Industrialization

Chapter 19 1865-1901

Telegraph

• Samuel Morse invented the telegraph. It communicated using a series of beeps (Morse code).

telephone

• Alexander Graham Bell invented the telephone.

Capitalism and Culture

“Allow to

be”

Laissez-faire (French, "leave alone"), in economics, is the doctrine that the best economic policy is to let businesses make their own decisions without government interference. This doctrine of noninterference was first enunciated by the French physiocrats of the 18th century as a reaction against the restrictionist policies of mercantilism. Linked with the concept of free trade, it became the basis of Adam Smith’s classical economics. Later, Jeremy Bentham and John Stuart Mill applied the economic notions of laissez-faire capitalism to utilitarian, individualistic political theory, and the Manchester school economists John Bright and Richard Cobden used them for practical political purposes.Laissez-faire principles were strongest in the mid-19th century, but the increasing practice of monopoly and the social costs of the Industrial Revolution brought about greater government regulation through Progressivism. Modern proponents of laissez-faire stress the importance to economic growth of the profit incentive and the undeterred entrepreneur. The phrase has been largely supplanted by such terms as market economy or free enterprise.

Capitalism: Our EconomyCapitalism is an economic system in which the means of production are privately owned. Business organizations produce goods for a market guided by the forces of supply and demand. Capitalism requires a financial system that enables business firms to borrow large sums of money, or capital, to maintain and expand production. Underlying capitalism is the presumption that private enterprise is the most efficient way to organize economic activity. Adam Smith expressed this idea in his Wealth of Nations (1776), extolling the free market in which the businessman is "led by an invisible hand to promote an end which was no part of his intention."

The marketplace is the center of the capitalist system. It determines what will be produced, who will produce it, and how the rewards of the economic process will be distributed. From a political standpoint, the market system has two distinct advantages over other ways of organizing the economy: (a) no person or combination of persons can control the marketplace, which means that power is diffuse and cannot be monopolized by a party or a clique; (b) the market system tends to reward efficiency with profits and to punish inefficiency with losses. Economists often speak of capitalism as a free-market system ruled by competition. But capitalism in this ideal sense cannot be found anywhere in the world. The economic systems operating in Western countries today are mixtures of free competition and governmental controlled regulation, thus negating the spirit of the economy.

Vert

ical

vs.

Hor

izon

tal

Inte

grat

ion

In microeconomics and strategic management, the term horizontal integration describes a type of ownership and control. It is a strategy used by a business or corporation that seeks to sell a type of product in numerous markets. Horizontal integration in marketing is much more common than vertical integration is in production. Horizontal integration occurs when a firm is being taken over by, or merged with, another firm which is in the same industry and in the same stage of production as the merged firm. The term vertical integration describes a style of management control. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or (market-specific) service, and the products combine to satisfy a common need.

Philanthropist

Entrepreneurs

• Andrew Carnegie owned US Steel.

And

rew

Car

negi

eborn Nov. 25, 1835, Dunfermline, Fife, Scot. died Aug. 11, 1919, Lenox, Mass., U.S. Scottish-born American industrialist who led the enormous expansion of the American steel industry in the late 19th century. He was also one of the most important philanthropists of his era.

During his trips to Britain he came to meet steelmakers. Foreseeing the future demand for iron and steel, Carnegie left the Pennsylvania Railroad in 1865 and started managing the Keystone Bridge Company. From about 1872–73, at about age 38, he began concentrating on steel, founding the J. Edgar Thomson Steel Works near Pittsburgh, which would eventually evolve into the Carnegie Steel Company.

In 1889 Carnegie's vast holdings were consolidated into the Carnegie Steel Company, a limited partnership that henceforth dominated the American steel industry. In 1890 the American steel industry's output surpassed that of Great Britain's for the first time, largely owing to Carnegie's successes.

In 1900 the profits of Carnegie Steel (which became a corporation) were $40,000,000, of which Carnegie's share was $25,000,000. Carnegie sold his company to J.P. Morgan's newly formed United States Steel Corporation for $250,000,000 in 1901. He subsequently retired and devoted himself to his philanthropic activities, which were themselves vast.

Carnegie's own distributions of wealth came to total about $350,000,000, of which $62,000,000 went for benefactions in the British Empire and $288,000,000 for benefactions in the United States.

• Steel Mill at night.

Philanthropist

Entrepreneurs

• John D. Rockefeller owned the the oil industries

John D. RockefellerAmerican industrialist and philanthropist John Davison Rockefeller, b. Richford, N.Y., July 8, 1839, d. May 23, 1937, began his career in Cleveland, Ohio, before the Civil War. In 1863 he and his partners formed an oil business that eventually absorbed many Cleveland refineries and expanded into Pennsylvania oil fields to become the world's largest refining concern. Rockefeller founded (1870) the Standard Oil Company of Ohio; the Standard Oil Trust, which he formed in order to avoid state controls, was dissolved (1892) by the Ohio Supreme Court. The division of his operations into 18 companies--later to include more than 30 corporations--under the umbrella of Standard Oil of New Jersey (1899) helped him to accumulate a personal fortune of over $1 billion. In 1911 this venture, however, was interpreted by the U.S. Supreme Court as "a monopoly in restraint of trade" and thus illegal according to the Sherman Anti-Trust Act; Standard Oil was broken up into 39 separate companies. Rockefeller retired the same year but expanded his efforts in philanthropy, which claimed about one-half of his vast fortune. He created such institutions as the Rockefeller Foundation, the General Education Board, and the Rockefeller Institute for Medical Research; founded the University of Chicago; and presented many gifts to colleges and churches.

John D. Rockefeller & Standard OilWood River Refinery, Illinois, 1908

Monopoly

• Carnegie and Rockefeller ran their competition out of business.

• A monopoly is when one company controls the entire industry.

Progressive View

of Statndard O

il

Thom

as Edison

• The light bulb allowed factories to work at night.

Night was now banished

• Phonograph

Edison’s inventions

• Motion picture camera

Led to movie theaters

Add

itio

nal

entr

epre

neur

s

• Cornelius Vanderbilt- American shipping and railroad magnate who acquired a personal fortune of more than $100,000,000.

• George Westinghouse- American inventor and industrialist who was chiefly responsible for the adoption of alternating current for electric power transmission in the United States.

• George M. Pullman- American industrialist and inventor of the Pullman sleeping car for use on railroads.

• Milton S. Hershey- American manufacturer and philanthropist who founded the Hershey Chocolate Corporation and was instrumental in popularizing chocolate candy throughout much of the world.

• Éleuthère Irénée du Pont- The Dupont company was in Delaware in 1802 to produce black powder and later other explosives, which remained the company's main products until the 20th century, when it began to make many other chemicals as well- nylon, rayon, polyester.

• Gustavus F. Swift- founder of the meat-packing firm Swift & Company and promoter of the railway refrigerator car for shipping meat.

• Philip D. Armour - American entrepreneur and innovator whose extensive Armour & Company enterprises helped make Chicago the meatpacking capital of the world.

POLITICAL CARTOON ILLUSTRATING PEOPLE INVOLVED IN THE SCANDAL BEING SENTENCED TO HARA-KIRI (A FORM OF RITUAL JAPANESE SUICIDE, IN THIS CASE THE COMPANY GOING BANKRUPT AND CONGRESSMEN INVOLVED GETTING KICKED OUT) BY UNCLE SAM WHO REPRESENTS THE AMERICAN PEOPLE.

The federal government in 1864 had chartered a “Union Pacific Railroad,” with $100,000,000 capital, to complete a transcontinental line west from the Missouri River. It offered to assist it by a loan of $16,000 to $48,000 a mile according to location, over $60,000,000 in all, and a land grant of 20,000,000 acres, worth $50,000,000 to $100,000,000. Even this offer attracted no subscribers: it meant building 1,750 miles of road through desert and mountain, at enormous freight costs for supplies, with frequent bloody encounters with Indians, and no probable early business to pay dividends.In 1867, Dr. Thomas C. Durant was replaced as head of Crédit Mobilier by Congressman Oakes Ames.[3] In that year Ames offered to members of Congress shares of stock in Crédit Mobilier at its discounted value rather than market value, which was much higher. The Congressmen and others who were allowed to purchase shares at a discount could reap enormous capital gains simply by, in turn, offering their discounted shares to a grossly under-subscribed market, that was very eager to own shares of such a “profitable” company. These same members of Congress voted to appropriate government funds to cover the inflated charges of Crédit Mobilier. Ames' actions became one of the best-known examples of graft in American history.

Cré

dit M

obli

er

Cap

ital

ism

and

en

trep

rene

ursh

ip

Sem

anti

c M

ap

Industrial Revolution

Culture

ResultsCapitalism

Inventions

Capitalist Entrepreneurs

Cap

ital

ism

and

E

ntre

pren

eurs

hip

Qui

z1. Give two examples of Industrial

Revolution culture.

2. Give an example of an Industrial Revolution invention.

3. Name a principle or leader of capitalism.

4. Name an entrepreneur-philanthropist.

5. Give a result of this phase of the Industrial Revolution.

Immigration

Pull factors

• Immigrants come to the USA for jobs and opportunities.

• Pull factors are good ideas to bring legal immigrants here like jobs.

• Jobs pulled immigrants here.

• Free land was a pull factor

Push factors

• Push factors are bad reasons that push immigrants away like war, famine, or disease. This is blighted potato that represents the reason for the Irish potato famine.

• Many immigrants lived in tenements.

tenement

Child labor

• Children were expected to work. Employers also liked that they could pay a child less than an adult.

• The first law against child labor, the Factory Act of 1833.

• Children younger than nine were not allowed to work

• Children were not permitted to work at night

• The work day of youth under the age of 18 was limited to twelve hours

Housing

• Poor people lived in small houses in cramped streets. These homes would share toilet facilities, have open sewers and would be at risk of damp. Conditions did improve during the 19th century as public health acts were introduced covering things such as sewage, hygiene and making some boundaries upon the construction of homes. Not everybody lived in homes like these. The Industrial Revolution created a larger middle class of professionals such as lawyers and doctors. The conditions for the poor improved over the course of the 19th century because of government and local plans which led to cities becoming cleaner places, but life had not been easy for the poor before industrialization.

Popular culture

Popular culture• the culture of the people • It results from the daily interactions, needs and desires and

cultural 'moments' that make up the everyday lives of the mainstream.

• It can include any number of practices, including those pertaining to cooking, clothing, mass media and the many facets of entertainment such as sports and literature.

• People like to feel a part of a group and to understand their cultural identity within that group, which tends to happen naturally in a small, somewhat isolated community.

Labor Movement and Unionism

Labor ReformAt the same time a philosophical movement called the Enlightenment propagated many new ideas concerning the rights of mankind in relation to the state. (The American Declaration of Independence is one of the best statements of Enlightenment principles in this regard.) The American and French revolutions, with their declarations of rights, did much to spread the notion that individuals have certain rights that governments must honor.

In this new, more democratic political setting, it became increasingly obvious to many people that the combinations of government and those with great wealth would not look out for the interests of workers unless pressured to do so. Hence, there emerged the first attempts to organize workers into labor and trade unions to exert just such pressure on politicians and employers. For a century or more, these attempts at unionization were regarded by governments as criminal, communist conspiracies. Gradually, aided by the efforts of socialist politicians and the self-interest of employers, unions began to gain recognition. Their demands for better working conditions, shorter hours, and social welfare began to be met.

Jean Jaurès addressing workers under a red flag. Countries with red as the background for their flags later became communist countries.

Labor R

eform

• Labor unions struggled in the 1800s for better working conditions (shorter work day, workers’ comp).

U. S. Labor Movement

Unions are distinctly national institutions that vary in structure and character from one country to another. Even within a country each has its own peculiar history and its own unique way of conducting its affairs. A noteworthy difference between U.S. trade unions and their British counterparts is that U.S. unions have never achieved a political identity or even clearly associated their individual interests as "working class." Whether this is attributable to the absence of a traditional guild legacy in the United States, the greater degree of labor mobility compared to Britain, the negative impact of early antitrust legislation (which extended to unions), or the dominance, as late as 1930, of agricultural employment, the fact is that in 1956, the peak year of U.S. union membership, slightly less than 25% of all eligible workers were union members.

These data reflect, on the one hand, an ambivalence on the part of workers about aligning themselves with unions and, on the other, the unions' less-than-sympathetic public image. The numbers, however, belie the lobbying effectiveness that unions have had, at least until the recent past, on social legislation. Legislative gains in such key areas as minimum wages, safety regulations, and unemployment compensation are in no small measure attributable to the success of labor's powerful lobbying efforts in Washington.

Walther P. Reuther (CIO) &George Meany (AFL) Dec1955

Child labor

• Many immigrants put their children to work ASAP.

Child labor

• Shoeshine boys

Child labor

• Bowling pin boys

Child labor

• Coal miner boys

Child labor

• Young miner

• Girls were preferred over boys. They were paid less, had smaller hands.

Labor reform

• Unions allied themselves with communists, socialists, and anarchists. They went on strike, and they turned violent most of the time.

Labor unions

• Skilled labor unions were more successful because they were harder to replace.

• Taylorism – increasing efficiency through studies of human motion.

Industrial efficiency

• Henry Ford learned that the less people had to move, the faster they would work.

Ford’s assem

bly line

• The first cars were very expensive.

Model T

• The Model T was the first car that middle class people could afford.

Model T

• The assembly line lowered the cost of the Model T from $825 to $300.

The Beginning of Capitalism

The word economics comes from a Greek word that means “household management”—performance of the tasks and services that allow a family to survive and prosper. Thus economic functions are activities devoted to satisfying the primary needs of food, clothing, and shelter—needs that are common to all human beings. Economic functions also satisfy desires for goods and services that are not genuine needs but that people in a prosperous country want. Such goods and services are often called luxuries, but today some luxuries are considered necessities by many people: such things as automobiles, television sets, cell phones, and visits to the dentist.One of the ways goods and services are provided is through an economic system called capitalism. Other names for this system are free market economy and free enterprise. All three terms were coined in the late 19th and the early 20th century to describe economic arrangements that began developing in Europe several centuries ago.The word capital refers to what are called factors of production. These include the money, land, buildings, and machinery that it takes to operate a factory or farm. The capitalist is the individual—or group of individuals—who supplies the money to get the enterprise going.The other two terms, free market economy and free enterprise, put a slightly different slant on capitalism. They have in common the word free.

The Beginning of Capitalism (cont’d)The implication is that people have individual liberty and the right to own property. They also have the right to do what they wish with their property, as long as it does not harm anyone else. These freedoms set capitalism apart from all other kinds of economic arrangements: all others are top-down, command-and-control political systems in which personal freedom and the rights of property are sacrificed for the good of the state.In the context of capitalism, the term private property has a specific definition. It signifies the means of production. A farm as property is the means by which food is produced; and a factory as property is the means by which durable goods are produced. As an example of services, a physician’s office and equipment are the physician’s property and are used in the treatment of patients. The heart of capitalism is the producer’s right to make what he wants and the consumer’s right to choose what to buy.

The RailroadsThe first transcontinental railroad

The American West

Transcontinental RR

• The transcontinental railroad made travel across the country faster, cheaper and more efficient.

The Transcontinental RailroadThe transcontinental railroad in North America became a reality on May 10, 1869, when the tracks of the Union Pacific joined those of the Central Pacific at Promontory, Utah. The event fulfilled dreams of spanning the continent that were spurred by settlement of the American West and that dated back to at least 1845. Interest in a transcontinental railroad was heightened by the acquisition of Oregon (1846) and California (1848) and the subsequent gold rush. In 1853, Congress appropriated $150,000 to defray expenses of surveying feasible routes, but the question of the best one quickly became a matter of sectional controversy.

Once the South left the Union, Congress pushed through the Pacific Railroad Act (July 1, 1862), which authorized the Central Pacific to build eastward from San Francisco and the Union Pacific to build westward from Omaha, Nebr., via South Pass; the two were to join at the California-Nevada line. Each company was to receive 400 ft (122 m) of right-of-way through public (or 100 ft/31 m--through private) lands and 10 alternate square-mile sections of public land for each mile of track laid. Loans of $16,000 to $48,000 per mile--depending on the grade of the terrain--were also available as a first mortgage on the railroad. In 1864, Congress doubled the land grant and made the financial subsidy a second lien on the property. Congress yet again amended the original

The Transcontinent

al Railroad

(cont'd)

legislation in 1866 to allow the Central Pacific to advance eastward until it met the Union Pacific, thereby turning the project into a construction race.

The Last Spike by Thomas Hill, 1869 Golden spike that was donated by the governor of Arizona Territory. It is one of four ceremonial spikes driven at the completion (but is not the final golden spike).

The Building of the Railroads

• Built in 1860s • Two companies

– Central Pacific Railroad Company

– Union Pacific Railroad Company• Met and joined railroad in

Promontory, Utah• Date of completion 10 May 1869• By 1893 there were 6 major

railroad companies

Why

did America

need

Railroads?

• Communication from East to West was not very good

• Travelling time from East to West took 6 months +

• It would help fulfil ‘Manifest Destiny’

• The U.S. needed to keep up with other countries

• Trade links with China and Japan• Help to bring law and order to the

West

Effect of

the Railroads

• Previous methods – Wagon Train– Foot– By boat– Pony

Express• The railroad

turned a 6 month journey into a maximum of 8 days

Effect of the Railroads: Cheap land for people wanting to go

West• Once the

Railroads were built the Railroad companies had no use for the excess land

• Sold land off cheap

• Benefitted Homesteaders and Ranchers who came west.

Effect of

the Railroads

• Hunters used the Railroad to go west to hunt the buffalo

• Hunters were only interested in buffalo hides

• 1875 southern buffalo herds were wiped out

• 1885 northern buffalo herds wiped out

• Indians depended on the buffalo, but now they were almost extinct!

Effect of the Railroads: Helps develop the Cattle Industry

• Cattle were transported by the railroads making it easier to move them from Texas to the East

• Cow Towns grew up around these railroad stops