Unit 3: Birth of Modern America

1. Unit 3: Birth of Modern America

2. Chapter 9 Industrialization

3. Intro to Industrialization

4. I. Introduction to Industrialization • Industrial Revolution - the movement from small-scale manufacturing to the production of heavy industry, using machines to replace human laborers • Factors that set the stage for Industrialization 1. Expansion of the West 2. Expansion of Industry – pre Civil War 3. Growth of Cities

5. Fun Facts about Industrialization 1. What the Brits did in a century, the US outdid in ½ the time! 2. By end of 1800s, US was the most industrialized nation in the world 3. 1865: $2B in goods produced 1900: $13B in goods produced 4. moved from 4th to 1st in productivity (productivity rose 12 X).

6. Now time for a little economics lesson

7. D. Types of Economic Systems • 3 basic economic questions What to make? How much to make? Who to make it for?

8. Traditional Economy (subsistence economy) a. all goods & svc produced & consumed by the family/for family b. Very little surplus or exchange of goods c. Survival drives economic decisions d. Found in poor countries, mostly in rural areas

10. Market Economy • People freely choose what to buy & sell according to the laws of supply & demand • Individuals or companies make decisions about production & distribution – competition • Capitalism – biz, industries, resources are privately owned - Competition leads to the best product at the lowest cost! d. In US, govt provides some svc & imposes somegovt regulations • Pure capitalism: gov’t plays NO part in economy • Profit drives economic decisions

11. Capitalism

13. 3. Command Economy • Central Govt makes decisions about production/distribution - decides what to make, where to make it, how much to make, what price to charge, what to pay workers • Production doesn’t necessarily reflect consumer demand • Communist economy – govt owns, operates all major farms, factories, utilities, stores • Social goals drive economic decisions

15. D. Mixed Economy • Combo of command & market economies • Socialism: state owns/operates somebasic industries while allowing pvt enterprise in other parts of economy • Belief that wealth should be distributed more equally – all entitled to certain goods/svcs • “welfare states” characterized by HIGH TAXES to pay for the many social svcs like housing, health care, child care, pensions

16. Mixed Economy (Socialism) Government Private Enterprise Laws of Supply & Demand Determine price & production Determine price & production Operates some businesses Owns somebusinesses

17. II. Rise of Industry • Factors that contributed to rapid industrialization 1. Natural Resources a. Western Minerals (access to these thanks to settlement of West!), iron, coal, timber, copper, water power, etc. b. Could be obtained cheaply c. Little need for imports

18. 2. Innovations in transportation and communication - Infrastructure a. Made for efficient distribution of products and information b. Telegraph, Telephone: allowed biz to be conducted quickly across long distance c. Roads, Canals, RRs: allowed mass distribution of raw materials, farm produce and products of manufacture

19. 3. New Energy Sources a. Steam Engine b. Electric Dynamo c. Petroleum power (internal combustion engine) - already in demand as Kerosene - oil fields opened from PA to TX - economy expands with production increase

20. 4. Business-Friendly Gov’t a. Republican dominated (became party of big biz) b. Gov’ts role in Industrialization - kept taxes/spending low - few costly regs on industry - didn’t control prices/wages - protective tariffs - subsidies in land and money subsidy = Monetary assistance granted by a gov’t to a person or group in support of an enterprise regarded as being in the public interest

21. c. Laissez-Faire Economics –theory that gov’t should not interfere in economic affairs - gov’t role to protect pvt property & keep the peace - supply & demand, not gov’t regulates prices & wages - supports belief that gov’tregs increase price and hurt society in long run - free market w/ competing co.s leads to efficiency & wealth for all - low taxes ensure that pvt individuals, not gov’t make decision on how nation’s wealth is spent - gov’t debt should be kept to minimum: if gov’t borrows from banks, $ not available for individuals for their own use - entrepreneurs – people who risk their $ organizing/running a biz should be free to pursue rewards of bldg a biz &making a profit for themselves d. Gov’t corruption: often took bribes etc.

22. 5. Economic Stimuli a. Lots of Capital ($) – from Europe, Americans, Western minerals b. Population Boom – immigration (20m btwn 1870-1910) + high birth rate, lrg families (adv. in med tech, nutrition, infrastructure = lower infant mortality rate) - Lrg workforce/cheap labor - created demand for consumer goods produced by factories

23. c. New ways of selling/organizing - 1st dept store: Macy’s - 1st chain store: A & P - 1st mail order: Ward’s - advertising/packaging to attract consumers Macy’s NY A & P

24. 6. New Technologies - you name it, somebody invented it! a. Textile Industry: - Factory System = Samuel Slater - 1st built the first successful water-powered textile mill in America - Cotton Gin = Eli Whitney - revived slavery - Sewing Machine = Elias Howe - switch from home-made to machine- made clothes - Sewing Machine = Isaac Singer - challenged Howe for patent - installment plan

25. The Factory System

26. Rise of the Sewing Machine Industry

27. b. Railroads: - Standardized Gauges = John Stevens - width btwn rails = 56 ½ “ contributes to completion of Transcontinental RR - Air Brakes = George Westinghouse - more precise stopping of trains - Sleeping Car = George Pullman - comfortable, luxurious travel

28. Pullman Car • Beveled mirrors, ornate carvings, and polished brass were the hallmarks of travel in a Pullman parlor car, such as the one depicted here from 1893. • First-class passengers enjoyed plush swivel seats and could eat their meals in equaling lavish dining cars. • The wealthiest owned their own luxuriously appointed private cars.

29. c. Steel: - Bessemer Process = Henry Bessemer, William Kelly - mass production of steel: heat iron ore to liquid state, blast w/ hot air to burn out impurities, end product = steel - Iron RR tracks replaced by steel tracks - Birth of Skyscrapers

30. Bessemer Process

31. Bessemer Process

32. - Elevator = Elisha Otis - Skyscrapers made practical - Suspension Bridge = John Roebling - uses steel cables - London Bridge 1st - Brooklyn Bridge 1st in US - Trolley Car = Frank Sprague - early mass transit - runs on steel cables - Light Bulb = Thomas Edison - uses a dynamo (primitive electric generator) - factories can be built away from natural source of power - can work longer hrs Thomas Edison

33. d. Oil: - Oil Well & Pump = Edwin Drake - launched an oil boom nationwide - cheap source of fuel for autos (future)

34. e. Business Industry: - Telegraph = Samuel Morse - Morse code - allows biz to communicate quickly across long distances - Telephone = Alexander Graham Bell - communication revolution - allows biz to communicate quickly across long distances - Transatlantic Cable = Cyrus Fields - uses telegraph to send impulses - communicate with Europe - Typewriter = Christopher Sholes - Cash Register = James Ritty

35. f. Food Industry - Mechanical Reaper = Cyrus McCormick - harvest grain quickly using machines - Steel Plow = John Deere - Evaporated Milk = Gail Borden - Food Preservation (w/o canning) = HJ Heinz - Refrigerated RR Car = Gustavus Swift - can ship slaughtered meat across long distances safely - leads to growth of meatpacking industry in Chicago

36. Chicago Stockyards

37. - Dried Flake Cereal = John Kellog - More cereal = CW Post - leads to cereal wars and use of gimmicks to sell products

38. g. Miscellaneous Inventions - Kodak Camera = George Eastman - Airplane = Orville & Wilbur Wright - revolution in transportation - revolution in warfare First flight at Kitty Hawk, NC on December 17, 1903

39. III. Railroads • Linking the Nation 1. Expansion after Civil War (by 1900, 200,000 mi of track. Only 30,000 in 1860) 5 Transcontinental RRs built 2. 1st Transcontinental RR – completed 1869 a. Pacific Railway Act (1862) b. Transcont. RR built by 2 companies : Central Pacific – from CA used Chinese labor; Union Pacific – From MW used Irish immigrants, ex-cons, veterans etc. • RRs contribution to Industrial Growth 1. Impact on economy a. increased market for many products by linking nation b. stimulated economy by spending lots of $ on steel, coal, timber etc.

40. Railroads

41. Transcontinental RR

42. 2. Linking other lines a. lots of unconnected lines – a challenge to create single rail system b. Large RRs lines take over small. Consolidation. Then 7 main systems with terminals in major cities w/ branches to the country c. Cornelius Vanderbilt: RR consolidator. Merged NY RRs. 1st svc from NYC to Chicago 3. Benefits of a National System a. Time Zones: before 1880, clocks set by sun’s position in sky at high noon (example – at 12:00 pm in Chicago, it was 12:50 pm in DC ** problem: with scheduling, pax safety – 2 trains on same track could collide from scheduling errors caused by time variations ** solution: 1883 – 4 time zones – made RR travel safer and more reliable

43. Time Zones

44. b. Large integrated RRs benefit US. - increase in efficiency - decrease in time spent on long distance travel - united Americans from different regions C. Land Grant System 1. Land Grants given to RRs by gov’t to encourage RR construction 2. RR companies able to cover their construction costs by selling land to settlers, real estate agencies & other biz

45. Gov’t Land Grants to RRs

46. D. Robber Barons 1. Some RR entrepreneurs engaged in corrupt practices that led to the acquisition of great wealth - another way to put it… Robber Barons: people who loot an industry and don’t give anything back - used ruthless biz tactics against their competitors a. Jay Gould – used info to manipulate stock prices to his benefit (insider trading) b. RR investors realized they could make more $ by selling land grants than by running a RR – bribed Congress to vote for more land grants

47. 2. Credit Mobilier Scandal – 1872 a. Stockholders from UP RR set up CM – a construction co. b. CM overcharged RR c. Since same investors controlled both co.s, RR paid bills d. Investors made millions, RR almost bankrupt 3. More corruption a. RR wanted more land grants b. Convinced Congress to issue them by giving Congress members shares of UP stock at price below market value c. Several Congressmen implicated – including James Garfield (becomes President later)

48. 4. Great Northern a. Success w/o corruption b. James Hill – built RR from St Paul, MN to Everett, WA w/o any land grants or subsidies c. Built along good land & passed thru towns d. Offered low fares to settlers who homesteaded along route e. Carried products to WA for shipment to Asia – thus, RR earned $ by hauling goods E & W f. Most successful TC RR – never bankrupt

49. IV. Big Business • Rise of Big Biz 1. Role of corporations a. Corporation: an organization owned by many people but treated by law as if it were a single person b. people who own the corporation are known as stockholders c. Stockholders own shares of the company called stock d. Advantages of incorporating? - can raise $ from sale of stock; invest in new tech, hire workforce, buy machines to increase efficiency - limit liability – spread out financial risk

50. 2. Economies of Scale a. Corps ability to make goods more cheaply b/c they produce so much so quickly using lg. manuf. facilities b. Cost of Biz 1) Fixed Costs = cost a biz pays whether its operating or not (mortgage, loans, taxes) 2) Operating costs: occur when running company(wages, shipping, raw materials) 3) Small vs. Large Company: * small: low fixed, high operating costs. If biz slow, cheaper to shut down and wait * large: high fixed, lower operating. Keep operating in an economic recession