Chapter 22
Section 3
New Methods and
Business Organizations
Capitalism and Changing
Production Methods
 By the late 1800’s Europe and the United States
were characterized by their capitalist methods
 {Capitalism is an economic system in which
individuals or corporation rather than
governments control the factors of production}
 Before the Industrial Revolution, commercial
capitalism- merchants who bought and sold
goods- was the most common form of capitalism
 During the Industrial Revolution industrial
capitalism- the producing and manufacturing of
goods- became more common
Division of Labor and
Interchangeable Parts
 Before division of labor if a part of an object were
broken, the owner would have to buy a whole new
item
 Thanks to division of labor, {interchangeable
parts came about. Because parts were created
and assembled separately and identically they
could simply be changed out if broken}
 {The system of interchangeable parts
resulted not only in speedy production, but
now items could be easily repaired}
The Assembly Line
 {Division of labor, the use of interchangeable
parts and the assembly line are all essential for
{mass production}- producing large numbers of
identical items}
 In one part of the factory all the parts were made
 Then all the parts were brought together in a
central location where as assembly line would put
the pieces together
 This saved time and energy and opened the doors
for mass production
 {Henry Ford was a primary founder of the
assembly line. He went as far as to use conveyer
belts for the production of automobiles}
Henry Ford and the
utilization of the
assembly line
Rise of the Corporation
 A business owned by one person is called a sole
proprietorship
 A business owned by two or more people is called
a partnership
 These types of businesses are typically too small
and could not afford mass production
 Businesses began to form groups called
{corporations- allowed people to buy stock in
the company and those people elected who ran
the company and shared in the profits based
on how much they invested}
 By the late 1800’s corporations became large,
powerful and common place
Continued….
 In 1901 J.P. Morgan founded the United States
Steel Company, one of the first multi-billion dollar
corporation
 As more and more corporations came out the
competition increased
 Prices were lowered for big businesses’ products
because they could mass produce them resulting
in many small businesses to sell out or even fail
 Sometimes {a corporation would gain almost
complete control of the production on a
single good or service- a monopoly.}
 By the 1900’s {several huge corporations would
combine in order to have monopolies over every
stage of entire industries- a cartel}
 Rich Uncle Pennybags is the rotund old
man in a top hat who serves as the
mascot of the game Monopoly. The
character first appeared on Chance and
Community Chest cards in U.S. editions
of Monopoly in 1936. The artist who
designed the character to appear across
several of the cards has remained a
mystery. Historian and author Philip
Orbanes wrote in 2006 that it is believed
that the character was partially
influenced by the stature and dress of
financier and banker J. P. Morgan.
Business Cycles
 The Industrial Revolution also brought with it {alternating
periods of up’s and down’s- a pattern that came to be called
the business cycle}
 Each industry affected another:
 Rising demand for goods > rising need for machines to make
the goods > rise in need of steel to make more machines >
rise in need of coal and iron to make steel for machines >
more workers to do all of this > higher wages > more
purchasing power
 On the other hand, a falling demand in goods had the exact
opposite effect and the economy would fall into a depression
 Eventually the economy would go back to normal as surpluses
depleted and demand went back up, thus completing the
business cycle
Review Questions
 What is the economic system in which
individuals or corporation rather than
governments control the factors of
production?
 What was the benefit of interchangeable
parts
 What was the benefit of interchangeable
parts
 What is mass production?
 What was Henry Ford known for inventing?
 This photograph
was taken in the
1960’s as a
demonstration
that was
supposed to
reflect the
growing
population and its
impact on the
economy. There
are 19 grown men
crammed in this
phone booth.