Industry Comes of Age
1865–1900
Part 1
Key Concept 6.1: Technological advances, large-scale
production methods, and the opening of new markets
encouraged the rise of industrial capitalism in the
United States.
I. Large-scale industrial production — accompanied by
massive technological change, expanding international
communication networks, and pro-growth government
policies — generated rapid economic development and
business consolidation.
• A) Following the Civil War, government subsidies for
transportation and communication systems helped open
new markets in North America.
• B) Businesses made use of technological innovations,
greater access to natural resources, redesigned financial
and management structures, advances in marketing, and a
growing labor force to dramatically increase the production
of goods.
• C) As the price of many goods decreased,
workers’ real wages increased, providing new
access to a variety of goods and services; many
Americans’ standards of living improved, while
the gap between rich and poor grew.
• D) Many business leaders sought increased
profits by consolidating corporations into large
trusts and holding companies, which further
concentrated wealth.
• E) Businesses and foreign policymakers
increasingly looked outside U.S. borders in an
effort to gain greater influence and control over
markets and natural resources in the Pacific Rim,
Asia, and Latin America.
II. A variety of perspectives on the economy and labor
developed during a time of financial panics and downturns.
• A) Some argued that laissez-faire policies and competition
promoted economic growth in the long run, and they
opposed government intervention during economic
downturns.
• B) The industrial workforce expanded and became more
diverse through internal and international migration; child
labor also increased.
• C) Labor and management battled over wages and
working conditions, with workers organizing local and
national unions and/ or directly confronting business
leaders.
• D) Despite the industrialization of some segments of the
Southern economy — a change promoted by Southern
leaders who called for a “New South” — agriculture based
on sharecropping and tenant farming continued to be the
primary economic activity in the South.
III. New systems of production and transportation
enabled consolidation within agriculture, which, along
with periods of instability, spurred a variety of responses
from farmers.
• A) Improvements in mechanization helped agricultural
production increase substantially and contributed to
declines in food prices.
• B) Many farmers responded to the increasing
consolidation in agricultural markets and their
dependence on the evolving railroad system by
creating local and regional cooperative organizations.
• C) Economic instability inspired agrarian activists to
create the People’s (Populist)
• Party, which called for a stronger governmental role in
regulating the American economic system.
The Bosses of the Senate
Joseph Kepler in Puck
1889
https://www.senate.gov/artandhistory/art/artifact/Ga_Cartoon/Ga_cartoon_38_00392.htm
Gilded Age Economics
• Rapid growth of industry
– Railroads link the entire country into a national
economic system
– Corporations promote industrial growthmonopolies formed
– Factory system
– Mass production of interchangeable parts
These trends began before the Civil War. They
increased/grew enormously during the Gilded Age
Key Industries of the Gilded Age
•
•
•
•
•
•
Railroads
Oil
Steel
Banking
Coal
Farm equipment
Factors that Facilitated
Industrialization
•
•
•
•
Techniques of mass production
Natural resources of the U.S.
Labor supply; immigration
Inventions (440,000 new patents 1860-1890)
–
–
–
–
–
–
Typewriter (1867)
Phone (1876, Alexander Graham Bell)
Cash register (1879)
(first practical) Light bulb (1879, Thomas Edison)
Air Brake for railroads (1878, George Westinghouse)
Transformer (1885, Westinghouse; made possible the
lighting of cities, streetcars, appliances, etc.)
Consumer Economy and a Consumer
Culture
• Increased output of factories and the invention of
new products prompted consumer marketing
• R.H. Macy (NY)
• Marshall Field (Chicago)
• Woolworth’s Five and Ten
• Sears Roebuck (mail order)
• Montgomery Ward (mail order)
• Kellogg
• Post
Changing Socio-economic Classes
• Industrial capitalists
• Growing middle class
• Wage-earning class
– By 1900 2/3rds of all working Americans worked for
wages
– Real wages rose, but most wage earners could not
support a family well on one income
• (status of various groups- African Americans,
Asian Americans, women, immigrants- was lower
socio-economically compared to whites)
• Growth of a millionaire class
– By 1900, 10% of the American people controlled
90% of the wealth
Government Regulation
• 1776 Adam Smith, The Wealth of Nationsargued that business should be regulated by
the “invisible hand,” not by government
(businesses will be motivated to help society
because it is in their own best interest)
• Laissez-faire- “hands off”- government should
not regulate business
• Industrialization led to knew debates over the
issue of government regulation
Railroads
• 1865- 35,000 miles of rail
• 1900- 192,556 miles
• More than all of Europe combined
• Government subsidized the building of
railroads (loans and land grants)
-railroad construction was costly and risky
-gov’t received preferential rates for postal service
and military transportation
Transcontinental Railroad
•
•
•
•
•
•
•
Union Pacific (from the east w/ Irish labor)
Central Pacific (from the west w/ Chinese labor)
Completed 1869 (Promontory Point, Utah)
Great engineering feat
Tied West Coast more closely to the Union
Facilitated trade w/ Asia
Paved the way for the growth of the West
• Consolidation of railroads
– Creation of regional monopolies
• (interlocking directorates of bankers such as Morgan
eliminated competition)
– Pools- an agreement to divide the business in a
given area and share the profits
– Rebates- kickbacks to powerful shippers for steady
and assured traffic (such as Standard Oil)
• Cornelius Vanderbilt
– Improved NY City railroad
– Offered service at a lower rate
– Replaced iron tracks with steel
– Made $100 million (richest man in America at the
time; worth more than the U.S. Treasury had)
– “Law! What do I care about the law? Ain’t I got
the power?”
Cornelius Vanderbilt Mansion
Biltmore Estate, Asheville, NC
Built by George Vanderbilt (grandson). Opened 1895
Railroads Transformed American Life
• the nation became more united in a physical sense
• Creation of a huge domestic market for American goods,
spurring domestic and foreign investors;
• spurred, more than any other factor, industrialization of the
post-Civil War years
• rails generated the largest single source of orders for the new
steel industry
• led the movement to the city of the last decades of the
century
• railroad companies stimulated immigration through their
selling of land grants
• environmental and ecological impact
• standard time was instituted in 1883 as a result of railroad
schedules
• more than any other single factor, railroads contributed to the
rise of a millionaire aristocracy.
Figure 24-1 p513
Map 24-1 p514
p517
p518
Grange
• Farmers impacted by high freight rates
• Patrons of Husbandry
• Agrarian group that called for state regulation
of the railroad monopoly
• 1870s- some states passed laws regulating
railroad rates
Wabash Case
• Wabash, St. Louis & Pacific Railway Co. v. Illinois
• 1886
• Supreme Court declared that individual states
had no power to regulate interstate commerce
• An important result of Wabash was that the
Court clearly established the exclusive power of
Congress to regulate interstate commerce. (See
Gibbons v. Ogden.)
p521
The Supremacy of Steel
• Bessemer process
– cold air blown on red-hot steel caused the metal
to become white hot and burn off impurities
Carnegie and Other Sultans of
Steel
p522
U.S. Steel
U.S. Steel
• Morgan bought out Carnegie’s steel interests
for $400 million
• U.S. Steel launched 1901
• America’s first billion-dollar corporation
John D. Rockefeller
Oil
John D. Rockefeller
• 1859- first American oil well drilled in PA
• 1870 Rockefeller founded Standard Oil Company
• Used railroad rebates and price cutting to force
rivals out of business
• Horizontal integration used to reduce
competition (competitors were brought under
the control of the Standard Oil Trust)
• By 1881 Rockefeller had 90% of the oil refining
business
• Rockefeller worth $900 million
p523
Vertical integration-combining into one organization all phases
of manufacturing from mining to marketing
-pioneered by Carnegie
Benefits- improved efficiency, better control of
quality, and elimination of middleman fees
Horizontal integration-allying with competitors to monopolize a
given market
-pioneered by Rockefeller
Trust-a combination of firms or corporations
formed by a legal agreement
-used by Rockefeller to eliminate competition
-stockholders in small companies would
assign their stock to the board of directors of
Standard Oil Company. Standard Oil then
consolidated operations
-Standard Oil controlled most of the world’s
oil production
Interlocking directorates
-designed by Morgan to consolidate rival
enterprises and eliminate competition
-officers of his banking syndicate were placed
on the various boards of directors of rival
enterprises.
Social Darwinism
• “Survival of the fittest”- coined by Herbert
Spencer
• Carnegie was influenced by Spencer
• Spencer applied Charles Darwin’s concept of
natural selection to society
• Supported the idea of competition in a laissezfaire capitalist society