AP Ch. 17
Big Question: Was the economic growth of
the U.S. between 1860-1900 due to laissez
faire government policy or rather sustained
and direct governmental intervention?
• America had been moving toward an
industrial economy for decades. This
remarkable growth did much to increase the
wealth and improve the quality of life for
many Americans. But not for everyone-the
industrial moguls and a growing middle class
were enjoying a prosperity without precedent
while the workers' (immigrants), farmers and
others were experiencing an often painful
The Rise of Industry
• After the Civil War there were 30 million
people living in the US –1.3 million worked in
• Only 40 years later, by 1900, US was the
largest Industrial country in the world.
How did the US become the largest
Industrial country in the World?
Many factors contributed to the Industrial
The 5 factors that Contributed to
Plenty of Raw
• A flood of important inventions helped
increase the nation’s productive capacity and
improved the network of transportations and
• Patents up to 1860- 36,000
• Between 1860-1890—440,000
• Christopher Sholes-typewriter
• James Ritty-cash register
• William Burroughs-calculating or adding
Thomas Alva Edison
• Perhaps the most famous inventor of the late
• Perfected the light bulb-the incandescent
• Later the battery, the Dictaphone, the
mimeograph and the motion picture
• Charles Brush-electrical wiring 1870’s
• Henry Bessemer & William Kelly—Bessemer
Process-blowing air through molten iron to
burn out the impurities
• Abram C. Hewitt-open hearth process—made
steel available in large quantities
• Steel Industry-Pittsburgh, Pennsylvania center
of the steel world.
• Andrew Carnegie
Andrew Carnegie and Steel
• He became a multi-millionarie by a practice
known as Vertical Integration—a vertically
integrated company owns all of the different
businesses on which it depends for its
• For example-he bought coal mines, limestone
quarries and iron ore fields.
• First thought to be useful for lubrication of
machines, then discovered it could be used to
burn in lamps.
• First oil well near Titusville, Penn.
• In 1901 oil was discovered in Texas—
John D. Rockefeller--Oil
• Rockefeller made his millions by a practice
called Horizontal Integration-buying up the
same type of business into one.
• He gained control of about 90% of all oil
companies in the US.
• When a single company achieves control of an
entire market, it becomes a monopoly-to have
total control of an industry or company
• What potential problems exist if one large
business buys all its competitors?
• Radio (Marconi), Airplanes (Wright Brothers),
and Automobiles (Henry Ford) all were
developed around the turn of the century. The
automobile began to reshape the American
What was the Government Doing?
• The Government practiced Laissez-Faire
• Kept taxes low and imposed no regulations
Science of Production-How to increase
• Frederick Winslow Taylor— “Taylorisms”-increase production by subdividing
tasks, human beings could be trained to do
one thing and be interchangeable.
• Many companies began to implement his
theory—most notably Henry Ford in 1914 that
coupled with the assembly line method of
Production of Cars
• From 12 ½ hours to 1 ½ hours
• Increased production meant lower prices
• The Model T 1914-$950 to $290 in 1929
• Main method of transportation
• By linking the nation, railroads helped
increase the size of markets for many
products-creating a national economic
market-and sources of raw materials
• The Nations biggest business-Railroads itself
stimulated the economy by spending
extraordinary amounts of money on
steel, coal, timber and other necessities.
• When entrepreneurs realizes that no single
person or group of limited partners, no matter
how wealthy, could financed their great
ventures, the modern corporation emerged.
• The purchase of stocks in a company and
“limited liability” made investments attractive.
• Holding Companies
• As a result of all this corporate
consolidation, 1% of the corporations in
America were able to control more than 33%
of the manufacturing—enormous power in
the hands of a very few men.
Was this consolidation a good thing?
Stimulate substantial economic growth
Creating an industrial infrastructure
Stimulating new markets
Creating new jobs for the unskilled
Creating mass production
Capitalism and its Critics
• Does corporate power threaten the ideals of a
republican society in which wealth and
authority should be widely spread?
• A lot of criticism at the time…
• Captains of Industry (Robber Barons) Moguls,
needed to defend this new corporate economy-that it WAS compatible with ideology of
individualism and equal opportunity that had
long been central to the American self –image.
• They claimed this WAS the result of individualism
– anyone could do the same thing—this new
industrial economy was expanding opportunity to
• “Self- Made Man”
Some rags to riches—hard work and ingenuity
Some began careers from wealth and power
Some use Machiavellian instincts
Some modest entrepreneurs
Also politicians were bought and sold
Survival of the Fittest-Social Darwinism
• The effect of Charles Darwin and his “survival
of the fittest” influenced the mind set of the
businessman of this time.
• Moguls applied Darwin’s ideas of the animal
kingdom to human beings, natural selection
chose those who would be successful and
weeded out those who would not.
• Herbert Spencer –proponent of Social
Darwinism “society benefited from the
elimination of the unfit and the survival of the
strong and talented”
• Rockefeller “The growth of a large business is
merely the survival of the fittest…This is not
an evil tendency in business. It is merely the
working out of the law of nature and a law of
• What does this type of thinking do for the
• Legitimized this success
• Confirms his virtues
• It justified their tactics—economic life was
controlled by natural law-law of competitionsupply and demand
• As businessmen were extolling the virtues of
competition and the free market, they were at
the same time protecting themselves from
The Gospel of Wealth
• To soften their image many businessmen
accepted the notion that people with great
wealth had great responsibilities—it was their
duty to use their riches to advance social
• Carnegie “The Gospel of Wealth”—
philanthropy spread as a result.
• “Acres of Diamonds”-Russell H. Conwell –
preacher “ought to get rich”
• Horatio Alger—ex minister, wrote over 100
novels that celebrated the rags to riches