Growing Pains: Robber Barons and the Growth of
U.S. Industry, 1870-1900
AN AGE OF BIG BUSINESS
Mr. Pitcairn
U.S. History
2005/06
FOUNDATIONS FOR GROWTH
Factors of Production
I.
1870-1900 time of great economic growth
New technology + new business methods
 allow U.S. to
A.
B.
1.
2.
3.
tap rich supply of natural resources
increase production
raise $ needed for growth
Growth possible because U.S. benefited
from “factors of production”
C.
1.
2.
3.
LAND (land & natural resources)
LABOR (availability of workers)
CAPITAL (buildings, machinery, & tools)
FOUNDATIONS FOR GROWTH
Growth of railroads after Civil War
stimulates economic growth
II.
1869: first transcontinental railroad
By 1890: five major transcontinental
railroads
Miles of track:
A.
B.
C.
1.
2.
1860:
1900:
about 30,000
almost 200,00
FOUNDATIONS FOR GROWTH
Raising Capital
III.
Economic & business growth requires
“capital”
A.
1.
B.
$ for investment
Banks: businesses borrowed $ to expand
FOUNDATIONS FOR GROWTH
“Corporation”
C.
Company that sells shares – “stock” – of its
business
“shareholders” – people who invest in a
company by buying shares
GOOD TIMES  shareholders do well
1.
2.
3.
a.
b.
4.
5.
6.
“dividends” – cash from company’s profits
stock rises in value
BAD TIMES  shareholders lose investment
Stocks sold in “stock markets”
Railroads first businesses to incorporate
THE OIL BUSINESS
1850s oil found in PA hills
I.
Oil valuable
A.
1.
2.
1859 first oil well
B.
1.
2.
II.
lubricate machinery
burn to produce energy
Titusville, PA
Edwin Drake
Oil industry grows rapidly
in late 1800s
THE OIL BUSINESS
John D. Rockefeller
III.
Made fortune in AND came to control oil
industry
Standard Oil Company of Ohio, 1870
A.
B.
1.
JDR set up oil refinery in Cleveland, OH
Built empire through “horizontal
integration”
C.
1.
2.
Combining competing companies into
one corporation
JDR bought competing oil refineries
THE OIL BUSINESS
SOC became a “monopoly” - total control by a
single producer
D.
Lowered prices to drive out competitors
Pressured customers to not use other oil companies
Demanded rebates from railroad companies
Created Standard oil “trust”
1.
2.
3.
4.
a.
Group of companies controlled by one Board of Directors
THE STEEL BUSINESS
Steel becomes big business in late 1800s
I.
Steel
A.
1.
2.
3.
Strong & long-lasting form of iron
Iron alloyed with carbon
Great for railroad tracks, bridges, buildings, etc.
1860s: new methods of making steel (Bessemer
process)  could produce larger amounts, more
cheaply
1870s: Pittsburg, PA  steel capital of US
B.
C.
1.
2.
Close to sources of iron ore (PA & OH)
Large steel mills built
“Making Bessemer Steel at Pittsburgh, the Converters at Work”
Charles Graham
Harper’s Weekly
April 10, 1886
THE STEEL BUSINESS
Andrew Carnegie
II.
Son of Scottish immigrant
By 1890, rules steel industry
A.
B.
1.
2.
3.
Built one of first steel mills in
Pittsburg
Brought Bessemer process to US
Created empire through “vertical
integration”
a.
buying companies that provide
equipment and services for a
business
THE STEEL BUSINESS
By 1900, Carnegie’s company
produces 1/3 0f all US steel!
1901 Carnegie sells his
company to banker J. Pierpont
Morgan for $450 million
D.
E.
1.
JPR forms US Steel Corporation
 first billion $ corporation
CONCENTRATION OF ECONOMIC POWER
“Mergers” – combining of companies –
concentrated economic power in a few
corporations
I.
By 1900  1/3 US manufacturing controlled by
1% of US corporations!
A.
Problems of giant corporations
II.
Drove competition away
Hurt consumers
A.
B.
1.
2.
Corporations did not need to keep prices low
Corporations did not need to improve goods/services
REFERENCES



“The Growth of Industry” (Chapter 19). The American
Journey. New York: Glencoe McGraw-Hill, 2003.
“Industrial Revolution.” Wikipedia. Wikimedia.
<http://en.wikipedia.org/wiki/Industrial_Revolution>.
“The American Experience: Andrew Carnegie.” PBS.
<http://www.pbs.org/wgbh/amex/carnegie/>.