The Incorporation of America

1. The Incorporation of America The Rise of Smokestack America, 1865-1900

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 (1830s-1850s) • Railroad fueled growing US economy: • First big business • Investment magnet • Opened the West • Aided development of other industries • Abundant unskilled & semi-skilled labor • Abundant capital

4. Causes of Rapid Industrialization • New, talented group of businessmen • Market growing population increased • Government willing to help stimulate economic growth • Abundant resources • Technological advancements • Managerial revolution

5. New Business Structure • Company • Privately owned by individual, family, partners • Corporation • Publicly owned by stock holders; run by elected board • Limited liability • Trust • Numerous corporations’ stocks controlled by a Board of Trustees • Holding Company • Numerous trusts’ stocks controlled by a Board of Directors

6. “Robber Barons” or “Captains of Industry”? • Which were they? • Railroad Tycoons: • Jay Gould, Daniel Drew, Tom Scott, Cornelius and William Vanderbilt • Industrial Monopolists: • John D. Rockefeller, Andrew Carnegie, GustavusSwift, James B. Duke • Finance Capitalist: • J. Pierpoint Morgan

7. Steel Industry • Grew because of • Bessemer Process • Access to coal & iron ore • Ready labor

8. Steel Industry • Andrew Carnegie • Born poor in Scotland • Immigrated to America • Saved & invested • Built 1st steel mill (1872) • Became one of richest men in America!

9. Coal and Iron Ore Deposits

10. Mesabi Range

11. Iron & Steel Production

13. U.S. SteelFirst Corporation Capitalized at over $1 Billion

14. Industrial ConsolidationIron & Steel Firms

15. Carnegie Homestead Steel Plant

16. Carnegie and Labor • Why successful? • Low Wages • Long Hours • Dangerous Working Conditions • Anti-Union • Strike Breaker (Homestead, 1892) • Pinkertons & Scabs

17. Railroad Age • Post-War expansion • Too much for individuals • Too much for government • Completed by private corporations with government aid (land grants) • Corporations set up with stockholders (limited liability) • Big names: • Cornelius Vanderbilt • William Vanderbilt • Jay Gould

18. Railroad Age • Needs • Steel (Carnegie) • Track • Engines • Systemic approach • Standard track • Consolidation of rail lines • Shipping • Technology (air brakes, stronger engines, etc.) • Time zones

19. The Vanderbilts The Son – William The Father – Cornelius

20. Cornelius “Commodore” Vanderbilt

21. Jay Gould • Competed with Vanderbilts • Along with Vanderbilts controlled most rail lines of northeast • Also wealthy financier

22. Corruption in the Railroad Industry • Scams • Stock watering (artificially inflating value of stock) • Bribery • “pool” (insider trading) • Rebates & kickbacks (for favorable legislation or rates) • Price gouging (monopolies)

23. George Pullman’s Dream – Travel in Style

24. Pullman’s Factory Town Workers apartments Pullman’s Factory Pullman’s Home

25. Impact of the RR on the Nation • Trans-continental • Railroads as business • Impact on • National unity & economics – how? • Industrialization – how? • Mining & agriculture – how? • Grown of cities & urban areas – how? • Immigration – how? • Environment – how? • Time – how? • Wealth – how?

26. Time Zones

27. New Financial Businessman • Made money from money • Owning or regulating new businesses or industries • Creating trusts • The King – J.P. Morgan

28. J.P. Morgan and Company A “Trust of Trusts” • At one time or another was involved in • Banking • Insurance • Steam Shipping • Railroads (UP, SP, NP, Penn, B&O, C&O, L&N, AT&SF, Erie, Atlantic Coast, Reading, & many more) • Communications (AT&T, Western Union) • Public Utilities (Edison, NY, NJ, Chicago) • Real Estate • At one time or another partially or totally owned • U.S. Steel • Amalgamated Copper • General Electric • Westinghouse • International Harvester • National Biscuit Co • American Sugar trust • Pullman Company • Armour & Company • U.S. Rubber Co. • American Ag. Chemical

29. Wall Street – 1867 & 1900

30. Availability of Mass Markets • Availability of capital (money to invest) • Improvement in technology • Improvement in communication • Increase in people (immigrants) • Increase in tariffs (protective) • Growth of advertising • Ability to package products in usable sizes • Examples • Standard Oil • Sears and Roebuck • Montgomery Wards

31. Efforts to curb competition • Horizontal integration • Control more & more of one stage of an industry • John D. Rockefeller in oil • By 1904 Standard Oil controlled 91% of the oil industry • Nickname: John D. Wreck-a-feller

32. Standard Oil Company

33. Efforts to curb competition • Vertical integration • Controls all aspects of process • Gustavus Swift in meat packing industry • Andrew Carnegie in steel industry

34. Gustavus Swift • Owned meat packing plants • Developed refrigerated rail cars • Bought stock yards • Bought refrigerated warehouses • Bought delivery wagons • Bought fertilizer plants • Bought dairy production facilities

35. Andrew Carnegie • Owned steel mills • Bought iron ore mines • Bought rail lines to bring in iron ore and ship out steel • Bought warehouses to store product

36. Horizontal and Vertical Integration

37. Horizontal and Vertical Integration • Once successfully integrated (either horizontally or vertically) often then did the other • Any problems with horizontal or vertical integration?

38. Is the entire country benefitting? What about the South?

39. The South • Behind North • Still plantation economy (post-Reconstruction) • Began modernizing in 1877 • Low crop prices kept wages low • Didn’t have the capital of North • Profits sometimes went North

40. The South • Textiles • Carolinas and Georgia • Smaller operation than North • Local capital • Lower wages • Women and children

41. The South • Still dependent on natural resources • Cotton • Tobacco • Timber • Coal and iron ore • Segregation • Whites got best jobs • Behind North on wages & education

42. James B. Duke and the American Tobacco Company • 1870’s – Duke switched from chewing tobacco to cigarettes • 1884 – Embraced Rockefeller’s methods; formed American Tobacco trust • 1892 – 2.9 bil. cigarettes sold • 1903 –10+ bil. cigarettes sold • Funded small Trinity College which changed its name to

43. What is the pattern of wealthy industrialists?

44. Justifications of the Industrialists

45. Divisions between Rich & Poor • Rising upper class • Falling working class • How do the wealthy justify it? • Gospel of Wealth • Social Darwinism • Rugged individualism & contempt for poor • Popular aspirations

46. The Gospel of Wealth:Religion in the Era of Industrialization • Russell Conwell “Acres of Diamonds” • Wealth not bad • Sign of God’s approval • Wealth is Christian duty • Should not help the poor

47. The Gospel of Wealth • “Gospel of Wealth” by Andrew Carnegie (1889). • Inequality is inevitable and good • Wealthy should act as “trustees” for their “poorer brethren”

48. New Business Culture • Laissez Faire • Individual is moral and economic ideal • Individuals should compete freely • The market was not man-made • No room for government

49. Social Darwinism • British economist Herbert Spencer • Advocated laissez-faire • Adapted Darwin’s ideas “Origin of Species” to humans • “Survival of the Fittest”

50. Social Darwinism in America • Individuals: absolute freedom to struggle, succeed or fail • State intervention: futile! • Who would support Social Darwinism? • Who would oppose Social Darwinism?