8.1 Industrialization and the Rise of Big Business
7 min read•august 16, 2024
The Industrial Revolution transformed America, ushering in an era of rapid economic growth and technological innovation. Big businesses emerged, led by powerful industrialists who amassed vast fortunes through new manufacturing techniques and corporate structures.
This period saw the rise of massive corporations, often monopolies, that dominated entire industries. While this led to increased efficiency and productivity, it also created significant social and economic challenges, including poor working conditions and growing inequality.
Factors of Industrialization
Abundance of Natural Resources
Top images from around the web for Abundance of Natural Resources
20.1 Metal Deposits – Physical Geology – 2nd Edition View original
Is this image relevant?
Fossil Fuels (Coal and Gas) | Sustainability: A Comprehensive Foundation View original
Is this image relevant?
11.2 Non-Renewable Energy Sources | Environmental Biology View original
Is this image relevant?
20.1 Metal Deposits – Physical Geology – 2nd Edition View original
Is this image relevant?
Fossil Fuels (Coal and Gas) | Sustainability: A Comprehensive Foundation View original
Is this image relevant?
1 of 3
Top images from around the web for Abundance of Natural Resources
20.1 Metal Deposits – Physical Geology – 2nd Edition View original
Is this image relevant?
Fossil Fuels (Coal and Gas) | Sustainability: A Comprehensive Foundation View original
Is this image relevant?
11.2 Non-Renewable Energy Sources | Environmental Biology View original
Is this image relevant?
20.1 Metal Deposits – Physical Geology – 2nd Edition View original
Is this image relevant?
Fossil Fuels (Coal and Gas) | Sustainability: A Comprehensive Foundation View original
Is this image relevant?
1 of 3
- Coal, iron ore, oil, and timber provided the raw materials necessary for industrial growth
- Enabled the production of goods on a large scale and fueled the expansion of industries such as steel, textiles, and transportation
Technological Innovations
- Bessemer process for steel production increased efficiency and productivity in manufacturing
- Allowed for the mass production of steel at a lower cost
- Facilitated the construction of skyscrapers, bridges, and railroads
- Telegraph and telephone improved communication and coordination across vast distances
- Enabled businesses to expand their operations and reach new markets
- Facilitated the growth of a national market by connecting producers and consumers
Expansion of Railroad Network
- Facilitated the transportation of raw materials, finished products, and labor
- Allowed for the efficient movement of goods from factories to markets
- Enabled the growth of industries such as agriculture and mining by providing access to new markets
- Encouraged the development of a national market by connecting different regions of the country
- Reduced transportation costs and increased the speed of commerce
- Stimulated economic growth and encouraged the expansion of cities and towns along railroad lines
Influx of Immigrants
- Provided a large, inexpensive labor force for factories and mines
- Immigrants, particularly from Southern and Eastern Europe, were willing to work for lower wages than native-born workers
- Enabled the expansion of labor-intensive industries such as textiles, steel, and mining
- Contributed to the growth of cities and the development of urban infrastructure
- Immigrants often settled in cities, providing a ready supply of labor for factories and construction projects
- Stimulated the growth of housing, transportation, and public services to accommodate the growing urban population
Rise of the Corporation
- Allowed for the pooling of capital and resources, enabling large-scale production and investment
- Corporations could raise large amounts of capital by selling stocks and bonds to investors
- Enabled the development of capital-intensive industries such as railroads, steel, and oil
- Limited liability protection encouraged investment and risk-taking
- Shareholders were only liable for the amount they invested, reducing the risk of personal financial loss
- Encouraged the growth of large-scale enterprises and the concentration of economic power
Government Policies
- High tariffs protected domestic industries from foreign competition
- Encouraged the growth of American manufacturing by making imported goods more expensive
- Provided a stable market for American producers and encouraged investment in new technologies and production methods
- Land grants to railroads encouraged the expansion of transportation networks
- Government provided land to railroad companies in exchange for building new lines
- Encouraged the development of new territories and the growth of agriculture and mining industries
Rise of Big Business
Concentration of Economic Power
- and holding companies, such as Standard Oil and U.S. Steel, led to the concentration of economic power in the hands of a few wealthy industrialists known as "robber barons"
- Trusts allowed companies to control multiple firms in the same industry, reducing competition and increasing profits
- Holding companies allowed a single entity to control multiple companies through stock ownership
- Robber barons, such as (Standard Oil) and (U.S. Steel), amassed vast fortunes and wielded significant political and economic influence
- Used their wealth and power to influence government policies and shape public opinion
- Engaged in philanthropic activities, such as funding universities and libraries, to improve their public image
Vertical and Horizontal Integration
- Vertical integration allowed companies to control all stages of production from raw materials to finished products
- Increased efficiency by reducing transportation costs and ensuring a steady supply of raw materials
- Allowed companies to capture profits at each stage of the production process
- Horizontal integration involved the acquisition of competing companies in the same industry
- Led to the formation of monopolies and reduced market competition
- Allowed companies to control prices and limit consumer choice
Monopolistic Practices
- Predatory pricing involved temporarily lowering prices to drive competitors out of business, then raising prices once competition was eliminated
- Allowed monopolies to eliminate rivals and establish market dominance
- Led to higher prices and reduced innovation in the long run
- Lack of competition resulting from monopolies often led to higher prices, lower quality products, and reduced innovation
- Without the pressure of competition, monopolies had little incentive to improve products or reduce prices
- Consumers had limited options and were forced to accept the terms set by the
Economic Inequality and Social Tensions
- Concentration of wealth and power in the hands of a few industrialists contributed to growing economic inequality
- Robber barons enjoyed lavish lifestyles while many workers lived in poverty
- Widening gap between rich and poor led to social tensions and calls for reform
- Working conditions in factories and mines were often dangerous and exploitative
- Long hours, low pay, and hazardous conditions led to high rates of injury and illness among workers
- Child labor was common, with children as young as five working in dangerous conditions
Industrialization and Labor
Rise of Wage Labor
- Growth of factories led to the rise of wage labor, with workers often enduring long hours, low pay, and dangerous working conditions
- Workers were paid a fixed wage for their labor, rather than owning the means of production
- Lack of job security and benefits left workers vulnerable to economic downturns and layoffs
- Unskilled labor, particularly immigrants, led to low wages and job insecurity
- Immigrants were often willing to work for lower wages than native-born workers
- Easily replaceable nature of unskilled labor gave employers little incentive to improve working conditions or raise wages
Child Labor
- Children as young as five worked in factories, mines, and mills, often in hazardous conditions
- Children were paid lower wages than adults and were seen as a cheap source of labor
- Long hours and dangerous working conditions led to high rates of injury and illness among child workers
- Lack of education and opportunities for advancement trapped many children in a cycle of poverty
- Children who worked in factories often had little time or opportunity for schooling
- Lack of education limited future job prospects and perpetuated economic inequality
Industrial Accidents and Health Hazards
- Lack of safety regulations and use of dangerous machinery resulted in high rates of industrial accidents and injuries
- Workers often operated heavy machinery without proper training or safety equipment
- Employers had little incentive to invest in safety measures, as injured workers could be easily replaced
- Poor ventilation, inadequate sanitation, and overcrowding in factories contributed to the spread of diseases and poor health among workers
- Cramped and unsanitary working conditions facilitated the spread of infectious diseases such as tuberculosis
- Exposure to toxic chemicals and pollutants led to respiratory illnesses and other health problems
Rise of Labor Unions
- Labor unions, such as the and the , sought to improve working conditions and advocate for workers' rights
- Unions negotiated with employers for better wages, shorter hours, and safer working conditions
- Engaged in collective bargaining and organized strikes to pressure employers to meet their demands
- Unions faced significant opposition from employers and the government
- Employers often used violence and intimidation to break up strikes and prevent unionization
- Government often sided with business interests and used military force to suppress labor unrest (Pullman Strike of 1894)
Government and Industry
Laissez-Faire Economic Policies
- economic policies of the late 19th century limited government intervention in business
- Government took a hands-off approach to regulating industry and allowed businesses to operate with minimal oversight
- Belief that free market competition would regulate itself and lead to economic growth
- Limited government regulation allowed industrialists to engage in practices such as monopolization, price fixing, and labor exploitation
- Lack of antitrust laws and labor protections gave businesses wide latitude to pursue profits at the expense of workers and consumers
- Concentration of economic power in the hands of a few industrialists led to growing inequality and social tensions
Government Encouragement of Industrial Growth
- High tariffs protected domestic industries from foreign competition
- Government imposed taxes on imported goods to make them more expensive than domestically produced goods
- Encouraged the growth of American manufacturing by providing a captive market for domestic producers
- Land grants to railroads facilitated the expansion of transportation networks
- Government provided land to railroad companies in exchange for building new lines
- Encouraged the development of new territories and the growth of agriculture and mining industries
Early Attempts at Regulation
- of 1887 established the Interstate Commerce Commission to regulate railroads
- Prohibited discriminatory pricing practices and required railroads to publish their rates
- First federal law to regulate private industry in the United States
- of 1890 prohibited trusts and monopolies that restrained trade
- Aimed to promote competition and prevent the concentration of economic power
- Enforcement was initially limited, as courts often interpreted the law narrowly
Progressive Era Reforms
- Progressive Era, beginning in the late 1890s, saw increased government regulation of industry
- Reformers sought to address the social and economic problems caused by industrialization and
- Believed that government had a role to play in regulating business and protecting workers and consumers
- Pure Food and Drug Act and Meat Inspection Act of 1906 aimed to protect consumers from unsafe products
- Required food and drug manufacturers to label their products accurately and prohibited the sale of adulterated or misbranded products
- Established federal inspection of meat processing plants to ensure sanitary conditions and prevent the sale of contaminated meat
Key Terms to Review (18)
American Federation of Labor: The American Federation of Labor (AFL) was a national federation of labor unions in the United States founded in 1886. It aimed to unite skilled workers from various trades to collectively negotiate for better wages, working conditions, and hours. The AFL played a crucial role during a time when industrialization led to harsh working conditions and the rise of large corporations, impacting labor dynamics significantly.
Andrew Carnegie: Andrew Carnegie was a Scottish-American industrialist who led the expansion of the American steel industry in the late 19th century. He is best known for founding Carnegie Steel Company, which became one of the largest and most profitable steel companies in the world, symbolizing the rise of big business during the Industrial Revolution.
Assembly line: An assembly line is a manufacturing process in which individual components are added to a product in a sequential manner, allowing for mass production. This method revolutionized production efficiency and significantly lowered costs by breaking down the manufacturing process into simple, repetitive tasks performed by workers or machines.
Capitalism: Capitalism is an economic system characterized by private ownership of the means of production, where individuals and businesses operate for profit in a competitive market. This system emphasizes free markets, consumer choice, and limited government intervention in the economy, leading to innovation and economic growth. Capitalism played a crucial role in shaping modern economies and political systems, influencing various historical contexts such as industrialization and global conflicts.
Consumer culture: Consumer culture refers to a society that is characterized by the acquisition of goods and services in excess, where personal happiness and social status are often linked to consumption. This culture emerged prominently during periods of rapid industrial growth, leading to increased production capacities and marketing strategies aimed at encouraging people to purchase more. In this environment, consumers became central figures in the economy, influencing production patterns and the overall marketplace.
Haymarket Affair: The Haymarket Affair was a labor protest that turned violent on May 4, 1886, in Chicago, Illinois, when a bomb was thrown at police officers during a rally advocating for workers' rights and an eight-hour workday. This incident highlighted the growing tensions between labor unions and law enforcement amid the rapid industrialization and rise of big business in America, raising questions about workers' rights and the use of violence in labor movements.
Interstate Commerce Act: The Interstate Commerce Act was a landmark piece of legislation passed in 1887 that aimed to regulate the railroad industry and its monopolistic practices. This act established the Interstate Commerce Commission (ICC), the first federal agency designed to oversee and enforce regulations on interstate commerce, particularly focusing on fair rates and eliminating discriminatory practices by railroads. The act represented a significant response to the challenges posed by industrialization and the rise of big business, addressing public concerns over monopolies and the need for government intervention in economic affairs.
John D. Rockefeller: John D. Rockefeller was an American industrialist and philanthropist, best known for founding the Standard Oil Company, which dominated the oil industry and revolutionized the petroleum sector in the late 19th and early 20th centuries. His business practices and strategies contributed significantly to the rise of big business in America, setting the stage for modern corporate capitalism.
Knights of Labor: The Knights of Labor was one of the first major labor organizations in the United States, founded in 1869. This secret society aimed to unite all workers, regardless of skill level, race, or gender, to advocate for better working conditions, fair wages, and an eight-hour workday. The organization's inclusive approach marked a significant shift in labor activism during a time of rapid industrialization and the rise of big business.
Laissez-faire: Laissez-faire is an economic philosophy that advocates minimal government intervention in the economy, allowing businesses and individuals to operate freely. This concept emphasizes the importance of free markets where supply and demand dictate production, pricing, and distribution without regulatory constraints. It became especially significant during periods of rapid industrialization and economic growth, promoting the idea that less governmental oversight fosters innovation and prosperity.
Monopoly: A monopoly is a market structure where a single seller or producer dominates the market for a particular product or service, effectively controlling supply and prices. This market control can lead to reduced competition, influencing prices and availability, which can have significant implications for consumers and the economy as a whole. Monopolies often arise in industries with high barriers to entry, where one company can consolidate resources and eliminate competition.
Rust Belt: The Rust Belt refers to a region in the northeastern and midwestern United States that experienced significant industrial decline from the late 20th century onward, primarily due to the loss of manufacturing jobs and economic shifts. This area, which includes cities like Detroit, Cleveland, and Pittsburgh, was once known for its booming steel and automotive industries, but has faced challenges including population decline, factory closures, and urban decay as factories shut down or relocated.
Sherman Antitrust Act: The Sherman Antitrust Act, enacted in 1890, is a landmark U.S. legislation aimed at promoting fair competition and curbing monopolistic practices. It was the first federal act that outlawed monopolistic business practices and prohibited contracts, combinations, or conspiracies in restraint of trade or commerce. This act was a response to the rapid industrialization and the rise of powerful trusts and monopolies that threatened free-market competition and economic fairness.
Steam engine: The steam engine is a heat engine that performs mechanical work using steam as its working fluid. This invention played a pivotal role in the Industrial Revolution, allowing for more efficient transportation and production methods, and significantly contributed to economic growth and the rise of industrial capitalism.
Sun Belt: The Sun Belt refers to a region in the southern United States characterized by a warm climate, which stretches from California across the southern states to the Atlantic coast. This area experienced significant population growth and economic development during the latter half of the 20th century, particularly due to industrialization and the rise of big business, attracting businesses and individuals seeking a favorable environment for investment and living.
The great railroad strike of 1877: The Great Railroad Strike of 1877 was a nationwide labor protest that began in response to wage cuts and poor working conditions on the railroads, ultimately leading to violent clashes between workers and state militias. This strike marked a pivotal moment in American labor history, highlighting the growing tensions between industrial workers and large corporations during the era of rapid industrialization. The event underscored the significant social unrest that emerged as workers sought better conditions amidst the rise of big business and the expanding railroad industry.
Trusts: Trusts are legal arrangements where a group of companies, known as a trust, work together to control a particular market or industry by limiting competition and setting prices. This practice emerged during the late 19th century as industrialization gave rise to big businesses seeking to maximize profits and reduce competition, leading to the formation of powerful corporate entities that dominated the economy.
Urbanization: Urbanization is the process by which an increasing percentage of a population comes to live in urban areas, typically resulting from industrial growth, economic opportunities, and rural-to-urban migration. This shift leads to significant social, economic, and environmental changes as cities expand and develop in response to population growth. Urbanization often influences cultural trends, economic structures, and infrastructure development.