Sources of Industrial Growth

Sources of Industrial Growth • Factors which contributed to growth of industry – abundant raw materials, large labor supply, technological innovation, entrepreneurs, federal government eager to assist the growth, and an expanding domestic market

Sources of Industrial Growth • In the 1870's and 1880's iron production soared, Henry Bessemer and William Kelly developed a process for converting iron into the much more durable steel, Abram Hewitt introduced open-hearth process (better than Bessemer) and made possible production of steel in great quantities

Sources of Industrial Growth • Steel industry emerged in western Pennsylvania and eastern Ohio (iron ore found in abundance), Pittsburgh became the center of the steel world, after the Civil War furnaces were redesigned as cylindrical iron shells lined with brick

Sources of Industrial Growth • Demand for vessels capable of transporting oil and the development of the new powerful steam engine encouraged the design of larger freighters

Sources of Industrial Growth • Relationship between steel production and railroads emerged, the Pennsylvania Railroad funded and ensured a market for the Pennsylvania Steel Company

Sources of Industrial Growth • Bissell discovered petroleum could be used to fuel lamps, Drake, one of Bissell's employees established the first oil well in Pennsylvania, by the 1870's oil had advanced to fourth place among the nation's exports

Sources of Industrial Growth • German Nicholas Otto created a gas-powered "four-stroke" engine, Charles and Frank Duryea built the first gasoline-driven motor vehicle in America in 1903, Henry Ford by 1910 the automobile industry became a major force in economy, Wilbur and Orville Wright developed first airplane, Charles Lindbergh's famous solo flight from NY to Paris electrified the nation

The Wright Brothers

Sources of Industrial Growth • General Electric created one of the first corporate laboratories in 1900, the emergence of corporate laboratories and decline in government support decentralized the sources of research funding, University faculty and laboratories began to receive funding from corporations for research leading to a partnership between academic world and commercial world

Sources of Industrial Growth • Taylor argued that scientific management was a way to manage human labor to make it compatible with the demands of the machine age.

Sources of Industrial Growth • Scientific Management was theory about the way to increase the employers control of the workplace, and make working people less independent

Sources of Industrial Growth • Taylorism meant subdividing tasks, speed up production, make employees interchangeable, reduce the need for skilled laborers, led to the emergence of mass production and moving assembly line (Henry Ford)

Sources of Industrial Growth • Railroads promoted economic growth, main method of transportation, gave industrialists access to distant markets, raw materials

Railroads 1870-1890

Sources of Industrial Growth • Vanderbilt, Hill and Huntington used railroad combinations to make immense wealth, symbols of the nations great economic power concentrated in individual hands

Sources of Industrial Growth • Modern Corporations emerged as a major force after the Civil War, Corporations began selling their stocks, Limited Liability meant that investors risked only the amount of their investments, not liable for any debts the corporations might accumulate

Sources of Industrial Growth • Andrew Carnegie became a central figure in steel, cut costs and prices by striking deals with the railroads and then bought out rivals who could not compete with him, controlled the processing of his steal frommine to market, financed through sale of stock, in 1901 he sold out for $450 million to banker J. P Morgan who merged Carnegie Steel with others and created the United States Steel Corporation which controlled almost 2/3 of the nations steel production

Sources of Industrial Growth • Corporate leaders introduced a set of managerial techniques, which relied on a division of responsibilities, and a hierarchy of control, the Middle Manager formed a layer of command between workers and owners

Sources of Industrial Growth • Horizontal Integration – the combining of a number of firms engaged in the same enterprise into a single corporation

Sources of Industrial Growth • Vertical Integration – the taking over of all the different businesses on which a company relied for its primary function (Carnegie Steel)

Sources of Industrial Growth • John D. Rockefeller founded Standard Oil, which was created through both vertical and horizontal and vertical integration, allied himself with other wealthy capitalists, built his own barrel factories, terminal warehouses and pipelines, in the 1880's Rockefeller served as the symbol of a monopoly (in petroleum), controlled 90% of the refined oil “The growth of a large business is merely the survival of the fittest.” John D. Rockefeller

Sources of Industrial Growth • Pool arrangements were informal agreements among various companies to stabilize rates and divide markets. • Consolidation (mergers) was a way to cope with cutthroat competition

Sources of Industrial Growth • Trust (trust agreement) – stockholders in individual corporations transferred their stocks to a small group of trustees in exchange for shares in the trust itself, received a share of the profits of the combination

Sources of Industrial Growth • In 1889 New Jersey changed its laws to permit companies to buy up other companies, which led to corporate mergers

Sources of Industrial Growth • Holding Company was a central body that would buy up the stock of various members of a trust and establish direct, formal ownership of the corporations in trust, resulted in enormous power in the hands of a very few men, substantial economic growth, creation of industrial infrastructure, stimulating new markets, new jobs for unskilled workers, large scale mass production

Capitalism and Its Critics • Farmers and workers saw the new corporate power as a threat to republican society • Self-Made men – millionaires claimed their rise to power was a result of hard work and ingenuity

Capitalism and Its Critics • Social Darwinism – in human society only the fittest individuals survived and flourished in the marketplace, success is deserved through hard work, appealed to businessmen because it seemed to legitimize their success and confirm their virtues, justified their tactics

Capitalism and Its Critics • Herbert Spencer argued society benefited from the elimination of the unfit and the survival of the strong and talented Herbert Spencer Charles Darwin

Capitalism and Its Critics • Adam Smith – Law of supply and demand

Capitalism and Its Critics • Gospel of Wealth (Andrew Carnegie) people of great wealth had not only great power but great responsibilities, it was their duty to use money to advance social progress

Capitalism and Its Critics • Conwell (Acres of Diamonds) great wealth was available to all • Horatio Alger wrote stories about the powerful myth that anyone could advance to great wealth through hard work

Capitalism and Its Critics • Lester Frank Ward argued civilization was no governed by natural selection but by human intelligence, which was capable of shaping society as it wished, believed that an active government was societies best hope

Capitalism and Its Critics • Socialist Labor Party (De Leon): failed to become major political force, the American Socialist Party broke off from De Leon in 1901

Capitalism and Its Critics • Henry George (Progress and Poverty) tried to explain why poverty existed amidst the wealth, wanted a single tax “This association of poverty with progress is the great enigma of our times.” Henry George

Capitalism and Its Critics • Edward Bellamy (Looking Backward) abundance of industrial economy equally distributed among all people, in his view of nationalism fraternal cooperation replaced competition

Capitalism and Its Critics • Resentment of monopolies – unreasonably high prices, new class of enormously wealthy people, but as the standard of living increasing for everyone, the gap between the rich and the poor was increasing

Industrial Workers in the New Economy • Industrial work force expanded dramatically in late 19th century, there continued a flow of rural Americans into factory towns and cities, and a great wave of immigration from Mexico, Asia, Canada and above all Europe

Industrial Workers in the New Economy • This wave of immigrants was more than four times greater than before Civil War, not just Irish and English, now Polish, Russians, Greeks, Slavs and Italians

Industrial Workers in the New Economy • Labor Contract Law permitted industrial employers to pay for the passage of workers in advance and deduct the amount later from their wages

Industrial Workers in the New Economy • Italians, Slavs and Poles emerged as a major labor source for the mining industry

Industrial Workers in the New Economy • Average income of American worker was 400 – 500 dollars a year, loss of control, low wages and long hours

Industrial Workers in the New Economy • The number of women industrial workers increased - 75% under 25, mostly white, vast majority immigrants, textile industry was the largest single employer of women, women earned about half of what men did. • 60% of child workers were employed in agriculture

Industrial Workers in the New Economy • Workers fought back against low wages, hazardous and dangerous conditions by attempting to form unions

Industrial Workers in the New Economy • William Sylvis founded the National Labor Union, which included a variety of reform groups, excluded women, men argued women were used to drive down their wages

Industrial Workers in the New Economy • The Molly Maguire's were a militant labor organization in the coal region of Pennsylvania that sometimes used terrorist tactics

Industrial Workers in the New Economy • Railroad Strike of 1877 – eastern railroads announced a 10% wage cut, strikers disrupted rail service, destroyed equipment and rioted in the streets, result President Hayes ordered federal troops to suppress the disorders, first major national labor conflict, damaged the reputation of labor organizations in other industries as well

Industrial Workers in the New Economy • Uriah S. Stephens founded the Noble Order of The Knights of Labor which was open to all (except lawyers, bankers, liquor dealers and professional gamblers) and hoped to replace the wage system with a new cooperative system in which workers would themselves control a large part of the economy, under Powderly movement moved into the open

Industrial Workers in the New Economy • Federation of Organized Trade and Labor (AFL) was formed by representatives of a number of existing craft unions, represented mainly skilled workers, were generally hostile to organizing unskilled workers, believe women should stay in the home but sought equal pay for those who did work and even hired female organizers

Industrial Workers in the New Economy • Samuel Gomper’s Goal – better wages, hours and working conditions (Bread and Butter Unionism)

Industrial Workers in the New Economy • Strike at Haymarket Square in Chicago protested wage cuts at the McCormick Harvester Company, when the police ordered the crowd to disperse someone threw a bomb that killed 7 officers and injured 67 people as a result police fired into the crowd

Sources of Industrial Growth