Chapter 26

1. Chapter 26 Technology, Industry, and Business: Economic Development in the Late Nineteenth Century

2. A Blessed Land • U.S. in last half of 19th century • Population doubles • Production growing even faster • Industry starts dominating economy • U.S. becomes leading industrial nation • An embarrassment of riches • America rich in capital • U.S. able to attract foreign investors • U.S. has large labor force • Labor force literate and mechanically able

3. A Blessed Land(cont.’d) • Land of plenty • U.S. produces cheap food • Rich in natural resources • Governments eager to help industry • “Yankee Ingenuity” • Americans love inventions • Americans mechanically inclined • New inventions become major industries

4. A Blessed Land (cont.’d) • The telephone • Alexander Graham Bell • Bell sets up pilot company • Telephones seize American imagination • Communication helped business • Wizard of Menlo Park • Thomas Alva Edison • Invented storage battery • Invented motion picture projector • Invented phonograph • Invented incandescent light bulb • Worked hard to find practical filament • J.P. Morgan provides financing • Electric lighting quickly spreads

5. A Blessed Land (cont.’d) • George Westinghouse • Air brake • Pneumatically sent air throughout length of train • AC Versus DC power • Nikola Tesla • Worked for Westinghouse on developing AC power plants • High tension lines and transformers • AC became standard • Columbian Exposition in 1893

6. Conquering the Wide-Open Spaces • Railroads prior to 1865 • Most lines very short • Railroads in different gauges • Lines seldom link with each other • Lack of standard time zones • Consolidators • J. Edgar Thomson: Pennsylvania Railroad • Cornelius Vanderbilt: New York Central • Bent laws, ethics, but brought order to railroads

7. Wide-Open Spaces (cont.’d) • Erie War • Vanderbilt purchases Erie stock • Erie Ring waters down stock • Vanderbilt seek indictment, gets settlement • Stockholders, safety suffers • Bringing order to chaos • Thomson, Vanderbilt improve safety, system • Other magnates just seek big profits • Time zones established by railroads • Charles Dowd set at 4 time zones

8. The Transcontinental Lines • Public Finance • Owned by private companies • Small population out West makes building risky • Pacific Railway Act of 1862 • Federal government provides land grants, loans • Romance of the rails • Railroad business deals sometimes shady • Credit Mobilier construction scandal • Immigrants, veterans provide labor force • Railroads built through difficult, dangerous terrain • Transcontinental railroad complete May 10, 1869

9. The Transcontinental Lines (cont.’d) • Railroad mania • Federal government provides land grants • States provide land grants • Towns offer incentives • Owners set towns against each other • Railroad builders become rich • Panic of 1873 • Railroaders overbuild • Not enough customers to support lines • Causes bankruptcy, financial panic • Beginning of major depression

10. The Great Organizers • Series of boom and bust cycles • Free unregulated economy • Americans devoted to competition • Most successful want to eliminate competition • Steel Industry • At first steel too expensive to mass produce • Bessemer process makes mass production practical • Andrew Carnegie sees possibilities • Builds Bessemer plant in Pennsylvania

11. The Great Organizers(cont.’d) • Andrew Carnegie • Forces railroads to compete for his business • Buys, builds in times of depression • Seeks and rewards talent • Vertical integration • Carnegie’s contribution to organization • Controls all aspects of production • Carnegie extremely successful • Sells out to J.P. Morgan in 1901 • Makes $500 million • Morgan creates first billion $ company = US Steel

12. The Great Organizers(cont.’d) • Corporation’s edge • Able to raise more capital by selling shares • Provides dispersed risk, limited liability • Organizers still control company • Supreme Court: corporation is an individual • John D. Rockefeller and Black Gold • Careful investor, religious man • Built greatest corporation • 1855: chemist learns to make kerosene • Kerosene very cheap • Oil rush follows • Rockefeller sees potential

13. The Organizers(cont.’d) • Horizontal Integration • Control key aspect of industry • Oil refineries key to controlling oil • Rockefeller invests in oil refineries • Standard Oil controls 90% of refining, 1890 • Rockefeller and the competition • Uses cutthroat rate wars • Relies on rebates from railroads • Undersells competitors to drive them out of business • Standard Oil Trust • Convinces competitors to surrender control to trust • Manages companies as near-monopoly • Able to drive resisters out of business • Few men control vital industry • Richest man in history of world

14. Discussion Questions • What were the main factors that led to the rise of industrialization in the United States in the late 1800s? • What is meant by “Yankee ingenuity”? How does it apply to men like Bell, Edison, and Westinghouse? • How were railroad companies in the late 19th century symptomatic of the problems and strengths of the U.S. industry? • What role did entrepreneurs like Carnegie and Rockefeller play in the development of industry and business in the United States?