Chapter 14

1. Chapter 14 Industrialization

2. Section 1: The Rise of Industry • Objectives: • Identify the effects of expanding population on industry. • Explain the effects of technological innovations such as the telephone and telegraph on American development.

3. The United States Industrializes • By the earl 1900s Americans had transformed the US into the world’s leading industrial nation. • By 1914, the nation’s gross national product (GNP)-the total value of all goods and services produced by a country-was 8 times greater than before the civil war.

4. Natural Resources • An abundance of raw materials was one reason for the nation’s industrial success. • Coal, water, timber, iron, and copper. • Having them meant that we didn’t have to import them (cheaper.) • Many of these resources were located in the mountain west spurring development of the region and the building of the transcontinental railroad. • At the same time a new resource, petroleum, began to be exploited. • Even before the automobile, petroleum was in high demand because it could be made into kerosene.

5. A Large Workforce • The human resources available were as important as natural resources. • Population growth stemmed from 2 causes: • Large families • A flood of immigrants • Between 1870 and 1910, roughly 20 million immigrants arrived in the United States. • This contributed 2 ways: • Large workforce=more production • More people=more demand

6. Free Enterprise • Another important factor that enabled the US to industrialized rapidly was free enterprise. • In the late 1800s, the Americans embraced the idea of “laissez-faire,” meaning “let do.” • Supporters of laissez-faire believe the government should not interfere in the economy other than to protect private property and maintain peace. • Relies on supply and demand. • Entrepreneurs people who risk their capital in organizing and running a business. • Foreign investors saw more opportunity for profit and growth in the US than at home. (another source of private capital.

7. Government’s Role in Industrialism • In many respects, the US practiced laissez-faire economics in the late 1800s. • State and federal governments kept taxes and spending low and didn’t impose costly regulations on industry. • Since the early 1800s, the North wanted high tariffs to protect industry from foreign competition, the South opposed, wanting cheap foreign products. • Supporters of laissez-faire generally favor free trade and oppose subsidies, believing that tariffs and subsidies drive up prices and protect inefficient companies.

8. New Inventions • New wealth and new jobs. • Alexander Graham Bell: • Bell intended to make an electric current of varying intensity transmit sound. • 1876 Bell succeeded in transmitting his voice, “Come here Watson, I need you.” • Revolutionized both business and personal communication. • 1877-Bell Telephone Co.-American Telephone & Telegraph Co. (AT&T) • Thomas Alva Edison: • 1877- invented the phonograph • 1879- perfected the light bulb (HUGE) • 1882-an Edison company began supplying electricity to New York City customers • 1889- several Edison companies merged to form Edison General Electric Company (GE) • Charles and Frank Duryea • Gasoline powered car (nuff said)

9. Technological Impact • As knowledge of technology grew, almost everyone in the US felt its effects. • Thaddeus Lowe’s ice machine. • Gustavus Swift had a refrigerated railroad car developed. • The Northrop automatic loom. • Standard sized clothing-from measurement taken from Union soldiers during the Civil War-for ready made clothes. • New machinery to mass-produce shoes. • Radio-changed the world.

10. Section 2: The Railroads • Objectives: • Discuss ways in which the railroads spurred industrial growth. • Analyze how the railroads were financed and how they grew.

11. Linking the Nation • 1865 the US had almost 35,000 miles of railroad track, almost all of it east of the Mississippi River. • By 1900, the US, now a booming industrial power, boasted over 200,000 miles of track. • The railroad boom began in 1862, when President Lincoln signed the Pacific Railway Act. • This act provided for the construction of the transcontinental railroad. • The 2 railroads involved were the Union Pacific and the Central Pacific railroad companies. • The Union Pacific pushed west from Omaha, Nebraska, in 1865.

12. 2 More Important things • To make rail service safer and more reliable, in 1883 the American Railway Association divided the country into 4 time zones in regions where the same time was kept. • To encourage railroad construction, the federal government gave land grants to many railroad companies who would then sell the land to settlers, real estate companies, and other business to raise the money they needed to build the railroad.

13. Section 3: Big Business • Objectives: • Analyze how large corporations came to dominate American business. • Evaluate how Andrew Carnegie’s innovations transformed the steel industry.

14. The Rise of Big Business • Before the Civil War, most manufacturing enterprises were very small. • By 1900, Big Business dominated the economy, operating vast complexes of factories, warehouses, offices, and distribution facilities. • Big Business would not have been possible without corporation- an organization owned by many people but treated by law as if it were one person. • The people who own the corporation are called stockholders because they own shares of ownership called stock.

15. Economies of Scale • With money from the sale of stock, corporations could invest in new technologies, hire a large workforce, and purchase many machines greatly increasing their efficiency. • This enables them to achieve what is called economies of scale, in which corporations make goods more cheaply because they produce so much so quickly using large manufacturing facilities. • All businesses have 2 types of costs: • Fixed costs-costs a company has to pay whether or not it is operating (loans, mortgages, and taxes) • Operating costs-cost that occur while operating a company (wages, shipping charges, buying raw materials) • Small businesses had low fixed cost but very high operating cost. Why? • Corporations high fixed, low operating costs-more economical to continues operations during recessions.

16. The Consolidation of Industry • Many corporate leaders did not like the intense competition that benefited consumers but cut profits. • To stop prices from falling many companies organized pools-agreements to maintain prices t a certain level. • They broke apart when one member would cut prices to steal the market. • By the 1870s, competition had reduced many industries to a few large and highly efficient corporations.

17. Andrew Carnegie and Steel • Andrew Carnegie immigrated to the U.S. in 1848, the son of a poor hand weaver. • At age 12 he worked as a bobbin boy in a textile factory earning $1.20 per week, 2 years later he was a messenger in a telegraph office, he then worked as secretary to Thomas Scott, a superintendent and later president of Pennsylvania Railroad. • When Scott was promoted, Carnegie became superintendent. • As railroad supervisor, Carnegie knew that he could make a lot of money by investing in companies that served the railroad industry. • On business trip to Europe, he met a English inventor, Sir Henry Bessemer, who had invented a new process for making high quality steel efficiently and cheaply. • Carnegie decided to concentrate his investments in the steel industry and in 1875 opened a steel company in Pittsburg where he quickly adapted his steel mills to use the Bessemer process.

18. Vertical and Horizontal Integration • To increase manufacturing efficiency even further, Carnegie took the next step by beginning vertical integration of the steel industry. • A vertically integrated company owns all of the businesses on which it depends for its operation. • Carnegie’s company bought coal mines, limestone quarries, and iron ore fields. • Saved money and made big companies bigger. • He also pushed for horizontal integration-combining many firms engaged in the same type of business into one large corporation. • When a single company achieves control of an entire market, it becomes a monopoly. • Many feared that monopolies could charge what ever they wanted and in the late 1800s laws were passed that made it illegal for one company to own stock in another without legislative permission.

19. Trusts and Holding Companies • In 1882 Standard Oil formed the first trust-a new way of merging businesses that did not violate laws against owning other companies. • A trust is a legal concept that allows one person (trustee) to manage another person’s property. • In 1889 New Jersey passed a new general incorporation law, allowed corporations chartered in New Jersey to own stock in other businesses without legislative permission. • Many companies immediately used the New Jersey law to form holding companies which do not produce anything but owns stock in and control companies that do produce goods, effectively merging them into one large enterprise.

20. Selling the Product • The vast array of products that American industries churned out led retailers to look for new ways to market and sell goods. • Large display ads with illustrations replaced the small-type line ads that had been standard in news papers. • 1877 John Wanamaker’s Grand Depot boasted the world’s largest retail sale on a single floor. • Chain stores-Woolworth’s, a chain store that opened in 1879 became one of the most successful retail chains in American history. • To reach the millions of people who lived in rural areas away from department stores, retailers began issuing mail-order catalogs.

21. Section 4: Unions • Objectives: • Describe industrial working conditions in the United States in the late 1800s. • List the barriers to labor union growth.