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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