U.S. Industrialization

List of businessmen who were called robber barons

• John Jacob Astor (real estate, fur)—New York City
• Andrew Carnegie (steel)—Pittsburgh and New York
• Jay Cooke (finance)—Philadelphia
• Charles Crocker (railroads)—California
• Daniel Drew (finance)—New York
• James Buchanan Duke (tobacco)— Durham, North Carolina
• James Fisk (finance)—New York
• Henry Morrison Flagler (railroads, oil, the Standard Oil company)—New York and Florida
• Henry Clay Frick (steel)—Pittsburgh and New York City
• John Warne Gates (barbed wire)
• Jay Gould (railroads)--New York
• Edward Henry Harriman (railroads)—New York
• Mark Hopkins (railroads)—California
• Andrew W. Mellon (finance, oil)—Pittsburgh
• J. P. Morgan (finance, industrial consolidation)—New York City
• Henry B. Plant (railroads)—Florida
• John D. Rockefeller (oil), Cleveland, New York
• Charles M. Schwab (steel) Pittsburgh and New York
• John D. Spreckels (sugar)— California
• Leland Stanford (railroads)—California
• Joseph Seligman (banking)
• Cornelius Vanderbilt (water transport, railroads)--New York
• Charles Tyson Yerkes (street railroads)--Chicago.

The United States. The first industrialization outside Europe occurred in the British colonies that became the United States. The colonies had a wide range of industries. The most successful was shipbuilding. By the time the colonies declared their independence in 1776, about a third of Britain's ships were being built in America. Iron manufacturing was also a major industry, and a few American companies exported iron to Great Britain.

By the early 1800's, the small arms industry in the United States had developed machines and machine tools that could produce standard parts that were required for mass production. Industrial production, especially of textiles and light metals, began to increase sharply in the United States in the 1820's. The greatest increases in manufacturing took place in New England. Industrialization also benefited from improvements made in rivers and canals. These improvements reduced the cost of transporting goods to and from the interior of the country.

Beginning in the 1830's, industrialization increased rapidly throughout the Eastern United States. The iron industry in Pennsylvania made especially great advances as iron was adapted for agricultural tools, railroad track, and a variety of structural uses. By the 1850's, the quality and price of American iron enabled U.S. ironmakers to compete with Great Britain's ironmakers in the international market.

During the mid-1800's, the agricultural, construction, and mining industries expanded as the population spread westward. Manufacturing accounted for less than a fifth of all U.S. production in 1840. By 1860, it accounted for a third. However, agricultural products made up more than two-thirds of the value of all U.S. exports in 1860, and the country still imported more manufactured goods than it exported. But by the late 1800's, the United States had become the largest and most competitive industrial nation in the world.

By 1870, the main trends of the Industrial Revolution were clearly marked in all industrialized countries. Industry had advanced faster than agriculture. Goods were being made by power-driven machinery and assembled in factories, where management planned operations and the workers did little more than tend the machines. Capital controlled industrial production, but labor was being allowed to organize to fight for higher wages, shorter hours, and better working conditions. The railroad, the improved sailing ship, the steamship, and the telegraph had reduced the cost and time of transportation and communication. Living standards of the workers in industrial countries were higher than they had ever been. Populations grew rapidly, and more people lived in cities than ever before.

Wherever the Industrial Revolution spread, it destroyed a traditional way of life. But as the revolution progressed in each country, more and more workers came to accept the routines and disciplines of industrialization.

Industrialization and reform (1870-1916)

The industrial growth that began in the United States in the early 1800's continued steadily up to and through the Civil War. Still, by the end of the war, the typical American industry was small. Hand labor remained widespread, limiting the production capacity of industry. Most businesses served a small market and lacked the capital needed for business expansion.

After the Civil War, however, American industry changed dramatically. Machines replaced hand labor as the main means of manufacturing, increasing the production capacity of industry tremendously. A new nationwide network of railroads distributed goods far and wide. Inventors developed new products the public wanted, and businesses made the products in large quantities. Investors and bankers supplied the huge amounts of money that business leaders needed to expand their operations. Many big businesses grew up as a result of these and other developments. They included coal mining, petroleum, and railroad companies; and manufacturers and sellers of such products as steel, industrial machinery, automobiles, and clothing.

The industrial growth had major effects on American life. The new business activity centered in cities. As a result, people moved to cities in record numbers, and the cities grew by leaps and bounds. Many Americans amassed huge fortunes from the business boom, but others lived in extreme poverty. The sharp contrast between the rich and the poor and other features of American life stirred widespread discontent. The discontent triggered new reform movements, which--among other things--led to measures to aid the poor and control the size and power of big business.

The industrial growth centered chiefly in the North. The war-torn South lagged behind the rest of the country economically. In the West, frontier life was ending.

America's role in foreign affairs also changed during the late 1800's and early 1900's. The country built up its military strength and became a world power.

The rise of big business

The value of goods produced by American industry increased almost tenfold between 1870 and 1916. Many interrelated developments contributed to this growth.

Improved production methods. The use of machines in manufacturing spread throughout American industry after the Civil War. With machines, workers could produce goods many times faster than they could by hand. The new large manufacturing firms hired hundreds, or even thousands, of workers. Each worker was assigned a specific job in the production process. This system of organizing laborers, called the division of labor, also sped up production. The increased production speed had a tremendous impact on the economy. It enabled businesses to charge lower prices for products. Lower prices, in turn, meant more people could afford the products, and so sales soared.

Development of new products. Inventors created, and business leaders produced and sold, a variety of new products. The products included the typewriter (1867), barbed wire (1874), the telephone (1876), the phonograph (1877), the electric light (1879), and the gasoline automobile (1885). Of these, the automobile had the greatest impact on the nation's economy. In the early 1900's, Ransom Eli Olds and Henry Ford began turning out cars by mass production. Automobile prices dropped, and sales soared. The number of automobiles owned by Americans jumped from 8,000 in 1900 to almost 3,500,000 in 1916.

Natural resources. America's rich and varied natural resources played a key role in the rise of big business. The nation's abundant water supply helped power the industrial machines. Forests provided lumber for construction and wooden products. Miners took large quantities of coal and iron ore from the ground. Andrew Carnegie and other business leaders made steel from these minerals. Steel played a vital role in the industrialization process. It was used to build machines, railroad tracks, bridges, automobiles, and skyscrapers. Other industrially valuable minerals included copper, silver, and petroleum. Petroleum--the source of gasoline--became especially important after the automobile came into widespread use in the early 1900's.

A growing population. More than 25 million immigrants entered the United States between 1870 and 1916. Immigration plus natural growth caused the U.S. population to more than double during the same period, rising from about 40 million to about 100 million. Population growth helped the economic boom in two ways. It increased the number of consumers, and thus enlarged the market for products. It also provided the additional workers needed for the jobs created by the new business activity.

Distribution, sales, and communication. In the late 1800's, the American railroad system became a nationwide transportation network. The distance of all railroad lines in operation in the United States soared from about 9,000 miles (14,500 kilometers) in 1850 to almost 200,000 miles (320,000 kilometers) in 1900. A high point in railroad development came in 1869, when workers laid tracks that joined the Central Pacific and Union Pacific railroads near Ogden, Utah. This event marked the completion of the world's first transcontinental railroad system. The system linked the United States by rail from coast to coast.

The new railroads spurred economic growth. Mining companies used them to ship raw materials to factories over long distances quickly. Manufacturers distributed their finished products by rail to points throughout the country. The railroads became highly profitable businesses for their owners, including Cornelius Vanderbilt and Jay Gould.

Improved sales methods also aided economic growth. Owners of big businesses sent salespeople to all parts of the country to promote their products. Enterprising merchants opened huge department stores in the growing cities. They included Marshall Field of Chicago, R. H. Macy of New York, and John Wanamaker of Philadelphia. The stores offered a wide variety of products at reasonable prices. Other merchants--including Montgomery Ward and Richard Sears--began mail-order companies, chiefly to serve people who lived far from stores. The companies published catalogs that showed their products. Buyers used the catalogs to order goods by mail.

Advances in communication provided a boost for the economy. Railroads replaced such mail-delivery systems as the stagecoach. In 1876, Alexander Graham Bell invented the telephone. These developments, along with the telegraph, provided the quick communication that is vital to the smooth operation of big business.

Investment and banking. The business boom triggered a sharp increase in investments in the stocks and bonds of corporations. As businesses prospered, persons eager to share in the profits invested heavily. Their investments provided capital that companies needed to expand their operations.

New banks sprang up throughout the country. Banks helped finance the nation's economic growth by making loans to businesses. Some bankers of the era, especially J. P. Morgan, assumed key positions in the American economy because of their ability to provide huge sums of capital.

Monopolies. The government did little to regulate business during the 1800's. Unrestricted, business executives in the United States struggled to wipe out competition and gain complete control of their industries. They formed monopolies, which--for the most part--are illegal today. Some business owners in the same industry merged (united to form a single company) in order to reduce or eliminate competition. Other business leaders formed trusts. A trust was a monopoly in which a group of managers controlled rival businesses without formal ownership of the businesses.

The monopolies had some favorable effects on the economy. They helped make possible the giant, efficient corporations that contributed so much to economic growth. The monopolies also enabled businesses to avoid sharp fluctuations in price and output, and thus keep sales steady. On the other hand, monopolies gave some business leaders so much power that they could take unfair advantage of others. A business executive with little or no competition could demand goods from suppliers at low cost, while charging high prices for the finished product. The executive could also save money by reducing a product's quality.

Contributor: Eric Edwin Lampard, Ph.D., Prof. of History, State Univ. of New York at Stony Brook; Former Prof. of History, Univ. of Wisconsin, Madison.

The Square Deal was President Theodore Roosevelt's domestic program formed upon three basic ideas: conservation of natural resources, control of corporations, and consumer protection. Thus, it aimed at helping middle class citizens and involved attacking plutocracy and bad trusts while at the same time protecting business from the extreme demands of organized labor.

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