Chapter 18

I. The Rise of Industrial America

A. Prominent industrialists and The Alger Hiss Myth

1. John Pierpont Morgan (1837-1813) Began in banking perfected the trust system and holding company corporate structure. His trusts eventually dominated the railroad, electric, steel and agricultural equipment business.
2. Andrew Carnegie (1835-1919)- Scottish immigrant who started his career in railroads. Created the country’s most successful, vertically integrated (where the boss controls every piece of the production- stores, raw materials, etc) steel business (Carnegie Steel), first to use the Bessemer process to produce steel rapidly. Sold his steel business to JP Morgan for nearly $500 million in 1901. Recognized as the US’s foremost philanthropist (giving away $350 million during his lifetime), wrote The Gospel of Wealth, established 2500 free lending libraries and several educational institutions
3. John D Rockefeller (1839- 1937)- Cleveland merchant, son of a snake oil salesman. Entered the oil business soon after oil was first discovered in Pennsylvania. Established the Standard Oil Company, which monopolized the oil industry until its breakup. Credited for originating the trust and holding company corporate structure. Also involved in philanthropy, was worth $5 billion at the time of his death.
4.Gould, Hull, Huntington and Vanderbilt- led the consolidation of the railroad industry in the 1870’s and 1880’s. Standardized railroad equipment, interconnected railroads and fought federal regulation. However, when the industry fell on hard times, it was largely taken over by JP Morgan.
5. Thomas Edison (1847-1931)- Prolific American inventor. First major invention was the stock quote machine. Used capital from the first invention to establish his Menlo Park research facility (NJ). Invention included the phonograph, reliable filament for the light bulb; first full scale standardized electrical system (together with Morgan established GE), mimeograph machine, microphone, motion picture camera and film, and storage battery. Patented 1,093 inventions by 1931!
6. Alexander Graham Bell (1847-1922) Scottish immigrant who invented the telephone in 1876. Responsible for establishing national and international telephone systems

B. Industrial Change in the late 1800s
1. Between 1850-1900, US industrial output increased 5fold. By 1900, the US accounted for 35% of the world’s manufactured goods
2. Factors in US industrial development
a. Development and exploration of new energy sources (coal then oil)
b. Technological innovation
c. Large and exploitable workforce
d. Intense competition led to the creation of large vertically integrated corporations
e. Low prices due to increased productivity led to increased demand
3. Consequences of rapid industrial development
a. Huge increase of consumer goods
b. Labor saving technologies
c. Explosion in urban growth
d. Increased social inequality
e. Widespread suffering among the working class
f. Industrial pollution of air and water

C. Major US Industries
1. Railroads
a. By 1900, the us had 193,000 miles of railroad track
b.Railroad development was subsidized by the government during the Civil War and ongoing though huge land grants in the West
c. Capital intensive nature of the business led railroads to raise money through stock and bond offerings
d. Due to their scale and geographic span, railroads developed innovative management, accounting, recordkeeping and communication techniques.
e. Railroads began to standardize equipment as the industry began to consolidate in the 1870s and 1880s
f. By the 1890s, fierce competition and indebtedness made the railroads vulnerable to take over.
g. The governments also attempted to combat rated differentiation and other monopolistic practices throughout the interstate commerce act of 1887. Railroads successfully fought government regulation in the courts.

2. Steel
a. Carnegie set his sights on the steel industry
b. In the 1970’s he started his own steel mill using the Bessemer process
c. Carnegie’s goal was to make a vertically integrated steel manufacturer that would control costs
d. Carnegie Steel became the world’s largest industrial concern by 1900
e.Industry was consolidated by JP Morgan who brought Carnegie steel and joined it with others to make the first billion dollar business: US steel in 1901