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Growing Pains: Robber Barons and the Growth of U.S. Industry, 1870-1900 AN AGE OF BIG BUSINESS

Growing Pains: Robber Barons and the Growth of U.S. Industry, 1870-1900 AN AGE OF BIG BUSINESS. Mr. Pitcairn U.S. History 2005/06. FOUNDATIONS FOR GROWTH. Factors of Production 1870-1900 time of great economic growth New technology + new business methods  allow U.S. to

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Growing Pains: Robber Barons and the Growth of U.S. Industry, 1870-1900 AN AGE OF BIG BUSINESS

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  1. Growing Pains: Robber Barons and the Growth of U.S. Industry, 1870-1900AN AGE OF BIG BUSINESS Mr. Pitcairn U.S. History 2005/06

  2. FOUNDATIONS FOR GROWTH • Factors of Production • 1870-1900 time of great economic growth • New technology + new business methods  allow U.S. to • tap rich supply of natural resources • increase production • raise $ needed for growth • Growth possible because U.S. benefited from “factors of production” • LAND (land & natural resources) • LABOR (availability of workers) • CAPITAL (buildings, machinery, & tools)

  3. FOUNDATIONS FOR GROWTH • Growth of railroads after Civil War stimulates economic growth • 1869: first transcontinental railroad • By 1890: five major transcontinental railroads • Miles of track: • 1860: about 30,000 • 1900: almost 200,00

  4. FOUNDATIONS FOR GROWTH • Raising Capital • Economic & business growth requires “capital” • $ for investment • Banks: businesses borrowed $ to expand

  5. FOUNDATIONS FOR GROWTH • “Corporation” • Company that sells shares – “stock” – of its business • “shareholders” – people who invest in a company by buying shares • GOOD TIMES  shareholders do well • “dividends” – cash from company’s profits • stock rises in value • BAD TIMES  shareholders lose investment • Stocks sold in “stock markets” • Railroads first businesses to incorporate

  6. THE OIL BUSINESS • 1850s oil found in PA hills • Oil valuable • lubricate machinery • burn to produce energy • 1859 first oil well • Titusville, PA • Edwin Drake • Oil industry grows rapidly in late 1800s

  7. THE OIL BUSINESS • John D. Rockefeller • Made fortune in AND came to control oil industry • Standard Oil Company of Ohio, 1870 • JDR set up oil refinery in Cleveland, OH • Built empire through “horizontal integration” • Combining competing companies into one corporation • JDR bought competing oil refineries

  8. THE OIL BUSINESS • SOC became a“monopoly” - total control by a single producer • Lowered prices to drive out competitors • Pressured customers to not use other oil companies • Demanded rebates from railroad companies • Created Standard oil “trust” • Group of companies controlled by one Board of Directors

  9. THE STEEL BUSINESS • Steel becomes big business in late 1800s • Steel • Strong & long-lasting form of iron • Iron alloyed with carbon • Great for railroad tracks, bridges, buildings, etc. • 1860s: new methods of making steel (Bessemer process)  could produce larger amounts, more cheaply • 1870s: Pittsburg, PA  steel capital of US • Close to sources of iron ore (PA & OH) • Large steel mills built

  10. “Making Bessemer Steel at Pittsburgh, the Converters at Work”Charles GrahamHarper’s WeeklyApril 10, 1886

  11. THE STEEL BUSINESS • Andrew Carnegie • Son of Scottish immigrant • By 1890, rules steel industry • Built one of first steel mills in Pittsburg • Brought Bessemer process to US • Created empire through “vertical integration” • buying companies that provide equipment and services for a business

  12. THE STEEL BUSINESS • By 1900, Carnegie’s company produces 1/3 0f all US steel! • 1901 Carnegie sells his company to banker J. Pierpont Morgan for $450 million • JPR forms US Steel Corporation  first billion $ corporation

  13. CONCENTRATION OF ECONOMIC POWER • “Mergers” – combining of companies – concentrated economic power in a few corporations • By 1900  1/3 US manufacturing controlled by 1% of US corporations! • Problems of giant corporations • Drove competition away • Hurt consumers • Corporations did not need to keep prices low • Corporations did not need to improve goods/services

  14. REFERENCES • “The Growth of Industry” (Chapter 19). The American Journey. New York: Glencoe McGraw-Hill, 2003. • “Industrial Revolution.” Wikipedia. Wikimedia. <http://en.wikipedia.org/wiki/Industrial_Revolution>. • “The American Experience: Andrew Carnegie.” PBS. <http://www.pbs.org/wgbh/amex/carnegie/>.

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