Industrialization and the Rise
of Big Business
Chapter 9
Did You Know?
Alexander Graham Bell taught deaf
children. He once told his family that he
preferred to be remembered as a teacher
rather than the inventor of the telephone.
His father was a pioneer of Visible
Speech.
Industrialization
With the end of the Civil War, American
industry expanded and millions of people
left their farms to find work.
1900 – US had become the world’s
leading industrial nation
1914 – gross national product was 8x’s
that at the end of the Civil War.
Factors of growth
Natural Resources in the west contribued
to industrial growth.
Transcontinental Railroad increased
industrialization by bringing settlers west
to work, and by bringing resources east.
Petroleum discovered in Pennsylvania in
1859 by Edwin Drake. Used for kerosene.
Population tripled between 1860 & 1910.
Laissez Faire
“Let people do as they choose.”
Defined: Government non-interference in
the economy.
In the years after the Civil War, 100s of
factories built.
Investors from Europe invested in the
economy
Government Role
Late 1800s, state and fed. Government
kept taxes and spending low, and did not
impose regulations on business. Example
of Laissez Faire.
One of chief causes of the Civil War was
economic policy = tariffs; After South
seceded, US passed Morrill Tariff which
raised tariff level to new high.
– North felt tariffs necessary to protect
businesses; By 1900, most favored free
trade and competition.
New Inventions
Alexander Graham Bell – invented
telephone.
Thomas Edison – phonograph; light bulb;
electric generator; dictaphone,
mimeograph; motion picture; built electric
distribution network
New innovations in clothing industry such as
power-driven sewing machines, clothcutter, automatic loom
Mass production reduced cost; savings
passed on to consumers.
Railroads
Pacific Railway Act – provided for federal
funds for building of Transcontinental RR.
Gave land grants for funding
Union Pacific pushed west from Omaha.
Central Pacific pushed east from
Sacramento
Workers = Civil War vets, Irish immigrants,
farmers, miners, ex-convicts, Chinese
immigrants.
Credit Mobilier Scandal – several
stockholders of the Union Pacific set up a
construction company (Credit Mobilier);
Investors contracted themselves – greatly
overcharged the railroad.
Railroad investors made a fortune; Union
Pacific bankrupt; bailed out by the
government
Terms
Corporation
Stockholders/Stock
Economies of Scale
Fixed Costs
Operating Costs
One of the biggest names was Andrew
Carnegie
Steel Tycoon – Used Bessemer process
Believed in Gospel of Wealth – the wealth
are chosen of God; are responsible for
caring for the poor (philantropy)
Donated millions to build libraries
What advantage does large corporations
have over small businesses?
Big businesses can produce more cheaply,
and could continue to operate even in poor
economic times by cutting prices; Small
businesses could not!
Consolidation of Industry
Competition caused lower prices, but it
also cut profits
Many companies formed pools –
agreements to keep prices as certain
levels; broke apart easily.
By 1870s, competition had reduced
industries to a few highly efficient
corporations.
Andrew Carnegie worked his way up from
a bobbin boy in a mill to head of Carnegie
Steel in 1873. 1st mill to use the Bessemer
Process.
Used Vertical Integration – a company
owns all the different businesses required
for operation.
Horizonal integration – owns all
companies doing similar business (ex. Oil)
Selling the Product
Department stores changed the idea of
shopping by bringing in large assortment
of products in a large glamorous building
(Dillards, Sears, Foleys)
Chain Stores offered low prices instead of
fancy décor (Wal-mart, Woolworth’s)
Mail order catalogues reached rural
Americans (Montgomery Ward, Sears)
Rise of Labor
Workers faced monotonous, dangerous
work; Uneven division of income.
Deflation in economy – As prices fell,
wages fell, but cost of living remained
same; seemed that employers paid them
less for the same work.
Workers formed unions
Early Unions
Craft Workers – special skills and paid
more.
Common laborers – few skills and lower
wages.
1830s – craft workers formed trade unions
(limited to specific skills)
Industrial Unions united all craft workers
and laborers in a common industry (RR)
Companies went to great length to limit
unions – hired detectives; Organizers
placed on a Blacklist. – hard to get a job.
No laws gave workers the right to organize
Marxism (Karl Marx) – Popular in Europe;
Theorized a class struggle shaped society;
Believed a worker’s revolution would
evenly distribute wealth and end classes.
Many laborers supported Marxism
Anarchists (no laws) believed a few acts of
violence would cause government to
collapse.
Both very popular in Europe. Many
immigrants brought them to the US.
Associated with immigrants and unions
Workers attempted to create large unions,
but rarely succeeded. Confrontations
often led to violence.
Great Railroad Strike of 1877
A recession caused companies to cut
wages. Workers struck in protest.
1st nationwide labor protest.
Ended when President Hayes called in the
army to end violence. 100 killed.
Knights of Labor
First nationwide industrial union
Demanded 8 hour day, government
bureau of labor statistics; equal pay for
women; end to child labor; worker owned
factories.
Arbitration: impartial 3rd party helps
mediate between worker and
management.
Haymarket Riot
Caused popularity of K of L to decline
Resulted from a strike; Anarchists threw a
bomb and killed several policemen.
Blamed on the K of L.
Pullman Strike
1893 – American Railroad Union
unionized the Pullman company.
A strike after wages were cut
To end the boycott, US government
placed mail on Pullman cars.
Injunction – they were holding up the mail.
American Federation of Labor
Made up of trade unions
1st leader – Samuel Gompers
Limit politics within unions
Fought for higher wages and better
conditions
3 goals: 1) recognition of unions; 2)
closed shops; 3) 8-hour workday
Even in 1900, majority of workers
unorganized.
Working Women
Women made up 18% of workforce
Domestic servants; teachers; nurses;
sales clerks; secretaries
Paid less than men – felt men needed
higher wages to support families
Most unions excluded women
Women’s Trade Union League – 1st
national association for women’s labor
issues.