Unit II Notes: The Gilded Age and
Industrialization 1877-1909
What do we mean by the term
“Gilded Age”?
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Time period from 1877-1909
Characterized by rapid industrialization
Entrepreneurial expansion
Efficiencies in production = lower prices and more
affordable goods
• Rise of corporations
• Huge profits made owners “instant” millionaires
• Industrialists amassed enormous wealth and
created a lavish lifestyle for themselves
Factors from the Civil War that Lead to
Economic Growth in America
• Steam Power
– Replaced human and animal power in agriculture
and factories
– Needed coal or wood to create steam
– Used in transportation
• Trains
• Steamboats
The Bessemer Process (steel)
• Made production of steel more economical
• Could now make 5 tons of steel in 15 minutes
instead of 12 hours
Coal
• Main source of fuel in America
• Production increased from 14 million tons in
1860 to 100 million tons in 1884
Refining Petroleum
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First oil well drilled 1859 PA
Used to make kerosene for lighting
Used for machine lubrication
Will later be refined into gasoline for cars and
planes
Internal Combustion Engine
• Fuel is burned to turn propellers or turbines
Commercial Use of Electricity
• First used to relay messages along telegraph
wires
Inventors
• Alexander Graham Bell
• Created the telephone in 1876
• Increased the speed of communication
Thomas A. Edison
• Patented the light bulb in 1880
• Increased factory hours and efficiency
• First filaments were bamboo; replaced with
tungsten
Elisha Otis
• Created the passenger elevator in 1852
• Allowed for the construction of sky scrappers
• Safety device that prevented elevator
accidents
Elias Howe
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Invented the sewing machine in 1846
Shortened time for clothing production
Improved quality of clothing
Clothing became cheaper
Christopher Sholes
• Created QWERTY typewriter in 1867
• Improved and sped up communication
• Sold patent to Remington Arms; mass
production began in 1881
The Wright Brothers
• Wilber and Orville were bicycle shop owners
• Tried to make bike into flying machine
* created first successful plane
• Dec. 17, 1903 flew for 12 seconds; traveled
120 feet in Kitty Hawk, NC
Cyrus McCormick
• Invented mechanical reaper
• Improved speed of harvesting grains (wheat,
corn, oats)
• Increased farm production
• Decreased price of bread, cereal, etc…
Free Enterprise System
• Economic system in which people have the
freedom to:
– Produce what they wish
– Sell what they wish at the price of their choice
– Buy whatever they can afford
Free Enterprise/Capitalism
• Right to private property
• Profit Motive
• Economic Freedom
Entrepreneur
• A person who starts a business is the hope of
making a profit
• One who invests capital hoping to make a
profit
“Captains of Industry”
• Entrepreneurs of the Gilded Age
• Forged the modern industrial economy of the US
• Created enormous wealth for themselves
• Lived lavish lifestyles
Andrew Carnegie
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Came to US from Scotland 1848 at age of 13
Worked in Pittsburg cotton mill as a boy
Telegraph operator for Penn. RR
Promoted to RR Superintendent at 30
Invested in oil and iron
1870’s went into steel business
Founded Carnegie Steel in 1892
Andrew Carnegie
• Under cut his competitors prices to drive them
out of business
• Bought his own coal mines, iron ore fields, and
shipping lines to control production prices and
supply
• Paid workers low wages and forced them to
work 12 hour shifts
• Crushed attempts to unionize
Carnegie
• Sold Carnegie Steel to JP Morgan in 1901 for
$480 million
• Spent the rest of his life in philanthropy
• Built libraries, museums, and universities
• Gave away $350 million
John D. Rockefeller
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Born in New York to working class family
Studies book keeping in school
Went into business selling fruits and vegetables
Invested his money in an oil refinery in
Cleveland
• Made kerosene and lubricants
• In 1870 formed Standard Oil of Ohio
• By 1879, he controlled 90% of the refining in the
US
Rockefeller
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Standard Oil became a monopoly or trust
He forced competitors out
Forced railroads to give him better rates
In 1892, the government split up his company
into 20
• He remained the major shareholder of all 20
• He gave away millions to education and science
• He founded the University of Chicago and
Rockefeller Foundation
Henry Ford
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Born in Dearborn, Michigan
Lived on farm until 16
Apprenticed as a machinist in Detroit
Hired as engineer @ Edison Electric
In 1896 created his first plans for a car; called
the Ford Quadricycle (electric powered)
• In 1903 he formed Ford Motors Co.
Ford
• 1908 introduced the Model T
• 1914 introduced the assembly line
• Introduced the $5/day wage (equivalent to
$110 today)
• By 1918, 50% of all cars in the US were Model T’s
• His revolutionary vision was to create a cheap,
reliable, car build by skilled, loyal workers
• Introduced profit-sharing to employees who stayed
at least 6 months
Ford
Radical Ideas:
• Required that his employees maintain a
“proper” lifestyle.
• Pacifist; opposed WWI
• Anti-Semite
Assembly Line
Henry Form Museum
Cornelius Vanderbilt
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Born 1794 Staten Island, NY
Grew up poor; parents illiterate
Dad worked as a seaman
One of 8 children
Dropped out of school at 11 to work w/ his
dad
• Invested $ in a sailboat; built a business
ferrying goods around New York Harbor
Vanderbilt
• 1917 started steamboat business
• By 1840’s had 100+ ships
• Was called Commodore Vanderbilt by his
contemporaries
• 1860’s invested in NY rail lines
• By 1870’s he owned RR’s in NY, Chicago, and to the
west
• At his death, he had accumulated the largest wealth of
any person in US history
• $ 100,000,000 estate was left primarily to his oldest
son (Henry); other 12 children got $2 million each
Vanderbilt
• In todays $, his estate would be worth $143
billion
• Left $1 million to build Vanderbilt University
Biltmore Estate
Famous Descendants
• Gloria Vanderbilt, clothing designer
• Anderson Cooper, CNN news anchor
J. P. Morgan
(John Pierpont)
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Born in 1837 in Hartford, CT.
Son of a banker
Went into family business
In 1871 built his own finance company; JP
Morgan & Co.
• Dominated banking and finance in the US
• Family business still in operation (Chase)
J.P. Morgan
• Created several monopolies
– U.S. Steel (world’s largest steel manufacturer)
– Consolidated Railways (controlled rail systems on
the east coast)
J.P. Morgan
• Ardent sailor; won several World Cup races
• Avid art collector; his collection was donated
to the Met in NYC
• Avid book collector; his books are found in the
Morgan Library in NYC
• Married twice; first wife dies 5 months after
wedding
• Four children; 1 son, 3 daughters
J.P. Morgan
• One of America’s leading businessmen
• Helped to create the modern banking system
• His consolidation of rail systems helped to
standardize railroads
Morgan
Monopolies
• A monopoly occurs when one company or
group owns all or nearly all of a product or
service
• Rockefeller was accused of having a monopoly
since he controlled 90% of the oil refineries in
the late 1800s
• Monopolies usually hurt the consumer
because of a lack of competition, which can
lead to poor products
How Monopolies Formed
• Horizontal Integration – When companies
acquire rival companies’ property
• Example – AT&T tried to merge with T Mobile
• Example – Rockefeller bought out his
competition and then took over their
refineries
How Monopolies Formed
• Vertical Integration – When a company takes
control of the entire production and
distribution of a product
• Example – Carnegie took control of the iron
mines, he owned the trade routes between
the mines and the mills, and the steel mills
themselves
Comparing Horizontal and Vertical
Integrations
Consolidating
• Businesses often consolidate, or to shrink,
their facilities to save costs. If they can
remove “X” amount of employees or steps in a
manufacturing process, they can increase
their profits.
• Example: Rockefeller merged with his
competitors to consolidate the oil industry