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Birth of
Modern
America
Chapter 3
Industrialization
I. Introduction to Industrialization
A. Industrial Revolution
1. Definition: the movement from small-scale
manufacturing to the production of heavy
industry, using machines to replace
human laborers
2. In the US, this occurred 1865-1901
3. By end of 1800s, US was the most
industrialized nation in the world
II. Rise of Industry
B. Factors that contributed to rapid
industrialization
1. Natural Resources
a. Western Minerals (access to these thanks to
settlement of West!), iron, coal, timber,
copper, water power, etc.
b. Could be obtained cheaply
c. Little need for imports
2. Innovations in transportation and
communication - Infrastructure
a. Telegraph, Telephone: allowed biz to be
conducted quickly across long distance
b. Roads, Canals, RRs: allowed mass
distribution of raw materials, farm produce
and products of manufacture
3. New Energy Sources
a. Steam Engine
- drove textile mill spindles, sewing etc. Steam came from burning coal
b. Petroleum power
1) initially in demand as Kerosene, for lanterns and stoves (replacing whale oil), and machine lubrication
2) oil fields opened from PA to TX
3) Internal Combustion Engine (late 1800s): used gasoline refined from oil to run cars and the 1st airplane
4) growth of oil industry led to expansion of the economy
c. Electricity:
1) Used initially for communication across
long distances: telegraph, telephone
2) Edison’s electric light bulb
3) drove machinery in factories
4) by 1900: powered streetcars and
subway trains
5) by 1920: electric refrigerators
4. Economic Stimuli
a. Lots of investment Capital ($) – from Europe, Americans, Western minerals
b. Increased immigration (20m btwn1870-1910) + high birth rate and large families ( thanks to advances in medical technology, better nutrition, infrastructure = lower infant mortality rate) = A Population boom that stimulated the economy by providing industry with…
1) Large workforce/cheap labor
2) created demand (lots of customers!) for consumer goods produced by factories
c. New ways of selling/organizing
1) 1st dept store: Macy’s in NY
• lots of products in huge, elegant
building
• Made shopping glamorous
2) 1st chain store: A & P
• a group of similar stores owned by
the same company
• Focused on thrift & low prices
instead of elaborate service or
decor
A & P
3) 1st mail order catalog: Ward’s
• Attractive to rural shoppers who
lived far from chain or dept stores
• Used enticing illustrations and
descriptions to advertise items for
sale
4) advertising/packaging to attract
consumers
• Lots of new products forced
retailers to look for new ways to
market and sell goods
5. New Technologies - you name it, somebody invented it!
a. Textile Industry:
1) Factory System = Samuel Slater
- built the 1st successful water-powered textile mill in America
2) Sewing Machine = Elias Howe & Isaac Singer (competed for patent)
- switch from home-made to machine-made clothes
- sold on installment plan (a form of credit)
Rise of the Sewing
Machine Industry
b. Railroads:
1) Standardized Gauges = John Stevens- width btwn rails = 56 ½ “ contributes to
completion of Transcontinental RR
2) Air Brakes = George Westinghouse
- more precise stopping of trains
3) Sleeping Car = George Pullman
- comfortable, luxurious travel
Pullman
Car
• Beveled mirrors,
ornate carvings, and
polished brass were
the hallmarks of travel
in a Pullman parlor car,
such as the one
depicted here from
1893.
• First-class passengers
enjoyed plush swivel
seats and could eat
their meals in equaling
lavish dining cars.
• The wealthiest owned
their own luxuriously
appointed private cars.
c. Steel:
1) Bessemer Process = Henry Bessemer,
(William Kelly)
- mass production of steel: heat iron ore to
liquid state, blast w/ hot air to burn out
impurities, end product = steel
- Iron RR tracks replaced by steel tracks
- Birth of Skyscrapers
Bessemer Process
2) Elevator = Elisha Otis
- Skyscrapers made practical
3) Suspension Bridge = John Roebling
- uses steel cables
- London Bridge 1st
- Brooklyn Bridge 1st in US
4) Trolley Car = Frank Sprague
- early mass transit
- runs on steel cables
Thomas Edison
d. Oil:
- Oil Well & Pump = Edwin Drake
- launched an oil boom nationwide
- cheap source of fuel for autos (future)
e. Thomas Edison
1) Light Bulb
- uses a dynamo (primitive electric
generator)
- factories can be built away from
natural source of power
- can work longer hrs
2) Menlo Park Research Lab
- model for current research labs
f. Business Industry:1)Telegraph = Samuel Morse
- Morse code
- allows biz to communicate quickly across long distances
2)Telephone = Alexander Graham
Bell- communication revolution
- allows biz to communicate quickly across long distances
3) Transatlantic Cable = Cyrus
Fields - uses telegraph to send impulses- communicate with Europe
4) Typewriter = Christopher Sholes
5) Cash Register = James Ritty
g. Food Industry
1) Mechanical Reaper = Cyrus McCormick
- harvest grain quickly using machines
2) Steel Plow = John Deere
3) Evaporated Milk = Gail Borden
4) Food Preservation (w/o canning) = HJ
Heinz
5) Refrigerated RR Car = Gustavus Swift
- can ship slaughtered meat across long
distances safely
- leads to growth of meatpacking industry
in Chicago
6) Dried Flake Cereal = John Kellogg
- More cereal = CW Post
- leads to cereal wars and use of gimmicks
to sell products
h. Miscellaneous Inventions
1) Kodak Camera = George Eastman
2) Airplane = Orville & Wilbur Wright
- revolution in transportation
- revolution in warfare
First flight at
Kitty Hawk, NC
on December
17, 1903
6. A Business-Friendly Government
a. Mini Economics Lesson: Economic Systems
- every society must answer three basic
economic questions to determine how to
use its limited resources:
What to make?
How much to make?
Who to make it for?
1. Traditional Economy
a. Decisions made by: head of family or tribe
b. Survival drives economic decisions
c. Prices and Wages undetermined as very little surplus or trade
d. Found in developing countries, mostly in rural areas
e. Also known as a subsistence economy
f. Most goods & services produced & consumed by the family/for family
2. Market Economya. Decisions made by Individual or
Privately owned businesses
b. Desire for Profit drives economic decisions
c. Prices and Wages determined by the laws of supply and demand
d. This type of economy is found in the USA!
e. It is also known as Free Enterprise and Capitalism
f. Competition is valued to provide consumers with the best quality product at the best possible price
g. Gov’t role in a market economy: to provide some services and impose certain regulations
3. Command Economya. Decisions made by the
Government b. Social goals drive economic
decisionsc. Prices and Wages determined
by the Gov’td. Found in countries like Cuba
and North Korea today + the former USSR
e. Also known as COMMUNISM – gov’t owns, operates all major farms, factories, utilities, stores
f. Production doesn’t necessarily reflect consumer demand
D. Mixed Economy – Combo of
Market and Command Economya. Gov’t owns/operates some basic
industries while allowing private enterprise in other parts of economy
b. Decisions driven by Profit and Social Goals
c. Prices and Wages determined by Supply and Demand and the Gov’t
d. Found in many European countries (UK, France etc)
e. Also known as Socialism
f. characterized by HIGH TAXES (to pay for the many social svcs like housing, health care, child care, pensions)
g. Belief that wealth should be distributed more equally through
entitlements
Mixed Economy (Socialism)
Government Private Enterprise
Operates somebusinesses
Owns somebusinesses
Laws of Supply & Demand
Determine price & production
Determine price & production
b. Biz-Friendly Gov’t was Republican Dominated
1) supported many Laissez-Faire principles
2) supported the free enterprise system by
letting privately owned business firms
operate with minimal gov’t control
3) became known as Party of Big Business
c. Biz-Friendly Gov’t largely supported Laissez-Faire Capitalism: policy that the gov’t should interfere as little as possiblein the nation’s economy
Laissez-Faire Principles
1) role of gov’t : protect private property + keep the peace
2) prices and wages determined by the laws of supply
& demand – not the gov’t
3) gov’t should limit costly regulations that lead to increased prices
- regulation: gov’t imposed rule or law
4) gov’t should keep taxes and spending low
5) gov’t should keep debt to minimum: (if gov’t borrows from banks, then $ not available for individuals for their own use)
d. Costs and Benefits of Laissez-Faire
1) Benefits:• Free market makes the most of efficient use
of resources (without government interventions, how resources are used is decided by the way people choose to spend their money, thus increasing efficiency overall)
• Avoids people becoming reliant on the gov’t (because individuals are forced to become more productive or make better decisions in order to do well financially)
• Encourages creativity and growth (the need for people to be economically self-reliant will give added incentive to come up with creative ideas and processes that wind up benefiting everyone)
• Competition determines which industries succeed or fail – and society prospers if the economy is left in the hands of those who can compete
d. Costs and Benefits of Laissez-Faire
1) Costs:• If a person falls on hard times under laissez-
faire there is no government programs
ensuring a minimum standard of living
• Firms may ignore issues such as pollution,
unsafe working conditions, without
regulations from gov’t
• Firms may form monopolies where they can
effect the market price and cause a welfare
loss for consumers
• Businesses that may be essential (like the
financial giants) may fail causing commerce
to be affected.
e. Gov’t intervention that promoted growth of
business and industry (against Laissez-Faire
principles)
1) Protective Tariffs
tariff: tax on imported goods
- due to fear that new US industries
could not compete with established
European industries
2) Subsidies in land and money (land grants
to RRs etc)
subsidy: monetary assistance granted by a
gov’t to a person or group in support of an
enterprise thought to be in the public interest
3) provided a system of laws to protect
competition, property and enforce
contracts – this encouraged
entrepreneurship
entrepreneur: one who organizes, manages,
and assumes the risks of a business or
enterprise
4) established a system of patents which
encouraged new inventions
patent: an official document that gives a person
or company the right to be the only one that
makes or sells a product for a certain period of
time
III. Railroads A. Linking the Nation
1. Pacific Railway Act (1862) – authorized
construction of Transcontinental RR
2. 1st Transcontinental RR – completed 1869 by 2
RR companies
a. Central Pacific: built from CA east using many
Chinese laborers
b. Union Pacific: built from Omaha, NE west using
Irish immigrants, ex-cons, veterans
Transcontinental
RR
B. RRs contribution to Industrial Growth
1. Development of a National Market
a. TC RRs increased market for many products
by linking the nation (along with canals,
telegraphs and telephones – now biz can be
done quickly across long distances)
b. Manufacturers could sell the same goods
throughout the country (recall the news ways
of selling goods + role advertising)
c. United Americans from different regions
2. RRs Impact on the Economy
a. stimulated economy by spending lots of $ on
steel, coal, timber etc.
b. shipping raw materials and finished goods
became less expensive
3. Challenges to creating a National RR System
a. problem: lots of unconnected RR lines
- solution: RR consolidation. Large RRs
take over small – eventually 7 main
systems with terminals in major cities with
branches into the country
- Cornelius Vanderbilt: successful RR
consolidator. Merged NY RRs and
opened the 1st service from NYC to
Chicago
Consolidate:
unite
Railroad Consolidation
b. problem: scheduling and passenger safety issues
because clocks set by sun’s position in the sky at
high noon (ex. at 12:00 noon in Chicago, already
12:50 in DC). 2 trains on same track could collide
from scheduling errors caused by time variations
- solution: Time Zones
- made rail travel safer and more reliable
Time Zones
C. Land Grant System
1. Land Grants given to RRs by gov’t to
encourage RR construction
2. RR companies able to cover their construction
costs by selling land to settlers, real estate
agencies & other biz
Gov’t Land Grants to
RRs
D. Robber Barons
1. Some RR entrepreneurs engaged in corrupt
practices that led to the acquisition of
great wealth. They were called Robber
Barons
Robber Barons: a wealthy person who tries to get
land, businesses, or more money in a way that is
dishonest or wrong
- often used ruthless tactics to drive
out the competition
- often exploited workers and kept
wages low to enrich themselves
- sometimes bribed public officials
2. Credit Mobilier Scandal – 1872
a. Stockholders from Union Pacific RR set up
Credit Mobilier – a construction co.
b. Credit Mobilier overcharged Union Pacific
c. Since same investors controlled both,
Union Pacific RR paid bills
d. Investors made millions, RR almost
bankrupt
3. More corruption: RR investors realized they
could make more money selling land than
operating a RR
- bribed Congressmen to vote for more land
grants to RRs
IV. Big BusinessA. Shift from individually owned businesses to
Large Corporations
1. Corporation: an organization owned by many people but treated by law as if it were a single persona. people who own the corporation are known as
stockholders
b. Stockholders own shares of the company called stock
- the more stock a person owns, the larger their share of the corporation
c. Why incorporate?
1) can raise $ from sale of stock; invest in new tech, hire workforce, buy machines to increase efficiency
2) limit liability – spread out financial risk
d. Role of Big Corporations
1) people pool $ together to raise vast sums of
money – enough to build RRs, steel mills etc –
made modern industrial production possible
2) produce goods cheaply & efficiently thanks to
economies of scale: the reduction in the cost of a
good brought about by increased production at large
manufacturing facilities
3) could negotiate deals/rebates to lower operating
costs further
e. Effect on Small Biz?
- some couldn’t complete against big biz – forced
out of biz
B. Consolidation of Industry
consolidation = the uniting of separate companies into a
single one
1. The Panic of 1873 (an economic depression)
a. companies suffered loss of sales and falling
prices
b. some large producers began driving smaller
companies out of business or purchasing
them
c. Some hoped to eliminate the competition by
establishing a monopoly
monopoly: total control of a type of industry
by a single person or one company
1) The problem with monopolies: free to charge
whatever they wanted! Quality not
guaranteed!
2) leads to gov’t intervention and laws to prevent
anti-competitive practices of business
2. Still some businesses sought to better
consolidate industries to bring efficiency and
reduce “cutthroat” competition – tried to get
around anti-monopoly laws
a. some companies organized Pools.
Pools: agreements between companies
to maintain prices at a certain level
- Usually broke apart when 1 member
would try to lower prices to steal biz
away from another
b. some companies formed Trusts
Trust: a group of companies whose stock is
controlled by a central board of directors
1) instead of buying another co. outright, company
gives stock to board of trustees. These
stockholders receive a portion of trust’s profits.
2) Since they just managed the stock, didn’t own it,
they were not violating the law
c. Some companies formed Holding
Companies
Holding Company: a company whose
primary business is owning a controlling
share of stock in other companies
1) they don’t produce anything; they own the
stock of companies that do
2) by controlling the stock, it is sort of merging
them into one large company
d. some companies Vertically Integrated
Vertical Integration: the combining of
companies that supply equipment and services
needed for a particular industry
1) owns all stages of productionthe different businesses on
which a company depends for its
operation
2) allows businesses to save $
3) allows big business to get bigger
4) Andrew Carnegie and Steel
- idea to make $ by investing in
companies that served the RRs
- invested in iron mills, sleeping cars, RR
bridges
- Opened a Steel company ( US
Steel) and customized his mills to use
the new Bessemer process
Just visitin’ Andy
at the Sleepy Hollow Cemetery
e. Some companies Horizontally Integrated
Horizontal Integration: the combining of
competing firms into one corporation 1) eliminates the competition
2) allows big businesses to get bigger
3) John D Rockefeller and Standard Oil
- Standard Oil controlled 26 similar
companies and gained control of
90% of the world oil refining
industry
Standard Oil:
A cartoonists view
C. The Pros and Cons of Big Business
1. The Pros a. large companies are efficient, leading to
lower prices
b. they can hire large # of workers
c. can produce goods in large quantities
d. Have resources to support expensive
research and invent new items
1. The Consa. unfair competitive advantage against smaller
businesses
b. They sometimes exploit workers
c. They are less concerned with where they do
business and pollute the area
d. They have an unfair influence over
government policies affecting them
Gov’t Corruption in the
Industrialization Era
Corruption Today??
V. Unions (aka Labor Unions, or just Labor)
A. Working in the US in the Industrial Era
1. Problems faced by workers:
a. unhealthy & dangerous working conditions (lint, dust, toxic fumes in the air; lack of safety devices)
b. low pay, repetitive tasks
c. lack of job security- workers easily replaced by new immigrants
d. child labor
2. While there was a rise in standard of living for allAmericans (thanks to all of the new technology in ag and industry) – there was a growing division of income between wealthy & working class
standard of living: a person’s or group’s level of material well-being, as measured by education, housing, health care and nutrition
3. Deflation (1865-1897) – a rise in value of $
a. Caused prices to fall – so companies
cut wages (that were already low)
b. This results in a call for Unionization
Union: An organization of workers formed for
the purpose of advancing its members’ interests
in respect to wages, benefits, and working
conditions
1) historically unions fight for:
- higher wages
- shorter hours
- better working conditions
2) today unions fight for all of the above
+ more benefits
B. Early Unions
1. Type of industrial workers in 1800s: skilled
(craft) workers vs. unskilled (common) labor
a. skilled workers = special skills & training.
- higher wages
- control of time
- formed trade unions.
trade union: an organization of workers with
the same trade or skill
b. unskilled labor = few skills
- lower wages
2. Industry owners and management oppose
unions…
a. regard them as conspiracies that interfered w/
property rights
b. Actions taken to prevent unions from forming:
1) sign oath/contract promising not to join union
2) undercover agents identify union organizers
3) workers blacklisted – list of troublemakers,
made it difficult to get another job
4) lockouts: locked union members out of
property – refused to pay them
5) if strike? Hired strikebreakers (replacement
workers
3. Political & Social Opposition to Unions
a. Courts often ruled against them and sided
with business owners in legal battles
b. Many Americans saw them as threats to our
institutions - seen as MARXIST
- Marxism: belief that the basic force
shaping capitalist society was the class
struggle between workers & owners
- Marx believed workers would eventually
revolt, take over factories, seize the
gov’t, seize private property, divide
wealth evenly.
- result? A classless society
Marxism
c. some workers advocate anarchism
anarchism: belief that there should be no gov’t
d. Marxism/Anarchism spreading in Europe. At
same time, Europeans immigrating to US
- American workers are uniting in Unions,
and Marxism calls for workers to unite…
so Unions are SCARY!
C. Struggle to Organize
1. Great Railroad Strike of 1877
a. Panic of 1873 – led to wage cuts followed by NATIONWIDE labor protest – biggest in the US to date
b. RR workers across country walked off jobs
- involved 80,000 workers in 11 states & affected 2/3 of US RRs
c. Workers smashed equip., tore up tracks, blocked rail svc
d. States send militias. Gun battles erupted
e. President Hayes sent Army. Restored order, but 100 people dead & property destroyed
The Great Railroad Strike of 1877
July 21- 22, 1877, rioters destruction in
Pittsburgh, PA
2. The Knights of Labor
a. 1st nationwide industrial unionIndustrial Union: an organization (union) of skilled AND unskilled workers
b. demands:
- 8 hr workday
- equal pay for women
- abolition of child labor
- creation of worker-owned factories
c. Supported arbitration (impartial 3rd party workers and mgmt reach agreement
d. Began using strikes by 1880
- successful at first
- membership rose
3. The Haymarket Riot – Chicago, Haymarket Square May 1886
a. demanded 8 hr workday – organizers called strike to show support for it on May Day
b. strikers & police clash – 1 striker killed
c. Anarchists organize meeting, 3000 people. Police come, bomb is thrown, police fire, workers fire,
- 7 police dead
- 4 workers dead
d. 8 arrested. 7 are German immigrants who support anarchism
e. All 8 convicted, 4 executed
f. 1 convicted was Knights of Labor member –reputation ruined
Haymarket Riot
4. The Pullman Strike
a. American Railway Union (ARU) organized in
1893
b. Pullman Co – made Pullman RR cars –
forced workers to live in Pullman, IL and buy
goods from company stores
c. Depression of 1893. Pullman slashed wages.
Workers had trouble paying rent & paying
high prices at the company stores
Pullman, IL (George Pullman’s company town)
d. workers who complained were fired. Strike
began
e. ARU members nationwide stopped handling
Pullman cars. Threatened to paralyze US
economy
f. US Mail cars attached to Pullmans: to
interfere w/ mail is violation of federal law
g. Court ordered halt to boycott. Strike & ARU
collapsed
The Pullman Strike
• In 1898, the
Illinois Supreme
Court ordered
Pullman Town
sold off, ruling
that a company
town was
incompatible
with the spirit of
America.
Violence in Chicago escalated when federal troops came to break the 1894 Pullman factory strike, as illustrated in this drawing from Harper's Weekly. More than one thousand rail cars were destroyed, and 13 people were killed. (Photo Courtesy of Chicago Historical Society)
D. American Federation of Labor
1. organized 20 + trade unions (skilled workersonly), led by Samuel Gompers
a. believed unions should stay out of politics
b. rejected socialist/communist ideasc. Fought for higher wages/better working
conditions
d. Strikes ok, negotiate better
2. Goals:
a. recognize unions/agree to collective bargaining
b. push for closed shops – companies hire only union workers
c. 8 hr workday
American
Federation of
Labor
Samuel Gompers
Just visitin’ Sam
at the Sleepy Hollow Cemetery
E. Working Women
1. by 1900, women = 18% of labor force
a. 1/3 = domestic servants; 1/3 = nurses,
teachers; 1/3 = industrial (garment/food
processing)
b. wages less than men for same job (men had
to support the family)
2. Women’s Trade Union League (WTUL)
organized to promote women’s labor issues
a. 8 hr day
b. Create minimum wage
c. No evening work for women
d. Abolish child labor
F. Early Labor Unions Fail
1. Too many strikes
2. Too much violence associated with strikes
3. Early unions were disorganized
4. Gov’t/Courts usually sided with Biz leaders.
5. Effectiveness of blacklisting, lockouts etc.
6. Associated with Radicalism: Marxism/Anarchy