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The Second Industrial Revolution

The Second Industrial Revolution

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The Second Industrial Revolution

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  1. The Second Industrial Revolution The rise of the United States as an economic power

  2. The Rise of Industry Following the Civil War, the United States had been primarily a rural (farming-based) country, by the 1920s it becomes one of the worlds leading industrial centers. What things allowed this to happen? • Superabundant supply of land and natural resources • Excellent natural and manmade transportation systems • A growing supply of labor caused by natural population growth and an explosion of immigration. • A Special facility for invention and technology • Superb industrial organization.

  3. The Corporation One major innovation was the development of the modern corporation: • replaced family owned businesses as the main form of business organization • a type of business that raises capital (money) through the sale of stock. Stock is shares of ownership in a corporation, and stockholders are part owners of the corporation. • Two advantages of a corporation are its ability to raise large amounts of money and limited liability.

  4. The Corporation Limited liability (responsibility) means the corporation acts as an artificial legal person. It can sue and be sued, pay taxes, go into debt. Therefore, the corporation itself, rather than the individual stockholders, is responsible for the business’s actions. For example, cancer victims, who were smokers, have successfully sued tobacco companies for damages. However, only the tobacco corporation itself is liable; the individual stockholders are not personally responsible for causing the smokers to develop cancer.

  5. BLACK GOLD • In 1859, Edwin Drake used a steam engine to drill for oil • This breakthrough started an oil boom in the Midwest and later Texas • At first the process was limited to transforming the oil into kerosene and throwing out the gasoline -- a by-product of the process • Later, the gasoline was used for cars EDWIN DRAKE PICTURED WITH BARRELS OF OIL

  6. BESSEMER STEEL PROCESS • Oil was not the only valuable natural resource • Coal and iron were plentiful within the U.S. • When you removed the carbon from iron, the result was a lighter, more flexible and rust resistant compound – Steel • The Bessemer process did just did (Henry Bessemer & William Kelly) BESSEMER CONVERTOR CIRCA 1880

  7. NEW USES FOR STEEL • The railroads, with thousands of miles of track, were the biggest customers for steel • Other uses emerged: barbed wire, farm equipment, bridge construction (Brooklyn Bridge- 1883),and the first skyscrapers BROOKLYN BRIDGE SPANS 1595 FEET IN NYC


  9. ELECTRICITY 1876- Thomas Alva Edison established the world’s first research lab in New Jersey There Edison perfected the incandescent light bulb in 1880 Later he invented an entire system for producing and distributing electricity By 1890, electricity powered numerous machines EDISON

  10. THE TELEPHONE • Another important invention of the late 19th century was the telephone • Alexander Graham Bell and Thomas Watson unveiled their invention in 1876 BELL AND HIS PHONE

  11. PROFESSOR DOWD CREATES TIME ZONES • In 1869, to remedy this problem, Professor C.F. Dowd proposed dividing the earth into 24 time zones • The U.S. would be divided into 4 zones: the eastern, Central, Mountain, and Pacific • 1883 – Railroads synchronized their watches across U.S. • 1884 – International Conference adopts zones PROFESSOR DOWD EXPLAINS HIS TIME ZONES

  12. RAILROADS SPUR OTHER INDUSTRIES • The rapid growth of the railroad industry influenced the iron, coal, steel, lumber, and glass businesses as they tried to keep up with the railroads demand for materials • The spread of the railroads also led to the growth of towns, new markets, and opportunity for profiteers

  13. RAILROADS LED TO GROWTH OF CITIES • Many of today’s major cities owe their legacy to the railroad • Chicago, Minneapolis, Denver, and Seattle all grew up thanks to the railroad “MY KIND OF TOWN”


  15. CREDIT MOBILIER SCANDAL • Stockholders of Union Pacific Railroad formed a construction company in 1864 • Stockholders then gave contracts to the company to lay track at 3 times the actual costs and pocketed the difference • They donated shares of the stock to 20 Republican members of Congress in 1867 POSTER FOR BOGUS CONSTRUCTION COMPANY

  16. THE GRANGE AND THE RAILROADS • Farmers were especially affected by corruption in the railroad industry • Grangers (a farmers organization) protested land deals, price fixing, and charging different rates to different customers • Granger Laws were then passed protecting farmers • States were given regulation control of railroads by the Courts GRANGERS PUT A STOP TO RAILROAD CORRUPTION

  17. INTERSTATE COMMERCE ACT • In 1887, the Federal government re-established their control over railroad activities • Congress passed the Interstate Commerce Act and established a 5-member Interstate Commerce Commission (ICC) • The ICC struggled to gain power until 1906 1887 – CONGRESS PASSED THE ICA

  18. SECTION 3: BIG BUSINESS AND LABOR • Andrew Carnegie was one of the first industrial moguls • He entered the steel industry in 1873 • By 1899, the Carnegie Steel Company manufactured more steel than all the factories in Great Britain combined

  19. CARNEGIE BUSINESS PRACTICES • Carnegie initiated many new business practices such as; • Searching for ways to make better products more cheaply • Accounting systems to track expenses • Attracting quality people by offering them stock & benefits ANDREW CARNEGIE 1835 -1919

  20. CARNEGIE’S VERTICAL INTEGRATION • Carnegie attempted to control as much of the steel industry as possible • How? Vertical integration; he bought out his suppliers (coal fields, iron mines, ore freighters, and rail lines) in order to control materials and transportation


  22. HORIZONTAL INTEGRATION • Additionally, Carnegie bought up the competition through friendly and hostile takeovers • This is known as Horizontal Integration; buying companies that produce similar products – in this case other steel companies MERGERS

  23. BUSINESS GROWTH & CONSOLIDATION • Mergers could result in a monopoly (Trust) • A monopoly is complete control over an industry • An example of consolidation: In 1870, Rockefeller Standard Oil Company owned 2% of the country’s crude oil • By 1880 – it controlled 90% of U.S. crude oil CHICAGO’S STANDARD OIL BUILDING IS ONE OF THE WORLD’S TALLEST

  24. SOCIAL DARWINISM The philosophy known as Social Darwinism has its origins in Darwin’s theory of evolution Darwin theorized that some individuals in a species flourish and pass their traits on while others do not Social Darwinists (like Herbert Spencer) believed riches was a sign of God’s favor, and being poor was a sign of inferiority and laziness DARWIN (RIGHT) LIMITED HIS FINDINGS TO THE ANIMAL WORLD SPENCER WAS THE ONE WHO COINED THE PHRASE “SURVIVAL OF THE FITTEST”

  25. ROBBER BARONS Alarmed at the cut-throat tactics of industrialists, critics began to call them “Robber Barons” Famous “Robber Barons” included Carnegie, Rockefeller, Vanderbilt, Stanford, and J.P. Morgan J.P MORGAN IN PHOTO AND CARTOON

  26. ROBBER BARONS WERE GENEROUS, TOO • Despite being labeled as greedy barons, rich industrialists did have a generous side • When very rich people give away lots of money it is called “Philanthropy” • Carnegie built libraries, Rockefeller, Leland Stanford, and Cornelius Vanderbilt built schools ROCKEFELLER CHAPEL – UNIVERSITY OF CHICAGO

  27. SHERMAN ANTI-TRUST ACT • In 1890, the Sherman Anti-Trust Act made it illegal to form a monopoly (Trust) • Prosecuting companies under the Act was not easy – a business would simply reorganize into single companies to avoid prosecution • Seven of eight cases brought before the Supreme Court were thrown out

  28. The Big Names • Andrew Carnegie – Steel, vertical integration, “gospel of wealth” • James Piedmont (J.P.) Morgan – Banking and Steel • John D. Rockefeller – Oil and horizontal integration • Cornelius Vanderbilt – Railroads • Philip Armour – Meat • Jay Gould and James Fisk - speculation

  29. Horizontal Integration • Rockefeller Oil • Eliminating all of the competition so you own majority (or all) of the resources for a product • Example: Buying all of the oil rigs and refineries so you are the only oil producer

  30. Vertical Integration • Carnegie Steel • The monopoly owner takes over not just the industry that they are in but also the means of producing their product • Steel refineries • Mines • Coke • Railroads • Boats

  31. Monopolies and Trusts • Monopolies involved accumulating all of the companies that make a product • A trust is a new company that controls all of the businesses in a monopoly • A holding company is a paper company that owns all of the businesses in a monopoly

  32. Social Darwinism • Charles Darwin’s “On the Origin of Species” 1859 • Tried to explain differing patterns of development within a species • Evolution • Herbert Spencer – English sociologist • “Survival of the fittest” • Rich are wealthy because they are better than poor.

  33. Gospel of Wealth • Carnegie’s idea • Wealthy owe an increased responsibility to redistribute their wealth • Not through handouts or charity • Through institutions to help future generations achieve great things through hard work • Libraries • Foundations • Scholarships

  34. Telephone

  35. Building the Empire • 1865-1916--U.S. lays over 200,000 miles of track costing billions of dollars • Expenses met by government at all levels • Federal railroad grants prompt corruption • Railroads save government $1 billion in freight costs 1850-1945


  37. Federal Land Grants to Railroads as of 1871

  38. Railroad Construction, 1830-1920

  39. Railroads, 1870 and 1890

  40. Problems of Growth • Intense competition among railroads (Jay Gould) • Efforts to share freight in an orderly way fail • After Panic of 1893, bankers gain control of railroad corporations • Bankers impose order by consolidating to eliminate competition, increase efficiency • In 1900, seven giant rail systems dominate

  41. An Industrial Empire • Bessemer process of refining steel permits mass production • REMOVAL of carbon and THE ADDITION OF other alloys makes iron into stronger steel. • Use of steel changes agriculture, manufacturing, transportation, architecture

  42. Bessemer Process

  43. Carnegie and Steel • Large-scale steel production requires • access to iron ore deposits in Minnesota • extensive transportation network • Requirements lead to “vertical integration” • definition: a type of organization in which a single company owns and controls the entire process from obtaining raw materials to manufacture and sale of the finished product


  45. Carnegie Quotes • Concentrate your energies, your thoughts and your capital. The wise man puts all his eggs in one basket and watches the basket. • I would as soon leave my son a curse as the almighty dollar. • The first man gets the oyster, the second man gets the shell.

  46. Carnegie and Steel (2) • 1872--Andrew Carnegie enters steel business • By 1901 Carnegie employs 20,000, produces more steel than Great Britain • Sells out to J. P. Morgan ($492,000,000) • Morgan heads incorporation of the United States Steel Company


  48. International Steel Production, 1880-1914

  49. Rockefeller and Oil • Petroleum profitable as kerosene for lighting • 1859--first oil well drilled in Pennsylvania • 1863--John D. Rockefeller organizes Standard Oil Company of Ohio • Rockefeller lowers costs, improves quality, establishes efficient marketing operation • Standard Oil Trust centralizes Rockefeller control of member companies outside Ohio