Industrialization

1. Industrialization Rise of Industry

2. United States Industrializes • 1860 1.3 million Americans out of 30 million population worked in industry • 1900s U.S transformed into leading industrial nation • 1914 U.S. GNP was eight times greater than when Civil War ended. • GNP=total value of all goods and services produced by a country

3. Natural Resources • U.S. industrial success=abundance of raw materials=do not have to import • Exploitation of petroleum: • high demand because it can be turned into kerosene=lanterns and stoves • 1859 Edwin Drake drilled first oil well near Titusville, Pennsylvania

4. Large Workforce • 1860-1910 the population of U.S. almost tripled • Two causes: • Large families • Flood of immigrants=eastern Europe & China • 1870 – 1910=20 million immigrants arrived • Helped factories increase production and further demand for industrial products

5. Free Enterprise • U.S. embraced laissez-faire=French “let do” meaning “let people do as they choose” • Government should not interfere in the economy other than protect property rights & maintain peace • If government regulates economy=increased cost and hurts society

6. Aspects of Laissez-Faire • Relies on supply & demand not government regulation of prices & wages • Free market w/competing companies=greater efficiency and more wealth • Supports low taxes • Ensure private individuals, not the government, make most of the decisions about how the nation’s wealth is spent • Government’s debt should be limited • Money government borrows from banks is not available to be loaned to individuals for own use • Profit motive=attracted people of high ability & ambition • Entrepreneurs=people who risk their capital in organizing & running a business

7. Government’s Role in Industrialism • Early 1800’s economic debate between northeast and south • North wanted high tariffs & federal subsidies • South opposed subsidizing & favored low tariffs • Civil War ended this debate • Republican control in Congress passed the Morrill Tariff=reversing declining tariffs • End of Civil War tariffs nearly tripled

8. Government’s Role Continued • Laissez-faire favors free trade and opposes tariffs & subsidies • Tariffs & subsidies drive up prices and support inefficient companies • High tariffs against foreign goods=those countries raised tariffs against American goods sold to foreign countries • Hurt American companies & farmers • Many rural farmers left to take jobs in factories • Many Congressmen believed tariffs were necessary • Helped American companies compete with large European companies • 1900”s many business leaders pushed for free trade

9. New Inventions • 1874 Scottish-American Alexander Graham Bell suggested idea of a telephone • 1876 transmitted his voice “Come here, Watson, I want you.” • Telephone revolutionized business & personal communication • 1877 organized Bell Telephone Company • Became American Telephone and Telegraph Company (AT&T)

10. More Inventions • Thomas Alva Edison=laboratory at Menlo Park, New Jersey • 1877 invention of the phonograph • 1879 lightbulb & electric generator • 1882 Edison Company began supplying electric power to New York City • 1889 Edison companies merged to from Edison General Electric Company (GE)

11. In 1887, Thomas Alva Edison (1847–1931) moved his laboratory from Menlo Park to West Orange, New Jersey. This photograph, taken in 1901, shows him in what many historians consider the first industrial research facility. Here, he invented the alkaline storage battery, the phonograph, and the kinetoscope, the first machine to allow one person at a time to view motion pictures.

12. In his watercolor The Bowery at Night, painted in 1885, W. Louis Sonntag Jr. shows a New York City scene transformed by electric light. Electricity transformed the city in other ways as well, as seen in the electric streetcars and elevated railroad. SOURCE:The Bowery at Night, 1885.Watercolor.Museum of the City of New York.

13. Technology’s Impact • Thaddeus Lowe=experimented with the cooling properties of compressed gases and developed a Carbon Dioxide cooled commercial ice-making machine • His commercially produced ice was first sold in Dallas, TX in 1866. • He built a 24,000 house in Pasadena, CA • Northrop automatic loom=changed bobbins without stopping • Ready-made clothes=measurements taken from Union soldiers during the Civil War

16. Railroads

17. Linking the Nation • 1865 U.S. had about 35,000 miles of railroad track • 1900 U.S. had over 200,000 miles of track • 1862 President Lincoln signed the Pacific Railway Act. This began the railroad boom. • Provided construction of a transcontinental railroad by two corporations • Union Pacific and Central Pacific • Encourage rapid construction govt. offered each company land along the right-of-way • Produced very intense competition for land

18. Union Pacific • 1865 Union Pacific pushed westward from Omaha, Nebraska • Engineer former Union general Grenville Dodge • Workers included Civil War veterans, new immigrants from Ireland, ex-convicts, etc. • Life was rough, dirty, dangerous, gambling, hard drinking, and fighting.

19. Central Pacific • Dream of engineer Theodore Dehone Judah • Sold stock in his Central Pacific Railroad Co. to the big four: • Grocer Leland Stanford • Shop owner Charley Crocker • Hardware store owners Mark Hopkins & Collis P. Huntington • They made huge fortunes • Labor was short in California • Hired about 19,000 workers from China • All machinery was shipped from the East • Around Cape Horn or over the Isthmus of Panama

20. Chinese immigrants, like these section gang workers, provided labor and skills critical to the successful completion of the first transcontinental railroad. This photo was taken in Promontory, Utah Territory, in 1869. SOURCE:The Denver Public Library,Western History Collection.

21. Connecting the Union and Central • Promontory Summit is 56 miles west of Ogden Utah territory. • May 10, 1869, at Promontory Summit in Utah territory, the first of five transcontinental railroad's were completed. • The golden spike was driven in the last tie plat to commemorate the Union Pacific Railroad and the Central Pacific Railroad at Promontory Summit as the completed first Transcontinental Railroad as directed by the Pacific Railway Act

22. "The Last Spike" by Thomas Hill (1881) depicting the ceremony of the driving of the "Last Spike" at Promontory Summit, UT, on May 10, 1869, joining the rails of the Central Pacific Railroad and the Union Pacific Railroad.

23. Celebration of completion of the transamerican railroad on 1869-05-10 (May 10th 1869) at what is now Golden Spike National Historic Site. from the NPS website at http://www.nps.gov/gosp/index.htm

26. Linking Lines • Railroad consolidation occurred rapidly from 1865 to 1900 • Cornelius Vanderbilt – most successful/famous • Former steamboat captain – largest steamboat fleet in America • 1869 formed the New York Central • First direct rail service between New York City and Chicago • 1871 began construction on New York’s Grand Central terminal.

27. Benefits of National System • Before 1880’s communities set clocks by sun’s position in the sky at high noon. • Interfered with train scheduling & safety • Like trains traveling on the same track YIKES!! • 1883 American Railway Association divided country into four time zones in regions where the same time was kept • Federal Government ratified in 1918 • Large integrated railroad systems benefited the nation. • Helped unite Americans in different regions • Air brakes enabled railroads to put longer and heavier trains on their lines

28. Land Grant System • Land grants – federal government would give to RR companies to encourage RR construction • RR would sell land to settlers, real estate companies, and other businesses to raise money to build RR • 1850s federal government gave over 28 million acres of public lands to individual states • 1862 & 1864 Pacific Railway acts gave directly to RR

29. English: $1,000 (30 year, 7%) "Pacific Railroad Bond" (#93 of 200) issued by the City and County of San Francisco under "An Act to Authorize the Board of Supervisors of the City and County of San Francisco to take and subscribe One Million Dollars to the Capital Stock of the Western Pacific Rail Road Company and the Central Pacific Rail Road Company of California and to provide for the payment of the same and other matters relating thereto" approved on April 22, 1863, as amended by section Five of the "Compromise Act" approved on April 4, 1864, to fund the construction of the Western Pacific Railroad between San Francisco Bay (at Alameda) and the CPRR of Cal. at Sacramento, dated May 1, 1865

30. Robber Barons • Persons accused that they built their fortunes on swindling investors & taxpayers, bribing government officials, and cheating on their contracts & debts. (NOTHING NEW HERE) • Jay Gould – practiced insider trading • Bribery of Congressmen &state legislators • RR investors could make more money by acquiring land grants than operating RR

31. Crédit Mobilier Scandal • Crédit Mobilier– construction company set up by several stockholders of the Union Pacific • Included Oakes Ames member of congress • Investors signed contracts with themselves • Overcharged Union Pacific-RR agreed to pay inflated bills • Investors made several millions but RR was almost bankrupt • Ames gave other members of Congress shares in Union Pacific priced below market value • Election campaign 1872 came out in New York Sun • Listed members of congress that accepted bribes • Speaker of the House James Blaine • James Garfield (future President of US) • Vice President Schuyler Colfax • Scandal impression that all RR entrepreneurs were robber barons-people that loot and industry and give nothing back

32. Great Northern • James Hill – not a robber baron • Built Great Northern RR without any federal grants or subsidies • Offered low fares to settlers who homesteaded along his route • RR hauled in demand goods to Washington to be shipped to Asia • Made money by hauling goods both east and west • Became the most successful transcontinental railroad and the only one not forced into bankruptcy

33. Big Business

34. Corporations • Organization owned by many people but treated by law as if single person • Can own property • Pay taxes • Make contracts • Sue and be sued • People who own the corporation are stockholders • They own shares of ownership called stock • Can raise large amounts of money for big projects while spreading out the financial risk

35. Economies of Scale • Sale of stock – corporations invest in new technologies, hire large workforce, purchase many machines, larger manufacturing facilities • Economies of scale=corporations make goods more cheaply because they produce so much quicker using large manufacturing facilities • The result is lower costs and lower prices • Fixed costs=costs company has to pay whether operating or not • Loans, taxes, mortgages • Operating costs=costs that occur when running the company • Paying wages, shipping charges, buying raw materials & supplies • Big corporations had small operating costs compared to their fixed costs • When economic times where poor, better to continue operating • They would cut prices rather than shutting down

36. Andrew Carnegie • Born in Scotland, poor, emigrated to US in 1848 • Age 12 worked as bobbin boy in textile factory earning $1.20 per week • Became messenger in telegraph office • Private secretary to Thomas Scott Pennsylvania Railroad • Scott promoted to President, Carnegie became superintendent • Knew he could make lots of money investing in companies that served the RR industry • Bought shares in iron mills, factories that made sleeping cars & locomotives, company that built RR bridges • His early 30s making $50,000 per year & quit his job • Met English inventor, Sir Henry Bessemer-making high quality steel efficiently and cheaply • Carnegie opened steel company in Pittsburgh in 1875 • Adapted steel mils to use Bessemer process

38. This engraving of steel manufacturing at Andrew Carnegie’s plant in 1886 features a Bessemer Converter, which converts molten pig iron into steel. The process was named after Sir Henry Bessemer of Sheffield, England, who first patented the process in 1855. SOURCE:The Granger Collection,New York (0009141/4E452.14).

39. Vertical and Horizontal Integration • Vertical integrated company owns all of the different businesses on which it depends for its operation • vertical integration to control every step of production • Carnegie did this will steel company • Bought coal mines, limestone quarries, iron ore fields • Saved companies money enabling them to become bigger. • Horizontal integration combines many firms engaged in the same type of business into one large corporation • horizontal combination to control the market for a single product. • John D. Rockefeller achieved this with his Standard Oil Company • Gained control of 90% of the oil refining industry in US

40. John D. Rockefeller, who formed the Standard Oil Company in 1870, sought to control all aspects of the industry, from the transportation of crude oil to the marketing and distribution of the final products. By the end of the decade, after making shrewd deals with the railroads and underselling his rivals, he managed to control 90 percent of the oil-refining industry. To further consolidate his interests, in 1882 Rockefeller created the Standard Oil Trust, which, by integrating both vertically and horizontally, became a model for other corporations and an inspiration for critical commentary and antitrust legislation. This cartoon, published in Puck in 1904, shows the stranglehold Standard Oil had on government and industry alike. In 1911, in response to an antitrust suit, the Supreme Court ordered the company to break up. SOURCE:Courtesy of the Library of Congress (LCUS264-435).

41. Public Fears • Monopolies-single company achieves total control over single market • Standard Oil was close but competition with other world oil companies forced it to keep prices low • To preserve competition and prevent horizontal integration many states made it illegal for one company to own stock in another without permission from state legislature • 1882 Standard Oil formed the first trust • Trust is legal to allow one person to manage another person’s property • Trustee is the person who manages another person’s property

42. Holding Companies • 1889 New Jersey general incorporation law • Allowed corporations chartered in NJ to own stock in other businesses • Created new organization called holding company • Does not produce anything itself • It owns the stock of companies that do produce goods • Controls all of the companies it owns • Merging them into one large enterprise • By 1904 US had 318 holding companies • Controlled over 5,300 factories worth $7 billion

43. Selling the Product • 1900 retailers spending over $90 million a year on advertising • Advertising firms helped companies reach customers • 1877 John Wanamaker’s Grand Depot department store • “largest space in the world devoted to retail selling on a single floor” • Department stores changed the idea of shopping by bringing together different products in one large elegant building • Purpose to make shopping glamorous & exciting • Department stores captured the urban market • Chain stores appeared in the mid 1800s • Chain stores developed in other retail areas, frequently specializing in specific consumer goods • Focused on thrift, offering low prices • 1879 Woolworth opened • Mail-order catalogs Montgomery Ward & Sears, Roebuck • Rural free delivery enabled Sears and Montgomery Ward to thrive and required thatthese companies set up sophisticated ways of reaching their customers

44. Taken from J. B. Legg’s architecture book, this page illustrates the ideal suburban home. His book, published in 1876, was aimed at the prospering middle class. SOURCE:Courtesy of the Library of Congress.

45. Unions

46. Working in the U.S. • Life for workers was difficult • Monotonous, repetitive tasks, unhealthy, dangerous • Uneven division of income between wealthy and the working class • 1900 average industrial worker paid 22¢ per hour for 59 hour work week • 1865-1897 U.S. experienced deflation=rise in the money value • Caused prices to fall=increased buying power of workers wages • Late 1800s companies cut wages but prices fell even faster so wages were still going up in buying power.

47. Early Unions • Two basic types of industrial workers: • Craft workers had special training and skills • Machinists, iron molders, stonecutters, glassblowers, shoemakers, printers, carpenters • Received higher wages • Common laborers had few skills • Received lower wages • 1830s trade unions formed-limited to people with specific skills • 1873 were 32 national trade unions in U.S. • One of largest and most successful was Iron Molder’s International Union

48. Industry Opposes Unions • Employers regarded unions as illegitimate conspiracies that interfered with their property rights • Strongly opposed industrial unions which united all craft workers & common laborers in a industry • Required workers to take oaths or sign contracts promising not to join • Undercover detectives to identify union organizers • Fired and put on blacklist=“troublemaker” • Lockout=workers were locked out of property & refused to pay them • Company would hire strikebreakers known as scabs

49. The American Federation of Labor • The American Federation of Labor, led by Samuel Gompers, organized skilledworkers within the wage system. • The AFL: • did not organize unskilled workers, females, or racial and ethnic minorities • focused on short-term goals of higher wages, shorter hours and collective bargaining. • Unlike other unions, the AFL did achieve a degree of respectability.

50. At the 1886 General Assembly of the Knights of Labor, which met in Richmond, Virginia, sixteen women attended as delegates. Elizabeth Rodgers, the first woman in Chicago to join the Knights and the first woman to serve as a master workman in a district assembly, attended with her two-week old daughter. The convention established a Department of Women’s Work and appointed Leonora M. Barry, a hosiery worker, as general investigator. SOURCE:Corbis/Bettmann.