Slide 1

Railroads Key to Industrial GrowthChapter 19Section 1 & 2

Industrial growth in the United States had lagged far behind that of European nations in the 1860s.

By 1900 American industry would produce more goods than any other nation in the world.

Creating a Railroad Network

Railroads carried troops and supplies to the battlefronts during the Civil War.After the Civil War railroad companies built new lines all around the country.

Connecting lines

Many railroads serving local communities ran no more than 50 miles and sometimes were not connected to one other.When passengers or freight reached the end of one line they had to move to a train on a different line.

Connecting lines

Different lines used railed of different gauges making them incompatible.May 30, 1886 southern railroads stopped running to begin adopting the northern gauge.

Connecting lines

In one day all 2,000miles of rail lines had been standardized.Network: system of connected rail lines. By 1900 there were more miles tracks in the United States then Europe and Russia combined

Other Improvements

Railroad travel was fast cutting travel times significantly.Long distant travel was accommodating and made comfortable.

Consolidation

Consolidate: combineLarger companies bought up smaller companies or forced them out of business.

Consolidation

Railroad barons: tough minded business people headed the drive for consolidation.Cornelius Vanderbilt: The most powerful railroad baron; Son of a poor farmer he earned his fortune in steamship lines and then began buying railroads in New York State.By the time of his death in 1877 he owned 4,500miles of track connecting New York City and the Great Lakes region.

Building New Lines

Railroad builders raced to create thousands of new tracks.James Hill a Canadian finished the last major cross-country railroad in 1893 known as the Great NorthernThe Great Northern ran from Minnesota to Washington.

Building New Lines

The Great Northern was built without aid from Congress.To ensure his railroad made a profit, Hill encouraged farmers and ranchers to settle near his railroad.He gave seeds, equipment and imported cattle to help farmers and ranchers.He considered the people along his rail lines co-partners.

Abuses

Soon there were too many rail lines in parts of the country.There was not enough traffic to keep all the lines busy.

Cutthroat Competition

Rate wars broke out as rival railroads cut their fares to win customers.Big railroads secretly offered rebates or discounts to their largest customers.This in turn forced small companies out of business.It also hurt small farmers

Cutthroat Competition

Railroad barons realized competition was hurting their large railroad lines.Pool: several railroad companies agree to divide up business and fix their prices in an attempt to limit competition

Farmers react

Both rebates and pools kept shipping prices high for small farmers.Many farmers joined the Populist Party.Populists called for government regulation of railroad rates.

Farmers react

Congress and several states passed laws to regulate railroad companies however the laws did not end the abuses.Railroad barons paid large bribes to official to keep laws from being enforced.

Railroads and Industry

The American railroad made the rapid growth of industry possible.Steelworkers turned iron into steel for tracks and engines.Lumberjacks cut down forest to supply wood for railroad ties.Miners dug coal to fuel railroad engines.

Railroads and Industry

Railroad companies themselves employed thousands of workersRailroads opened up every corner of the country to settlement and growth.New businesses and new towns grew where rail lines crossed.

Section 2 : Big Business

John D. Rockefeller and the Standard Oil Company would come to dominate the oil industry.Rockefeller and a few other ruthless, imaginative business leaders shaped the nations emerging business and industries.

The Steel Industry

Growth of the railroads fueled the growth of the steel industryIron rail lines rusted quickly but steel was much more expensive and difficult to make.

A New Way to Make Steel

William Kelly in the United States and Henry Bessemer in England both discovered a new way to make steel.Bessemer Process: enabled steel makers to produce strong steel at a lower cost. A New Way to Make Steel

Railroads began to lay steel railroads.Skyscrapers also began to be built using steelEveryday items like screws and needles began to be made using steelSteel Mills Spring Up

Pittsburgh became the steel making capital of the nation.Steel mills brought jobs and prosperity to Pittsburgh. They also brought problems, black smoke turned the air gray and soot covered houses trees, streets, rivers.

King of Steel

Andrew Carnegie: Scottish immigrant who made a fortune in the steel industry.Carnegie is known for working his way up from a textile mill worker to building a steel mill in Homestead PA, close to Pittsburgh.

Huge Profits

Carnegie used his profits to buy out rivals.He also bought iron mills, railroads, steamships lines and warehouses.Carnegie soon had control over all steps in producing and shipping steelHuge Profits

Vertical integration: having control over all the steps required to change raw materials into finished products.Carnegie Steel Company was turning out more steel than all of Great Britain.

A duty to society

Carnegie believed that the rich had a duty to improve society.He gave over 60 million to build public libraries.He gave millions more to charities.After selling Carnegie Steel he spent his time and money helping peopleNew Ways of Doing Business

Big factories producing goods cheaper then small town factories caused the demand for local goods to fall. Many small factories closed.Shopping by Mail

Montgomery Ward and Sear Roebuck sold goods in western farmlands by mail order catalogs.

Investment in Business

Capital: moneyFactory owners used capital to buy raw materials, pay workers and cover shipping costs.Corporation: a business owned by investors.Stock: shares in a business.Corporations can use money invested in shares to build new factories or buy new machines.

Investment in Business

Dividend: a share of a corporations profitStockholders hope to receive dividends.The rise in corporations helped American industry to grownStockholders faced fewer risks than owners of private business.

The role of banks

Corporations borrowed millions of dollars from banks.J.P. Morgan: the most powerful banker in the 1890s.Morgan and his friends invested money in stock of troubled corporations. They would then win seats on the boards of these corporations and direct them in ways that limited competitions and made profit.

The role of banks

Between 1894 and 1898 Morgan gained control of most of the nations major railroads.He took control of the United States Steel Company and was the first US business worth more than $1 billion.

Plentiful Resources

Industrial growth could not have occurred without the country supplies of natural resources such as Coal, gold, silver, copper, and forests

Oil boom

1859 Americans discovered oil near Titusville PennsylvaniaRockefeller and Standard Oil

At that time Rockefeller knew oil was only valuable after it had been refined in to kerosene.Rockefeller used his profits from his first oil refinery to buy up other refineries and combined them in to the Standard Oil Company

The Standard Oil Trust

Rockefeller formed the Standard Oil TrustTrust: is a group of corporations run by a single board of directors.Small oil companies turned over their stock to Standard Oil Trust to received stock in the new trust.

The Standard Oil Trust

The new stock paid high dividends but they gave up their right to choose the board of directors.The Standard Oil Trust created monopoly in the oil industry.Monopoly: a company that controls all or nearly all the businesses of an industry.Other businesses followed Rockefellers lead forming huge monopolies.

Big Business: Good or Bad

Free enterprise system: business are owned by private citizensAmericans argued that giant corporations were abusing the free enterprise system.

Arguments for competition

Trusts and monopolies often put an end to competition.Without competition there are no reasons for companies to keep their prices low.It is also hard for new companies to start.

Arguments for competition

Workers felt they were treated badly by large corporations.Critics worried about political influence of trusts.Americans worries that millionaires used their wealth to buy favors from politicians.

Arguments for Trusts

Business leaders defend trusts.Large corporations made goods cheaply and helped the consumer.

Government reaction

Government did little to control giant corporations.Sherman Antitrust Act: banned the formation of trusts and monopolies but it was too weak to be effective.