Section 1: Building an Industrial
Empire
Conditions favoring industrial growth
1. By the late 1800’s, the US was outproducing its European rivals
2. US natural resources were the key factor
a. Vast supplies of: coal, iron ore, oil, timber and waterpower
3. Growing number of workers was a factor as well
c. Many new immigrants were coming to America
d. Rushing to cities, mines and factories
4. With the growing number of people to work, it also meant more of a market for
goods and services as well
5. Investors were then interested in investing money in railroads, mines and factories
a. They figured they could get rich doing this
b. Formed corporations – a business owned by many investors rather than a
single owner or a small number of partners
c. The investors then purchased stocks, or shares, in the business
d. The investors then earned dividends, or payments, that were based on
the company’s profits
1. The better a company did, the more money stockholders got
back
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6. All levels of government: local, state and federal, stimulated the economics growth
by providing money, land and encouragement
a. Protected private property and encouraged individual enterprise
b. Became known as a policy of laissez faire – “let the people do as they
choose”
1. Business should operate with as little government regulation or
interference as possible
7. Entrepreneurs – people who organized and managed businesses and took the
financial risks
a. Many flourished during this time period
b. They were called captains of industry by some and robber barons by
others
1. Some used illegal or improper methods to get ahead
Carnegie and Steel
1. Steel becomes a huge and important industry from the 1870s on
a. Because it was harder and more lasting than iron, people began to use it
for everything
b. Longer bridges, taller buildings, stronger railroad tracks, better plows,
more efficient machines
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2. Bessemer process
a. Launches the steel industry
b. Done by blowing a blast of air through molten iron burning off impurities
in the metal; results in strong, high-quality, flexible steel.
3. Andrew Carnegie
a. Born in Scotland and comes to the US at age 12
c. Takes a job in a textile mill near Pittsburgh, then works as a telegrapher
e. By 24, he’s a railroad supervisor
f. Becomes wealthy from good investments and decides to enter the steel
business in 1872
g. Is able to bring in good people with higher pay but he works them very
hard
h. Kept worker’s wages low and their hours long
i. Got lots of contracts: Brooklyn Bridge, the Washington Monument and the
New York City “El”
j. By 1900, he’s producing more steel than all of Great Britain
k. In 1901, he sells his company for almost $500 million dollars (making his
personal fortune worth $75 billion to $279.8 billion in today’s money, to a
corporation set up by J.P. Morgan (who then combines Carnegie and the
other steel companies into US Steel which controls 3/5 of the nation’s steel)
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Rockefeller and Oil
1. In the early 1800s, petroleum was seen as a bothersome and stinking fluid that
would bubble from the ground
2. Some people would scoop it up, bottle it and sell it as medicine
3. Others would use it to burn for light or to lubricate the wheels of their wagon
4. Emergence of the oil industry
a. In 1859, Edwin Drake dilled his first oil well in Titusville, PA
1. Scientists had previously learned how to create kerosene out of
petroleum to use as lamp fuel
b. This would start the first oil boom
1. Drake would end up bankrupt and poor until the PA legislature
decided to give him a $1500 a year annuity.
c. World market develops for oil and its by-products
1. Kerosene, wax, lubricating oil, paint and varnish
d. Entrepreneurs scrambled to drill wells, build storage tanks, build pipelines
and refineries – places where crude oil is processed into useful products.
5. Rockefeller enters the business in 1863 when he and 4 partners built a refinery in
Cleveland, Ohio
a. 2 years later he bought out all but 1 partner, built a second refinery and
began to expand
6. In 1870, he formed Standard Oil of Ohio which became one of the most powerful
corporations ever in America.
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Rockefeller’s Business Practices
1. Considered competition wasteful and small businesses inefficient
2. Decided on business consolidation – uniting all companies in the same industry to
create larger and more powerful businesses
3. Set out to eliminate and take over weaker competitors
4. Demanded efficiency, cost cutting and the latest technologies
5. Expanded into all areas of the oil business
a. Bought pipelines, warehouses, storage tanks, railroad cars and more
refineries
b. Owned chemical plants that made acids used in refining; built his own
factory to make oil barrels and owned timberland to provide wood for them
c. Vertical integration – Expansion into all parts of the industry, from raw
materials to the sale of finished products
6. Marketed high-quality products at low prices; drove other competitors out of
business; became almost a monopoly
a. By 1879, Standard Oil controlled 90% of the oil-refinery business
b. Set up a new form of business organization called a trust – where the
shareholders of many companies turn in their shares of stock in exchange
for new shares in the trust; a board then controls the policies of all the
companies brought together in the trust
c. Rockefeller led the board, gave him lots of power
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A New Oil Boom
1. Rockefeller retired in 1897 with a fortune of $900 million (between $392 billion and
$663.4 billion in today’s dollars)
2. New uses of petroleum were emerging
a. Gasoline became a major product with the beginnings of Henry Ford’s
automobiles
2. New oil discoveries were being made
a. Anthony Lucas began drilling on a hill called Spindletop near Beaumont,
Texas
b. On January 10, 1901, the well erupted with a flow that shot 175 feet into
the air and took 9 days to bring it under control
c. By the end of the year, 440 wells were pumping oil there
d. Other wells were drilled in Texas and Oklahoma
e. By the early 1900s, oil stood toe to toe in importance with steel in the US
economy
Section 2: Linking the Nation by
Rail
Movement: Transportation Revolution
1. At the end of the Civil War, the US had about 35,000 miles of track; by 1916, it had
exceeded 250,000 miles
2. Offered year round, dependable service, dependable schedule; could go where
canals and rivers couldn’t go
3. Products from communities could reach a national market
4. Encouraged a revolution in industry
a. Trains could carry raw materials to factories at distant locations and
finished goods throughout the nation
b. Encouraged mass production – making goods in large quantities; and
mass consumption – the use of goods and services by large numbers of
people
Consolidating the Railroad
1. To avoid cooperating with competing lines, railroad companies adopted conflicting
schedules, built separate train stations, and used different gauges – the distance
between the rails, could range from 4 feet, 8.5 inches to 6 feet
2. Trains with wheels of one gauge couldn’t run on the tracks of another gauge
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3. Larger railroads took over smaller one like Standard Oil did with other oil companies
4. As railroads consolidated, they adopted standard schedules, signals, equipment and
gauges
a. Created a number of trunk and feeder lines
b. Trunk lines – a major railroad line that linked important cities: New York
City to Chicago; the most important lines
c. Feeder lines – smaller railroads that fed into the trunk lines
Cornelius Vanderbilt
1. Became a millionaire in shipping
2. 1867, took over the New York Central Railroad, which merged with other lines to
provide a trunk line from New York City to Buffalo
3. When he died in 1877, his company operated over 4500 miles of track going all the
way to Chicago
a. Worth $143 billion to $178.4 billion in today’s money
Continued Growth
1. The volume of people and goods traveling by rail grew steadily
2. Stronger and faster locomotives pulled refrigerator, dining and plush sleeping cars
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Problems of Competition
1. Competition for traffic pushed owners to offer free passes for large shippers and
low rates on heavy freight and long hauls
2. The offered customer rebates (or returns of part of the normal fee)
a. For companies like Standard Oil who demanded them for being a large
volume business
3. Railroads sought to limit competition by forming pools – an arrangement where
several companies agree to divide the available business in an area among themselves
a. They would then raise prices in the areas they controlled
4. Jay Gould and Jim Fisk (both very wealthy) bought and sold lots of railroad
companies.
5. JP Morgan (another extremely wealthy individual) saw the problems with
competition as being wasteful and dangerous
a. He helped more than a half dozen railroad lines out of financial troubles
and forced them to give control to his hand picked trustees
b. Consolidated railroads to reduce competition, cut costs, set rates,
eliminated rebates and issued new stock to raise money
Section 3: The Business of Invention
A Flurry of Inventions
1. March 10, 1876, Alexander Graham Bell sent the first telephone message
2. In 1878, a telephone was installed in the White House
3. By 1915, there were 10 million telephones in the United States
a. By then, Bell had consolidated hundreds of local telephone systems into
the American Telephone and Telegraph Company or AT&T
b. This gave the nation a centralized communications system
The Wizard of Menlo Park
1. Thomas Edison worked up to 20 hours a day in his lab in Menlo Park, NJ
2. In 1877, he invented a machine that recorded sound on tinfoil wrapped around a
rotating cylinder
3. Also created a motion picture machine
a. Presented the first motion-picture show in New York City in 1896
4. 1879, he created the electric light bulb
a. He then devised a system of generating stations, meters and overhead
wires to produce and carry electricity to homes and businesses
b. JP Morgan helped back him when he formed the Edison Illuminating
Company and built a power station in NYC
c. September 4, 1882, he threw a switch and lighted a number of NYC
buildings
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5. By 1900, there were 2,774 stations powering some 2,000,000 electric lights around
the US
6. George Westinghouse and Nicola Tesla added more innovations to electricity
7. Electricity began to pull trolley cars and railroads; the first subway beneath city
streets and lifted elevators to the tops of the skyscrapers
New Forms of Transportation
1. Henry Ford was a young engineer at Edison’s Detroit power company
2. He was experimenting with a gasoline powered engine to power a horseless
carriage; Edison pushed him to keep working on it
a. Ransom E. Olds was another person working to develop the gasoline
engine
3. Ford opened the Ford Motor Company in 1903
a. He wanted to build a car that could be produced cheaply and sold at a low
price
b. Spring of 1908, Ford introduces the Model T for $850
a. By 1914, sales reached 248,000 and it was selling for $490
c. Low costs were due to the design: no frills, no options, standard car, black
d. The assembly line – a row of workers and machines along which work is
passed until the final product is put together
a. They could put a whole car together in 93 minutes
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4. The airplane
a. 2 Ohio bicycle mechanics, Orville and Wilbur Wright developed a heavier
than air flying machine using the gasoline engine that was designed by the
auto makers
b. On Dec. 17, 1903, they took flight at Kitty Hawk in North Carolina at the
sand dunes for 12 seconds to a distance of 120 feet
Section 4: The Sellers
Industries and companies need to compete for business; marketing – selling a product or
service. Consumers – the buying public, were bombarded with advertisements, special deals
and gimmicks. The goal was to convince consumers to buy their products, beat the
competitions and conquer the marketplace.
Growth of Advertising
1. In 1867, businesses spent $50 million on advertising, by 1910, they were spending
$1 billion
2. Growth of magazine and newspaper readership helped to reach millions of people
a. In 1860, there were some 387 daily newspapers, by 1914, there were over
2,500 daily newspapers and nearly 14,000 weekly newspapers; these
reached some 73,000,000 readers (and potential consumers)
3. Before the rise of advertising, if you wanted something, you went in a store and
asked for that item; with advertising, people were buying specific brands because
they’d heard or seen an advertisement
What are some of the ads you recognize? How have they changed? How are ads marketed
today?
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Retailing
1. Manufacturers produced huge quantities of goods, but most consumers only need
one or a couple at a time; so few sold directly to individual consumers
a. They sold to retailers – those who sold goods directly to consumers in
small quantities
2. Retailers included: door to door salespersons, push-cart peddlers who sold items on
the street and shopkeepers
a. General stores in little towns sold a little of everything: from plows to food
b. In towns and shops, there were a wide variety of shops to choose from
a. These shops would specialize in one type of merchandise
3. Department stores
a. 1862 – Alexander D. Stewart opened Stewart’s Cast Iron Palace in New
York City
b. Followed by: John Wanamaker in Philly, R.H. Macy in New York City and
Marshall Field in Chicago
c. Made a wide selection of goods available in one location; many used
advertisements
4. Chain stores
a. Chain store – two or more stores under the same ownership and selling
the same line of products
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b. The first chain store was the Great Atlantic & Pacific Tea Company
(became known as the A & P); opened in 1859 and sold only tea
a. As they started more stores, they added grocery items
b. Had 67 stores by 1876 and 1,000 by 1915
c. F.W. Woolworth’s Five and Ten Cent chain started in 1879
a. By 1900 had 59 stores with yearly sales of $1,000,000 (after
early failures)
d. 1916 – Piggly Wiggly chain was started in Memphis, Tennessee by
Clarence Saunders
a. Self-service instead of having clerks in each department or
counter; they then brought the items to a check-out line to pay for
them
5. Mail Order
a. Aaron Montgomery Ward noticed that rural people had little chance to
shop in stores, so he started a service to allow people to shop by mail
a. In 1872, he sent out a one sheet price list
b. By 1884, his Montgomery Ward catalog was 240 pages and
offered almost 10,000 different items
b. Richard Sears saw the same opportunities
a. Started with watches and jewelry, then expanded
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b. In 1893, Sears teamed with Alvah C. Roebuck to found Sears,
Roebuck and Company in Chicago
c. Got a huge boost with the Rural Free Delivery Service that the
US Post Office started
d. By the early 1900s, they were the world’s largest mail-order
retailer, distributing 6 million catalogs a year each with 500 pages
c. Wards and Sears would eventually add chain of department stores to
supplement the mail order business; bringing together 3 retail ideas: mail
order, chain stores and department stores
Section 5: Organizing Workers
Conditions in the Workplace
1. Into the 1900s, workers still worked 10 hour days, 6 days a week
a. Skilled labor earned $12 a week
b. Unskilled labor about $6
c. Few holidays or vacations
d. Easy to replace workers (workers exceeded jobs available)
e. Few safety standards in factories, mines and mills
f. Job-related accidents and diseases killed many, men, women and kids
g. 20% of women over 16 (5.3 million) and 1.8 million children worked for
wages
h. Men earned more than women, adults more than children and nativeborn more than foreign born; Protestants earned more than Catholics and
Jews; whites more than non-whites
i. Blacked worked in the least desirable jobs; last hired and first fired and
earned less than almost everyone, regardless of skill
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The Growth of Labor Unions
1. Were small and weak during most of the 1800s; difficult to organize workers of
different skills and backgrounds
2. Rather than forming a union for all railroad workers, they were organized by
category or department
3. Most employers actively opposed unions
4. The Knights of Labor
a. Began as a secret society in 1869 by garment worker Uriah Stevens
b. 1879, Terence Powderly took over, ended secrecy and opened it to all
workers
c. Accepted women as well and had 60,000 black members at its peak
d. Called for higher wages, an 8 hour day, compensation – payment, for
work related injuries and the end to child labor (Powderly also wanted to
see worker-run factories, mines and railroads)
e. Disliked strikes – work stoppage in order to force an employer to agree to
worker demands
a. When a series of strikes failed, tens of thousands of workers left
the union; by 1890 membership fell from 730,000 to 100,000
b. A few years later the Knights of Labor dissolved
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5. The American Federation of Labor
a. Founded in 1896 as an alliance of national craft unions: cigar makers,
carpenters, typesetters, machinists and others
b. By, the 1890s, the AFL was the most important
a. Membership went from 140,000 in 1886 to over 2,000,000 by
1914
b. Included almost 1/3 of the nation’s skilled workers
c. The vast majority of workers though still remained unorganized
6. Women wage earners
a. Very few allowed women members
b. Women worked as hard as men, under hazardous conditions, at less pay
c. Garment-making and food-processing industries were good organizing
areas where women took the lead in forming their own organizations
d. WTUL – Women’s Trade Union League
a. Formed by Mary Kenny O’Sullivan
b. Led at one time by President Rose Schneiderman
1. Also organized the ILGWU – International Ladies’
Garment Worker’s Union
2. Mostly Jewish immigrants
3. Lead a strike in 1909-1910 in New York City’s garment
industry where 20,000 workers walked off their jobs
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Labor Unrest
1. Most employers fought the union movement
a. They fired those that joined unions
b. To break up strikes, they hired scabs – non-union workers who take over
strikers’ jobs
c. Strikes many times turned violent
a. Railroad strike of 1877 happened when railroads tried to lower
worker’s wages
a. Involved over 80,000 workers and affected 500,000
other workers
b. Affect 2/3 of the nation’s railroads from WV to CA
c. Last 2 weeks and left 100 dead and the President
(Hayes) to call in federal troops to battle the workers
b. 1892 Carnegie Steel Company plant strike in Homestead, PA
a. Lowered wages for workers by nearly 20%
b. Workers walked off the job, were locked out and scabs
were hired.
c. Pinkerton detectives were hired to drive away strikers
d. After a battle, 10 workers and 3 detectives were dead
e. Governor of PA called in the state militia
f. Company reopened and strikers gave up