The Rise of Industry

Overview

• Perfect Storm – cheap labor, resources, capital, tech

• RR’s & new tech spur increase in steel production

• The dominance of corporations– Trusts, monopolies

• “Robber Barons” amass big big $• Farmers & workers – declining opportunities

Overview

• Laissez-Faire–Social Darwinism, Gospel of Wealth, Horatio Alger

• Growing discontent–Populism, unions & alternative economic theories

Steel Production

•

Railroads

• Gov’t subsidies – rampant corruption– Crédit Mobilier

• RR corporations > consolidation • Transcontinental – “Chinamen” • States could not regulate interstate commerce > rate fixing > farmers appeal to fed gov. > Interstate Commerce Act

• Time Zones

Inventors & Inventions

• Samuel Morse• Transatlantic cable by 1866

Alexander Graham Bell 1876

Other Inventions

Thomas Edison

• 1st modern research laboratory in NJ

• Phonograph, light bulb, motion picture camera, dynamo

> George Westinghouse – transformer to produce AC electricity (1885) > lighted cities, indoor appliances, etc.

Consolidation & Corruption – The Rise of Barons

• Jay Gould – “watering stock”• RR’s gave rebates & kickbacks to big customers – raised rates on smaller customers

• Panic of 1893 – JP Morgan buys up RR industry = more efficient/too much power?

• Steel, Oil, other industries follow RR model > monopolies

Andrew Carnegie

• Vertical Integration• Philanthropy• Carnegie Mills out-produced Britain by 1900

• Sold of to Morgan > US Steel Corp. – Controlled 3/5 of U.S. steel business

John D. Rockefeller

• Standard Oil Trust• Tech & efficiency• Controlled 90% of US oil by 1881

• Horizontal Integration• Control of supply & price = $$$$$$$$$$$$

Failing Anti-Trust Movement

• Grangers – farmers push for reforms but…

• State reforms fail• Sherman Anti-Trust Act (1890)

– Prohibited “trust…or conspiracy in restraint of trade”

• U.S. v E.C. Knight Co. – Sherman ATA only applied to commerce not manufacturing

Laissez Faire Capitalism

• Little gov’t regulation– Violation of economic, scientific, religious principles

• Low taxes• Free markets• Adam Smith

– Wealth of Nations– The Invisible Hand (Competition)

Social Darwinism

• Based on theory of natural selection

• Herbert Spencer– Natural selection & survival of the fittest

applied to economy– Concentration of wealth is natural– Help for lower classes unnatural

Gospel of Wealth

• Religious justification for polarization of wealth

• Protestant work ethic• Rockefeller – “God gave me riches” • Rev. Russel Conwell – Everyone has a duty

to become rich• Carnegie – Wealthy have responsibility to

create civic projects

Horatio Alger Myth

• By 1890 10% controlled 90% of the wealth

• But…Alger’s novels convinced some that honesty & hard work would lead to riches = Anomalous…upward mobility a myth

Labor Discontent

• Farmers = The Grange, Granger Laws, Populist Party

• Urban & RR workers = trade & industrial unions

• Middle-class = progressive movement

Competing Economic Theories

• Laissez Faire Capitalism –

• Limited Cap –

• Socialism -

• Communism –

Other Critiques