The first Industrial
Revolution
 Began in the 1700s when people stopped making
things by hand and began using machines
 The spinning jenny, steam engines, and the cotton
gin are early examples of the technology used
Steam Power
 Invented by the Scottish
Mechanical engineer
James Watts
 Improved on design by
other inventors
 Key Power source of the
Early Industrial Revolution
 Replaced human, animal,
wind and water power
 Allowed industries to be
built anywhere.
Industrial Innovation
 The Second Industrial Revolution (1865-1914) was
sparked by several inventions and discoveries
 Bessemer Process, Steam Train, Oil, Electricity, etc.
Steel
 The Bessemer Process
 Invented in 1859 by William
Kelly (U.S.) and Henry
Bessemer (G.B.)
 Used hot air to remove
impurities
 Produced more steel in 1 day
than previously produced in a
week
 Improved and adapted by
William Holley – significantly
increased production
Why is this important?
Bessemer Advantages
 Allowed development of Industrial
cities
 Pittsburgh, PA – Gary, IN –
Cleveland, OH
 Allowed railroad industry to
replace iron rails
 Last longer and easier to make
 Steel used in construction
 Lighter weight – can build taller
buildings (Skyscrapers)
 Resists rust and corrosion
 Used in nails, wire, etc.
Steel Mills
 Bessemer process allowed
development of steel mills
 Pittsburgh became
production capital of U.S.
 Brought jobs and prosperity
 Pollution choked the city and
covered it in soot
 Rivers turned yellow
Oil
 Petroleum used by Europeans to grease wagons &
tools
 Late 1850s process of refining crude to kerosene
 Replaced whale oil for lamps and lighting
Oil Drilling
 In 1859 Edwin Drake used a steam powered drill to
search for oil under ground
 Called Drake’s Folley (no one believed it would work)
 After production topped 20 Barrels /day others tried
 Similar to Gold Rush (Oil called “Black Gold”)
 By 1880 25 million Barrels produced in PA alone
Oil Products
 Kerosene, Waxes, Lubricants, Petroleum Jelly, etc.
 Railroads
Transportation
 Steam Ships
 Horseless Carriages
 Airplanes
Steam Trains and Railroads
 The locomotive was invented by Richard Trevithick
in 1804
 Rapidly refined and became a viable transportation
by 1830s
 In U.S. the Civil War led to rapid expansion of rail
system in U.S.
 As price of steel dropped expanded faster
 Steel use was faster and stronger than old iron rails
 Steel cost 12 dollars a ton in 1873
Steam Trains
 Locomotives rapidly improved
 Early trains were slow and hard to stop
 George Westinghouse invents airbrakes 1868
 Allowed cars and locomotive to brake simultaneously
 Granville woods improved Airbrake and developed a
communication system for trains
 Standard track width (gauge) was adopted
 No need to change trains for different tracks
 Improves efficiency and speed of travel
Transcontinental Railroad
 First completed in 1869 at
Promontory Point, UT
 Golden Spike driven by
Leland Stanford
 Connected the country by
land
 Allowed rapid
transportation of people
and goods
The original "golden
spike", on display at
the Cantor Arts
Museum
Affects of Rail travel
 Linked small towns to large cities
 Rapid western expansion/settlement
 Urban growth/Job Growth
 Expand other industries
 National Distribution of goods
 National standard time to coordinate schedules
 Began in 1883 by agreement of Rail owners in U.S. and
Canada
 Made into law with the 1918 Standard Time Act
Steam Ships
 First came into use in the
1800s
 Began with sailing ships
hybridized to paddle ships
 Screw-Propeller adopted
later on
 Rapid cross ocean travel
 First Atlantic crossing
credited to the SS
Savannah May 1819
Horseless Carriages
 First developed using steam by French military
officer Nicholas-Joseph Cugnot (inefficient and loud)
 Gasoline fueled internal combustion engine built by
Nicholas A. Otto in 1876
 In 1893 Charles and J.Frank Duryea built the first
“car”
Suspension Bridge
 Uses steel cables to suspend a roadway over gaps
 First suspension bridge in the U.S. was the Brooklyn
Bridge that crossed the East River in NYC
 At the time was longest bridge in the world
Airplanes
 Invented in 1903 by Orville and Wilbur Wright
 First successful flight at Kitty Hawk, NC
 Lasted only 12 seconds but proved it was possible
Communication
Telegraph
 Invented by Samuel Morse in 1837
 Allowed for communication with electricity
 Used a series of dots and dashes called Morse Code
 Led to a company called Western Union
 Had 2,000 offices by 1866
 Could rapidly communicate over long distances
Telegraph
 First commercial telegraph line completed May 1844
 The first message sent on theis line was “What hath
God Wrought”
 The telegraph embossed paper with a series of dots
and dashes to be interpreted
Telephone
 Invented by Alexander
Graham Bell
 First successfully
demonstrated at
Philadelphia Centennial
Exposition in 1876
 By 19000ver 1 million
installed in homes and
businesses
 Required operators to
connect lines (created job
opportunity for women)
Typewriter
 Christopher Sholes developed typewriter in 1867
 Sold patent to E. Remington & Sons.
 Produced easily legible documents
 Used carbon paper and strike arms to print
 Created another job opportunity for women
Electricity
 First studied by the Greek Thales of Miletus in 600
B.C.E.
 Renewed interest in the 1600s but saw little
progress until 19th century
 Ben Franklin’s kite experiment in 1750s proved
lightning was electrical energy
 In early 1800s other scientists began to experiment
leading to the development of communication,
lighting and other devices
Thomas Edison
 Opened invention business at Menlo Park
NJ 1876
 Used Direct Current (DC) for electrical
inventions
 Held over 1,000 patents when he died in
1931
 Major inventions include:







Multi-message Telegraph
Electric Lightbulb
Phonograpn
Motion Picture Machine
Telegraphic Stock Ticker
First Electric Power Plant
Electric vote counter
Westinghouse and Tesla
A.C. Electricity
 Alternating Current
(AC)developed by Tesla &
Westinghouse
 More efficient than D.C.
 Could be transferred long
distances and distributed
 Allowed cities to be
lighted by electricity
 Made electric streetcars
possible
Tesla’s other inventions
 Tesla Coil
 Radio
 Remote control
 Fluorescent light
 X-rays
Industrial Revolution
Technology
 The key to all of these inventions was Technology
 Technology is advancing knowledge
 Innovation drives technology
 Scientific experimentation drives innovation
 Machines replace human work through Technology
Big Business
 Terms:
 Corporation - a form of group ownership in which a
number of people share the ownership of a business
 Monopoly – complete control of a product or service
 Cartel – an arrangement in which businesses making
the same product agree to limit production to keep
prices high
 Horizontal integration – a system of consolidating
many firms in the same business to lower production
costs
 Vertical integration – the practice of gaining
control of many different businesses that make up all
phases of a product’s development
 Trust – a situation in which companies assign their
stock to a board of trustees, who combine them into
a new organization
Big Business
 Terms
 Entrepreneur – people who invest in a product or
enterprise to make profit
 Protective Tariff – taxes that make imported goods
cost more in order to protect local industry
 Laissez-faire – policies that allow business to operate
with minimal government regulation
 Social Darwinism – an application of Charles
Darwin’s work which held that wealth was a
measure of one’s inherent value and those who had
it were the most “fit”
 ICC – the Interstate Commerce Commission, a
government body set up to oversee railroad
operations
 Sherman Antitrust Act – a bill passed in 1890
which outlawed any trust that operated “in
restraint of trade or commerce among the several
states”
Big Business
People
 John D. Rockefeller – an oil tycoon who made
deals with railroads to increase his profits
 Andrew Carnegie – a steel tycoon who used
vertical integration to increase his power
 J.P. Morgan – Financier and banker dominated
finance and industrial consolidation bought U.S.
Steel from Carnegie
 Cornelius Vanderbilt – railroad tycoon who
dominated the eastern rail industry and expanded
it west to Chicago
Industrialization Changes
Business Practices
• Business leaders combined funds and resources.
• Investors formed corporations that protected them
from losing more than original investment.
• A corporation could operate in different regions.
The BIG Picture
 Businessman like
Rockefeller and
Carnegie use new
methods to expand
business
 New methods and
help from the gov’t.
allow business to
control the U.S.
Economy
U.S. Businesses, 1870-1900
140,000
120,000
100,000
80,000
U.S.
Businesses,
1870-1900
60,000
40,000
20,000
0
1870 1880 1890 1900
New Business Methods:
Advertising
 Department Stores:
 Mail-Order Catalogs:
 1862, A.T. Stewart, N.Y.C.
 Montgomery Ward, Chicago
 Provides many different
consumer goods
 Sears & Roebuck, 1890s
 Shopping becomes
recreational
 Urban Consumers
 Supply rural consumers
New Business Methods: Rise of
Corporations
 Corporations fueled the rise of “Big Business”
 Small business could not compete! Shut down in hard times!
Rise of Corporations
 Corporation: organization owned by many people but treated
by law as though it were a person.
 Stockholders buy stock…
 Raise money, spread the risk! (vs. partnership, proprietorship)
 Created Economies of Scale…
 Could produce goods more efficiently, which allowed to the rise
of “big business”
 Produce more goods @ cheaper price, continue to operate in
harsh economic times, drive out small competition!
New Business Methods
 Corporations worked
to maximize profits
by:
• paying workers
low wages
• paying lower prices
for raw materials
• supporting research
Standard Oil Factory
labs
New Business Methods:
Help from the Gov’t
 Santa Clara County
v. Southern Pacific
Railroad Company
 SCOTUS, 14th
Amendment and
Corporations…
 Received
protection just as
individuals would!
New Business Methods:
“Pooling”
 Competition created problems; low prices for
consumers!!!
 Railroad pools:
 associations of competing railroads “for the purpose of
a proper division of the traffic at competitive points and
the maintenance of equitable rates that may be agreed
upon.”
 Interstate Commerce Act, 1887
New Business Methods:
BIG Business!
 By 1870s, competing businesses were merging
together, creating “big business”
1. Mergers, Consolidation of Industry
2. Creation of Trusts
3. Holding Companies
 Example of consolidation:
 1870, Rockefeller’s Standard Oil Company owned 2% of
the country’s crude oil…
 By 1880 – it controlled 90% of U.S. crude oil!
How did it do
so???
New Business practices
 Monopolies:
 Single company achieves
control of an entire market!
 Many states begin
outlawing…
 Trusts:
 Legal maneuver allowing
trustee to control several
companies & run them as
one.
 Holding Companies:
 Produce no actual product.
 Controls several
companies, merging into
one large enterprise!
VERTICAL INTEGRATION
“Carnegie Steel”
Steel
Refineries
Railroad
Lines
Raw
Materials
Limestone
Quarries
Iron Ore
Fields
Coal
Mines
HORIZONTAL INTEGRATION
“Standard Oil Company”
Refinery
Refinery
Refinery
New Business Methods:
Trusts
 … by creating Trusts!
 Stocks would be
traded in for trust
certificates.
 “Super-Corporation”
created from many
small corporations!
 Standard Oil, 1882 –
first TRUST!
New Business Methods:
Investment Banking
 J.P. Morgan
 Buy large blocks of stock
from companies looking to
sell… (discounted)
 Re-sell the stock for profit!
 These investment bankers
became interested in holding
companies and trusts…
 United States Steel, 1901
Captains of Industry?
Were the
tycoons
“robber
barons” who
swindled the
poor and
drove small
businesses
under…
or “captains
of industry”
who served
the nation
and made
prices of
goods
cheaper?
Is Big Business Bad for
Small Businesses?
Or Is Big Business Good for
the Nation?
 Provides Jobs
 Allows for product innovations
 Financially supports universities, libraries, museums,
etc.
Survival of the Fittest
Charles Darwin’s idea of evolution of species
applied to American capitalism
led to the idea of Social Darwinism
The belief that wealth was a measure of
a person’s value and
those who had wealth were most “fit”
to survive
Conflict with Business
Social Darwinists
believed
government
should stay out of
private business
and thought it
was wrong to use
public funds to
assist the poor.
Americans who
worried about
the methods of
industrialists
called for federal
regulation of
business
practices.
Sherman Antitrust Act
 The ICC and the Sherman Antitrust Act began a
trend toward government regulation of corporate
power.