Growing Pains: Robber Barons and the Growing Pains: Robber Barons and the Growth of U.S. Industry, 1870-1900Growth of U.S. Industry, 1870-1900

AN AGE OF BIG BUSINESSAN AGE OF BIG BUSINESS

Mr. PitcairnMr. PitcairnU.S. HistoryU.S. History

2005/062005/06

FOUNDATIONS FOR GROWTHFOUNDATIONS FOR GROWTHI.I. Factors of ProductionFactors of Production

A.A. 1870-1900 time of great economic 1870-1900 time of great economic growthgrowth

B.B. New technology + new business New technology + new business methods methods allow U.S. to allow U.S. to

1.1. tap rich supply of natural resourcestap rich supply of natural resources2.2. increase productionincrease production3.3. raise $ needed for growthraise $ needed for growth

C.C. Growth possible because U.S. benefited Growth possible because U.S. benefited from from “factors of production”“factors of production”

1.1. LAND (land & natural resources)LAND (land & natural resources)2.2. LABOR (availability of workers)LABOR (availability of workers)3.3. CAPITAL (buildings, machinery, & tools)CAPITAL (buildings, machinery, & tools)

FOUNDATIONS FOR GROWTHFOUNDATIONS FOR GROWTH

II.II. Growth of railroads after Civil War Growth of railroads after Civil War stimulates economic growthstimulates economic growth

A.A. 1869: first transcontinental railroad1869: first transcontinental railroad

B.B. By 1890: five major transcontinental By 1890: five major transcontinental railroadsrailroads

C.C. Miles of track:Miles of track:1.1. 1860: 1860: about 30,000about 30,000

2.2. 1900:1900: almost 200,00almost 200,00

FOUNDATIONS FOR GROWTHFOUNDATIONS FOR GROWTH

III.III. Raising CapitalRaising CapitalA.A. Economic & business growth requires Economic & business growth requires

“capital”“capital”1.1. $ for investment$ for investment

B.B. Banks: businesses borrowed $ to Banks: businesses borrowed $ to expandexpand

FOUNDATIONS FOR GROWTHFOUNDATIONS FOR GROWTH

C.C. ““Corporation”Corporation”1.1. Company that sells shares – Company that sells shares – “stock”“stock” – of its – of its

businessbusiness

2.2. ““shareholders”shareholders” – people who invest in a – people who invest in a company by buying sharescompany by buying shares

3.3. GOOD TIMES GOOD TIMES shareholders do well shareholders do wella.a. ““dividends”dividends” – cash from company’s profits – cash from company’s profits

b.b. stock rises in valuestock rises in value

4.4. BAD TIMES BAD TIMES shareholders lose investment shareholders lose investment

5.5. Stocks sold in Stocks sold in “stock markets”“stock markets”

6.6. Railroads first businesses to incorporateRailroads first businesses to incorporate

THE OIL BUSINESSTHE OIL BUSINESS

I.I. 1850s oil found in PA 1850s oil found in PA hillshills

A.A. Oil valuableOil valuable1.1. lubricate machinerylubricate machinery

2.2. burn to produce energyburn to produce energy

B.B. 1859 first oil well1859 first oil well1.1. Titusville, PATitusville, PA

2.2. Edwin DrakeEdwin Drake

II.II. Oil industry grows Oil industry grows rapidly in late 1800srapidly in late 1800s

THE OIL BUSINESSTHE OIL BUSINESS

III.III. John D. RockefellerJohn D. RockefellerA.A. Made fortune in AND came to Made fortune in AND came to

control oil industrycontrol oil industry

B.B. Standard Oil Company of Ohio, Standard Oil Company of Ohio, 18701870

1.1. JDR set up oil refinery in Cleveland, JDR set up oil refinery in Cleveland, OHOH

C.C. Built empire through Built empire through “horizontal “horizontal integration”integration”

1.1. Combining competing companies Combining competing companies into one corporationinto one corporation

2.2. JDR bought competing oil refineriesJDR bought competing oil refineries

THE OIL BUSINESSTHE OIL BUSINESS

D.D. SOC became a SOC became a “monopoly”“monopoly” - total control by - total control by a single producera single producer

1.1. Lowered prices to drive out competitorsLowered prices to drive out competitors

2.2. Pressured customers to not use other oil Pressured customers to not use other oil companiescompanies

3.3. Demanded rebates from railroad companiesDemanded rebates from railroad companies

4.4. Created Standard oil Created Standard oil “trust”“trust”a.a. Group of companies controlled by one Board of Group of companies controlled by one Board of

DirectorsDirectors

THE STEEL BUSINESSTHE STEEL BUSINESS

I.I. Steel becomes big business in late 1800sSteel becomes big business in late 1800sA.A. SteelSteel

1.1. Strong & long-lasting form of ironStrong & long-lasting form of iron2.2. Iron alloyed with carbonIron alloyed with carbon3.3. Great for railroad tracks, bridges, buildings, etc.Great for railroad tracks, bridges, buildings, etc.

B.B. 1860s: new methods of making steel 1860s: new methods of making steel (Bessemer process) (Bessemer process) could produce larger could produce larger amounts, more cheaplyamounts, more cheaply

C.C. 1870s: Pittsburg, PA 1870s: Pittsburg, PA steel capital of US steel capital of US1.1. Close to sources of iron ore (PA & OH)Close to sources of iron ore (PA & OH)2.2. Large steel mills builtLarge steel mills built

““Making Bessemer Steel at Pittsburgh, the Converters at Making Bessemer Steel at Pittsburgh, the Converters at Work”Work”

Charles GrahamCharles GrahamHarper’s WeeklyHarper’s WeeklyApril 10, 1886April 10, 1886

THE STEEL BUSINESSTHE STEEL BUSINESS

II.II. Andrew CarnegieAndrew CarnegieA.A. Son of Scottish immigrantSon of Scottish immigrant

B.B. By 1890, rules steel industryBy 1890, rules steel industry1.1. Built one of first steel mills in Built one of first steel mills in

PittsburgPittsburg

2.2. Brought Bessemer process to Brought Bessemer process to USUS

3.3. Created empire through Created empire through “vertical integration”“vertical integration”

a.a. buying companies that provide buying companies that provide equipment and services for a equipment and services for a businessbusiness

THE STEEL BUSINESSTHE STEEL BUSINESSD.D. By 1900, Carnegie’s By 1900, Carnegie’s

company produces 1/3 0f company produces 1/3 0f all US steel!all US steel!

E.E. 1901 Carnegie sells his 1901 Carnegie sells his company to banker J. company to banker J. Pierpont Morgan for $450 Pierpont Morgan for $450 millionmillion

1.1. JPR forms US Steel JPR forms US Steel Corporation Corporation first billion $ first billion $ corporationcorporation

CONCENTRATION OF ECONOMIC CONCENTRATION OF ECONOMIC POWERPOWER

I.I. ““Mergers”Mergers” – combining of companies – – combining of companies – concentrated economic power in a few concentrated economic power in a few corporationscorporations

A.A. By 1900 By 1900 1/3 US manufacturing controlled 1/3 US manufacturing controlled by 1% of US corporations!by 1% of US corporations!

II.II. Problems of giant corporationsProblems of giant corporationsA.A. Drove competition awayDrove competition awayB.B. Hurt consumersHurt consumers

1.1. Corporations did not need to keep prices lowCorporations did not need to keep prices low2.2. Corporations did not need to improve Corporations did not need to improve

goods/servicesgoods/services

REFERENCESREFERENCES

““The Growth of Industry” (Chapter 19). The Growth of Industry” (Chapter 19). The The American JourneyAmerican Journey. New York: Glencoe McGraw-. New York: Glencoe McGraw-Hill, 2003.Hill, 2003.

““Industrial Revolution.” Industrial Revolution.” WikipediaWikipedia. Wikimedia. . Wikimedia. <http://en.wikipedia.org/wiki/Industrial_Revolutio<http://en.wikipedia.org/wiki/Industrial_Revolution>.n>.

““The American Experience: Andrew Carnegie.” The American Experience: Andrew Carnegie.” PBSPBS. . <http://www.pbs.org/wgbh/amex/carnegie/>.<http://www.pbs.org/wgbh/amex/carnegie/>.