Graphs• Analyze the data and poster below. Plot the data on the

appropriate graph in your notebook.

Revolutionary Changes in Communication and Transportation

• Samuel F. B. Morse created the first practical telegraph by 1837▫Created Morse code

• Telegraph lines mainly followed railroad tracks▫Railroads relied on the telegraph to keep track of their

trains▫Newspapers used it to gather information and send

stories to local newspapers• By 1870, the Western Union Telegraph Company

dominated the industry• By 1900, nearly 1 million miles of telegraph wires

were carrying more than 60 million messages a year.

Revolutionary Changes in Communication and Transportation

•Alexander Graham Bell invented the telephone on March 10, 1876▫Attracted lots of financial support

•1877 – founded the Bell Telephone Company

•By 1893, more than 250,000 phones were in use

•By 1920, 13 million phones in use

Revolutionary Changes in Communication and Transportation

•First automobile came to the United States from Europe in the 1890’s

•The first airplane was invented by Orville and Wilbur Wright in 1903.▫First flight was at Kitty Hawk, North

Carolina

“Rock Oil” Provides a New Source of Fuel

• Pre-Civil War - lamps burned whale oil which was very expensive.

• Mid-1800’s – a Canadian scientist discovered how to refine crude oil into a lamp oil called kerosene

• 1858 – Edwin Drake used techniques for drilling salt wells to strike oil in Titusville, Pennsylvania▫Countless more wells were drilled in Pennsylvania

and 13 other states.▫Supplied fuel for lamps, lubricating oils for

machinery, and later, gasoline for automobiles

The Bessemer Process Revolutionizes Steelmaking

• Prior to 1855, iron was the main metal used in construction▫ Iron is brittle and fairly soft▫Steel was preferred because it was harder, stronger,

and lighter than iron. The process for making steel was time-consuming and

expensive• 1855 – Henry Bessemer, a British inventor, patented

a new method of making steel.▫The Bessemer process involved blowing air through the

iron to remove impurities ▫Produced steel far more cheaply and quickly than in

the past.

The Bessemer Process Revolutionizes Steelmaking

• Andrew Carnegie invested heavily in steel production in the U.S.

• 1873 – formed the Carnegie Steel Company▫Later built the largest and most modern steel mill of

its time near Pittsburgh, Pennsylvania• Railroads switched to steel rails• Builders began using steel to construct longer

bridges and taller buildings.▫1883 – Brooklyn Bridge (longest suspension bridge in

the world at that time)▫1885 – world’s first skyscraper built in downtown

Chicago (10 stories tall)

Electricity Lights up America• Edison’s light bulb gave birth to the electric

power industry.• Huge impact on America:

▫Allowed businesses to stay open longer Factories could run through the night

▫Americans could work and read at night▫Could plug in electric refrigerators and other

appliances• Electricity was costly at first, and power

companies mainly built power stations in cities.▫Rural areas had to wait decades longer for electric

lines to reach them.

Processing Questions – 7 minutes• Answer the following questions in the space next to the

“New Inventions and Technologies” graph.• Restate the question in your answer and use complete

sentences.

1. How did capitalists (investors) in the late 1800’s help fuel the development of new technologies?

2. How did the invention of the telegraph and telephone revolutionize communications?

3. Which invention do you think had the greatest impact on America in the 1800s: oil drilling, the Bessemer process, or electricity? Give at least two reasons to justify your choice.

An Explosion of Industrial GrowthThe growth of technology helped fuel the expansion of American industry in the late 1800’s. Markets expanded to sell their goods nationwide. To meet the needs of a growing national market, companies developed new ways of operating.

New Ways to Manage Work

•They had to create systems of mass production that would enable them to supply a much larger market.▫Interchangeable parts in factory machines▫Specialized machinery that could produce

identical parts for quick assembly into finished products. Could hire unskilled workers to run machines

and supervisors to manage day-to-day operations.

▫Assembly line production

New Ways to Manage Work• Frederick W. Taylor, writes The Principles of

Scientific Management▫Used scientific techniques to analyze work tasks

and find ways to work faster and reduce wasted motion

▫Speed boosted productivity, which increased profits

• Henry Ford▫Pioneered the moving assembly line to mass-

produce automobiles Workers stood in one place all day, while a conveyor

belt brought the work to them.

New Ways to Manage Work

•Increased productivity resulted in cheaper goods.

•A factory could operate with fewer workers.▫Those who remained performed the same

dull task all day long, but at a faster pace.•Many assembly-line workers felt as

though they had become machines▫Often protested for better working

conditions.

New Ways to Finance and Organize Businesses

•Factors of production: land, labor, and capital▫Land was abundant (the west!!!)▫Labor was plentiful thanks to a steady

stream of immigrants into the country during this period.

▫Capital was hard to come by. Any asset that can be used to produce an

income. Money, buildings, tools, machinery

Small business owners did not have the capital they needed to expand. Formed corporations.

New Ways to Finance and Organize Businesses

• Corporation: a company that is recognized by law as existing independently from its owners.▫ Own property▫ Borrow money▫ Sue or be sued▫ Investors could not be held liable for a corporation’s debt.

• Investors could buy stock and therefore become partial owners of the company. ▫ Wealthy capitalists controlled corporations by buying huge

amounts of stock.• Owners did not run the daily operations. Corporations

hired managers, accountants, engineers, and others to keep production going.

New Ways to Finance and Organize Businesses• Competition among

corporations provided consumers with a wide choice of new products.▫ Companies slashed

prices to compete▫ Profits fell and company

debts rose Many companies went

bankrupt.

• Capitalists decided to limit competition in order to stay in business.▫ They would buy or bankrupt

competitors John D. Rockefeller, Standard Oil

By 1882 – Standard Oil was a monopoly▫ It controlled 90% of the

nation’s oil production.▫ Raised its prices and reaped

great profits▫ They would form trusts

A set of companies that are managed by a small group known as trustees

Trustees have the power to prevent companies in the trust from competing with each other.

Innovations and Industry Graphs• Analyze the data and poster below. Plot the data on the

appropriate graph in your notebook.

Processing Questions – 7 minutes• Answer the following questions in the space next to the

“An Explosion of Industrial Growth” graph.• Restate the question in your answer and use complete

sentences.

1. How did Frederick W. Taylor’s studies impact industry in the early 1900’s?

2. Why were corporations formed, and how are they run?3. How do monopolies and trusts differ?

Big Business and the GovernmentTrusts and monopolies concentrated capital – and power – in the hands of a few people. With less competition, companies grew larger and more profitable. Americans began to refer to these industrial giants as “big business.” Big business was impersonal, extremely profit-driven, and responsive mainly to investors.

Businesses Grow Larger and More Powerful

Businesses Grow Larger and More Powerful

•Horizontal Integration: called for joining together as many firms from the same industry as possible.▫Example: John D. Rockefeller’s Standard

Oil•Vertical Integration: involved taking

control of each step in the production and distribution of a product.▫Example: Andrew Carnegie’s Steel

Company

The Government Leaves Business Alone•Lawmakers were unwilling to stop big

business practices.▫Limiting competition, raising prices

•Believed in laissez-faire▫Held that the market, through supply and

demand, would regulate itself if government did not interfere.

▫“leave it alone”

The Government Leaves Business Alone•Social Darwinism: held that the best-run

businesses led by the most capable people would survive and prosper.▫Based on Charles Darwin’s theory of

evolution▫Herbert Spencer coined the phrase

“survival of the fittest”▫Discouraged government regulation of

business practices▫Argued that government should leave

businesses alone to succeed or fail on their own.

The Government Leaves Business Alone• Reality Check – the government did not leave business alone,

they helped them.▫ Gave the railroads hundreds of millions of dollars worth of land▫ Sold natural resources such as forests and minerals at very low

prices to companies there were prepared to exploit them.▫ Imposed protective tariffs on foreign goods to make them more

expensive than American-made goods.• Some businesses bribed legislators to pass laws favoring their

companies in return for cash payments.▫ 1904 – “Our political leaders are hired, by bribery…to conduct

the government of city, state, and nation, not for the common good, but for the special interests of private business.” -Lincoln Steffens, journalist

• By 1900, the U.S. had the strongest industrial economy in the world.

Government Takes Some Action to Limit Business

• 1887 – Interstates Commerce Act▫ Prohibited unfair practices by railroads, such as charging higher

rates for shorter routes. ▫ Interstate Commerce Commission was established to enforce the act.▫ This was a landmark measure, since it was the first time that

Congress stepped in to regulate business in America.• 1890 – Sherman Anti-Trust Act

▫ Marked a significant change in the attitude of Congress toward the abuses of big business.

▫ Outlawed trusts, monopolies, and other forms of business that restricted trade.

▫ “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the states is declared to be illegal. Every person who shall engage in any combination or conspiracy declared to be illegal shall be deemed guilty of a felony.”

Government Takes Some Action to Limit Business

• Government only made feeble attempts to enforce the law.▫Law was written by lawyers who favored laissez-faire▫Congress left the courts to clarify the law – but the

courts were not impartial, or unbiased▫Often interpreted the law in favor of big business

• United States v. E.C. Knight Co.▫1895 – the Supreme Court blocked government

efforts to break up a sugar trust that controlled most of the nation’s sugar manufacturing

▫Ruled that the Sherman Act only applied to trade, not manufacturing.

Innovations and Industry Graph• Analyze the data and poster below. Plot the data on the

appropriate graph in your notebook.

Processing Questions – 7 minutes• Answer the following questions in the space next to the “An

Explosion of Industrial Growth” graph.• Restate the question in your answer and use complete sentences.

1. How were the new big businesses of this time different from traditional companies?

2. How did horizontal and vertical integration lead to larger companies?

3. Why did the government adopt a laissez-faire policy toward business during this time?

The Gilded AgeIn 1873, Mark Twain coauthored a book about rich industrialists and corrupt politicians called The Gilded Age. Something that is gilded looks like gold, but only on the outside. The title described American society in this period well. Industrialists made great fortunes and led glittering lives but the period was marked by political corruption and social unrest.

From Industrialists to Philanthropists

•The growth of three industries fueled a rapid expansion of the American economy.▫1870 – 1900:

Steel production rose from 77,000 tons to more than 11 millions tons.

Oil production swelled from around 5 million barrels annually to more than 63 million barrels.

Railroad track expanded from 53,000 to around 200,000 miles.

•The owners of these industries became towering figures in America.

Andrew Carnegie• Rags-to-riches story.

▫ Immigrated from Scotland in 1848 when he was 12

▫ Worked in a Pennsylvania cotton mill earning $1.20 a week

• His thrift and shrewd investments gave him a $50,000 annual income by the time he was 30▫ Owned Carnegie Steel Company

• 1889 – Carnegie earned $25 million▫ published an article titled

“Wealth” Declared that rich people had a

duty to use their surplus wealth for “the improvement of mankind”

“A man who dies rich dies disgraced.”

Andrew Carnegie

•Used his fortune to benefit society▫1911 – established the Carnegie

Foundation Charitable foundation offered grants of

money to promote the advancement of knowledge. Focused on education, especially libraries Built more than 2,500 free public libraries

▫Supported cultural institutions and promoted international peace

John D. Rockefeller• Started his career with one oil

refinery and built it into a huge corporation, Standard Oil

• Monopolistic approach to business▫ Brought him lots of wealth,

and a terrible reputation▫ Stood out for his ruthless

tactics Would undercut his

competitors by making deals with railroads, which agreed to ship his oil at discount prices. This allowed him to cut his prices.

“You can’t compete with the Standard…If you refuse to sell, it will end in your being crushed.” - Rockefeller

John D. Rockefeller

•Became a philanthropist like Carnegie.▫Philanthropist: a person who gives money

to support worthy causes.•Used his fortune to help establish the

University of Chicago in 1892•Started several charitable organizations

including the Rockefeller Foundation▫Supported medical research, education,

and the arts.

Cornelius Vanderbilt• 1810, at age 16, he started a

ferry business in New York Harbor

• Later built up a fleet of steamships▫ By upgrading ships and

cutting shipping rates, he prospered.

▫ Set up a route from New York to San Francisco in time to carry many 49ers to the goldfields.

• 1862 – sold his steamer business and invested in railroad stock.▫ Soon owned several rail lines▫ Opened the first direct service

from New York City to Chicago

Cornelius Vanderbilt

•Never believed he had a duty to use his wealth to benefit society.

•1873 – donated $1 million to found Vanderbilt University in Nashville, Tennessee

J.P. Morgan• Born into one of the most

prominent banking families in the world

• In 1901, he bought out Andrew Carnegie!!!

• Merged Carnegie Steel with other large steel companies into an enormous holding company called the United States Steel Company.

• U.S. Steel was worth $1.4 billion, the first billion-dollar company in American history.

• May recognize his name from one of the largest banks in the U.S.▫ J.P. Morgan Chase (CHASE

BANK)

J.P. Morgan• Began collecting art at the age of 19.

▫ Served as president and donated extensively from his personal art collection to the Metropolitan Museum of Art

• Was a trustee of the American Museum of Natural History for 44 years▫ Often the museum’s lead donor

Frequently giving under condition of anonymity• Episcopal Church

▫ Served as treasurer and senior warden at St. George’s Episcopal Church

▫ Underwrote the salaries of score of Manhattan clergymen▫ Contributed heavily to the construction of Manhattan’s

Cathedral of St. John the Divine. $500,000 in 1892 alone

Robber Barons or Captains of Industry?•Critics called the business giants robber

barons for the way they gained their wealth and the lordly style in which they lived.▫Prospered for mostly negative reasons▫Ruthlessly drove rivals out of business▫Raised prices by limiting competition▫Robbed the nation of its natural resources▫Bribed officials to ensure their success▫Kept wages low▫Imposed harsh working conditions

Robber Barons or Captains of Industry?• Supporters call the business giants Captains of

Industry who, despite some shady dealings, helped usher in our modern economy.▫Prospered for mostly positive reasons▫Worked hard and took advantage of new

technology▫Found new ways to finance and organize

businesses for greater efficiency and productivity▫Created jobs for millions of Americans▫The growing middle class profited from the up-

surge in business▫Living standards climbed with the rising economy

Robber Barons or Captains of Industry?•The greatest income inequality in American

history occurred during the gilded age.•The industrial expansion of the late 1800s

helped give rise to a vibrant economy and consumer society.▫Americans had access to an unprecedented

abundance of goods and services•By the early 1900s, economic growth had

helped make the U.S. one of the most powerful nations in the world.

Innovations and Industry Graph• Analyze the data and poster below. Plot the data on the

appropriate graph in your notebook.

Processing Questions – 7 minutes• Answer the following questions in the space next to the “An

Explosion of Industrial Growth” graph.• Restate the question in your answer and use complete sentences.

1. Do you think the term Gilded Age was appropriate for America at the time? Support your opinion with at least two examples.

2. Why do some historians call industrialists robber barons? Which industrialists from this lecture do you think would be considered robber barons, and why?

3. Why do some historians call industrialists captains of industry? Which industrialists from this lecture do you think would be considered captains of industry and why?