American History II: Robber Barons & "Big Business"
l Industrialization
l First began in US during the early 1800s, then accelerated during the Civil War
l By 1900, US had become the world’s leading industrial power
l America's Big Advantages?
l Natural Resources
l Water, Timber, Coal, Iron , Copper, Oil
l Large workforce, thanks to immigration
l Pro-Business Approach by the U.S. Government
l Kept taxes on American manufacturing low and tariffs (taxes on imported goods) high
l Minimal regulation of businesses
l Made no effort to control wages or prices
l What Were the New Industries?
l Steel
l Used for building railroads, heavy machinery, and skyscrapers and other buildings
l Stronger, lighter, more durable, and more flexible than iron
l Bessemer Process: New way of mass-producing high-quality steel, that also made the steel cheaper
l Put into large-scale use in U.S. by Andrew Carnegie
l Andrew Carnegie (1835 – 1919)
l Scottish immigrant who started with nothing, then worked his way up through telegraph and railroad companies until he eventually made a fortune investing in his own steel company
l In 1901, Carnegie sold his steel company for $230 million, then became a philanthropist (gave to charity)
l By the time of his death, he had given away nearly $450 million to various causes!
l U.S. Steel: Created in 1901 when J.P. Morgan bought out Carnegie and several other large steel manufacturers to create the world’s first billion-dollar company
l Oil
l First major US oil well was drilled in Pennsylvania by Edwin L. Drake in 1858
l Richest oil finds of 19th century would come in Texas and Oklahoma
l Used at first for making kerosene for lighting, but later used to power and lubricate machinery
l John D. Rockefeller (1839 – 1937)
l Became rich off his near-monopoly in the American oil industry
l First billionaire in US; was worth $1.4 billion when he died (That’s about $600 billion in today’s dollars) – He owned a little over 1% of the total wealth of the US!
l Standard Oil Company
l Created in 1870 by Rockefeller and several partners
l Volume pricing allowed Standard Oil to bankrupt any competitors
l Became so powerful a monopoly that it was broken up by the Supreme Court in 1911
l Railroads
l Railroads became the lifeline of all American agricultural and industrial production
l Moved natural resources to the factories, farm goods to market, and manufactured goods to distributors
l Cornelius Vanderbilt (1794 – 1877): Nicknamed “The Commodore”
l Dropped out of school to run a ferry business which grew into a fortune in the shipping and railroad industries
l Founded Vanderbilt University with a $1 million donation, the largest in US history at that time
l Electricity
l Vital to new industrial growth, the ability to use electrical power to create light and run machinery allowed factories to run 24 hours a day
l Electricity also opened up new avenues of entertainment
l Thomas Edison (1847 – 1931): Nicknamed “The Wizard of Menlo Park”
l Holder of over 1000 patents
l Developed the phonograph, the light bulb, and motion picture camera
l Founder of Edison General Electric Company, which later became General Electric (GE)
l George Westinghouse (1846 – 1914)
l Inventor, who developed the air brake and rotary steam engine for the railroads
l Made his fortune in electricity by backing Nikola Tesla’s alternating current (AC) method of electrical distribution over Edison’s direct current (DC) method
l Westinghouse Electric Company: Founded in 1886
l Became first commercially successful electric power company
l Also continued to develop devices that used electricity, like kitchen appliances and lighting fixtures
l Banking & Finance
l Larger and more powerful banking firms were needed to loan money to these new mega-corporations
l Small banks began to merge into giant national banks
l J.P. Morgan (1837 – 1913)
l Financed the merger of steel companies into the giant US Steel; also financed the merger of electric operators into General Electric
l Key stakeholder in several other corporations, including International Harvester, AT&T, and numerous railroads
l Tactics of Industry
l Monopolies: control of an entire market by a single company
l Trusts: group of companies run by the same managers
l Holding companies: several companies owned by another company which doesn’t actually make anything itself
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