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Chapter 17: Industrial Supremacy. Sources of Industrial Growth. Abundant Raw Materials Large, cheap labor supply Technological Innovation Rising class of entrepreneurs Business friendly govt. Laissez-faire Expanding domestic market Cheaper goods Rising middle class.
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Sources of Industrial Growth • Abundant Raw Materials • Large, cheap labor supply • Technological Innovation • Rising class of entrepreneurs • Business friendly govt. • Laissez-faire • Expanding domestic market • Cheaper goods • Rising middle class
The Rise of New Industry • Steel • Railroads • Oil • 1859- First Oil Well • 1870- 4th Largest export • Freight Ships
Airplane and Automobile • Internal Combustion Engine • Gottfried Daimler- • First independent engine for use in a car • 1893- Duryea Brothers • First US made gasoline powered car • 1906- Henry Ford • Quadricycle • 1895- 4 cars in America • 1917- 5 million • Began to transform economic, social, cultural life
Airplane • Davinci • Wright Brothers • 1903- Kitty Hawk, North Carolina • WW1- Combat and Intelligence • Commercial Viability • Charles Lindbergh 1920 • New York to Paris
R and D • Rise of corporate research for profit • Rapidly changing industries needed quick responses • Movement away from govt. research • Allowed for more diverse innovation • Less centralized control • University and Corporate partnership • Europe didn’t develop these relationships and market driven innovations
The Science of Production • “Scientific Management” • Frederick Winslow Taylor- “Taylorism” • Division of Labor/Specialization • Workers less skilled/ more interchangeable • Easier to train/ Easier to let go • Managers less dependent on one worker • Greater Efficiency • The Moving Assembly Line • Henry Ford • Faster production, higher wages ($5/day) • Shorter day • Affordable cars
Railroads • Transformed social and economic life • Changed every community that it reached • Allowed greater reach for industry • Time zones- Standardized Time • Govt. subsidies helped • Gave rise to the Corporation
Captains of Industry or Robber Barons • http://www.newbedford.k12.ma.us/srhigh/calnan/Industrialists.htm
The Corporation • Stocks • Improved the raising of capital • Limited Liability • Encouraged risk-taking
Andrew Carnegie • Poor Scottish Immigrant • Bought his first steel mill in 1873 • Vertical Integration of the process • Mine to Market • 1901- Sold to JP Morgan ($450 Million) • US Steel controlled 2/3 of the nations steel production
New Approach to Management • Division of Labor among managers • “Middle Managers” • Managerial heirarchy • Modern accounting • More efficient at managing large corporations
Consolidating Corporate America • Horizontal Integration • Potential for Monopoly • Vertical Integration • Rockefeller and Standard Oil • Both Horizontal and Vertical • Feared “cutt-throat competition” • Symbolized Monopoly • Controlled 90% of US refined oil • Railroad “Pool arrangements” • Cartels created agreements for rates • Is this Capitalism?
Trusts and Holding Companies • Trusts • Shareholders of smaller companies transferred stocks to “trustees”. • Received “trust certificates” for share of profits • Trustees controlled all companies in the trust • Holding Company • Central corporate body • Bought up control of trusts • Created direct ownership and control of corporations in the trust • Helped create more corporate mergers/consolidation • 1% of corporations controlled 33% of manufacturing
Accomplishments of Industrialists • Good • Economic growth • Job creation • Cost cutting • Industrial infrastructure • Creation of new markets • Mass production • Rising standard of living • Bad • Less competition • Concentration of economic power • Threat to Republicanism and Individualism • Corruption and political influence, Crony Capitalism • Less chance for “equal opportunity”
The “Self-made Man” • Argued • Industrialism has led to more NOT less opportunity for advancement • Carnegie • Bobbin boy in a cotton mill • Rockefeller • Clerk • E.H. Harriman- Railroad tycoon • Office boy • Exemplified in novels written by Horatio Alger
Critics • Most not self made • Ruthlessness • Corruption • Political Influence • Political contributions in exchange for political support • Politicians demanded bribes
Reality of Business • Most business ventures failed • Tough competition in fragmented industries • Monopolistic advantage killed small competitors • “Riches to Rags”
Survival of the Fittest • Protestant Work Ethic • Hard work, thrift, intelligence, individualism • Protestant Minister • “There is not a poor person in America who was not made poor by his own shortcomings” • Social Darwinism • Only the fittest survived in the marketplace • Is this true? • Herbert Spencer- philosopher
William Graham Sumner- Yale • Folkways- 1906 • Individuals must have the freedom to: • Struggle • Compete • Succeed or Fail
Arguments in from industrialists • Fit with traditional American values of freedom and individualism • Unions and Government Interference • Could not prevent Natural Law and the Law of Competition. • Fit with Adam Smith and classical economists • “The Invisible Hand”- Markets and Supply and Demand • Individuals pursuing their own self-interest creates the best results and is also inevitable
Supply and Demand • Determined all values in the most efficient way • Prices • Wages • Rents • Interest Rates
The Gospel of Wealth • Andrew Carnegie • It is the obligation of the rich to help the poor • With great wealth comes great responsibility • Philanthropic institutions would “help the poor to help themselves.”
Acres of Diamonds • Russell Conwell • Opportunity is all around you. Seize it!!!
"I say that you ought to get rich, and it is your duty to get rich.... The men who get rich may be the most honest men you find in the community. Let me say here clearly .. . ninety-eight out of one hundred of the rich men of America are honest. That is why they are rich. That is why they are trusted with money. That is why they carry on great enterprises and find plenty of people to work with them. It is because they are honest men. ... ... I sympathize with the poor, but the number of poor who are to be sympathised with is very small. To sympathize with a man whom God has punished for his sins ... is to do wrong.... let us remember there is not a poor person in the United States who was not made poor by his own shortcomings. ..."
Alternate Visions of Industrialism • Lester Frank Ward- Dynamic Sociology • Man (using his intelligence) can use govt. to improve society. “Un-constrained” Vision of Man • Modern liberal political thought • Henry George- Progress and Poverty-1879 • Complained of unequal wealth distribution • Championed the “Single Tax” to redistribute wealth. • Edward Bellamy- Looking Backward • Fictional story of a man who wakes up in the future to find a utopian, socialist society. • Competition replaced by “fraternal cooperation”.
Problems of Monopoly • Higher prices • Lack of competition • Unstable economy- production > demand • Threatened individual advancement • Small business • Wealth inequality • Ostentatious living
Industrial Workers in the New Economy • Benefits • Rising Standard of Living • Greater productivity = Real wages rising • Afford more goods • Costs • Sometimes harsh working conditions • Diminished control of own work
Immigrant Workforce • Two waves of workers • Rural workers • Foreign workers • 25 Million between 1865-1915 • 4 times larger than prior 50 years • Eastern Cities • Northern (first waves) and Southern/Eastern Europe, (second waves). • West • Asia and Mexico • Push and Pull Factors • Poverty and oppression in home country • Greater economic opportunity in America • Heightened Ethnic Tensions between groups • Lower paid new groups displaced higher paid older groups • Do we experience this today?
Working Conditions • Higher living standards • Job insecurity - Boom and Bust cycles • Loss of skilled labor • Long hours • Sometimes unsafe conditions • Led to Workers Compensation Laws • Loss of control of working conditions • Scientific Management • Push for greater efficiency
Women and Children at Work • Low skilled labor allowed for use of women and children • Lower wages • Easier to control\ • Social Issue of Working Women • Was it proper for women to work? • Textile and Domestic Service • Wages- Women as much as 50% less • Children and Inneffective Child-labor laws • Did not ban child labor but raised age to 12 and workday to 10 hours. (largely ignored)
