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Growth of the Steel Industry Civil War

Spurred the growth of the steel industry Iron rails wore out quickly so they had to

be replaced by steel Steel costly and difficult to make

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Making Steel a New Way

1850s William Kelly – United States Henry Bessemer – England

Discovered new way to make steel Bessemer process

Enabled steel makers to produce strong steel at a lower cost

Manufacturers Made steel nails, screws, and needles Steel girders – used to support skyscrapers

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Thriving Steel Mills

Steel mills Sprang up in cities throughout the midwest Pittsburgh became the steel-making capital

of the nation Coal mines and transportation helped steel

mills thrive Brought jobs and prosperity Caused problems

Industrial waste poured into the water Thick black smoke Soot blanketed houses, trees, and streets

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Andrew Carnegie’s Steel Empire Andrew Carnegie

Scottish immigrant Made fortune in steel industry

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Controlling the Steel Industry Carnegie

Saw the Bessemer process in action Borrowed money and began his own steel

mill Bought out rivals Bought iron mines, railroad and steamship

lines, and warehouses Controlled all phases of the steel industry

– mining iron ore to shipping finished steel Vertical integration

Changing raw materials into finished products

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The “Gospel of Wealth”

Carnegie Drove workers hard Believed rich had a duty to help the poor

and to improve society “gospel of wealth” Gave millions to charities

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The Corporation and the Bankers Railroad boom

Nearly every town had it own small factory

Big factories Made goods more cheaply than small

factories Railroads distributed goods to nationwide

markets Demand for local goods fell Small factories closed Increased their output

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The Corporation and the Bankers Expanding Factories

Needed capital, or money for investment Used capital to buy raw materials, pay

workers, and cover shipping and advertising costs

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The Rise of the Corporation Expanding business became

corporations Corporation

Business owned by investors Stock

Shares in the business Dividends

Shares of a corporation ‘s profit Stockholders

Elect board of directors to run the corporation Face fewer risks than owners of private

businesses10

Banks and Industry

Corporations Attracted large amts. of capital from

investors Borrowed millions of dollars from banks Loans helped American industry grow Bankers made huge profits

Bankers J. Pierpont Morgan

Most powerful banker in the late 1800s Used banking profits to gain control of major

corporations11

Banks and Industry - Continued

J.P. Morgan Invested in the stock of troubled corporations Won the seats on the board of directors Adopted policies that reduced competition and

ensured big profits 1894-1898

Gained control of most of the nation’s major rail lines

Began to buy up steel companies – including Carnegie Steel – merged it into a single large corporation

Became head of the United States Steel company First American business worth more than $1 Billion

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Rockefeller’s Oil Empire

Iron ore plentiful Mesabi Range of Minnesota

Coal Pennsylvania, West Virginia, and the

Rocky Mountains Rocky Mountains

Also contained other minerals such as gold, silver, and copper

Forests provided lumber for building

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Rockefeller’s Oil Empire - Continued

1859 Oil discovered

Drillers near Titusville, Pennsylvania made the nation’s first oil strike Oil boom follows

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Rockefeller and Standard Oil John D. Rockefeller

Went to Pennsylvania for the oil fields Oil had little value until it was refined, or

purified, to make kerosene Builds an oil refinery Competition was wasteful Used profits from his refinery to buy

other refineries Combined companies into the Standard

Oil Company of Ohio15

Rockefeller and Standard Oil - Continued

Rockefeller Shrew businessman Improving the quality of his oil Tried to get rid of competition Standard Oil slashed prices to drive

rivals out of business Pressured customers Forced railroad companies to grand

rebates to Standard Oil

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The Standard Oil Trust

1882 Rockefeller formed the Standard Oil trust

Group of corporations run by a single board of directors

Stockholders in smaller companies turned their stock over to Standard Oil Received stock in the new trust Paid high dividends

Created a monopoly of the oil industry Controls all or nearly all the business of an

industry Controlled 95% of all oil refining in the U.S.

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The Standard Oil Trust - Continued

Monopolies Other companies began to set up trusts

and build monopolies 1890s

monopolies and trusts controlled some of the nation’s most important industries

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The Case For and Against Trusts

Americans Leaders of giant corporations abusing

free enterprise system Businesses owned by private citizens

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The Case Against Trusts

Trusts and monopolies reduced competition Without competition thee was no reason for

companies to keep prices low or to improve their products

Political influences of trusts Government moves towards controlling giant

corporations Sherman Antitrust Act – 1890

Banned formation of trusts and monopolies Too weak to be effective

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The Case for Trusts

Some business leaders defended trusts

Andrew Carnegie published articles Growth of giant corporations brought

lower production costs, lower prices, higher wages, and a better quality of life for millions of Americans

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