Industrial Revolution: Transforming American Economy 1865-1900

1. Post Civil War Industrialization (Market Economy) (Post-Bellum) 1865 to 1900

2. In 1860, just before the Civil War, the USA was the 4th largest manufacturing country in the world • By 1894 it had reached 1st place. • By 1900 the USA was producing seven times more industrial goods than in 1865. • What accounts for this dramatic change in the industrial landscape?

3. Discovery of an abundance of basic raw materials and energy sources….esp. coal, iron, wood, petroleumResources

4. New deposits of iron (Mesabi Range in Minnesota) and coal (Pennsylvania) were discovered on East coast: coal production increased from 33m tons in 1870 to 250m tons in 1900) • Huge quantities of wood / timber were available from the West due to improved transportation • Discovery of a new and valuable energy source - Petroleum or oil. • First used to lubricate machines, then as kerosene for oil lamps, later as source of energy for diesel or petrol / gas engines.

5. The first petroleum discoveries were in western Pennsylvania (Titusville) in 1859 (59ers of PA); later discoveries were made in Ohio, and West Virginia. • Edwin Drake was one of the first to realize its potential value - estd the first oil well in Penn - people talked about "Drake's folly". • As its importance / value was discovered it became known as "black gold” (term also previously used for slaves). • By end of the 1870's, 40m barrels of petroleum had been produced; oil had advanced to 4th place among the nation's exports; annual production reached 20m barrels.

6. J.D. Rockefeller came to dominate the oil industry • Oil was later discovered in Alaska, purchased from Russia in 1867 for the bargain price of $7.2 million by Andrew Johnson's Sec. of State Seward - was derisively called "Seward's Folly" / "Seward's Ice-Box", "Seward's Polar Bear Gardens”, before oil was found there

7. John D. Rockefeller The Progressive Era 2.2F

8. 2. Remarkable technological inventiveness – “Yankee Ingenuity” – which created machinery, devices, new materials, and the productive processes necessary for Industrial growth Innovation

9. Very important to the industrial revolution was the development of new technologies, new devices to bring speed and efficiency to industry, and new productive processes to produce new materials. • From 1860-1890, 440,000 patents were registered, showing the amount of activity / research / invention among scientists and inventors. • Christopher Sholes invented the typewriter, James Ritty the cash register, William Burroughs the calculator (1870s, 1880s) - all helping with efficiency and organization. • Many inventions and discoveries were in the field of communication.

10. Cyrus Field laid a trans-Atlantic telegraph cable to Europe in 1858 - this cable went dead after 3 weeks - but in 1866 and afterwards he developed heavier cables which estd. a permanent link between the US and Europe. • Bell developed the telephone in 1876 - enormous effect on economy and on society - half a million phones in use in USA by the 1890's

11. There were further developments in communication and transportation around the turn of the century • Beginnings of Radio - Marconi. • First airplane and flight - Wright Brothers in Kitty Hawk, N. Carolina, 1903 • Development of automobiles - internal combustion engines developed in Fr, Ger; also in the USA by Henry Ford who produced the first of his cars - the model T - in 1906

12. The invention with the greatest impact on industry / life was perhaps Electricity (1870s) – new source of light and power • Industry had progressed from reliance on Water power, to Steam power, to Electricity, • Pioneered and developed by Charles Bush, and Thomas Edison (light bulb also)..1879. • By about 1900, there were 2,774 power stations in operation, and some 2 million electric lights were in use in the country. Electricity was also being used for street railway systems, in the elevators of urban skyscrapers, and to power machines in factories

13. Another important technological breakthrough was in the production of steel (purified Iron - more durable)….Carnegie Steel….US Steel Corp… • Efficient, inexpensive purification of large quantities of iron ore was made possible by a process developed by Englishman Bessemer and American William Kelly - blowing jets of air into the boiling iron to burn out the impurities (carbon and other gases) at a faster rate – to reduce costs. (replaced Henry Cort’s puddling and rolling) • Steel replaced iron in the manufacture of steam engines, railroad lines and in construction….sturdier, more durable • Main centers of steel production were Pennsylvania, Ohio, Michigan, Minnesota...

14. Steel production rose by 1,000% between 1865 and 1900. • In other industries, new processes also emerged: new methods of milling flour made possible the emergence of large milling companies in the Midwest: • New methods of canning foods and condensing milk helped established the prepared food industry - were developed by Gale Borden • All of the above developments: devices, technologies, transportation, communication, would help transform industry

15. 3. Development of the ideas of Scientific Management Taylorism

16. Convinced that industry required more efficiency and better management, Frederick Taylor promoted "scientific management" (“Taylorism”. ) • He favored increasing employer control of the workplace, greater worker efficiency, and less dependence on “skilled workers” – all of which would increase output, reduce costs, and increase profit • Subdivision of jobs / tasks, interchangeable workers, to diminish dependence on any particular employee.

17. “Taylorism” proposed that businesses / factories be sub-divided into departments with managers, answering to a general manager, in a hierarchy of control • He also advocated frequent work studies and cost accounting • Successful: welcomed by employers • Not so popular with workers: work became more tedious and repetitive, and eventually salaries decreased as a result of the decline in the skill factor

18. His methods were a complement to Whitney's ideas of mass production and the interchangeability of parts. • Combination of the ideas of Whitney and Taylor - paved the way for the introduction of the assembly line and mass production.... (perfected by Henry Ford)

19. 4. Extension of Network of Railroads

20. One of the principal agents (“greatest single factor” – text) of the Industrial Revolution was the expansion of the railroads (An Industry in itself and contributed to Transportation and Communication) • The total miles of track nationwide increased every decade; • 30,000 - 1860 • 52,000 - 1870 • 93,000 - 1880 • 163,000 - 1890 • 193,000 - 1900

21. Trains were safer now due to improved brakes, steel rails, uniform track gauges: also faster and more comfortable (Pullman Palace Cars) • The Federal Govt. undertook the Construction of the first Transcontinental Railroad (too big / costly for private ind) – Pacific Railroad Acts of 1862 and 1864 • Contracts were given to two companies – paid in land and money • The Central Pacific began building East from Sacramento CA. • The Union Pacific began building West from Omaha, Nebraska

22. Their lines joined in Promontory Point, near Ogden, Utah, in 1869 • See Handout for more details of building of Transcontinental Railroad………….3 documents, pg. 7-9, summarize key points of each document, answer questions on pg.9 • In later years, four more transcontinental railroads were build by private investors: • Northern Pacific 1883 • Atcheson, Topeka, Santa Fe 1884 • The Southern Pacific 1884 • The Great Northern, 1893

23. Led to acceptance of Time zones …. to standardize train schedules • Expansion too on East coast; and consolidation • Among the biggest RR companies were the New York Central owned by Cornelius Vanderbilt, and the Erie and Kansas Pacific owned by Jay Gould. • They battled in the “Erie Wars” for control of the Erie RR • Corruption was widespread among RR companies and their owners

24. Frequently involving in • “stock watering" (selling more stock than the Company was worth…Jay Gould) • “Cut-throat competition,” killing off or buying out their competitors to create huge monopolies • creating “pools”: agreement to keep rates high… not to compete, no lowering of rates • bribing members of the govt., judges, journalists (with money or often with free passes)

25. Vanderbilt, Gould, Hill, Stanford, Huntington – railroad owners… were among the first to be called the "Robber Barons" by Mark Twain • They preferred to call themselves the “Captains of Industry”

26. RR’s promoted Industrial Growth by • huge investments by RR companies stimulated economy, was an industry in itself, creating thousands of jobs, and creating huge demand for steel, coal.. and other materials from other industries • stimulated other industries / businesses through faster transportation of raw materials and finished goods (and communication through the extension of telegraph and telephone systems along the tracks) • helped create national markets: emergence of first nationwide chain stores (Woolworths, Great Atlantic and Pacific); • Refrigerated Cars (Gustavus Swift) helped the meatpacking industry and the producers of fruit and vegetables

27. 5. Availability of investment capital / entrepreneurs – Civil War Millionaires inc. "Shoddy Millionaires" -

28. America's first millionaires emerged during the civil war: selling uniforms, shoes, etc. to the army / Govt. (sometimes selling “shoddy goods”) • These millionaires were willing to take the risk of investing in big business (coal, iron, steel, oil, electricity etc…) • American banks were willing to invest in industry…J.P. Morgan Bank esp.

29. 6. Formation of huge Corporations with large amounts of investment capital

30. The formation of huge public corporations made great financial resources available to businesses to invest and expand • These Corporations engaged in: • Vertical Integration (Carnegie Steel: “mine to market”: sold to Morgan for $250m; enlarged it into US Steel Corp., valued at $1.4b, America’s first billion-dollar corporation) • Horizontal Integration (Rockefeller - formation of Monopolies, Trusts (huge business combination through controlling stock in other companies or buying them out) – controlled 40 companies and over 84% of oil industry: (Duke family and American Tobacco Company) • Interlocking Directories (JP Morgan Bank. “bankers bank”): put bank officers on the boards of various companies – to consolidated, harmonize, prevent competition … also Holding Companies

31. These industrialists, esp. Carnegie, believed in Social Darwinism…application of Darwinism to business / society… “survival of fittest” (developed by English philosopher Herbert Spencer); promoted in the US by William Graham Sumner of Yale. • But Carnegie and Rockefeller also promoted the Gospel of Wealth…responsibility of the wealthy to give back to the Community (libraries, colleges): By the time of his death in 1919, Carnegie had given away some $350 million ($60m for libraries) and Rockefeller $500m to philanthropic purposes. • Did not mean helping the poor – being poor was the fault of those who were poor….Gospel of Wealth involved helping the community…..summarize main ideas from Carnegie and George……see Handout (first page)………see Document #1, page 65, Document #2, page 68 of American Spirit

32. Andrew Carnegie-in the top with the white beard-surrounded by a group of business leaders. The Progressive Era 2.2D

33. Social Darwinism / The Gospel of Wealth was opposed by Henry George as hypocritical: he proposed a land tax • Opposed also by Edward Bellamy: Socialist: who proposed Nationalization of land and industry • Opposed also by Mark Twain: used terms “Robber Barons” and “Guilded Age” • Author, Horatio Alger: wrote novels promoting Social Darwinism, rags to riches stories: opportunities for wealth were available for anyone who worked hard, was thrifty, had integrity, followed the rules and had a little luck! “Algerisms”

34. 7. Increased educational opportunities – at high school and college level

35. Fed Govt. expenditure on Education increased from $35m in 1860 to $290m in 1900….mostly K-12 • The Morrill Act of 1862 helped with the growth of higher education. Set aside grants of public land to build colleges – the "land grant colleges". • Philanthropic businessmen donated millions to set up private universities - Cornell, Stanford, Chicago (Rockefeller). • There was a new emphasis on technical education, on engineering, science and on business – a move away from the traditional / classical / humanities based education

36. More education opportunities and the new focus on science, engineering, business….contributed to industrial expansion…more expertise……and better educated workers

37. 8. Government Policy

38. The Republican Party became “the party of big-business”, supporting investment and expansion…many industrialists were affiliated with the Party, some were representatives / held office (Gov. Stanford) • Supported Laissez Faire Economics: non- interference: supported free enterprise system and open competition. • Protection of industry through Tariffs - the Morrill Tariff, and thenthe McKinley Tariff Act, of 1890, which increased rates to an average of 48% (Wilson-Gorman Tariff) • Some small attempts to restrict monopolies through the Interstate Commerce Act / Commission (RR’s) and the Sherman Anti-Trust Act – but they were not effectively enforced, and had many loopholes (more on these later)

39. 9. A large and growing supply of labor and consumers

40. Population Increase: • 1861 31m • 1870 40m • 1900 80m

41. Population increase and huge migration from rural to urban areas…..source of labor and consumers • Between 1870 and 1890 the population of the major cities had tripled: NY had a pop. of 3.5 m (now the 2nd largest city in the world behind London). Chicago, Philadelphia had over 1m. • Increase in immigration contributed: esp. from Southern and Eastern Europe (New Immigration) in the 1880s • 25m immigrants arrived between 1865 and 1915

42. Summary • 1. Resources / Raw Materials: old and new types • 2. New Technology, Inventions • 3. Scientific Management: Taylorism • 4. Transportation: RR’s • 5. Investment Capital: Shoddy M’s • 6. Corporations • 7. Improved Education • 8. Govt. Policy: Laissez Faire • 9. Increased Population / Supply of Labor, Consumers