Trains, Technology and the Rise of Big Business

INDUSTRIAL GROWTH• The period from the end of the Civil War to

1900 was an era of unmatched economic growth in the United States.

• The KEY to this growth was INDUSTRIALIZATION.

• In 1889, income from manufactured goods exceeded that of farm goods for the first time.

• By 1894, the US had taken the place of Great Britain as the leading manufacturing nation in the world.

Foundations of Growth: Why did the economy grow?

Factors of production:

1) land:

such as the beginning of oil discoveries in 1859

2) labor:

1860-1900 the population went from 31 million to 75 million

3) capital:

equipment and money

Why did the economy grow?

• New technology and new processes.

By the 1880s, 20,000 were filed per year.

What were some of the new inventions?

• The Iron IndustryThe iron industry was revolutionized by two

discoveries: 1) the use of coke (soft coal with impurities removed; and 2) theBessemer Process (blasts of cold airused to burn off impurities from heated iron)

Since steel could be made cheaply, steel production soared.

Steel became the basis for other industrial advances.

For example, railroad tracks would last ten times as long as Iron.

Other inventions

• Refrigerator cars (eg meat shipping)

• Machines to shell corn and peas

• Typewriter 1867 by Christopher Sholes

• Electrical Power 1876

Thomas Edison

He created an invention factory. In 1880, he patented the incandescent light bulb.

In 1882, he created the first permanent central power station.

Inventions

Other Inventions• Electric motors:

Westinghouse• Telegraph service

1886• the TelephoneCreated by Alexander

Graham Bell in 1876. This led to Bell Telephone Systems in 1900

• Radio by Guglielmo Marconi in 1895

TRAINSThe Glenbrook on the way to

Virginia City

Railroads

• Railroads were vital to the industrial growth!

It mean no more isolated communities.

Goods could be sent anywhere.

People could move quickly and more comfortably.

Railroad Expansion and Improvement

As trains began to expand throughout the nation, improvements were made to improve. Some examples include:

1) Air brakes (created by Westinghouse)2) Trains became faster.3) More tracks were laid. By 1890, 166,703

miles of track.4) Standard Time (1883)5) Standard Gauge (4’8.5”)

Standard Time

6) The Transcontinental RailroadUnion and Pacific RR

• The train was created to connect Omaha and the West Coast (San Francisco).

• It had to go through mountains, deserts, Indian territory and would require six years to complete.

• The work would require great engineering, with teams working from east and west simultaneously.

• Much of the work on the Western team was done by Chinese immigrants. They were willing to work for little pay. By 1882, over 375,000 Chinese immigrants were in the US. Discrimination did follow.

• The Transcontinental Lines were completed on May 10, 1869, at Promontory Point, Utah.

• The “Golden Spike” driven in to mark its completion is seen as a turning point in the development of the West and the US.

The Power of the Railroads

• In 1862, the Pacific-Railway Act gave the Pacific and Central Pacific Railroads land.

• Each company received 400 feet of right-of-way and free use of timber and building materials from government land.

• Railroads could sell the land at their choosing.

• By 1871, 175 million acres of land was given to 29 railroad companies.

Criticism of the Act

• Some felt that provided railroads with too much power and led to railroad track being laid in areas for reasons of profit only. The critics also felt it made the possibilities of graft and corruption greater.

• Some states attempted to regulate the railroads that led to lawsuits. (eg Munn v Illinois)

• In short, the Supreme Court and its decisions will lead to a laissez-faire attitude by the courts toward regulation.

The Giants of Industry

• The heart of the new industrial system was MASS PRODUCTION

• Because of the large scale involved, the late 1800s are known as the ERA OF BIG BUSINESS

Rags to Riches?

• The ones who took chances and built businesses are called ENTREPRENEURS.

• These entrepreneurs were made famous in part due to the writings of Horatio Alger.

• His writings often included stories of business leaders who were born in poverty, usually on a farm or in a foreign country, who made their fame and fortune through hard work, good luck and quick wits.

Rags to Riches?

• Some business leaders did fall under this category (Philip Armour, Andrew Carnegie).

• Most entrepreneurs?

25% came from farms

50% had fathers in business

37% attended college

The Business Philosophy of the Era

• Captains of Industry OR• Robber-barons: Ruthless methods would

be followed by some. For example, if Rockefeller wanted to buy your company and you wouldn’t sell, he would cut his prices until you had to sell. He also placed spies in competitors and bribed legislators. He also gave REBATES to people and companies who used only his trains.

Philosophy continued

• Most individuals believed that the government should not interfere with business (LAISSEZ-FAIRE).

• SOCIAL DARWINISM:

A combination of beliefs based on Charles Darwin’s Origins of the Species and Herbert Spencer’s Social Darwinism. The belief was that social progress was based upon the struggle for survival among all people: “survival of the fittest”.

Philosophy continued

• Many Americans believed that poverty was a result of moral weakness; and, that the poor were being punished for their sins.

• The GOSPEL OF WEALTH was the belief that those with millions should be responsible for helping the poor, not the government. Andrew Carnegie will give millions to libraries, education and medical research.

Andrew Carnegie

• http://www.americaslibrary.gov/cgi-bin/page.cgi/aa/industry/carnegie

Carnegie

• Born in Scotland in 1835• Son of a poor weaver• Came to the US when he was 13• 1st job: bobbin boy (13 years old) He made

a $1.20 a week.• He gets a job as a messenger boy in a

telegraph office that changes his life. He uses the job to learn everything he can about the telegraph business.

Carnegie

• He leaves the telegraph office when Thomas A. Scott of Pennsylvania Railroad hires him as a personal secretary and telegrapher.

• By the age of 24, he is named the Superintendent of the Pittsburgh division. He helps develop the Pullman Car.

• With the money he makes he invests in stocks. A STOCK: ownership in a corporation.

Carnegie

• By 1870, Carnegie begins to focus on steel.

• He gains control of all levels of production of steel. This is called VERTICAL INTEGRATION.

• By 1900, he was making ¼ of the nation’s steel. 1901, he is the richest person in America.

• When Carnegie retires he sells his business to JP Morgan for $147 million.

Carnegie• Philanthropist: some one who gives

away money for the public good. He gave $125 million.

J.P. Morgan

Morgan

• In 1892 Morgan arranged the merger of Edison General Electric and Thompson-Houston Electric Company to form General Electric.

• In 1901, JP Morgan buys Carnegie’s steel company. This is a shift from INDUSTRIAL CAPITALISM to FINANCE CAPITALISM.

(Corporations controlled by individual owners to corporations owned by bankers)

Morgan combines Carnegie’s steel company with others creating US STEEL. It becomes the first billion dollar corporation in American history.

Philip Armour

Armour

• Born in 1832 in Madison County, New York. He grew up on a farm.

• At 20, he left to a be a miner and box builder in California.

• He returned home with money he saved in 1856. He tried farming, but didn’t like it.

• He moved to Milwaukee and entered the grocery business.

Armour

• During the Civil War, he formed a company that dealt in grain and meats and made about $2 million speculating in pork futures.

• With the profits, he built a meat packing plant in Chicago. He uses vertical integration, combined slaughtering and packing companies using every part of the cattle.

• In 1901 he died with a net worth of $50 million.

John D. Rockefeller

Rockefeller

• Born in western New York in 1839.• At 14, he moved to Cleveland.• After high school, he went to commercial

college for short time. He completed high school at age 16.

• At first he worked at a trading company at a salary for $15 a week.

• In 1859, he formed his own company to trade in grain, hay and meats.

Rockefeller

• In 1863, he began investing in oil refining. He decided to take a risk and invested one-half of his business to devote his energies to oil.

• By 1872, he took control of 21 of 26 refineries in Cleveland.

• Taking over a majority of ownership in a type of business is called HORIZONTAL INTEGRATION.

• He creates his own company called Standard Oil.

Rockefeller

• He did not stop there. He also decided to begin vertical integration of the business by buying all aspects of production: e.g. oil barrels, trains)

Comparative Wealth

• http://en.wikipedia.org/wiki/Wealthy_historical_figures_2008