Industrialization & Robber Barons in the "Gilded Age"

Gilded Age: 1870s-1900s

Some Highlights of the Gilded Age

• Industrialization continued at a rapid pace in the years following the Civil War.
• The Bessemer Process for making steel, allowed for a boom in industry.
• New inventions- like the telegraph, telephone, typewriter, and the sewing machine made America more productive.
• Natural Resources- like oil and electricity became important sources of energy.
• Entrepreneurs- like John D. Rockefeller and Andrew Carnegie establish new business techniques.
• Labor- workers would organize to gain higher wages, better working conditions, and an 8 hour workday.

Technological Innovations

• Bessemer Process- increased the amount and the quality of steel being produced.
• This new steel was used to lay more miles of railroads track, to build the world’s first skyscrapers and to make better machinery.
  • World’s first skyscraper was built in 1885 (180 ft tall).
  • World’s tallest skyscraper built in 2010 (2,722 ft tall).
• After the Civil War, human and animal strength were replaced by steam and electricity.
• Steam engines, powered by burning coal to heat water, drove the textile mills, factories, and trains.
• During the late 1800s the center of coal mining was in the Appalachian Mountains of western Pennsylvania.
• America’s first oil well was drilled in Titusville, Pennsylvania in 1859.
• At first, oil was just used as a lubricant, later it was refined into kerosene for lighting.
• It wasn’t until the internal combustion engine and the development of the car, that the demand for oil skyrocketed.
• New sources of energy and transportation technologies have improved our mobility and our production capabilities.

Electricity

• The use of electricity was another of the era’s most significant developments.
• Electricity was first used as a means of communication with the telegraph.
  • Telegraph dramatically changes the speed at which we communicated over great distances and made the Pony Express obsolete.
• Alexander Graham Bell would later perfect the telephone in 1876, it hasn’t stopped ringing since then.
• Later communication improvements, like the iPhone would also make land line telephones obsolete.
• Communications have never been the same!

Technological Innovations (contd.)

• Thomas Edison would also use electricity to produce amazing results.
• Edison designed a way to get electricity into homes and businesses, having electric appliances isn’t much good if you don’t have electricity.
• Edison was able to create:
  • Motion pictures (entertainment)
  • The light bulb (light 24/7)
  • The phonograph (which later gave way to other forms of recordings)

Other Inventors & Innovations

• This was a time period of many inventions that improved the lifestyle and standard of living of many Americans.
• Elias Howe- sewing machine, clothing would be made cheaper, faster, and now at home. (1846)
• Elisha Otis- passenger elevators, this new technique of making steel allowed for skyscrapers, this created a need for elevators to carry people between floors. (1852)
• Christopher Sholes- typewriter, made businesses more productive and helped improve communications. Eventually led to computer keyboards.
• Wright Brothers- Orville & Wilbur first successful manned flight. Although their first flight lasted only seconds, it opened way for air travel at a dramatically increased speed and distance traveled. (1903)

The Growth of Railroads

• Before the Civil War, most of the railroad track in America has been built in the Eastern USA, especially in the Northeast.
• Gold was discovered in the West and people slowly began migrating westward.
• Travel was slow and difficult.
• There was a desire to build a transcontinental railway that connected the East coast with the riches of California and the West.
• But what route would it take?

The Transcontinental Railroad

• Railroads would have a significant impact on the economic, cultural, and social development of the Western United States.
• Opinions differed as to which route to take.
• Should it go through the North or along a southern route?
• The resulting Civil War caused the Transcontinental Railroad to be built along a northern route from Omaha, Nebraska to Sacramento, California.
• Travel time would decrease from months to a few days.

Building the Transcontinental Railroad

• Civil War vets, Irish laborers, and free blacks started working westward from Omaha.
• Chinese workers started eastward from Sacramento.
• They met at Promontory Point, Utah.

The Impact of the Railroads

• The Transcontinental Railroad connected the different regions of the United States and Railroads became the lifeline to the West.
• Trains brought the settlers and everything they needed to the West as towns sprang up.
• Trains returned to the East with the products the West produced: beef, wheat, lumber, and gold.

Development of a National Market

• A new truly national market began to emerge as railroads, canals, the telegraph and telephone linked the country together.
• National producers could ship their goods cheaper and would dominate sales in the West.
• New methods of marketing and advertising gave manufacturers the ability to expand across the nation.
• Catalogs became “wish lists”
  • JC Penny
  • Sears

Impact of Population Growth

• The USA experiences a rapid population growth, as the population jumped from over 2 million to 76 million in just 50 years, cities were crowded.
• A high birth rate and a constant stream of immigrants created a rising demand for goods and growing population was a steady supply of cheap labor.
• This population growth favored business expansion.
• Lumbering depleted the forests.
• Sodbusters would plow the Great Plains to plant crops.
• Mining for gold and other precious minerals destroyed the land.
• The Railroads and buffalo hunters would soon wipe out the buffalo.
• Rivers and lakes would be polluted.

New Types of Business Organization

• Before the Civil War, most businesses were owned by individuals or by a group of partners.
• After the war, corporations became more common.
• A corporation is a company chartered by the state and recognized as a separate “person”.
• BAM! BIG business was born.

Corporations

• Corporations issue and sell “stock” or shares of a company.
• A shareholder is a partial owner, and they receive a share of a corporations profits based on the amount of stock they own.
• Shareholders were responsible only for the shares they own, not for losses and are protected from lawsuits.
• Corporations allowed for people to pool their money to raise the huge sums needed to build railroads, factories, steel mill, etc.
• Corporations made modern industrial production possible.

The Free Enterprise System

• The success of America’s industrialization was based on its free enterprise system.
• Free Enterprise System is when people have the freedom to make their own choices in what to buy, where to work, and what to make.
• People are free to use their money and time to start a business in hopes of making a profit. (Producers)
• People are free to choose the type of product they wish to buy and how much they’ll pay. (Consumers)
• People have unlimited wants but we have limited resources to satisfy these wants.
• Businesses use their resources to compete with each other to satisfy these consumer desires.
• Every society must answer three basic economic questions to determine how to use its resources to satisfy these wants:
  • What should be produced?
  • How should it be produced?
  • Who should get it?

Entrepreneurs

• An entrepreneur is a person that invests their time, money, and skills on the chance of making a profit.
• In the 1870s these entrepreneurs dominated America’s economic life.
• Efficient large-scale production allowed them to sell goods at lower prices and competition forced them to continually improve the quality.
• Many of these entrepreneurs made huge fortunes.

Captains of Industry

• Many of the more successful entrepreneurs became known as “Captains of Industry”.
• Some called them “robber barons” because of the ruthless tactics they used to destroy their competition and methods used to keep workers wages low.
• Some of the best known were:
  • John D. Rockefeller
  • Cornelius Vanderbilt
  • Andrew Carnegie
  • J.P. Morgan

Robber Barons got rich using two strategies:

• Horizontal Consolidation: when a company buys up smaller companies that sell the exact same thing they do (their competition).
  • Ex: John D. Rockefeller’s largest company, Standard Oil, bought up smaller oil companies
• Vertical Consolidation: when a company buys up smaller companies that go into the production of their product (the ingredients and transportation).
  • Ex: Andrew Carnegie bought mines, transportation companies, iron facilities, all so that he could control every part of his production and sale of steel.

Social Darwinism

• Social Darwinism is a term scholars use to describe the practice of misapplying the biological evolutionary language of Charles Darwin to politics, the economy, and society.
• Many Social Darwinists embraced laissez-faire capitalism and racism. They believed that government should not interfere in the “survival of the fittest” by helping the poor, and promoted the idea that some races are biologically superior to others.
• The ideas of Social Darwinism pervaded many aspects of American society in the Gilded Age, including policies that affected immigration, imperialism, and public health.

The Gilded Age

• The time when these Captains of Industry ruled America became known as the Gilded Age.
• They amassed fabulous wealth and lavishly spent it while the majority of Americans were poor.
• These “robber barons” were glorified and vilified.
• Some became the richest men in the world.

Andrew Carnegie

• Carnegie started penniless, but he made his fortune in steel mills in the Pittsburgh, PA area.
• He undercut the competition, bought his own iron ore fields, coal mines, and ships so he could control as phases of steel production.
• He crushed attempts to form labor unions, paid low wages, and forced laborers to work 12 hours days.
• The labor strike on Carnegie’s Homestead Steel Mill would be one of the era’s most violent.

John D. Rockefeller

• Rockefeller started out poor, but made his fortune in oil in Ohio.
• Kerosene, for lighting, made him millions, later the gasoline industry, would make him even richer.
• He used ruthless tactics to drive his competition out of business, then he would buy them out.
• His Standard Oil Co., became a trust, with hims owning most of the shares.
• Later it would be a monopoly as he controlled 90% of all oil refined.

Cornelius Vanderbilt

• Vanderbilt made his wealth in shipping and railroads. He came from a working class family and went into business for himself as a steamboat operator and was known as a ruthless negotiator.
• He gave one million dollars to build Vanderbilt University.
• His grandson, George, built the Biltmore Estate.

J.P. Morgan

• Morgan grew up privileged and was educated in Boston and Switzerland. He went into banking in London for a firm owned by his father (Peabody & Company became J.S. Morgan & Co.)
• In New York, he ran an investment bank.
• J.P. Morgan was heavily invested in railroads and helped organize US Steel, General Electric, and other major organizations.
• He is credited with helping the country out of 2 major economic crises, but was criticized for his power and ability to manipulate the financial system for his own gain.

Philanthropy

• Carnegie and Rockefeller both made millions at the expense of the American public.
• They paid low wages and demanded long hours of work.
• As businessmen they didn’t believe in charity, their belief was: “help those who help themselves”.
• Later, both would lead the rich in philanthropy, they gave away millions of their dollars to the public.
• They built libraries, museums, scholarships, and universities.
  • Carnegie’s grant resulted in 10 public libraries and 6 academic centers in North Carolina.

Laws Against Big Business

• At first, the government did little to regulate big business.
• Government and business leaders believed in laissez-faire:
  • The theory that the government should not interfere in the operations of the free market.
• Government did have some involvement in business, such as patent laws, enforcing contracts, laws protecting property, and tariffs to help American manufacturers.
• Big Business had a major influence on Congress especially the Senate through legal and illegal practices.
• Some of the anti-competitive practices of big business soon became so oblivious that reformers started calling for government intervention to remedy the problems.

Laws Against Anti-Competitive Practices

• Interstate Commerce Act (1887)
  • Railroads often charged small farmers more to ship goods than large companies.
  • States pressed laws to stop this, but the Supreme Court ruled these laws unconstitutional.
  • Congress finally passed the Interstate Commerce Act that prohibited unfair practices by the railroads.
  • First time Congress had regulated Big Business
  • The Interstate Commerce Commission was created to enforce these laws.
• Sherman Anti-Trust Act (1890)
  • Federal law aimed at stopping monopolies and trusts from engaging in unfair practices.
  • Attempted to prevent unfair competitive advantages.
  • Act marked a significant change in the attitude of government about the abuses of Big Business.
  • Standard Oil was the first monopoly the government broke down.