IndustrializationTechnology, Big Business, and the Rise of Labor

Unions1859-1914

The first Industrial Revolution

Began in the 1700s when people stopped making things by hand and began using machines

The spinning jenny, steam engines, and the cotton gin are early examples of the technology used

Steam Power

Invented by the Scottish Mechanical engineer James Watts Improved on design by

other inventors

Key Power source of the Early Industrial Revolution Replaced human,

animal, wind and water power

Allowed industries to be built anywhere.

Industrial Innovation

The Second Industrial Revolution (1865-1914) was sparked by several inventions and discoveries Bessemer Process, Steam Train, Oil, Electricity, etc.

Steel

The Bessemer Process Invented in 1859 by William

Kelly (U.S.) and Henry Bessemer (G.B.)

Used hot air to remove impurities

Produced more steel in 1 day than previously produced in a week

Improved and adapted by William Holley – significantly increased production

Why is this important?

Bessemer Advantages Allowed development of

Industrial cities Pittsburgh, PA – Gary, IN –

Cleveland, OH

Allowed railroad industry to replace iron rails Last longer and easier to make

Steel used in construction Lighter weight – can build

taller buildings (Skyscrapers)

Resists rust and corrosion Used in nails, wire, etc.

Steel Mills Bessemer process

allowed development of steel mills

Pittsburgh became production capital of U.S. Brought jobs and

prosperity

Pollution choked the city and covered it in soot

Rivers turned yellow

Oil Petroleum used by Europeans to grease wagons

& tools

Late 1850s process of refining crude to kerosene Replaced whale oil for lamps and lighting

Oil Drilling In 1859 Edwin Drake used a steam powered

drill to search for oil under ground Called Drake’s Folley (no one believed it

would work) After production topped 20 Barrels /day others

tried Similar to Gold Rush (Oil called “Black Gold”)

By 1880 25 million Barrels produced in PA alone

Oil Products

Kerosene, Waxes, Lubricants, Petroleum Jelly, etc.

Transportation Railroads

Steam Ships

Horseless Carriages

Airplanes

Steam Trains and Railroads

The locomotive was invented by Richard Trevithick in 1804

Rapidly refined and became a viable transportation by 1830s

In U.S. the Civil War led to rapid expansion of rail system in U.S.

As price of steel dropped expanded faster Steel use was faster and stronger than old iron

rails Steel cost 12 dollars a ton in 1873

Steam Trains

Locomotives rapidly improved Early trains were slow and hard to stop

George Westinghouse invents airbrakes 1868 Allowed cars and locomotive to brake

simultaneously

Granville woods improved Airbrake and developed a communication system for trains

Standard track width (gauge) was adopted No need to change trains for different tracks Improves efficiency and speed of travel

Transcontinental Railroad

First completed in 1869 at Promontory Point, UT Golden Spike driven

by Leland Stanford

Connected the country by land

Allowed rapid transportation of people and goods

The original "golden spike", on display at the Cantor Arts Museum

Affects of Rail travel

Linked small towns to large cities

Rapid western expansion/settlement

Urban growth/Job Growth

Expand other industries

National Distribution of goods

National standard time to coordinate schedules Began in 1883 by agreement of Rail owners in

U.S. and Canada Made into law with the 1918 Standard Time Act

Steam Ships

First came into use in the 1800s

Began with sailing ships hybridized to paddle ships

Screw-Propeller adopted later on

Rapid cross ocean travel First Atlantic crossing

credited to the SS Savannah May 1819

Horseless Carriages

First developed using steam by French military officer Nicholas-Joseph Cugnot (inefficient and loud)

Gasoline fueled internal combustion engine built by Nicholas A. Otto in 1876

In 1893 Charles and J.Frank Duryea built the first “car”

Suspension Bridge

Uses steel cables to suspend a roadway over gaps

First suspension bridge in the U.S. was the Brooklyn Bridge that crossed the East River in NYC At the time was longest bridge in the world

Airplanes

Invented in 1903 by Orville and Wilbur Wright First successful flight at Kitty Hawk, NC Lasted only 12 seconds but proved it was

possible

Communication

Telegraph Invented by Samuel Morse in 1837

Allowed for communication with electricity Used a series of dots and dashes called Morse

Code Led to a company called Western Union

Had 2,000 offices by 1866 Could rapidly communicate over long distances

Telegraph First commercial telegraph line completed

May 1844

The first message sent on theis line was “What hath God Wrought” The telegraph embossed paper with a series

of dots and dashes to be interpreted

Telephone Invented by Alexander

Graham Bell

First successfully demonstrated at Philadelphia Centennial Exposition in 1876 By 19000ver 1 million

installed in homes and businesses

Required operators to connect lines (created job opportunity for women)

Typewriter

Christopher Sholes developed typewriter in 1867

Sold patent to E. Remington & Sons. Produced easily legible documents Used carbon paper and strike arms to print Created another job opportunity for women

Electricity

First studied by the Greek Thales of Miletus in 600 B.C.E.

Renewed interest in the 1600s but saw little progress until 19th century Ben Franklin’s kite experiment in 1750s

proved lightning was electrical energy

In early 1800s other scientists began to experiment leading to the development of communication, lighting and other devices

Thomas Edison Opened invention business at Menlo

Park NJ 1876

Used Direct Current (DC) for electrical inventions

Held over 1,000 patents when he died in 1931

Major inventions include: Multi-message Telegraph Electric Lightbulb Phonograpn Motion Picture Machine Telegraphic Stock Ticker First Electric Power Plant Electric vote counter

Westinghouse and Tesla

A.C. Electricity

Alternating Current (AC)developed by Tesla & Westinghouse

More efficient than D.C. Could be transferred

long distances and distributed

Allowed cities to be lighted by electricity

Made electric streetcars possible

Tesla’s other inventions

Tesla Coil

Radio

Remote control

Fluorescent light

X-rays

Industrial Revolution Technology

The key to all of these inventions was Technology Technology is advancing knowledge

Innovation drives technology

Scientific experimentation drives innovation

Machines replace human work through Technology

Big Business Terms:

Corporation - a form of group ownership in which a number of people share the ownership of a business

Monopoly – complete control of a product or service

Cartel – an arrangement in which businesses making the same product agree to limit production to keep prices high

Horizontal integration – a system of consolidating many firms in the same business to lower production costs

Vertical integration – the practice of gaining control of many different businesses that make up all phases of a product’s development

Trust – a situation in which companies assign their stock to a board of trustees, who combine them into a new organization

Big Business Terms

Entrepreneur – people who invest in a product or enterprise to make profit

Protective Tariff – taxes that make imported goods cost more in order to protect local industry

Laissez-faire – policies that allow business to operate with minimal government regulation

Social Darwinism – an application of Charles Darwin’s work which held that wealth was a measure of one’s inherent value and those who had it were the most “fit”

ICC – the Interstate Commerce Commission, a government body set up to oversee railroad operations

Sherman Antitrust Act – a bill passed in 1890 which outlawed any trust that operated “in restraint of trade or commerce among the several states”

Big BusinessPeople

John D. Rockefeller – an oil tycoon who made deals with railroads to increase his profits

Andrew Carnegie – a steel tycoon who used vertical integration to increase his power

J.P. Morgan – Financier and banker dominated finance and industrial consolidation bought U.S. Steel from Carnegie

Cornelius Vanderbilt – railroad tycoon who dominated the eastern rail industry and expanded it west to Chicago

Industrialization Changes Business

Practices• Business leaders combined funds and

resources.

• Investors formed corporations that protected them from losing more than original investment.

• A corporation could operate in different regions.

The BIG Picture Businessman like

Rockefeller and Carnegie use new methods to expand business

New methods and help from the gov’t. allow business to control the U.S. Economy

1870

1880

1890

1900

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

U.S. Businesses, 1870-1900

U.S. Busi-nesses, 1870-1900

New Business Methods:

Advertising Department Stores:

1862, A.T. Stewart, N.Y.C.

Provides many different consumer goods

Shopping becomes recreational

Urban Consumers

Mail-Order Catalogs: Montgomery Ward,

Chicago Sears & Roebuck,

1890s Supply rural

consumers

New Business Methods: Rise of Corporations

Corporations fueled the rise of “Big Business” Small business could not compete! Shut down in hard

times!

Rise of Corporations

Corporation: organization owned by many people but treated by law as though it were a person. Stockholders buy stock… Raise money, spread the risk! (vs. partnership,

proprietorship)

Created Economies of Scale… Could produce goods more efficiently, which allowed to the

rise of “big business”

Produce more goods @ cheaper price, continue to operate in harsh economic times, drive out small competition!

New Business Methods

Corporations worked to maximize profits by:• paying workers low wages

• paying lower prices for raw materials

• supporting research labs

Standard Oil Factory

New Business Methods: Help from

the Gov’t Santa Clara

County v. Southern Pacific Railroad Company SCOTUS, 14th

Amendment and Corporations…

Received protection just as individuals would!

New Business Methods: “Pooling”

Competition created problems; low prices for consumers!!!

Railroad pools: associations of competing railroads “for the

purpose of a proper division of the traffic at competitive points and the maintenance of equitable rates that may be agreed upon.”

Interstate Commerce Act, 1887

New Business Methods: BIG

Business! By 1870s, competing businesses were merging

together, creating “big business”1. Mergers, Consolidation of Industry

2. Creation of Trusts

3. Holding Companies

Example of consolidation: 1870, Rockefeller’s Standard Oil Company

owned 2% of the country’s crude oil… By 1880 – it controlled 90% of U.S. crude oil!

How did it do so???

New Business practices

Monopolies: Single company

achieves control of an entire market!

Many states begin outlawing…

Trusts: Legal maneuver allowing

trustee to control several companies & run them as one.

Holding Companies: Produce no actual product. Controls several

companies, merging into one large enterprise!

VERTICAL INTEGRATION

“Carnegie Steel”

Steel Refineries

Railroad Lines

Raw Materials

Limestone Quarries

Iron Ore Fields

Coal Mines

HORIZONTAL INTEGRATION

“Standard Oil Company”

Refinery Refinery Refinery

New Business Methods: Trusts

… by creating Trusts! Stocks would be

traded in for trust certificates.

“Super-Corporation” created from many small corporations!

Standard Oil, 1882 – first TRUST!

New Business Methods:

Investment Banking J.P. Morgan

Buy large blocks of stock from companies looking to sell… (discounted)

Re-sell the stock for profit!

These investment bankers became interested in holding companies and trusts…

United States Steel, 1901

Captains of Industry?

Were the tycoons “robber barons” who swindled the poor and drove small businesses under…

or “captains of industry” who served the nation and made prices of goods cheaper?

Is Big Business Bad for Small

Businesses?

Or Is Big Business Good for the

Nation? Provides Jobs

Allows for product innovations

Financially supports universities, libraries, museums, etc.

Survival of the Fittest

Charles Darwin’s idea of evolution of species

applied to American capitalism

led to the idea of Social Darwinism

The belief that wealth was a measure of a person’s value and those who had wealth were

most “fit” to survive

Conflict with Business

Social Darwinists believed government should stay out of private business and thought it was wrong to use public funds to assist the poor.

Americans who worried about the methods of industrialists called for federal regulation of business practices.

Sherman Antitrust Act

The ICC and the Sherman Antitrust Act began a trend toward government regulation of corporate power.