The Age of Innovation and
Industry
Was the rise of industry good for
the United States?
Thomas Edison
• Inventor
▫ Phonograph
▫ Automated telegraph system
▫ Incandescent light bulb
▫ **watch video**
The 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.
The 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?
Trusts 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?
In 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.
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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?