American History II: Note Set #7: Robber Barons & "Big Business"

Industrialization

First began in US during the early 1800s, then accelerated during the Civil War

By 1900, US had become the world’s leading industrial power

America's Big Advantages?

Natural Resources

Water, Timber, Coal, Iron , Copper, Oil

Large workforce, thanks to immigration

Pro-Business Approach by the U.S. Government

Kept taxes on American manufacturing low and tariffs (taxes on imported goods) high

Minimal regulation of businesses

Made no effort to control wages or prices

What Were the New Industries?

Steel

Used for building railroads, heavy machinery, and skyscrapers and other buildings

Stronger, lighter, more durable, and more flexible than iron

Bessemer Process: New way of mass-producing high-quality steel, that also made the steel cheaper

Put into large-scale use in U.S. by Andrew Carnegie

Andrew Carnegie (1835 – 1919)

Scottish immigrant who started with nothing, then worked his way up through telegraph and railroad companies until he eventually made a fortune investing in his own steel company

In 1901, Carnegie sold his steel company for $230 million, then became a philanthropist (gave to charity)

By the time of his death, he had given away nearly $450 million to various causes!

U.S. Steel: Created in 1901 when J.P. Morgan bought out Carnegie and several other large steel manufacturers to create the world’s first billion-dollar company

Oil

First major US oil well was drilled in Pennsylvania by Edwin L. Drake in 1858

Richest oil finds of 19th century would come in Texas and Oklahoma

Used at first for making kerosene for lighting, but later used to power and lubricate machinery

John D. Rockefeller (1839 – 1937)

Became rich off his near-monopoly in the American oil industry

First billionaire in US; was worth $1.4 billion when he died (That’s about $600 billion in today’s dollars) – He owned a little over 1% of the total wealth of the US!

Standard Oil Company

Created in 1870 by Rockefeller and several partners

Volume pricing allowed Standard Oil to bankrupt any competitors

Became so powerful a monopoly that it was broken up by the Supreme Court in 1911

Railroads

Railroads became the lifeline of all American agricultural and industrial production

Moved natural resources to the factories, farm goods to market, and manufactured goods to distributors

Cornelius Vanderbilt (1794 – 1877): Nicknamed “The Commodore”

Dropped out of school to run a ferry business which grew into a fortune in the shipping and railroad industries

Founded Vanderbilt University with a $1 million donation, the largest in US history at that time

Electricity

Vital to new industrial growth, the ability to use electrical power to create light and run machinery allowed factories to run 24 hours a day

Electricity also opened up new avenues of entertainment

Thomas Edison (1847 – 1931): Nicknamed “The Wizard of Menlo Park”

Holder of over 1000 patents

Developed the phonograph, the light bulb, and motion picture camera

Founder of Edison General Electric Company, which later became General Electric (GE)

George Westinghouse (1846 – 1914)

Inventor, who developed the air brake and rotary steam engine for the railroads

Made his fortune in electricity by backing Nikola Tesla’s alternating current (AC) method of electrical distribution over Edison’s direct current (DC) method

Westinghouse Electric Company: Founded in 1886

Became first commercially successful electric power company

Also continued to develop devices that used electricity, like kitchen appliances and lighting fixtures

Banking & Finance

Larger and more powerful banking firms were needed to loan money to these new mega-corporations

Small banks began to merge into giant national banks

J.P. Morgan (1837 – 1913)

Financed the merger of steel companies into the giant US Steel; also financed the merger of electric operators into General Electric

Key stakeholder in several other corporations, including International Harvester, AT&T, and numerous railroads

Tactics of Industry

Monopolies: control of an entire market by a single company

Trusts: group of companies run by the same managers

Holding companies: several companies owned by another company which doesn’t actually make anything itself