THE INDUSTRIALIZATION OF AMERICA

1. THE INDUSTRIALIZATION OF AMERICA

2. With a stride that astonished statisticians, the conquering hosts of business enterprise swept over the continent. 25 years after Lincoln’s death, America had become, in the quantity and value of her products, the first mfg nation of the world. What England had accomplished in a hundred years, the USA had achieved in half the time – so wrote historians Charles and Mary Beard in the 1920s. But America’s rise to industrial supremacy was not as sudden as some observers and historians have suggested. THE INDUSTRIALIZATION OF AMERICA

3. THE INDUSTRIALIZATION OF AMERICA • The nation had been building a mfg economy since early in the 19th century, and industry was established before the Civil War. • But the accomplishments of the 19th century overshadowed all that came earlier. • Those years witnessed nothing less than the transformation of the national economy.

4. THE INDUSTRIALIZATION OF AMERICA • The remarkable growth did much to increase the wealth and improve the lives of many Americans. • But the benefits were not universal.

5. THE INDUSTRIALIZATION OF AMERICA • While the industrial titans and a growing middle class were enjoying a prosperity without precedent in the nation’s history, workers, farmers, and others were experiencing a disorienting and often painful transition that slowly edged the USA toward a great economic and political crisis.

6. SOURCES OF INDUSTRIAL GROWTH

7. SOURCES OF INDUSTRIAL GROWTH • Many factors contributed to the growth of American industry: • ABUNDANT RAW MATERIALS • A LARGE AND GROWING LABOR FORCE • A SURGE IN TECHNOLOGICAL INNOVATION • THE EMERGENCE OF THE ENTREPRENEURS • LASSIEZ-FAIRE ECONOMICS/HIGH TARIFFS • A GREAT AND EXPANDING DOMESTIC MARKET FOR PRODUCTS OF MFG,.

8. THE INDUSTRIAL ECONOMY • The rapid expansion of factory production, mining, and railroad construction in all parts of the country except the South signaled a transformation of America – a country centered on the small farmer and artisan workshop – to a mature industrial society. • The nation marveled at the triumph of the new economy. • Philosopher John Dewey: “there has never been a revolution in history, so rapid, so extensive, so complete.

9. 1913: The US produced 1/3 of the world’s industrial output – more than the total of GB, FR, and Germany combined. Small-scale craft production still flourished in many trades, and armies of urban workers, male and female, toiled in their homes or in the households of others as outworkers or domestics. Half of all industrial workers labored in plants with over 250 employees. On the eve of the Civil War, the first industrial revolution, centered on the textile industry, had transformed N.E., into a center of mfg. But, otherwise, the US was still primarily an agricultural nation. THE INDUSTRIAL ECONOMY

10. By 1880: For the first time, the Census Bureau found a majority of the workforce engaged in non-farming jobs. By 1890: 2/3 of Americans worked for wages, rather than owning a farm, business, or craft shop. Drawn to factories by the promise of employment, a new working class emerged in these years. 1870-1920: Almost 11 million American moved from the farm to the city, and another 25 million immigrants arrived from overseas. THE INDUSTRIAL ECONOMY

11. THE INDUSTRIAL ECONOMY • Most mfg now took place in industrial cities (F.R./N.B.) • NYC: With its new skycrapers and hundreds of thousands of workers in all sorts of mfg establishments, symbolized dynamic growth. • Its population exceeded 3.4 million. • The city financed industrialization and westward expansion, its banks and stock exchange funneling capital to railroads, mines, and factories.

12. THE INDUSTRIAL ECONOMY • But the heartland of the second industrial revolution was the region around the Great Lakes, with its factories producing iron and steel, machinery, chemicals, and packages food. • Pittsburg: Had become the world’s center of iron and steel mfg. • Chicago: By 1900 the nation’s second-largest city, with 1.7 million people, was home to factories producing steel and farm machinery, and giant stockyards where cattle were processed into meat products for shipment in refrigerated cars. • Smaller industrial cities proliferated, often concentrating on a single industry – cast-iron stoves in Troy, NY, silk in Paterson, NJ, and furniture in Grand Rapids, Michigan.

13. NEW TECHNOLOGIES AND NEW INDUSTRIES • The rapid emergence of new technologies and the discovery of new materials and productive processes were prerequisites to late 19th century industrial growth. • In the entire history of the USA up to 1860, the govt., had granted only 36,000 patents. • 1860-1890: The figure was 440,000. • Americans also benefited from comparable technological advances in Europe.

14. NEW TECHNOLOGIES AND NEW INDUSTRIES • Some of the most important innovations were in communications. • 1866: Cyrus W. Field laid a transatlantic telegraph to Europe. • During the next decade, Alexander Graham Bell developed the first commercially useful telephone.

15. NEW TECHNOLOGIES AND NEW INDUSTRIES • By the 1890s, American Telephone and Telegraph Company, which handled Bell’s interests, had installed nearly half a million telephones in American cities. • There were other inventions that speeded the pace of business organization.

16. NEW TECHNOLOGIES AND NEW INDUSTRIES • 1868: Christopher L. Sholes invented the typewriter.

17. NEW TECHNOLOGIES AND NEW INDUSTRIES • 1879: James Ritty invented the cash register.

18. NEW TECHNOLOGIES AND NEW INDUSTRIES • 1891: William S. Burroughs invented the calculating or adding machine.

19. NEW TECHNOLOGIES AND NEW INDUSTRIES • Among the most revolutionary innovations in the 1870s was electricity as a source of light and power. • Two pioneers of electrical lightening were Charles F. Brush and Thomas A. Edison.

20. NEW TECHNOLOGIES AND NEW INDUSTRIES • Charles F. Brush devised the arc lamp for street illumination.

21. NEW TECHNOLOGIES AND NEW INDUSTRIES • Thomas A. Edison invented the incandescent lamp (or light bulb) which could be used for both street and home lighting.

22. NEW TECHNOLOGIES AND NEW INDUSTRIES • Edison and others designed improved generators and built large power plants to furnish electricity to whole cities. • By the turn of the century, electric power was becoming commonplace in street railway systems, in elevators of urban skyscrapers, in factories, and increasingly in offices and homes.

23. THE RAILROAD AND THE NATIONAL MARKET

24. THE RAILROAD AND THE NATIONAL MARKET • The railroad made possible the second industrial revolution. • 1860-1880: The number of railroad track tripled and tripled again in 1920 creating a truly national market for mfg goods. • 1869: The first continental railroad completed at Promontory Point, UT. • 1890s: 5 transcontinental lines transported the products of western mines, farms, ranches, and forests to eastern markets and carried mfg goods to the west.

25. THE RAILROAD AND THE NATIONAL MARKET

26. THE RAILROAD AND THE NATIONAL MARKET • The rail lines connected every state in the Union ands opened up an immense new national market. • Most important, railroad companies pioneered crucial aspects of large-scale corporate enterprise.

27. These included the issuance of stock to meet their huge capital needs, the separation of ownership from management, the creation of national distribution and marketing systems, and the formation of new organizational and management structures. Railroad entrepreneurs such as Collis Huntington of the Central Pacific RR, Jay Gould of the Union Pacific RR, and James Hill of the Northern Pacific RR faced enormous financial and organizational problems. THE RAILROAD AND THE NATIONAL MARKET

28. To raise the staggering sums necessary for laying track, building engines, and buying out competitors, railroads at first appealed for generous land and loan subsidies from federal, state, and local governments. Even so, larger lines had to borrow heavily by selling stocks and bonds to the public. 1883: The railroads independently of the federal government corrected scheduling problems by dividing the country into 4 time zones – still in use today. THE RAILROAD AND THE NATIONAL MARKET

29. THE AUTOMOBILE

30. THE AUTOMOBILE • 1903: Charles and Frank Duryea built the first gasoline-driven motor vehicle in America. • 1906: Henry Ford produced the first of the famous cars that would bear his name.

31. THE AUTOMOBILE • 1910: The industry had become a major force in the economy. • The automobile had begun to reshape the American landscape. • 1895; There had been only four automobiles on the American highways. • 1917: There were nearly 5 million.

32. THE SCIENCE OF PRODUCTION

33. THE SCIENCE OF PRODUCTION • Central to the growth of the automobile and other industries were changes in the techniques of production. • By the turn of the century, many industrialists were turning to the new principles of “scientific management.” • Those principles were often known as “Taylorism” after their leading theoretician Frederick Taylor.

34. Taylor’s ideas were controversial during his lifetime and have remained controversial. Taylor argued that scientific management was a way to manage human labor to make it compatible with the demands of the machine age. But scientific management was also a way to increase the employer’s control of the workplace, to make working people less independent. He urged employers to reorganize the production process by subdividing tasks. THE SCIENCE OF PRODUCTION

35. THE SCIENCE OF PRODUCTION • This would speed up production. • It would make workers more interchangeable and thus diminish a manager’s dependence on any particular employee. • And it would reduce the need for highly trained skilled workers.

36. THE SCIENCE OF PRODUCTION • If properly managed by trained experts, Taylor claimed, workers using modern machines could perform simple tasks at much greater speed, significantly increasing productive efficiency.

37. COMPETITION AND CONSOLIDATION

38. COMPETITION AND CONSOLIDATION • The economic growth during the post-Civil War years was dramatic and highly volatile. • The combination of a market flooded with goods and federal monetary policies that removed money from the national economy led to a relentless fall in prices. • The world economy suffered prolonged downturns in the 1870s and 1890s. • Indeed, before the 1930s, the years 1873-1897 were known as the Great Depression.

39. Businesses engaged in ruthless competition. Railroads and other companies tried various means of bringing order to a chaotic marketplace. They formed “pools” that divided up markets between supposedly competing firms and fixed prices. They established “trusts” which were legal devices whereby the affairs of several rival companies were managed by a single director. They employed the use of “interlocking directorates” which were a means by which the CEOs of companies sat on the boards of other companies. They also used “holding companies” which was a central corporate body that would buy up stocks if various member companies and establish direct, formal ownership of the corporations in the trust. COMPETITION AND CONSOLIDATION

40. To avoid cutthroat competition, more and more corporations battled to control entire industries. 1897-1904: Some 4,000 firms vanished into larger corporations that served national markets and exercised an unprecedented degree of control over the marketplace. By the time the wave or mergers had been completed, giant corporations like U.S. Steel, Standard Oil, and International Harvester dominated major parts of the economy. COMPETITION AND CONSOLIDATION

41. CAPTAINS OF INDUSTRY OR “ROBBER BARONS”

42. In an era of no personal or corporate taxes, some business leaders accumulated enormous fortunes and economic power. Men, like Jay Gould and Collis Huntington, who reorganized and expanded the railroad and other industries in the 1870s and 1880s were often depicted by their contemporaries as villains and “robber barons” who manipulated stock markets and company policies to line their own pockets. Some used brutal and ruthless means to accumulate their wealth and power. But recent historians have pointed out that the great industrialists were a diverse group. Although some were ironfisted pirates who engaged in fraudulent practices, others were upstanding businessmen who managed their companies with sophistication and innovation. Some of their ideas were startling in their originality and inventiveness. CAPTAINS OF INDUSTRY OR “ROBBER BARRONS”

43. CAPTAINS OF INDUSTRY OR “ROBBER BARONS” • Andrew Carnegie: • Industrial giant • Born in Scotland and immigrated to US in 1848 • Ambitious and hard-working, he took a job at $1.20 a week as a bobbin boy in a Pittsburgh textile mill • Although he worked a 60 hour week, he enrolled in a night course to learn bookkeeping.

44. He then became a Western Union messenger boy. Because he had to decode the messages for every major business in Pittsburgh, Carnegie gained an insider’s view of their operations. 1852: He was hired as secretary and personal telegraph operator for the PA. Railroad. 1858: He took over as head of the line’s western division. In his six years as division chief, Carnegie more than doubled the line’s mileage and quadrupled its traffic. 1868: Having invested his earnings in the railroads, hew was earning more than $56,000 a year from his investments, a substantial fortune in that era. CAPTAINS OF INDUSTRY OR “ROBBER BARONS”

45. Early 1870s: He decided to build his own steel mill. His connections with the railroad industry, the country’s largest purchaser of steel, made this a logical choice. Starting with his first mill, he introduced the Bessemer Process. Combining this new technology with the cost-analysis learned from his railroad experiences, he became the first steelmaker to know the actual production cost of each ton of steel. Carnegie’s philosophy: “Watch the costs, and the profits will take care of themselves.” From the start he priced his rails below the competition. He then, through cost accounting and limiting wage increases to his workers, he lowered his production costs even further. As output climbed, Carnegie discovered the benefits of virtual integration – that is controlling every phase of the business from raw materials to transportation, mfg, and distribution. CAPTAINS OF INDUSTRY OR “ROBBER BARONS”

46. CAPTAINS OF INDUSTRY OR “ROBBER BARONS” • 1890s: He dominated the steel industry and had accumulated a fortune worth hundreds of millions of dollars. • His complex steel factories in PA, were the most technologically advanced in the world. • 1900: Carnegie Steel, employing 20,000 people, had become the world’s largest corporation. • He ran his companies with a dictatorial hand. • His factories operated nonstop with two 12 hour shifts every day except the 4th of July.

47. CAPTAINS OF INDUSTRY OR “ROBBER BARONS” • 1901: J.P. Morgan, who controlled Federal Steel and later finance capitalist, inquired what Carnegie wanted for his share of Carnegie Steel. • Carnegie said a half a billion dollars. • Morgan agreed to pay it.

48. CAPTAINS OF INDUSTRY OR “ROBBER BARONS” • Combining Carnegie’s companies with Federal Steel, Morgan set up the U.S. Steel Corporation, the first business capitalized at more than $1 billion. • The corporation, made up of 200 member companies employing 168,000, marked a new scale in industrial enterprise.

49. CAPTAINS OF INDUSTRY OR “ROBBER BARONS” • JOHN ROCKEFELLER • If any name became a byword for enormous wealth, it was JD Rockefeller. • He got his start as a bookkeeper. • 1863: He opened his first oil refinery. • Like Carnegie, he had a passion for cost cutting and efficiency.

50. 1873: He became head of the Standard Oil Company. He scrutinized every aspect of its operation. He drove out rival firms through cutthroat competition, arranging secret deals with railroad companies, and fixing prices and production quotas. Rockefeller began with horizontal integration – buying out competing oil refineries. But, like Carnegie, he soon established a vertically integrated monopoly, which controlled the drilling, refining, storage, and distribution of oil. CAPTAINS OF INDUSTRY OR “ROBBER BARONS”