MEANS OF PRODUCTION: Tools and raw materials used to make a product.

MEANS OF PRODUCTION:

Tools and raw materials used to make a product

What factors spurred industrial growth in the late 1800s?

The demands of the Civil War, the availability of natural resources, an increase in

immigration, and supportive government policies encouraged industries to expand.

WHY IT MATTERS ENCOURAGING INDUSTRIAL GROWTH

Edwin Drake discovers Oil – “Black Gold”

ECONOMIC SYSTEMS

What is meant by the term above???

Give examples to support your understanding

TEXT PAGE 816

Laissez – Faire Capitalism

Theory of Adam Smith

Businesses are left free from government regulation to compete in a free market

Most people believed government regulation would reduce individuals chances of prosperity

Utilitarian’s Limited Government

Theory of Jeremy Bentham

Goal of society should be to provide:

”Happiness for the greatest number of people”

Government should regulate business in certain circumstances

Democratic government absorbed many ideas from Bentham

SOCIALISM

Utopians – early socialists

Robert Owen –established Owen’s Utopia

Theory of collective ownership of all business means

“More equal incomes across the board”

COMMUNISM Theory of Karl Marx – wrote “Communist Manifesto”

Discussed communism as solution to Capitalism

Argued that the working class did not have the opportunity to prosper under a capitalist system because the power lies in the hands of few

No individual ownership of property - everyone within society should share property and ownership of production

Marx’s theory would create a classless society

Communism later evolves to small elite group controlling all economic and political aspects of life

How did new technologies shape industrialization?

New technologies improved communication and transportation.

Improved transportation allowed factories to change the way they created goods and led to the system of mass production, which

replaced performing tasks by hand.

INNOVATION DRIVES THE NATION

Page 102

Telegraph – Samuel F.B. Morse (1837)

Telephone - Alexander Graham Bell (1876)

Morse Code Enters Cyber Age http://www.npr.org/templates/story/story.php?storyId=1680529

The Kitty Hawk Flight100 Years Ago, Wright Brothers Launched First True Airplaneby Joe Palca http://www.npr.org/templates/story/story.php?storyId=1550446

Typewriter – Christopher Sholes (1867)

Edison's New Jersey Labhttp://www.npr.org/templates/story/story.php?storyId=1431059

Phonograph Turns 130 http://www.npr.org/templates/story/story.php?storyId=16504888

Necessity, who is the mother of invention. Plato, The Republic

Greek author & philosopher in Athens (427 BC - 347 BC)

SCHOOLHOUSE ROCK – Mother Necessity(3:09)

http://www.youtube.com/watch?v=4OLWJ1TMuNE

The Duryea Brothers

America's first gasoline powered commercial car manufacturers were two brothers, Charles Duryea (1861-1938) and Frank Duryea. The brothers were bicycle makers who became interested in gasoline engines and automobiles. On September 20 1893, their first automobile was constructed and successfully tested on the public streets of Springfield, Massachusetts. Charles Duryea founded the Duryea Motor Wagon Company in 1896, the first company to manufacture and sell gasoline powered vehicles. By 1896, the company had sold thirteen cars of the model Duryea, an expensive limousine, which remained in production into the 1920s. America's First Automobile Race

THE “HORSELESS CARRIAGE”

What impact did industrialization have on Americans?

Industrialization increased the population of U.S. cities because farms required fewer workers. Increased production made the

United States more involved with the economies of foreign nations. Waste from industries created pollution and caused

people to be concerned about their environment.

THE IMPACT OF INDUSTRIALIZATION

Page 104

EDWIN DRAKE AND TITUSVILLE. PENNSYLVANIA

• “Colonel” Edwin Drake, not really colonel, was the first to successfully drill for and find oil in Titusville, PA.

• This set off an oil boom in PA, that rapidly spread around the nation.

DRAKE AND HIS WELL (1859)

Early oil pipeline right-of-way (ROW) near Titusville, PA.  The ROW has been cleared and the tong gang is busy screwing together the joints of pipe.  Straight scars like this one became common in the oil regions as the criss-crossing network of pipelines were laid in the 1860's-70's and on.  Photo from a postcard

MOVING OIL DOWN THE ALLEGHENY

BENNINGHOF FARM (1860)

John D. Rockefeller

WHY OIL?

• Whale oil had been used to light lamps in homes for hundreds of years, with whales becoming more scarce, it was getting too expensive.

• Kerosene, derived from petroleum, was a viable alternative.

• Oil had been collected as it seeped to the ground, but there had to be a better way to find it to make it cheap enough.

ROCKEFELLER AND STANDARD OIL

The making of the worlds richest

man, and one titan of a company.

How an oil well works:

1. Find underground features that usually

hold oil.

2. Drill underground until pressure from

natural gas forces oil to the top.

3. Cap the well, and slowly drain the pool of

oil.

OIL REFINING

• Oil is relatively worthless until it is REFINED, or put through a process that takes out impurities to make kerosene or gasoline (Gas was burned off or dumped in rivers in the days before the automobile!

• Whoever refines the oil must get it to market, making refining the KEY part of the process.

• Lots of value is added to crude oil through these two areas (refining and transport). Lots of money can be made

HOW REFINING WORKS

ENTER JOHN D. ROCKEFELLER

• Rockefeller was not interested in drilling for and finding oil, only in refining it, transporting it, and marketing it under the Standard Oil name as a guarantee of quality.

• Lots of VALUE is added to oil in these areas, and his company became the biggest in the world by controlling these three areas of the energy business.

ROCKEFELLER BUSINESS PHILOSOPHY

• Always cut costs as much as possible to beat competitors.

• Bring your competition to their knees then buy them cheap.

• Get REBATES (low rates) from railroads to ship your product, or build pipelines to do it cheaper.

• Produce a high quality product with a brand name and price it lower than your competitors.

Standard Oil Office and Sign

STANDARD OIL

• The company started with one refinery in Cleveland, near Pennsylvania oil.

• It quickly grew as they bought out all of the competitors and consolidated into one large business.

• Rockefeller formed a corporation, then a TRUST to have complete control over the company and the oil market.

RAILROAD REBATES

• One of the most controversial business practice that Standard Oil used was to demand lower prices from its shippers, and even get rebates of money when its competitors used a railroad. (Yes, the railroads paid Rockefeller money from his competitors.)

• Why would they do this? Simple, he was the biggest customer, so they needed his business.

• Many said this gave Rockefeller an unfair (and illegal) advantage over his rivals.

PREDATORY PRICING

• Predatory Pricing is when you sell your product at a price BELOW your production cost, actually losing money in an attempt to run your rivals out of business.

• Most companies could not afford to do this, but Standard Oil could because they were so huge.

• They could afford to lose money in one area because they made so much in others.

• Often, they would raise prices after there were no competitors left, hurting the consumer with no choice and higher prices.

HORIZONTAL INTEGRATION

• Unlike Carnegie, Rockefeller made his business larger buy buying out all the refineries. He did not care to produce the oil, only to make it into something useful.

• This is called Horizontal Integration, unlike Vertical Integration where you want to own all pieces of an industry from raw materials to final product, Horizontal Integration is only interested in owning one sector of the industry.

• Think of McDonalds buying: Burger King, Wendy’s, KFC, Taco Bell, Panera, etc.

MARKET SHARE OF STANDARD OIL (Refining)

VALUE OF THE STANDARD OIL COMPANY

HOW DID ROCKEFELLER BECOME THE RICHEST MAN IN THE WORLD?

• He used the profits of the company to buy out all of his competitors. (page 110 – Horizontal Integration)

• He found the lowest cost methods to refine and ship his product. (means of production)

• By forming a trust, he was able to include many of his former competitors into his company as shareholders. They made money too, so they did not ALWAYS mind being bought out.

• By 1900 Standard Oil controlled 92% of the entire national kerosene market. It was the biggest company in the world.

Share of Standard Oil stock, you could purchase stock in the

company and share the profits.

Another use for crude oil!!!

BUILDING CARNEGIE

STEEL

How Carnegie took control of the steel

industry and revolutionized business practices nationwide.

ANDREW CARNEGIE

CARNEGIE’S KEYS TO SUCCESS

• Always invest in the newest technologies.

• Always find ways to cut costs. This allows you to price lower than your competitors.

• Control the production process from start to finish, it keeps all profits within the company.

• Drive your competitors to the brink of bankruptcy and buy them at low prices.

• All of these allowed Carnegie to control a vast steel empire and to become the second richest person in American history.

WHAT MADE CARNEGIE A SUCCESSFUL

BUSINESSMAN???• Hard working

• Ability to master the details of a business very quickly

• Daring and forceful – not afraid to make decisions and follow through

• Ability to pick gifted associates who reflected his style of management.

STEEL MAKING TECHNOLOGY

• The Bessemer Process allowed steel to be made in large quantities at much lower costs. Though an expensive investment up front, in the long run savings means more business.

• The Open Hearth Process was hotter and more efficient than the Bessemer. This allowed more steel to be made faster and even cheaper.

• Carnegie started with the Bessemer Process, then shortly after, scrapped these furnaces for newer Open Hearth technology. Cutting costs

BESSEMER PROCESS

OPEN HEARTH FURNACE

THE EFFECT OF NEW TECHNOLOGY

THE INDUSTRIAL REVLOUTION IN FULL SWING

WHAT IS NEEDED TO MAKE STEEL

• A factory with the proper technology and diversified labor.

• Coal, converted to coke, for a heat source.

• Iron ore and other chemicals to make the iron into steel.

• Transportation network to move materials.

• Guarantees that the needed materials will be supplied and delivered on time by your suppliers.

VERTICAL INTEGRATION

• Vertical Integration is the practice of merging all of the needed processes in a business into one large company.

• Carnegie was able to do this by owning: The iron ore fields, the coal and coke for energy, the factories, and even the railroads and boats needed to move all of these materials to production.

• It would be like McDonalds owning a paper company, a meat farm, a wheat and flour company, a marketing company, etc.

UNITED STATES STEEL HOLDINGS

THE EFFECTS OF CARNEGIE’S WORK

CARNEGIE’S SKIBO CASTLE IN SCOTLAND

CARNEGIE STEEL PLANT IN BRADDOCK

THE HOMESTEAD WORKS

HOMESTEAD WORKS TODAY

EDGAR THOMPSON WORKS TODAY: CARNEGIE’S LEGACY

By 1890, the richest 10% controlled 9/10 of the wealth

William Graham Sumner on Social Obligations

“A man who is present as a consumer, yet who does not contribute either by land, labor, or capital to the work of society, is a burden.”

“…and the State is thus made to become the protector and guardian of certain classes.”

“Poverty is the best policy. It you get wealth, you will have to support other people; if you do not get wealth, it will be the duty of other people to support you.”

William Graham Sumner on Social Obligations

“Every honest citizen of a free state owes it to himself, to the community, and especially to those who are at once weak and wronged, to go to their assistance and help redress their wrongs.”

“We each owe it to the other to guarantee rights.”

“The class distinctions simply result from the different degrees of success with which men have availed themselves of the chances which were presented to them.”

SOCIAL DARWINISM

Theory of Charles Darwin (On the Origin of Species1859)

Stated society progresses through competition

“Survival of the Fittest”

Encouraged racism between nationalist groups

Interstate Commerce Commission

February 4, 1887 – Law passed by Congress stating that all railroad charges should be fair and reasonable, and that forbade interstate railroad abuses. Its established a five-member Interstate Commerce Commission to administer the provisions of the law.

Sherman Antitrust ActJuly 2, 1890 – Legislation passed by Congress to break up monopolies (pg.108). The first of several antitrust (pg.109) acts designed to curb the power and growth of monopolies, the law forbade companies to join in a trust in order to control interstate trade. The law was also used to break up unions. Penalties for violation included a $5,000 fine, a year’s imprisonment, or both. Because its wording was unclear and it was difficult to enforce, the Sherman Anti-Trust Act was supplemented by the Clayton Anti-Trust Act in 1914.

LABOR UNIONS

ORIGINS AND

MAIN GOALS

CHILD LABOR IN AMERICA

FACTORY GIRLS

BOYS AT THE MINE

BREAKER BOYS AT WORK

ARTICLE: Children in PA coal mines

BREAKER BOYS

BOYS IN THE MINES

MINE ELEVATOR

BOYS IN A COTTON MILL

CIGAR WORKERS IN A FACTORY

EARLY PAPER BOY

OYSTER PICKERS

CLAM DIGGER

BERRY PICKER

DOGS AND PRETZELS

SHINE YOUR

SHOES?

RIDING THE RAILS

DELIVERING HATS

MAKING CLOTHES AT HOME

PROBLEMS OF WORKERS

• Long hours, often 12 hours a day 6-7 days a week.

• Unsafe and dangerous working conditions

• Relatively low pay, while company owners were becoming fabulously wealthy.

• Children working in dangerous conditions at very early ages(5-6 years old)

http://www.npr.org/templates/story/story.php?storyId=94449437

Kosher Meat Plant Faces Child Labor Allegationsby Jennifer Ludden

September 10, 2008

EARLY LABOR UNIONS

• Knights of Labor: Founded Uriah Stephens in 1869 & Terrance Powderly assumed leadership in the 1870’s

• American Federation of Labor (AFL): Founded by Samuel Gompers (1886)

• Congress of Industrial Organizations (CIO) led by John L. Lewis (1938)

REASONS UNIONS HELP WORKERS

• Workers banding together can force a company to shut down, thus costing the company profits and production.

• Together, workers are much more powerful than they would be alone.

Organization of wage earners, formed for the purpose of serving the members’ interest with respect to wages and working conditions.

WHAT DID UNIONS WANT?

• The 10 hour work day was a main goal, they wanted the government to make it a law.

• Higher pay for workers.• Better conditions at workplaces• Get rid of child labor. Not only because it

was bad, but also because children took jobs that adults could have sometimes. (This is a little greedy, but looked good)

TOOLS FOR UNIONS

• Strike: Refuse to work to hurt the company, and make them lose money.

• Boycott: Get consumers to refuse to buy a companies product.

• Work to Rule: Slow down production by only doing what is absolutely necessary and explicitly stated in a contract.

Workers Occupy Factory After Closinghttp://www.latimes.com/video/?slug=la-na-worker-sit-in9-2008dec09-vid

TOOLS OF THE COMPANY

• LOCKOUT: Refuse to let workers come to work until they have no money and beg to come back.

• STRIKEBREAKERS: When a company hires replacement workers to work in place of the original ones. (Scabs)

Railroad Workers Strike (1877)Railroad Workers Strike (1877)The Great Railroad Strike of 1877 began on July 17, 1877, in Martinsburg, West Virginia. Workers for the Baltimore & Ohio Railroad went on strike, because the company had reduced workers' wages twice over the previous year. The strikers refused to let the trains run until the most recent pay cut was returned to the employees.

West Virginia's governor quickly called out the state's militia. Militia members, for the most part, sympathized with the workers and refused to intervene, prompting the governor to request federal government assistance. President Rutherford B. Hayes sent federal troops to several locations to reopen the railroads. In the meantime, the strike had spread to several other states, including Maryland, where violence erupted in Baltimore between the strikers and that state's militia. In Pittsburgh, Pennsylvania, and St. Louis, Missouri, strikers temporarily gained control of the cities until federal soldiers reestablished order. In Chicago, Illinois, more than twenty-thousand people rallied in support of the strikers.

The strike also affected Ohioans. Governor Thomas Young encouraged Ohioans to form private police forces to defend businesses from strikers. He also dispatched the Ohio militia to several locations to maintain law and order. Cleveland residents opposed to the strike responded to the governor's call and formed their own police force to protect Baltimore & Ohio Railroad property. In Columbus, mobs attacked and destroyed much railroad property. Protests in Zanesville, Lancaster, and Steubenville also briefly shut down rail service. The worst agitation occurred in Newark, a major depot for the Baltimore & Ohio Railroad. On July 18, 1877, strikers blockaded the railroad, refusing to let any trains to pass. Governor Young quickly dispatched militia forces to the city, hoping to avoid violence.

By the end of August 1877, the strike had ended primarily due to federal government intervention, the use of state militias, and the employment of strikebreakers by the Baltimore & Ohio Railroad Company. The Great Railroad Strike was typical of most strikes during this era. The availability of laborers and government support for businesses limited workers' ability to gain concessions from their employers.

HAYMARKET AFFAIR (May 4, 1886)HAYMARKET AFFAIR (May 4, 1886)

Violent incident in Chicago’s Haymarket Square during the McCormick Harvester Machine Company Strike. Although the labor rally began peaceably, someone threw a bomb, killing seven policemen. Police responded by killing four demonstrators. Eight anarchists (a person who promotes disorder or excites revolt against any established rule, law, or custom.)

were found guilty of inciting a riot and murder. Four were hanged and one committed suicide. Seven years later, in an act that helped destroy his political career, Illinois governor John Peter Altgeld pardoned the remaining three, believing they had received an unfair trial.

Homestead Strike (1892)Homestead Strike (1892)

Labor dispute between steel workers and the Carnegie Steel Company in Homestead, Pennsylvania, one of the most bitter strikes in American history. The striking trade union, the Amalgamated Association of Iron and Steel Workers, refused to accept a decrease in wages and stepped-up production demands by plant manager Henry Clay Frick, who was determined to break the union. When he brought in three hundred Pinkerton guards to break the strike, they were met by ten thousand workers and violence erupted. Sixteen men were killed and many more injured. The governor then sent in eight thousand state militia who guarded non-union strike breakers running the plant. The strike ended after five months. The first major struggle between organized labor and big business resulted in failure for the most important craft union of the age and exhibited the power of American big business

Pullman Strike (May 11 – July 20, 1894)Pullman Strike (May 11 – July 20, 1894)

Violent strike between the American Railway Union (ARU) and the Pullman Palace Car Company of Illinois. About 2,500 employees went on strike against the company to protest wage cuts and high rents in the company’s town of Pullman, south of Chicago. Eugene V. Debs led the ARU in a nationwide boycott of Pullman cars. When railroads fired union members, the strike became national. United States Attorney General Richard Olney obtained a federal court injunction barring the union from interfering with the running of the trains after he had deputized about 3,600 men to keep the trains moving. A rioting mob wrecked a mail train on July 1, causing President Grover Cleveland to call in federal troops to Chicago; on July 4 rioting broke out again and several strikers were killed. By July 10 troops had broken the strike and labor leaders were jailed for disobeying the injunction. The U.S. Supreme Court upheld the use of the injunction by the government in 1895.

A federal panel appointed to investigate the strike sharply criticized the company's paternalistic policies and refusal to arbitrate, advancing the idea of the need for unions and for increased government regulation in an age of large-scale industrialization.

SIMILARITIES:

Both were a byproduct of a recession.Both turned violentBoth ended the union in their respective companiesBoth needed the militia to stop them, in the Pullman case, half of the U.S. ArmyBoth tarnished the reputation of labor unions to make them seem too radical and violent, thus hurting the future of the labor movement.

HOMESTEAD AND PULLMAN STRIKES

IN GENERAL THE STRIKES ILLUSTRATE:

•The workers feeling that the rich should help out when times get tough.

•The company attitude that if I built it, I’ll run it, and that workers are simply a piece of the production process.

OVERALL: Age-old rich versus poor distribution of wealth fight, it got bloody but did not end up like the French revolution.

Anthracite Coal Strike (1903)Anthracite Coal Strike (1903)

Reading.

THE URBAN TRANSFORMATIONhttp://player.discoveryeducation.com/index.cfm?guidAssetId=CD4B111C-046E-

493E-98FE-213071243A5D&blnFromSearch=1&productcode=US

The Age of Invention

You are to negotiate terms for:

WagesHours of employmentVacation timeMedical insuranceOther fringe benefitsGeneral working conditions

OLD AGREEMENT:Workers must be on the job 12 hours per day, six days a weekNo paid sick daysAll employees may take one week off per year for vacation, but will not be paid for that weekManagement is not responsible for medical bills resulting from job related injuries or illnessesWeekly wages are $5 for men, $3 for women, and $2 for children

Other issues: inadequate heating & lighting, insufficient number of fire escapes, and hiring of immigrants and very young children