The Incorporation of America

1. The Incorporation of America

2. Essential Question Industrialization increased the standard of living and the opportunities of most Americans, but at what cost?

3. Causes of Rapid Industrialization • Steam Revolution of the 1830s-1850s. • The Railroad fueled the growing US economy: • First big business in the US. • A magnet for financial investment. • The key to opening the West. • Aided the development of other industries.

4. Causes of Rapid Industrialization • Technological innovations. • Bessemer and open hearth process • Refrigerated cars • Edison • “Wizard of Menlo Park” • light bulb, phonograph, motion pictures.

5. Causes of Rapid Industrialization • Unskilled & semi-skilled labor in abundance. • Abundant capital. • New, talented group of businessmen [entrepreneurs] and advisors. • Market growing as US population increased. • Government willing to help at all levels to stimulate economic growth. • Abundant natural resources.

6. In 1865, there were only 35,000 miles of rails. By 1900, there were 192, 556 miles of rails. Transcontinental railroad was subsidized by the federal government: In total, Washington rewarded 155,504, 994 acres and western states contributed an additional 49 million acres. Military and postal needs seen as important. IN addition, railroad companies were unwilling to suffer initial heavy losses due to extending the rails into unpopulated areas. Railroads

7. Many critiqued the government subsidies especially when corporate greed was exposed later. However, the government did benefit by giving subsidies: long-term preferential rates for military and postal traffic Granting land was “cheaper” than raising taxes on everyone, which would result in direct cash assistance. (Essentially, gave away land for free for later tax collection). Lastly, the land given was mostly worthless until the railroads were built. Thus, this allowed the building of needed transportation at low costs for the government in nominal dollars. Railroads

8. Two rails built simultaneously: Union Pacific (from Omaha, Nebraska) Central Pacific (from Sacramento) Highly subsidized: 1 mile of track constructed = 20 square miles of land 1 mile constructed on prairie land = $16,000 1 mile constructed in mountains = $48,000 Immigrants used extensively to build rails: Union Pacific- Many Irish immigrants (Paddies) Central Pacific- Many Chinese immigrants. Hells on wheels- tent cities of debauchery Transcontinental Railroad

9. May 10, 1869, the Union Pacific and Central Pacific met in Ogden, Utah (Promontory Point) to complete the Transcontinental railroad. Transcontinental railroad

10. Northern Pacific Completed in 1883. From Lake Superior to Puget Sound Atchison, Topeka, and Santa Fe Completed in 1884. Stretched through southwest to California. Southern Pacific Completed in 1884, stretched from New Orleans to San Francisco Great Northern Duluth to Seattle and completed in 1893. Other Transcontinental Rails

11. Transcontinental railroads of 19th Century

12. Made money first in steam boating. In his sixties, turned to rails. He orchestrated the merging of the old eastern lines with the new western lines, especially the New York Central line. He updated rails by using steel tracks as opposed to iron and standardized the gauge of the rails. Cornelius Vanderbilt

13. Rails opened up new markets for manufactured goods and sped new raw materials to factories. Rails help create the consumer market. In particular, steel became a huge industry with the demand for steel rails. Industries impacted Mining and agriculture- clusters of farm settlements hugged the rails and brought their goods to market and brought them necessary manufactured goods. Benefits of the Rails

14. Growth of Cities Ensure them transportation and also an exchange of goods. (ex. Chicago) Immigration Increases as jobs became available and also needed settlers, rail companies advertised in Europe Land Prairie land used for cattle. White pine from Michigan, Wisconsin, and Minnesota disappeared Time To standardize time, 4 time zones created in U.S. Millionaires Rails created a legitimate millionaire class Benefits of the rails

15. Rail companies sought enormous profit and in many ways did it with corrupt means. Stock watering- grossly inflated their claims about the assets and profitability of a line, and sold stocks and bonds in excess of the rails actual value. Jay Gould was a master of this technique Cornelius Vanderbilt “Law! What do I care about law? Hain’t I got the power” I won’t sue you, for the law is too slow. I will ruin you.” William Vanderbilt “The public be damned” While abusing the public’s money and trust, the rail barons also bought Congressman, police, judges, and other officials. Rail Corruption

16. Cornelius [“Commodore”] Vanderbilt Can’t I do what I want with my money?

17. William Vanderbilt • The public be damned! • What do I care about the law? H’aint I got the power?

18. Rail Kings acquire essentially a monopoly, and could influence more lives than the President of the United States Used Pools, the agreement to divide profit and business in a given area. Offered secret rebates for steady business from shippers. Slash rates on one competitive line and jack up prices on another. Monopoly of Robber Barons

19. At first, many Americans were slow to combat against the apparent evils of the rail monopolies and owners. Why? Dedicated to concept of free enterprise and also free market capitalism. Natural predisposition to laissez faire economic policy, as championed by Jefferson. Closely attached to the concept of the “American Dream,” the hope that through hard work and shrewd choices, anyone can become a millionaire. Government tries to control Monopolies

20. Nonetheless, the government tried to limit and regulate the railroad monopoly First starts in State legislatures. However, this stopped abruptly in the Wabash Supreme Court case Case stated that individual states had no jurisdiction or authority to rule on interstate commerce So, if the monopolies and railroad trusts were to be regulated, it would have to be done by the federal government Government tries to control Monopolies

21. Published in 1887, it prohibited rebates and pools and also required the railroads to publish their rates openly. Also outlawed charging more for a short haul than for a long haul on the same line and forbid unfair discrimination against shippers. Most importantly, it set up the Interstate Commerce Commission (ICC) However, the Interstate Act was shrewdly manipulated by smart corporate lawyers. In the end, the law basically stabilizes business instead of revolutionizing it. Also important, because it marks the first time the federal government makes a large-scale attempt at regulating business in the interest of society. FULL NOTICE THAT THERE WAS A PUBLIC INTEREST IN PRIVTE ENTERPRISE THAT THE GOVERNMNET WAS BOUND TO PROTECT. Interstate Commerce Act

22. By 1894, the United States surpassed all rivals and was first in the world in manufacturing. Why? Liquid capital- abundant amount of money available to invest. Simply put, people had more money to risk. Natural resources- Large amounts of coal, timber, and iron. Mesabi iron ore fields allow for the steel industry to blossom and flourish Miracles of Mechanization

23. Immigration- massive amounts of immigration provided the needed labor supply to work in American factories. These low-paid immigrant workers from eastern and southern Europe provided the work needed for American industry to flourish. American ingenuity- American inventors and industrialists created important inventions. Examples are: techniques of mass production, some 440,000 patents issued from 1860-1890, and time saving devices such as the typewriter, cash register, stock ticker. To spur urbanization, the refrigerated car, the electric railway etc Miracles of Mechanization

24. U. S. Patents Granted 1790s  276 patents issued. 1990s  1,119,220 patents issued.

25. Thomas Alva Edison “Wizard of Menlo Park”

26. The Light Bulb

27. The Phonograph (1877)

28. The Ediphone or Dictaphone

29. The Motion Picture Camera

30. Alexander Graham Bell Telephone (1876)

31. Alternate Current George Westinghouse

32. Alternate Current Westinghouse Lamp ad

33. The Airplane Wilbur Wright Orville Wright Kitty Hawk, NC – December 7, 1903

34. Model T Automobile Henry FordI want to pay my workers so that they can afford my product!

35. “Model T” Prices & Sales

36. Business tycoons such as Andrew Carnegie, John D. Rockefeller, and J.P. Morgan all devised schemes to limit competition. So, the industrialists campaigned for laissez faire economic policies and for the benefits of competition, but did everything they could to eliminate competition. Carnegie and Vertical Integration The idea of combining into one organization all phases of manufacturing from mining to marketing. In his case, Carnegie’s miners dug the iron ore from the Mesabi range, floated it down the Great Lakes, his railroads delivered it to the factories, and his factories made the finished product which was delivered to market by his trains. Carnegie wanted to eliminate the middle man, control quality at all stages, eliminate inefficiencies, and lower costs. Trust Titans

37. Rockefeller and Horizontal Integration: Basically, aligning with competitors to monopolize a given market. He devised the “trust.” Basically, as Rockefeller said, “let us prey” He would target small competitors and essentially make them his own. Anyone left of his trust would be crippled economically because the Standard Oil Company controlled prices. Trust became known as any large-scale business combination Trust Titans

38. New Type of Business Entities

39. J. P. Morgan and interlocking directorates: When companies struggled, he would devise a a scheme to buy and consolidate them. This limited competition and he made sure that his banking syndicate was put on the board of directors for these consolidated companies, to protect his interests. Trust Titans

40. Prior to 1870, steel was too expensive to use. Thus, iron was the chosen metal for most products. However, the Bessemer process changed all this and by 1900, U.S produced more steel than Britain and Germany combined. Bessemer process is the idea of blowing in cold air on red-hot iron, which caused the eliminate impurities. First large scale use of steel was the railways. U.S became king of steel for many reasons, including, cheap available labor, abundant natural resources such as coal, iron, and the Great Lakes and rivers. Steel and the Bessemer Process

41. Iron & Steel Production

42. Came to America from Scotland in 1848. Worked as a bobbin boy. Worked hard and moved up the ranks quickly Accumulated some capital and entered steel business in Pittsburgh By 1900, produced ¼ of all the steel in the United States and he was making a profit of $25 million Andrew Carnegie

43. J. P. Morgan made a name for himself on wall Street by reorganizing corporations. In doing so, he established a reputation of integrity and he thought that money power was a positive He wanted Carnegie’s steel, and bought it for 400 million dollars. (10.6 billion in 2011 dollars) Carnegie, embarrassed at his riches, through philanthropy, gave away 350 million to various causes. Morgan expanded Carnegie Steel, bought other companies, and created U.S. Steel corporation, the Untied States first billion dollar corporation. Carnegie and Morgan

44. New Financial Businessman The Broker: • J. Pierpont Morgan

45. At Drake’s Folly in Pennsylvania, the first oil well was discovered. Kerosene was the first major product, burned with a cotton wick in a lamp to make light. Kerosene was a better fuel than whale oil, and destroyed the whaling business. However, electric light bulb made kerosene obsolete. But, the invention of the internal combustion engine and the automobile made oil (gasoline) king. Rockefeller and Oil

46. Standard Oil Co.

47. Rockefeller created Standard Oil in 1870. By 1882, most of his great trust was formed. By 1877, Rockefeller owned 95% of all refineries in America. His business principle was essentially survival of the fittest and was ruthless in eliminating competitors. Believed in combination and aggressive consolidation. Standard Oil and Rockefeller

48. 2.Social Darwinism • British economist. • Advocate of laissez-faire. • Adapted Darwin’s ideas from the “Origin of Species” to humans. • Notion of “Survival of the Fittest.” Herbert Spencer

49. 2.Social Darwinism in America • Individuals must have absolute freedom to struggle, succeed or fail. • Therefore, state intervention to reward society and the economy is futile! William Graham SumnerFolkways (1906)

50. The Gospel of Wealth:Religion in the Era of Industrialization • Contempt for poor grew, because many theorized that they must be poor due to their own laziness. Many wealthy industrialists were self-made men, so why can’t everybody also have the same success • Wealth no longer looked upon as bad. • Viewed as a sign of God’s approval. • Christian duty to accumulate wealth. • Should not help the poor. Russell H. Conwell Acres of Diamonds