2
The Hook
Make an effort to connect all the information in this presentation to the hook…“Technology of the late 19th Century was used
by capitalists who organized resources to build huge industries and personal fortunes.”
3
Objectives
Describe the economic system of capitalism and note how its supporters and critics felt about this system
Explain how business entrepreneurs developed methods of organizing capital (money) and other resources to build huge corporations.
Describe the efforts of Andrew Carnegie, John Rockefeller, Cornelius Vanderbilt, George Pullman, Frank Woolworth and George Westinghouse transformed the American economy.
How do these objectives connect to the hook for this section?
4
Capitalism, Free Enterprise and the American Economy
From its early history, the American nation supported and protected private property and the freedom of individuals to conduct commerce (trade) with minimal interference The pursuit of happiness in the Declaration of Independence
meant the ability to earn money.Traditional belief of American freedom- you can earn
your way to riches no matter of your birthUp though the Civil War, businesses were traditionally
small and the owner worked side by side his employees Businesses required limited capital and marketed locally
The economic demands of the Civil War and new technologies would press industries to grow in capacity
5
Some Thoughts about Capitalism: Supporters
In Support of Capitalism Individuals take risks with their
wealth in order to make more wealth
Motivated by self-interest, people work hard to build and protect property
People will work to develop skills, products and ideas that are in great demand and will be discouraged from skills, products and ideas whose values are low or declining
A Capitalist Solution to improving the economy Laissez Faire- Hands off- government
offers little or no regulation of business…
Individuals able to gain great riches by assuming risks
Successful risks and rewards benefit society at large
Focus on economic liberty Accept that capitalism has losers and
that competition should be the only force in the marketplace (social Darwinism)
6
…and Critics
Capitalist Critics Individuals who accumulate wealth
and use increasing economic power to protect and gain more wealth.
The business class (bourgeoisie) take advantage of powerless workers (proletariat) and make money on their labor
Capitalism increases the imbalances in wealth and eventually, the competition will narrow to few players and most people are too poor to consume products
A proposed Solution… Socialism- system where businesses
are owned by government with the focus on economic equality
Communism- A system of government by which the government eliminates capitalist elements of private enterprise and private property through force and to direct economic activity based on need rather than demand (the interest and ability to purchase a good)
7
In Support of Large Scale Capitalism: America in the 19th Century
Capitalism and industry made Britain the world’s most wealthy nation by 1800- “A nation of shop keepers” Capitalism made few people very rich but forced displaced
farmers to accept jarring poverty in dangerous employment Poverty of industrial England memorialized in the work of
Charles DickensDarwin and evolution-Theories that higher forms of
life evolved through an environmental struggle- Survival of the Fittest
Sociologist Herbert Spencer applied evolutionary theory to society and capitalism New ideas and hard work provides wealth. Weaker people lose the survival of the fittest and become extinct
8
Technology, Capital and Big Business
Emerging technologies of the late 19th century required larger scale investment and wider networks of communication Transportation and communication technologies required long distance
interdependence Development of a national standard time necessitated Ideas and products can move throughout the nation with relative ease-
National marketsEmerging technologies involved much larger scale production-
more capital than one person could provideCorporations- Many people pool resources (capital) by
purchasing shares of a company (stocks) Allows many small investors to support an enterprise Limited liability laws- You can not be held liable for a loss any greater than
your investment Corporations could outlive an entrepreneur- more stable
9
The Rise of Trusts: Corporations on Steroids
Competition between corporations was fierceCorporations attempted to organize in ways
they could defeat competition by… Organizing and taking control of all inputs and
distribution networks of a product (e.g. coal, rail lines, coke plants, iron mines and steel mills in the production of steel) Vertical Integration
Organizing and controlling an entire industry by buying out or burying the competition and forcing them out of business Horizontal Integration
Companies that could not compete failed- social darwinism…
11
The Hook
Make an effort to connect all the information in this presentation to the hook…“Technology of the late 19th Century was used
by capitalists who organized resources to build huge industries and personal fortunes.”
12
Capitalism and Industrialization: Part of a Global Movement
The Industrial Revolution began in Britain in the 1750’s Geographic advantages- transportation and coastline Political advantages- limited government and protection of
property Invention and the support of practical technology Resources- Iron and coal Labor- advancements in farming provided cities with growing
numbers of workersIdeas of industrial capitalism spread to Northern
Europe and America (Northeastern U.S.) Conditions supporting industrialism in Britain present in US
Early industrialism challenged artisans whose skills would become near worthless
13
Industrialism Comes to America
Textile industry technology smuggled out of Britain to New England (1820’s) Used water power to produce textiles Young women and children did much of
the work Invention of the sewing machine in 1846
made clothing much less expensiveSteamboats and trains begin to
connect northeastern cities in the 1830’s- Connecting people and markets
The Civil War pushed manufacturers to find more efficient ways to produce goods
14
Carnegie, Steel and Vertical Integration: The Making of the World’s Richest Man
Scottish immigrant believed that the steel industry would be a rapidly growing business after the Civil War New technology Bessemer Process could
make steel quicker and less expensively. Growing cities and the railroad would be a
market for steel Organized his company vertically- controlling
mines and transportation facilities Was able to produce steel inexpensively
Pittsburgh became the steel capital of the world
15
The Pain of Economic Revolution
“Twenty-five years after the death of Abraham Lincoln, America had become, in the quantity and value of her products, the first manufacturing nation on the world.”Andrew Carnegie
The transformation of the American economy created opportunity for riches and poverty- Divergence of wealth and opportunity and interests- The seeds of conflict
Jarring changes for working class Americans
17
Pittsburgh: Hell With the Lid Off
Pittsburgh was the ideal place to build the steel industry Coal fields nearby River transportation Iron ore from Midwest could be transported on
Great Lakes Central location to markets Growing supply of labor
The steel industry transforms Pittsburgh and steel transforms America
Pictures: Pittsburgh in 1850 (Population 46,600) and 1902 (Population 321,000)
Peak population nearly 700,000 in 1950
Industrialization would revolutionize the role of cities in America- more later…
18
The Hook
Make an effort to connect all the information in this presentation to the hook…“Technology of the late
19th Century was used by capitalists who organized resources to build huge industries and personal fortunes.”
19
John D. Rockefeller: Organizing Oil
Oil industry develops in Northwest PA by small scale investment Edwin Drake’s discovery in Titusville started a
wave of small investors to explore and refine oil in PA
Small refiners engaged in chaotic competition John D. Rockefeller became the largest refiner in
Cleveland Rockefeller incorporated in oil business
(brought in investors) and began to take control of the American oil industry
By 1880, Rockefeller’s Standard Oil controlled 90% of the American oil industry- Monopoly ended competition Standard oil was broken up in the early 20th
century Now is Chevron, Amoco, Sunoco and Conoco-
Phillips
20
How Did Rockefeller Gain Control of the Oil Industry?
Corporation provided the wealth to buy out competitors
Forced railroads to offer rebates to his company This enabled Standard Oil to “dump” oil in markets
where competitors refused to cooperate or sell out to his company
Horizontal Integration- Controlled the entire industry
Rockefeller saw this as establishing order in this new industry. Competition wasteful and ruinous
Critics condemned his practices and unfair and harmful to the public’s interest
Ida Tarbell exposed his practices to the public- more later…
21
The Hook: Rockefeller and Industrialization
“Technology of the late 19th Century was used by capitalists who organized resources to build huge industries and personal fortunes.” How does this picture connect what we have learned about Standard Oil to
the hook for this chapter?
22
Cornelius Vanderbilt: Putting the Rail Industry on Track
The growth of railroads were a both cause and effect of industrial growth in America Rail lines linked resources, labor and markets. Growing rail industry created demand for steel as well
as a means to transport finished goods Created a national market for goods Standardized lines created a national transportation
system Cornelius Vanderbilt controlled 4500 miles of track-
mostly in the east Would ruin rivals by building parallel lines- “The Public
be damned!”
24
George Pullman and the Company Town
George Pullman built a business in Chicago that designed and constructed passenger cars for rail lines.
Pullman sought to create a company town for workers of his growing business Controlled town- all aspects of life- Paternalism Charged rents and set prices in company owned stores
25
George Westinghouse: The Inventor as Industrialist
Westinghouse applied his practical skill as an engineer to the growing rail industry The airbrake Switch and signal technology
Became a rival to Edison in commercial electricity Advocated AC current instead of
DC that was used by Edison Westinghouse continues to be in
competition with Edison's General Electric
Westinghouse would develop the first commercial radio broadcast in Pittsburgh in 1920 KDKA
26
Thomas Edison: More than a Wizard
Edison was successful in marketing the many inventions he developed.
His biggest battle- the (electric) current war fought with George Westinghouse Edison worked with DC current (cars and small
electronics run on DC) DC is hard to distribute over long distances Edison sought to make the public fear AC
Developed the first electric chair to prove AC was dangerous
Edison video of the dangers of AC Westinghouse’s advocacy of AC current won the day…
27
Frank Woolworth: Marketing
Frank Woolworth brought to retail what Vanderbilt brought to railroads Standardized the retail experience. Presentation and price important in
selling goods Bought in bulk and passed discount
5 and 10 stores Offered an increasing variety of
affordable goods made possible by industrialization
Built a chain of 1000 stores between 1879 and 1919- The Walmart of his day
28
The Hook: Rockefeller Westinghouse, Woolworth, Edison and Vanderbilt
“Technology of the late 19th Century was used by capitalists who organized resources to build huge industries and personal fortunes.” Write a 5 word phrase that hooks each of these people to the hook
29
Carnegie and the Gospel of Wealth
Philanthropy- literally lover of man kind A philanthropist donates wealth to social
causes to improve the social condition- Examples…
The Social Gospel- Huge wealth given to industrialists was God’s blessing- Those who accumulated wealth had a solemn obligation to direct that wealth to help those in need. The rich are trustees of wealth
Carnegie- A man who dies rich dies in disgrace Money should not be given directly to the poor
This would increase dependency of poor Create social ladders for poor
• Libraries, universities, parks, museums and other institutions of social improvement
30
Examples of Philanthropy in the 19th Century
Andrew Carnegie Gave 350 Million
Over 2500 libraries Carnegie-Mellon
University Institutes and trust
funds supporting education and world peace
Carnegie Hall- New York
Bought church organs but no money directly to churches
John D. Rockefeller Gave 550 Million
80 million to the University of Chicago
Supported many colleges with huge grants
Focus on institutes of public and international health
Rockefeller and Carnegie money continue to work today