The Gilded Age

Mr. Williams10th Grade U.S. History

Causes of Industrialization• Great amount of natural resources• Large work force• High tariffs reduce the import of

foreign goods• National transportation and

communication networks

Pacific Railway Act• Signed in 1862 by Lincoln• Provided for the construction of a

transcontinental railroad by two companies• Union Pacific began westward from

Omaha, Nebraska• Central Pacific Railroad began

eastward from Sacramento, CA

Cornelius Vanderbilt• By 1869 had purchased and merged

three short New York railroads to form New York Central• First railroad to connect N.Y. to Chicago• 1871 began building Grand Central

Terminal in NYC• At time of his death worth an

estimated $100 million

Effects of Railroad• Created many jobs: building

railroad tracks and cars, engineers, firemen, brakemen, mechanics, loaders, machinists, etc.• Increased demand for resources:

coal, steel, timber, etc.• Linked major markets spurring

industry as well

Effects of Industrialization•Workers left farms for factories•Machines replaced hand made

goods• U.S. became world’s leading

industrialized nation• GNP-total value of goods and

services X8 from before Civil War

Types of Economic Systems

• Traditional Economy•Command Economy•Market/Capitalist Economy•Mixed Economy

Capitalism• Economic system in which most

businesses are privately owned (by people not govt.)• Laissez-faire (“Leave Alone” or

“Hands Off”) : companies operate without government interference

Freedom of Enterprise • Individuals own and control the

factors of production• Success is NOT A GIVEN• Government plays a hands off

role BUT places some restrictions on businesses to protect individuals

Freedom of Choice •People can buy what they

want •Demand determines what is

produced•What happens if no one wants

your product?

Competition

•Different people produce similar products and services•How do different companies

compete?

• Entrepreneurs: People who decide to take a risk and start a business • Collect information about

business, factors of production for products, and learn about taxes and laws relating to businesses

Getting Started

• Corporation: organization owned by many people called stockholders but treated by law as a single person• Own property, pay taxes, make

contracts, sue and be sued• Stock: shares of ownership which

allow corporation to raise money

•What was the Industrial Revolution?•Where did this start?•Why?•Effects?

Causes of Industrialization• Great amount of natural resources• Large work force• High tariffs reduce the import of

foreign goods• National transportation and

communication networks

Capitalism• Economic system in which most

businesses are privately owned (by people not govt.)• Laissez-faire (“Leave Alone” or

“Hands Off”) : companies operate without government interference

Andrew Carnegie• Scottish Immigrant came to

America at the age of Twelve• Started out cleaning bobbins

in a factory for $1.20/week. When he retired, he sold company to J.P. Morgan for $480 million.

• Carnegie Steel plant could churn out ten thousand tons a week• Cut the cost of making rails in half

from $58 to $25 a ton• “Cut the prices, scoop the market,

run the mills full; watch the costs and profits will take care of themselves”

How did he do it?

Vertical Integration• All aspects of business were under

Carnegie’s control •Mining of the ore to its transport

to the Great Lakes to the production of crude steel and rails

• “From the moment these crude stuffs were dug out of the earth until they flowed in a stream of liquid steel in the ladles, there was never a price, profit, or royalty pain to any outsider.”

John D. Rockefeller •1870, he incorporated his oil

business, founded the Standard Oil company which is the precursor to Exxon •Owned 90% of oil refining

business by the end of his career

How did he do it?The TRUST• Form of HORIZONTAL

INTEGRATION, where he took over and combined other oil refineries into one large corporation• Board of trustees ran companies

like a single corporation.

•Once Trust gained complete control over an industry, it held a MONOPOLY• Single company achieves

control of an entire market• This could raise prices or lower

quality at will

•Also used Vertical Integration•Acquired companies that

supplied oil business, such as pipelines and railroad cars•Before he died, Rockefeller

became the country’s first Billionaire

Gilded Age• U.S. became world’s leading

industrialized nation• GNP x 8 from before Civil War• Number of millionaires increases-

Carnegie, Rockefeller, Vanderbilt, J.P. Morgan, etc.

• Social Darwinism: Stronger people, businesses, and nations would prosper while weaker ones fail.• Little or no government

interference (Laissez-Faire)• Small businesses could not

compete with the monopolies• Average worker made $500/year

Writing Response-

What has to happen in Capitalism/Free Enterprise for the economy to be efficient (for it to be fair)? Why? During the Gilded Age, the government was strictly laissez-faire. What does this mean? Was this a good thing or bad thing for the country during the time?

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