Chapter 20

The Growth of Business and Industry

Chapter objectives

By the end of this chapter you will be able to…  explain how the United States became a major industrial power.

 explain why some people loved big business.

 explain why some people hated big business.

 name two laws that tried to control big business.

During the Civil War (1861-1864)

• During the Civil War, the U.S. built the largest military in the world. More factories were built. Production got faster and better. Technology increased and new things were invented.

After the Civil War (1865-1900)

 After the Civil War, the U.S. became a world power. Other countries wanted to buy U.S. products and technology.

How did it all begin?

It all started with the Industrial Revolution. The Industrial Revolution was a change from making products by hand to making products by machine.

Mechanized production

 Mechanized production makes products faster and cheaper.

Memory check

 How is mechanized production different from production by hand?

How Did the Industrial Revolution Start?

Some people started using machines to make cotton into thread and cloth. The new machines made the cloth faster and cheaper. The businessmen made a lot of money from the new machines. They used their money to buy more machines. Soon, there were many factories with many machines.

Memory check

 What was the Industrial Revolution?

 How did the Industrial Revolution start?

There are seven reasons why America became a great industrial nation from 1865 to 1900.

The first reason is that people had capital to invest.

Capital is money to spend on starting businesses. America had many wealthy businessmen. They spent their money to start new businesses.

The second reason is that the U.S. had a lot of important natural resources.

Natural resources are all the things from the Earth that can be used to make products. Iron, coal, and oil are all examples of natural resources. Iron and coal are used to make steel. Oil is used to make gasoline.

The third important reason is that the U.S. had energy sources.

In the early days they used water power from rivers. Then they started using steam power from burning wood and later coal. Later, oil and electricity became important. Factories need energy sources.

The fourth reason is that the U.S. was building a large railroad system.

The railroad could move around resources and products.

The fifth reason is the new inventions that helped the growth of industry.

For example, the telegraph and telephone helped communications. People in one place could order products from a factory in another place and have them delivered quickly by railroad.

The sixth reason is that the U.S. had a large and growing population.

 Because of immigration, there were plenty of cheap workers, clever inventors, and eager consumers. More people were coming from all over the world to become new Americans.

The seventh reason is that the U.S. economy was a capitalist system.

 Capitalism means anyone could start a business. Competition between companies encouraged them to make better products for cheaper. The competition forced companies to use more machines.

Memory check

 What is capital?

 What are natural resources?

 Name three energy sources.

 How did the railroad help development in the U.S?

 What is capitalism?

 Name seven reasons why the United States became a major industrial power.

Capitalism also encouraged consumerism

Consumerism means companies find new ways to sell their products. Some companies started department stores. Others started mail order catalogues. Many companies started advertising.

Companies made many new products for people to buy.

Capitalism also changed the way people organized businesses.

The old ways of organizing businesses could not compete. Family-owned businesses were too small. The new way of organizing businesses was more successful. It was called a corporation. Corporations are bigger and grow much faster.

corporations

 Corporations are businesses that sell shares to shareholders. Shares are also called stock. Owning shares means shareholders own a part of the corporation. The corporation has no single owner or boss. The corporation uses the money from people’s shares to get bigger or better. For example, railroad companies use the money from selling shares to build new railroads. Steel companies use the money from shares to build better factories. That is why corporations grow much faster than normal businesses.

Memory check

 What is a corporation?

 Why does it grow faster than other businesses?

Inventors and scientists helped make America successful.

Henry Bessemer invented a better way to make steel.

Iron and steel are similar, but steel is stronger than iron. Bessemer found a way to make steel cheaper.

Why is steel important?

 With steel people can make better ships, bridges, and machines. They can also make skyscrapers and railroads.

Granville T. Woods

One famous inventor was Granville T. Woods. He made hundreds of important inventions. One of his inventions was the electric train. Electric trains were used in cities because they made less pollution than steam locomotives. They were necessary for subways, mines, and any other work in underground tunnels.

Elijah McCoy

In 1872, Elijah McCoy made the first lubrication systems for trains. These systems kept the wheels lubricated so they could run faster and longer. His systems also made all the factory machines work better.

Thomas Edison

Thomas Edison led teams of inventors. These teams invented the first electric lights, phonographs, movie cameras and projectors.

Nicola Tesla

(Serbian immigrant)

Nicola Tesla worked with AC electricity and built the first successful power plants. AC is the kind of electricity we use today. AC can travel long distances through power lines.

Memory check

 Who was Henry Bessemer?

 Who was Granville T. Woods?

 Who was Elijah McCoy?

 Who was Thomas Edison?

 Who was Nicola Tesla?

Communication got better during the Industrial Revolution.

 In 1837 the telegraph was invented. With a telegraph, people could send messages quickly. In 1866 the first transatlantic cable was laid across the Atlantic Ocean. Now, people in England could send messages to people in America. Finally, in 1876 Alexander Bell invented the telephone.

Growth of big business

Oil, steel, and railroad companies became so big, rich, and powerful that they had a huge influence over the government.

•

Big companies destroyed the smaller companies.

Some big companies would crush their small competitors by selling their product for cheaper. Some would buy their competition. Other big companies would use corruption to stop their competition. Some would even attack and kill their competition. For example, Rockefeller used to put bombs in his competitors’ oil wells.

Monopolies

Once they had eliminated their competition, they would have a monopoly. A monopoly is when a business has no competition. Monopolies can charge any price they like!

trusts

 Some companies would join together to make monopolies called “trusts”. For example, if there were five oil companies, instead of competing with one another, they would join together and stop competing.

Memory check

 Describe some of the ways big businesses eliminate their competition.

Famous businessmen

Cornelius Vanderbuilt

 Vanderbuilt controlled most of the railroads in the U.S.

John D. Rockefeller

 Rockefeller controlled nearly all of the oil in the U.S.

Andrew Carnegie

 Carnegie controlled most of the steel.

People had different feelings about these famous businessmen.

Some people loved these famous millionaires, because they built schools, libraries, hospitals, and churches.

Other people hated them. They hated them because they didn’t allow competition and charged unfair prices. They also hated them because they corrupted the government.

Memory check

 Who was Andrew Carnegie?

 Who was Cornelius Vanderbuilt?

 Who was John D. Rockefeller?

While some people were very rich, many others were very poor.

There were different views on the problem of big business.

   Some people believed in laissez-fair economics. Laissez-fair means no regulation by government. They believed that capitalism was so perfect that it would solve its own problems if left alone.

Some people believed that big businesses had to be regulated in order to protect the people from bad businesses. Those people were called reformers.

Some people believed that capitalism itself was bad. They thought workers should take over the companies and share the wealth. This belief was called communism.

communism

Some people wanted to fight against big business and capitalism. They wanted the workers to take control of the companies. They wanted the workers to start a revolution.

Karl Marx

In 1877 the government started trying to control big business.

The first law was the Interstate Commerce Act. This law said that railroads must charge fair rates. In other words, they couldn’t charge too much to customers.

The second law was the Sherman Antitrust Act. This law made monopolies and trusts illegal. It tried to force large companies to break up into smaller companies and compete.

 Both of these laws were not very successful.

The Supreme Court stopped the government from controlling big business.

 When the congress passed laws to control big business, the big companies took the government to court. The Supreme Court took the side of the companies. The Court said that a corporation is a person, and according to the 14 rights.

th Amendment, the government cannot take away the rights of any person. In other words, they said that congress did not have the power to control big business because it was taking away corporations’

Memory check

 What were the three different views on how to solve the problem of big business?

 Why did some people hate big business?

 What two laws were passed to control big business and how effective were they?

summary

 America grew to be a very powerful country after the Civil War.

 Technology advanced rapidly.

 Big business grew and began to influence the government.

 In the U.S. some people were extremely rich while others were extremely poor.