Causes
By 1900, America had become the largest industrial power in the world.
I. Abundance of natural resources (coal, iron ore, copper, lead, timber, oil)
II. Abundant labor supply (including immigrants)
III. Advanced transportation network
IV. Substantial capital
V. Labor-saving inventions
VI. Business-friendly government policies
VII. Talented entrepreneurs rather than politicians
The Business of Railroads
America's first big business
I. Had the greatest impact on all American life
a. Created a national market
b. Railroad building promoted the growth of coal industry, steel industry, etc.
c. "Railroad time" was just one way every citizen was affected
d. Created modern stocks
II. Eastern Railroads
a. Southern railroads proved inefficient (differing track gauges, insufficient track)
b. Commodore Cornelius Vanderbilt merged local railroads into NY Central Railroad
c. Most major cities were connected by a standard rail system (Chicago: "window to the west")
III. Western Railroads
a. Promoted settlement in the West
b. Connected the East to the West
c. Pacific Railway Act (1862)
i. Federal subsidies were provided to stimulate Railroad expansion
ii. Also promoted "hasty and poor" construction and lead to widespread corruption (Crédit Mobilier scandal)
d. Transcontinental Railroad: connected California to the rest of the Union
i. Irish and Chinese immigrants provided labor
ii. May 10th, 1869: East and West ends of railroad connected
Competition and Consolidation
The problems of new industries
I. New technologies and technologies tended to be overbuilt
a. Mismanagement and outright corruption
b. Watering the stock: inflating stock values before sale
c. Kickbacks and rebates offered to favored shippers
d. Price fixing contributed to populist movement
II. Panic of 1893
a. Forced 1/4 of all railroads into bankruptcy
b. Banker J.P. Morgan consolidated bankrupt railroads
c. By 1900, seven companies controlled 2/3 of all railroads
d. Increased efficiency at the cost of competition
III. Americans loved railroads, but felt victimized by huge monopolies
a. Granger Laws and other regulatory legislation initially had little effect
b. Interstate Commerce Act eventually worked
Steel Industry
Carnegie's empire
I. New methods of steel-making increased production
a. Actually discovered in 1850
b. Bessemer process makes steel from iron
II. Andrew Carnegie
a. Based in the Great Lakes for its resources
b. Started his business in Pittsburgh in 1870s
c. Vertical integration: owned every step of the steelmaking process
d. Top of steel industry by 1890
e. Retires from business in 1900 to emphasize philanthropy
f. His company eventually becomes first billion dollar industry
Oil Industry
Who do you trust?
I. John D. Rockefeller
a. Standard Oil eliminated competition and created a huge monopoly
b. Horizontal integration: one step is completely owned
c. Rockefeller controlled supply of oil and dominated market
II. Trusts
a. Middle-class citizens feared monopolies
b. Sherman Antitrust Act outlaws trusts and monopolies (sort of)
c. American government was basically pro-business until Theodore Roosevelt
Laissez-Faire Capitalism
Subtitle
III.
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