What major factors led to the rise of big business and monopolies in the 1900s?

Video transcript

- [Instructor] The period from the end of the Civil War to the start of the 20th Century was one of incredible economic transformation in the United States. In 1865 the United States was the 4th largest industrial economy in the world. By the 1890s, it had leapt to 1st place. At the same time, where people worked, how people worked, and how much money they made, all changed drastically. During the Gilded Age, the United States went from being a nation of farmers to a nation of factory workers. The nature of work itself also changed as large corporations began to implement management techniques aimed at increasing efficiency and profit. The gap between rich and poor also increased considerably during this era. So what caused this economic transformation? In this video I want to explore some of the factors that contributed to these changes in work and the economy: technological advancements, new business strategies, business consolidation, and pro-growth government policies. So let's dive a little deeper into each of these. One of the biggest factors contributing to the rise of industrial capitalism was technology. The late 19th Century was an era of innovation. Nearly half a million patents were issued between 1860 and 1900. Improvements in machinery and manufacturing processes, like the Bessemer process to make steel, increased productivity. And there were new technologies that helped business: the telephone to coordinate transactions over long distances, the typewriter to speed up record keeping, and electricity which made it possible to work safely after dark. And the expansion of the railroad, made it easy to get raw materials to factories and finished goods to markets. Corporations also devised new strategies to cope with doing business at a national scale. In this era the first national brands emerged. Companies like Coca-Cola and Kellogg's Corn Flakes began advertising to national audiences. And mail order catalogs like Montgomery Ward and Sears sold products across the country. An integrated nation-wide system of business and shipping made it easy for customers and companies to connect. During the Gilded Age coordinating supplies and workers, time tables and sales, became its own full time job called management. Managers worked to increase efficiency and cut costs. They did this in a number of ways: by replacing workers with machines, increasing working hours, and decreasing wages for laborers. The titans of industry used other measures to maximize profits as well. The Gilded Age was an era of ruthless business competition and the magnates of each industry set out to crush their enemies. Many of the men who made fabulous fortunes during the Gilded Age, started out in the railroad industry taking advantage of government subsidies and land grants. The U.S. Government took a laissez faire, or hands off, approach to regulating business at this time. And there were no corporate or income taxes so it was possible for a few individuals and companies to amass enormous wealth. They did so by consolidating their businesses, reducing competition, and controlling markets. Steel baron Andrew Carnegie was one of the first businessmen to employ vertical integration in his companies. The goal of vertical integration is to control every part of the supply chain for a product. For example, Carnegie owned not just steel mills, but the mines that produced the iron ore and coal necessary for making steel, and the ships and railroads that transported raw materials to the factories, and finished steel from the factories. This cut out middlemen and ensured that Carnegie never had to wait for other companies to send him supplies. Big businesses in the Gilded Age also reduced competition through holding companies, trusts, and pools. Holding companies and trusts allowed mergers that put many companies under the control of one parent company. Using these tactics, John D. Rockefeller who owned Standard Oil, controlled 95% of the country's oil supply by the end of the 19th Century. Standard Oil become the nation's first billion dollar company. Some companies realized that cooperation was better than competition and simply agreed to divide markets and profits between them. These groups of supposedly competing business entities were known as pools. The rise of industrial capitalism had major consequences on American life, politics, and foreign policy. For some, this new economy meant a higher standard of living than ever before, with cheap and plentiful material comforts. But this new way of doing business came at the expense of wages and working conditions, leading workers to begin organizing unions and advocating for political solutions to economic problems. And as the United States produced more and more, it would begin looking abroad for new markets to sell its goods and consequently, for greater influence in the world.

SSUSH 11:  THE STUDENT WILL DESCRIBE THE ECONOMIC, SOCIAL, AND 
GEOGRAPHIC IMPACT OF THE GROWTH OF BIG BUSINESS AND 
TECHNOLOGICAL INNOVATIONS AFTER RECONSTRUCTION. 

A.  EXPLAIN THE IMPACT OF THE RAILROADS ON OTHER INDUSTRIES, SUCH AS STEEL, 
AND ON THE ORGANIZATION OF BIG BUSINESS. 

          The growth of American railroads helped expand the industries that supplied the railroad companies’ need for steel rails laid on wood ties, iron locomotives burning huge quantities of coal, wooden freight cars, and passenger cars with fabric-covered seats and glass windows. The railroads were the biggest customers for the steel industry because thousands of miles of steel track were laid. In turn, the railroads had a great impact on the steel industry. To supply their biggest customers, steel producers developed cheap, efficient methods for the mass production of steel rails. These low-cost methods enabled more industries to afford the steel companies’ products.

          The rapid rise of the steel and railroad industries between the end of the Civil War and the early 1900s spurred the growth of other big businesses, especially in the oil, financial, and manufacturing sectors of the economy. These big businesses acquired enormous financial wealth. They often used this wealth to dominate and control many aspects of American cultural and political life, and as a consequence of these practices, by the beginning of the 20th century big business became the target of government reform movements at the state and national levels.

B.  DESCRIBE THE IMPACT OF THE RAILROADS IN THE DEVELOPMENT OF THE WEST; 
INCLUDE THE TRANSCONTINENTAL RAILROAD, AND THE USE OF CHINESE LABOR. 

          The federal government granted vast areas of western land to railroad owners so they would lay train track connecting the eastern and western states. To complete this heavy work, the owners relied mainly on Chinese labor. These Asian immigrants accepted lower pay than other laborers demanded. The work was dangerous. Many Chinese died in the explosive blasts they ignited to clear the path across the railroad companies’ land. Many others died under rock slides and heavy snowfalls before the first transcontinental railroad was completed in 1869. 

          The railroad companies contributed to the development of the West by selling low-cost parcels of their western land for farming. Settlers traveled west on the trains to farm on the fertile soil. Western farmers used the trains to ship their grain east, and western cattle ranchers shipped their steers to eastern butchers. Both farmers and ranchers sold their goods to people they could not easily reach without railroads. The railroads earned money by transporting the settlers west and the goods east.

C.  IDENTIFY JOHN D. ROCKEFELLER AND THE STANDARD OIL COMPANY AND THE RISE OF TRUSTS AND MONOPOLIES 

Oil companies grew swiftly in this period, most notably the Standard Oil Company, founded by John D. Rockefeller. Standard Oil was the most famous big business of the era. Rockefeller also gained control of most other oil companies and created what is called a trust. By means of a trust, Rockefeller came to own more than 90% of America’s oil industry. Standard Oil thus became a monopoly––a single company that controlled virtually all the U.S. oil production and distribution.

D.  DESCRIBE THE INVENTIONS OF THOMAS EDISON; INCLUDE THE ELECTRIC LIGHT BULB, 
MOTION PICTURES, AND THE PHONOGRAPH, AND THEIR IMPACT ON AMERICAN LIFE 

The effects of technological advances made after Reconstruction forever changed how people lived. The most famous inventor of the period is Thomas Edison. He invented the electric lightbulb, the phonograph, motion pictures, a system for distributing electrical power, and many other technologies powered by electricity. Edison also established the concept of industrial research, and he founded a research laboratory staffed by engineers and technicians in New Jersey.           Edison’s technological achievements were used by other inventors, as evidenced by the development of long-distance electricity transmission, which enabled Edison’s electric light to illuminate buildings, streets, and neighborhoods across the United States.  Electricity soon replaced steam as the source of power for factories. It replaced horses as the means to power streetcars. Of greatest impact, perhaps, was electricity’s replacing humans as the source of power for household appliances. Edison’s inventions eliminated much manual labor that had been associated with everyday household activities and improved Americans’ quality of life.

How did monopolies impact America in the early 1900's?

What led to the development of monopolies?

What other industries were dominated by monopolies at the beginning of the 1900s?

What was a problem with big business during the late 19th century?