II. The Growth of
Industry in the US
&
Rise of Big Business
A. The Industrial Revolution
1871-1912
The Rise of Industry
The Captains of Industry
The Labor Force/ Working Conditions
Inventions
1. The Rise of Industry
a. Five features led the rise of
industry in the late 19th century:
i. Abundant coal deposits
(cheap energy)
ii. Rapid spread of
technological innovations
Inventors and
Inventions Chart
iii. Pressure to cut costs & prices
(eliminating competition &
building monopolies)
iv. Expanded labor force
(Immigrants who were willing to
work for CHEAP!)
v. Continued governmental attitude
of Laissez Faire toward
businesses.
2. U.S. Economic System
a. Capitalism: private businesses
run most industries;
competition drives the cost of
goods/ wages of workers.
b. Laissez Faire: “Let alone”/
“Hands off” - No government
intervention in the economy.
3. Economic Philosophies
a. Karl Marx: Opposed capitalism (he
said the business owners took
advantage of the workers).
1. COMMUNISM: Individual
ownership of property should not
be allowed. Property and means
of production are owned by
everyone.
b. Herbert Spencer: proposed Social
Darwinism:
1. Society progresses through
natural competition. The
“fittest” people, businesses, or
nations will rise to positions of
wealth and power; the “unfit” will
fail.
1. Social Darwinism: derived from
Darwin’s “Survival of the fittest” in
society; suggests that society
(government) should have little to do
with business (again- laissez faire)
2. Henry George wrote
Progress
and
Poverty
(1879)describing the
paradox in society
4. The Corporation
a. CORPORATION: organizers raise
money by selling shares of stock, or
certificates of ownership, in the
company. ** Stockholders are those who
buy shares and receive dividends (a % of
corporation’s profits). They have little say
(if any) in the affairs of the company
b. Trusts: a group of companies turn
control of their stock over to a
common board of trustees.
c. Monopoly: when a trust gains
exclusive control of an industry;
marked by little to no competition
- the company has almost complete
control over the price and quality
of a product.
5. Legislation- Government
& Business
a. US policies most often
favored industrialists, not
workers (because of laissez-faire).
- As big business owners formed
monopolies, Americans demanded that
trusts and monopolies be outlawed
b. Sherman Anti-Trust Act:
Congress’ response to
Americans’ demands- passed in
1890. This law outlawed all
monopolies and trusts that
restrained trade.
1. However, law failed to define
what was considered a monopoly or
trust.
2. Law was difficult to enforce.
6. Railroads
a. Railroads were the first
monopoly in America.
b. States developed railroad commissions
to look into complaints.
1. Charging more for short hauls
and less for long hauls
2. Offering rebates to
favored customers
7. Mass Marketing
a. Brand names and packaging played
important roles in promoting
goods.
b. Advertising promoted products
c. DEPARTMENT STORES: sold a
variety of goods. Marshall Fields
and RH Macy were
among the first
department store
owners.
Innovators in Organization:
Rockefeller and Carnegie
1.The Standard Oil Company was
formed by John D. Rockefeller
after he recognized the energy
potential of the oil industry
a. 1870 – John D. Rockefeller incorporated
his various interests into the Standard Oil
Company of Ohio
b. In 1882, all its properties were merged in
the Standard Oil Trust, which had an
initial capital of $70 million!
Standard Oil Co.
*January 2, 1882 :The Trust was
valued quite conservatively at
$70,000,000 – the true value was
about $200,000,000. The nine
Trustees controlled 23,314 of the
35,000 shares with J.D. Rockefeller
holding 9585 shares. ($2,000 each in
1882, with Rockefeller’s share
worth $19,170,000!!!)
Rockefeller was known to use the following tactics to
ensure Standard Oil was #1:
• Monopolization — Bought up all of the components
needed for the manufacture of oil barrels in order to
prohibit his competitors from getting their product on
the market
• Rate Wars — cutting the price of oil, forcing his
competitors to go out of business or sell out to him!
• Rebates — demanded a refund on public rates offered
by the railroads, who agreed to this practice because of
Standard's immense volume
• Intimidation — On more than one occasion, Standard
Oil dispatched thugs to break up competitors' operations
that could not otherwise be controlled!
c. Rockefeller used Horizontal
integration – the expansion of a
business’s ownership and control over
other similar businesses/industries - a
strategy used by a business or
corporation that seeks to sell a type of
product in numerous markets.
(Thus, the creation of an oil monopoly)
d. He grew very unpopular until he began
giving millions away to charity. Today
he is known for his philanthropy.
2. Andrew Carnegie – born in
Scotland, moved to PA at age 13.
a. Intelligent and hard-working, he
quickly worked his way up the
ranks
in every job he held.
b. In 1872, he began focusing on
the steel industry alone, and he
opened his first steel plant in
1875.
c. 1882 – bought out the Homestead
steel works
d.
Employed Vertical integration
- The process in which several
steps in the production and/or
distribution of a product or
service are controlled by a single
company
Ex: an oil refining business would be vertically
integrated if it owned or controlled pipeline
companies, railroads, barrel manufacturers, etc.
Carnegie Steel Works
One of the
earliest, largest
and most
famous
examples of
vertical
integration was
the Carnegie
Steel company.
Coal Mine
Iron Mine
(L) Rockefeller
(R) Carnegie
Capitalists and
Corporations
Captain of
Industry
• Business leader who
used his wealth and
power to
positively
impact the
country in some
way, often
through providing
more jobs or
through
philanthropy.
OR
Robber
Baron?
• Business leader who
dominated his
industry, amassing
great wealth, usually
by unfair
business
practices that
hurt the
majority of
Americans.
Robber Baron
or
A Captain of Industry
Analysis
The American Dream
• Many people, including monopolists
of the time, began pursing the
idea of the American Dream.
• The term was first used by James
Truslow Adams in his book The Epic
of America.
• He states: The American Dream is "that dream
of a land in which life should be better and
richer and fuller for everyone, with opportunity
for each according to ability or achievement…It
is not a dream of motor cars and high wages
merely, but a dream of social order in which
each man and each woman shall be able to attain
to the fullest stature of which they are innately
capable, and be recognized by others for what
they are, regardless of the fortuitous
circumstances of birth or position."
• How would you describe the American Dream
today?