Ch 5 SECTION 2 – The Second Ch 5 SECTION 2 – The Second Industrial RevolutionIndustrial Revolution

INDUSTRY & STEELINDUSTRY & STEEL In the 1850s a new method In the 1850s a new method

called the called the BessemerBessemer process process made steel-making faster and made steel-making faster and cheapercheaper

SteelSteel helped transform the US helped transform the US into a modern industrial economyinto a modern industrial economy

The low cost of steel made The low cost of steel made it practical for everyday it practical for everyday items such as items such as nails and wirenails and wire

Cheap steel also helped the Cheap steel also helped the railroadsrailroads expand expand

By the mid-1890s, the US had By the mid-1890s, the US had become the world’s become the world’s industrialindustrial leader leader

THE RISE OF BIG BUSINESSTHE RISE OF BIG BUSINESS EntrepreneursEntrepreneurs were risk takers were risk takers

who started new business within who started new business within the economic systemthe economic system

In the late 1800s, the US government In the late 1800s, the US government encouraged encouraged free free enterpriseenterprise – business that is free – business that is free from government involvementfrom government involvement

This new economic system of free This new economic system of free enterprise is called enterprise is called capitalismcapitalism with with most businesses being most businesses being privately ownedprivately owned

Supporters of the capitalism Supporters of the capitalism reasoned that if there were reasoned that if there were nono government interference, the government interference, the economy would economy would growgrow

There are huge There are huge inequalitiesinequalities under under capitalism (some people succeed capitalism (some people succeed and are rich and some are not)and are rich and some are not)

These inequalities were explained in These inequalities were explained in a philosophy called a philosophy called Social DarwinismSocial Darwinism which believed in which believed in ““survival of the fittestsurvival of the fittest” and ” and explains why some people explains why some people succeed and others do notsucceed and others do not

Social Darwinists favored Social Darwinists favored laissez-fairelaissez-faire (hands off) capitalism (hands off) capitalism where the government had where the government had little regulationlittle regulation of business of business

In the late 1800s, the US economy In the late 1800s, the US economy went through cycles of went through cycles of boom and bustboom and bust

Many entrepreneurs formed their Many entrepreneurs formed their businesses into businesses into corporationscorporations – – companies that had many of the companies that had many of the same legal rights as same legal rights as individualsindividuals– They sell They sell stockstock to raise to raise

money for expansionmoney for expansion– Corporations can exist after its Corporations can exist after its

founderfounder leaves leaves

Some corporations joined together to Some corporations joined together to form a form a trust trust – – a legal arrangement a legal arrangement grouping together a number of grouping together a number of companies under a single board of companies under a single board of directors, which work to directors, which work to eliminate competitioneliminate competition

Board of Directors

Company 1 Company 2 Company 3

Company 4

With no competition, they could With no competition, they could raise pricesraise prices or or lower qualitylower quality at will at will

Corporation

Consumers

Industrial Tycoons & Industrial Tycoons & Reasons for SuccessReasons for Success

In the late 1800s, entrepreneurs In the late 1800s, entrepreneurs succeeded in part to:succeeded in part to:

– VerticalVertical Integration – owning Integration – owning the businesses in each step the businesses in each step of the manufacturing processof the manufacturing process

Companies owned by US Steel

Steel Mills

Railroads & Ships

Coal Mines

Iron Mines

--HorizontalHorizontal Integration – Owning Integration – Owning all the business in a certain fieldall the business in a certain field

Standard Oil Company

Oil-Refining Companies

John D. Rockefeller’sJohn D. Rockefeller’s company, company, Standard Oil, started as an Standard Oil, started as an oiloil refineryrefinery

To increase profits, Rockefeller used To increase profits, Rockefeller used vertical integrationvertical integration by acquiring by acquiring companies that supplied the oil companies that supplied the oil business, such as pipelines and business, such as pipelines and railroad carsrailroad cars

Rockefeller also practiced Rockefeller also practiced horizontal integrationhorizontal integration by by taking over other refineriestaking over other refineries

By 1875 Standard Oil refined By 1875 Standard Oil refined halfhalf of all the oil in the US of all the oil in the US

Rockefeller gave huge amounts Rockefeller gave huge amounts of his wealth to of his wealth to collegescolleges and and other good causes other good causes

Andrew CarnegieAndrew Carnegie worked for the worked for the Pennsylvania Railroad, began to Pennsylvania Railroad, began to invest, then founded his own invest, then founded his own company and rose to the top company and rose to the top of the of the steelsteel business business

Andrew Carnegie’s Steel Company Andrew Carnegie’s Steel Company practiced practiced vertical integrationvertical integration by buying mines, coal fields, by buying mines, coal fields, and railroadsand railroads

By 1899 Carnegie Steel Company By 1899 Carnegie Steel Company dominateddominated the American the American steel industrysteel industry

In 1901 Carnegie sold the company In 1901 Carnegie sold the company for for $480 million$480 million and retired and retired

Carnegie was a Carnegie was a philanthropistphilanthropist who who gave millions of dollars to charitygave millions of dollars to charity

Cornelius VanderbiltCornelius Vanderbilt and other and other railroad owners began buying railroad owners began buying smaller companies to form larger smaller companies to form larger companies which is called companies which is called consolidationconsolidation

George PullmanGeorge Pullman made his fortune by made his fortune by designing sleeping cars for trains designing sleeping cars for trains that traveled long distancesthat traveled long distances

Some Americans viewed the tycoons Some Americans viewed the tycoons of the late 1800s as of the late 1800s as robber baronsrobber barons, , destroying competitors with tough destroying competitors with tough tacticstactics

Others saw the tycoons as Others saw the tycoons as captainscaptains of industry, using their business skills of industry, using their business skills to strengthen the economyto strengthen the economy

The government grew uneasy The government grew uneasy about the power of about the power of corporationscorporations

In 1890 Congress passed the In 1890 Congress passed the Sherman Antitrust ActSherman Antitrust Act which which made it illegal to form made it illegal to form trusts that interfered trusts that interfered with free tradewith free trade