APUSH - Topic 6.6 The Rise of Industrial Capitalism

Explain the socioeconomic continuities and changes associated with the growth of industrial capitalism from 1865 to 1898

Railroads

• the nation’s first big business

• lots of railroad growth

  • 35,000 miles (1865) → 193,000 miles (1900)

• fed gov. supported growth

  • low-interest loans and millions of acres of land given to companies

• encouraged mass production, mass consumption, and economic specialization

• resources used for railroad building promoted coal and steel industries

• created modern stockholder corporation

  • needed lots of investment to develop systems

Time Zones

• American Railroad Association divided country into 4 time zones instead of 144 (1883)

Consolidation of Railroads

• railroads used different gauges and incompatible equipment → railroads consolidated into trunk lines

• trunk line → major route between large cities, connected by smaller routes to small towns

  • New York Central Railroad (1867) → Vanderbilt

Railroad Problems and Corruption

• railroads were overbuilt

• Corruption

  • speculators entered business for quick profits → watered stock (inflate value of a corporation before selling its stock to the public)

• railroads tried to survive

  • offered discounts to favored customers, overcharged farmers

  • formed pools where companies agreed to fix rates

Concentration of Railroad Ownership

• financial panic of 1893 caused ¼ of railroads to be bankrupt

• J. Pierpont Morgan and other bankers took control of railroads

• stabilized rates, reduced debts, railroads became more efficient

• railroad monopolies

  • entire system controlled by a few people

  • interlocking directorates → same people ran competing companies

Railroad Power

• smaller customers and investors felt victimized by financial schemes of railroads

• most laws to regulate railroads were overturned or ineffective

The Steel Industry

• Andrew Carnegie (began as a poor immigrant)

  • vertical integration

    • company controls every part of making of product

    • completely dominated the steel industry

  • retired → philanthropy

    • sold company to J.P Morgan

    • Became United States Steel → 1st billion-dollar company

    • largest enterprise in the world

The Oil Industry

• John D. Rockefeller

  • Standard Oil Trust

    • controlled 90% of oil refinery business (monopoly)

    • horizontal integration → controlled all business on 1 level

      • able to completely control prices bc everybody depended on them

trust

• organization or board that manages assets of other companies

  • eg. Rockefeller’s Standard Oil managed a group of previously competing oil companies

Holding Company

• own and control diverse companies

  • eg. Banker J.P Morgan had a holding company that controlled banking, railroads, steel

Laissez-Faire Capitalism

• rejection of government regulation of business

• businesses motivated by their own self-interest

• often used in politics to prevent government regulation

Social Darwinism

• Darwin’s natural selection theory applied to business, not supported by Darwin himself

• “survival of the fittest”

  • concentrating wealth in the “fittest” would benefit everyone

• helping the poor is misguided, preserving the unfit

Protestant Work Ethic

(as opposed to Social Darwinism)

• material success is a sign of God’s favor and a reward for hard work

• Rockefeller: “God gave me my riches.”

Concentration of Wealth

• richest 10% of the population controlled 90% of wealth (1890s)

• the rich lived extremely lavish lifestyles

• common Americans found hope in “self-made men” (like Carnegie)

  • upward mobility socially occurred but dramatic rag-to riches rarely did

Business Influence Outside the US

• many exports, many imports

• US contained 5% of world population but 15% of world exports

  • more international business → more involvement in international affairs