Industrialization Making of the Good Life .

Industrialization

Making of the Good Life

http://www.youtube.com/watch?v=dPpZ7-4zjwA

5 Features of the Birth of American Industrialization

• Coal Deposits used as cheap source of energy. “Fuel of Industry”

• Spread of Technological Innovation and the Factory System

• Competition of Firms to cut Costs and Prices.

• Overall Drop in Price Levels• Failure of Money Supply to keep pace with

Productivity

Outcomes of Industrialization

• Major Industries Develop– Railroads– Steel– Oil (why is it so important – Machinery– Meatpacking

More Cheap Consumer Goods Produced

Problems of Industrialization

• Business leaders drive down costs

• Lower wages and poor conditions for workers

• No safety net during Economic Depression

• Small group of Wealthy Business owners on Top

• Millions of poor workers on the bottom

Problems of Industrialization

• No Government Regulation of Business– Monopolies– Corruption– Product Quality not tested– Poor Conditions for workers

• Pollution of the Environment

The Birth of American Consumerism

Mass Production

Mass Marketing

Increased Literacy

New Products

Positives NegativesCreates jobs for everyone

Cheaper goods, more goods-consumerism

Development of a middle class

Opportunity for financial success

US becomes a rich world power and world player

Poor pay

Long hours

No say, impersonal

Unskilled labor, elimination of artisans

Conditions of labor

Need for workerswomen and children

Union Pacific and Central Pacific Railroads

How did R.R’s Effect the US?

Railroad Benefits

• Consolidation of smaller lines, integrate tracks• Standardized equipment• Creation of Time Zones• Companies can sell goods across the Country• Farmers and store keepers can receive goods in

rural locations• New Industries needed such as Steel and Iron to

build the R.R.

Name that man and his industry!

1 2 3 4

RRs

VanderbiltJay Gould

Andrew CarnegieJP Morgan

John Rockefeller

Steel: Carnegie

Petroleum: Rockefeller

The rest of US businesses

Strategies of Competition

-Undercut prices

-Buyouts- Trusts and monopolies

-Rebates

-Technology/efficiency

-Strict Management of costs

-V. and H. Integration

Vertical Integration

Controlling all aspects of manufacturing from start to finish—raw materials to

finished product.

For example, a car company that is expanding into tire manufacturing.

"vertically integrated."

Horizontal Integration

The merger of two or more companies which are in the same line of business.

If Acme and Giant merged together

Commodore Cornelius Vanderbilt

•Shipping industry

•NY Central

•Steel Rails

•Pullman Palace Cars

•NY’s Central Station

•Vanderbilt University“What do I care about the law? Hain’t I got the power?”

William Henry Vanderbilt

Succeeded his father and ran NY Central

“The public be damned, I am working for my stockholders”

Jay Gould built larger integrated rail systems.

Cyrus W. Field (right leg), developer of the New York Elevated Railroad (first transatlantic cable).

Jay Gould

Involved in many Railroads: Union Pacific, Erie ….

Stock watering

“I could pay one-half of the workers to kill the other half”

Andrew Carnegie: “Rags to Riches Success Story”

Thinking Skill: Explicitly assess information & draw conclusionsObjective: Evaluate Industrial Capitalist philosophy of late 19th century

Rags to Riches

• Came to the US as a poor Scottish Immigrant, @ age 12

• Carnegie had a dream to return to Scotland a wealthy man

Rags to Riches

• Worked in Pittsburgh Textile Mill as a boy• Became a Western Union messenger

• Big Break: In 1852 hired by Tom Scott, Superintendent of Pennsylvania Railroad.– Learned the R.R. business– Became head of Western Division after 7

years

Carnegie as R.R. Chief

• Used Cost Analysis techniques to double traffic– Started use of Night Trains– Wrecks: Burned cars or built new tracks

around wrecks to keep trains running– Lowered Fares

• Invested in Related Industries: Telegraph, Sleeping Cars and Bridge Companies

Carnegie Steel Mill 1870’s

• Vertical Integration: control all aspects of manufacturing from extracting raw materials to producing the finished product– Partnership with Henry Frick owner of a Coke

Works Company – Lowered Consumer prices for steel rails from

$65- $11

• Carnegie Steel still profited $40 million

Andrew

Carnegie

•Horatio Alger story

•Carnegie Steel

•Bessemer Process

•Vertical integration

•Homestead Strike, PA (1892)

•Gospel of Wealth

Caption reads: "Forty-Millionaire Carnegie in his Great Double Role. As the tight-fisted employer he reduces wages that he may play philanthropist and give away libraries, etc."This cartoon originally appeared in the July 9, 1892 edition of The Saturday Globe, a pro-union weekly out of Utica, New York.

Homestead Strike

• The Homestead Strike was an industrial lockout and strike which began on June 30, 1892, culminating in a battle between strikers and private security agents on July 6, 1892. The battle was the second largest and one of the most serious disputes in U.S. labor history second only to the Battle of Blair Mountain The dispute occurred at the Homestead Steel Works in the town of Homestead, Pennsylvania, between the Amalgamated Association of Iron and Steel Workers (the AA) and the Carnegie Steel Company. The final result was a major defeat for the union and a setback for efforts to unionize steelworkers

John D. Rockefeller

•Standard Oil Co. (1870)

•Standard Oil Trust

•Mass Marketing

•Social Darwinism

•Horizontal and vertical integration

“The Growth of A Large Business is Merely a Survival of the Fittest”

-John D. Rockefeller, founder of Standard Oil.

John Pierpont Morgan•Financier

•Reorganized RRs, insurance companies, and banks

•US Steel (1901)

•Came to the aid of the US government twice

•Interlocking Directorates and Holding Companies

Characteristics

• What characteristics did these men all possess to help them succeed?

• Other important “men who built America?

• Wealthiest men in US history: http://www.celebritynetworth.com/articles/entertainment-articles/30-richest-americans-time-inflation-adjusted/#!/30-james-c-flood-net-worth-34-billion_727/

More on the Robber Barons…from Zinn

• J. P. Morgan had started before the war, as the son of a banker who began selling stocks for the railroads for good commissions. During the Civil War he bought five thousand rifles for $3.50 each from an army arsenal, and sold them to a general in the field for $22 each. The rifles were defective and would shoot off the thumbs of the soldiers using them. A congressional committee noted this in the small print of an obscure report, but a federal judge upheld the deal as the fulfillment of a valid legal contract.

• Morgan had escaped military service in the Civil War by paying $300 to a substitute. So did John D. Rockefeller, Andrew Carnegie, Philip Armour, Jay Gould, and James Mellon. Mellon's father had written to him that "a man may be a patriot without risking his own life or sacrificing his health. There are plenty of lives less valuable."

• While making his fortune, Morgan brought rationality and organization to the national economy. He kept the system stable. He said: "We do not want financial convulsions and have one thing one day and another thing another day." He linked railroads to one another, all of them to banks, banks to insurance companies. By 1900, he controlled 100,000 miles of railroad, half the country's mileage

Industrial Capitalist Philosophy

The Mindset of Big Business

“The Good Life”

• Materialism

–Idea that Material Objects such as Goods and Wealth offer the Highest Values to be Pursued in Life

GOSPEL OF WEALTH

“The Good Life”

• Gospel of Wealth – Carnegie

–Economically successful people have the responsibility to use their money for charity and social purposes

SOCIAL DARWINISM

Darwin’s theory of “natural selection” as applied to business & economics:

“Only the strong survive.”

•A defense of laissez-faire economics

“The Good Life”

• Social Darwinism

–Economic Competition is Natural Law

–The Fittest in Business will Survive

–Business should not be regulated

–The weak companies go under, while the strong survive

Herbert Spencer

British philosopher and sociologist,

A major figure in the intellectual life of the Victorian era. He was one of the principal proponents of evolutionary theory in the mid-nineteenth century, and his reputation at the time rivaled that of Charles Darwin. Spencer was initially best known for developing and applying evolutionary theory to philosophy, psychology and the study of society.

“The Good Life”• How to Succeed: Horatio Algerism

– An Ambitious Person can Succeed Financially:• if they Work Hard, • are Thrifty, • Practice Integrity, • Follow the Rules, • and Have some Luck!• Lazy and/or poor = “deserved misery”

Horatio Alger

“Pluck & Luck”Hard work will pay off!

•Rising literacy rate madeAlger’s stories vastly influential

to young Americans. •Yet another defense of laissez-faire economics.

Russell Herman Conwell

• Co-Founder of Temple U.• At Gettysburg• Acres of Diamonds-”dig in your own backYard”-implication – poverty = your own fault?

Debate statements

-Agree/Disagree –4 corners of room

-be prepared to defend your position with reasoning

-respect for all points of view

Debate statements

• “Robber Barons” / “Captains of Industry” were good for America

• The rich have a duty to give back to society• People are, to a large extent, in control of their

circumstances and therefore have the ability to succeed• Success in business is modeled on the “survival of the

fittest”• The government should leave business alone• America is too dependent on consumerism• Materialism is a good thing• Poverty is largely an individual’s own doing• America is an equal “land of opportunity” for all