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

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)

The Struggle to Unionize