In My Opinion…

January 1, 2007

The Growth of Big Business and Its Affects on America

Filed under: History — Thomas Hagen @ 8:09 am

The American Industrial Revolution and the growth of big business were fueled by innovations in energy, transportation, communications, manufacturing, and business strategies, and had both positive and negative affects on the American way of life.
When Scottish inventor James Watt made his landmark improvements to steam engine technology, he helped launch the Industrial Revolution. Prior to Watt’s innovations, industry was restricted to areas near rivers, which were its primary source of energy. The steam engine allowed industry to move from the riverside to anywhere a building could be built (Porter 2).

As factories moved into cities, people followed them. Urbanization and industrialization directly affected each other’s growth. The rising city population fed the ever-expanding market. The strong market, in turn, stimulated greater production, which created more jobs. This is known as the multiplier affect (Roark 430).

Railroads were America’s first big business and did much to advance industrialization. Between 1870 and 1890, the amount of railroad track laid in America grew almost 200%. By 1900, America had more track than Europe and Russia combined (Roark 445). When America’s first transcontinental railroad was completed in 1869, it allowed people and products to travel across the country faster and cheaper than ever before. Innovations in railroad and bridge construction helped to decrease shipping times, which led to a decline in shipping rates (Stover). As railroad tracks stretched across America, they helped to create a national market (Porter 3).

Jay Gould helped turn railroads into big business. Gould, admittedly, knew nothing about railroads or their operation, but he did know business strategy. When he detected a vulnerable railroad company, he would buy enough of their stock to take control. He would then use those companies to undercut his competitors until they bought him out at an inflated rate. By the time of his death in 1893, he had amassed a fortune of nearly $100 million and was said to be both the smartest, as well as, most hated man in America (Roark 445-7). Americans used the polls to try and regulate large railroad tycoons like Gould by electing state officials interested in reform, but the Supreme Court eventually ruled that railroads crossed state lines and fell outside state jurisdiction. Government commissions proved to be futile, as well. (Roark 461).

Railroads helped to develop the nation’s second big business—steel. Steel track was much stronger and more flexible than iron track (Roark 447). Advancements in steel production and improved management techniques allowed steel mills to boost their production, which drove the prices down. This aided an already expanding market, as well as expanding the pocketbooks of a few individuals (Porter 4).

Andrew Carnegie was one of those individuals. Carnegie Steel earned $40 million a year through Carnegie’s system of business known as vertical integration (Roark 448). Carnegie bought companies that sold materials and services necessary to the production and marketing of steel, putting all aspects of the business under his command. He then took over all of his competitors by undercutting them until they could no longer turn a profit, then buying them out at a low cost (Woloch 21). Carnegie also pitted plant managers against each other, then fired the losers and rewarded the winners. Employees of Carnegie Steel were forced to work long hours in unsafe conditions for low wages (Roark 448). Carnegie eventually used his wealth for good, giving “more than $350 million to various educational, cultural, and peace institutions” (“Andrew Carnegie”).

The 1859 discovery of oil in Pennsylvania created an instant market for “black gold,” and its most successful businessman was John D. Rockefeller. Rockefeller’s oil refining company—Standard Oil—was the largest in the city of Cleveland, Ohio. Rockefeller required regular refunds from railroad companies or he would not do business with them. He then used those refunds to undercut his oil competitors. His grip was so tight on the railroads that they would not only give him refunds on his own shipping costs, but also give him a share of his competitor’s rates. The refunds grew so large that the railroads eventually began to pay Standard Oil to ship their product. Rockefeller’s competitors could only sell out to him or be wiped out by him (Roark 448).

Rockefeller favored a horizontal approach to business, as opposed to Carnegie’s vertical method (Roark 449). In 1882 he, and his partners, formed the country’s first corporate trust—Standard Oil Trust. The trust put control of many companies in the hands of trustees that held the stock in trust for stockholders. Standard Oil soon controlled 90% of the nation’s oil refineries. When Congress attempted to outlaw trusts, Rockefeller changed tactics and developed a holding company, putting control under a single administration. Standard Oil went on to become the largest business organization on the planet (Roark 449-50).

The American people reaped many benefits by the rise of industry and big business. During the latter half of the nineteenth century thousands of people moved from the countryside into the cities, and were joined by millions of immigrants from Europe and Asia. Industry provided employment for the skilled, as well as unskilled masses (Roark 430-1).

Industry brought many new inventions that benefited the American way of life. In 1880, American Bell, the company founded by Alexander Graham Bell, marketed the telephone and long-distance telephone service. For the first time, Americans on each end of the country could hear each other’s voices transferred through a tiny cable. Electricity was also brought to the masses through the hard work of Thomas Alva Edison and George W. Westinghouse. Electricity quickly became the nation’s primary source of power, energizing trolley cars, subways, and factory machines, as well as providing light to homes, factories, and offices (Roark 450-1).

Many improvements to agriculture came from the growth of industry. As farm labor moved into the cities, machines were developed to take their place. Machines increased production, putting more food onto tables and dollars into pockets (Porter 4).

Leisure time for many Americans was enhanced by industry. As machines entered the home, much of the time spent on chores was freed up for other things. The working class spent their free time in dance halls, baseball parks, and amusement parlors. Upper class citizens spent free time in saloons, clubs, and fraternal orders. Coney Island became an attraction during the 1870’s where people could go and forget about troubles of life (Roark 482-3).

The expansion of business created a need for business managers and white-collar employees. As machines continued to replace skilled labor, many found themselves in positions of management. The bulk of these new managers were white males that held a high school diploma. Engineering schools began supplying skilled labor that machines could not replace. Educated women found work through inventions like the typewriter, adding machine, and cash register. Department stores also opened up new employment opportunities for women (Roark 478-9).

Innovations and advantages did not come without their costs, however. Many Americans suffered hardships so that a few could collect rewards. Overcrowding in the cities led to class and ethnic issues, as well as a high mortality rate. As mass transit developed, upper class workers could afford to live away from the factories, while the lower class was forced to live within walking distance. Social segregation and racism in the cities quickly evolved and often turned violent (Roark 433).

Big business was not above using children in its attempts to gain a dollar. Child labor was common in dangerous industries, such as mining. Both boys and girls could be trained to operate machinery as proficient as an adult, but were paid considerably less wages. By 1900, children ages ten to fifteen years made up over 18% of America’s work force (Roark 476-7).

As technology continued to advance, skilled workers began to lose their jobs to machines. Unskilled labor, through the division of labor and assembly lines, also took away jobs. The balance of power between labor and business was tipped to the side of the latter. Workers were forced to form trade unions to represent them against the powerful industry bosses. Strikes often turned violent and many people were killed in the name of worker’s rights (Porter 5).

America continues to be affected by the Industrial Revolution and the rise of big business. Many lessons have been learned and new laws continue to be passed in order to keep big business in check. Industry continues to develop new products to make our lives easier and more rewarding. The impact of this period in American history will continue to be felt for many years to come.

Bibliography

“Andrew Carnegie,” MSN Encarta. <http://encarta.msn.com/encyclopedia_761558094/Andrew_Carnegie.html&gt;.

Porter, Glenn. “Industrial Revolution.” MSN Encarta. <http://encarta.msn.com/encyclopedia_761577952_1/Industrial_Revolution.html&gt;.

Roark, James L., et al. The American Promise: A History of the United States. 2nd ed. Vol. 2. Boston: Bedford/St. Martin’s, 2003.

Stover, John F. “Railroads.” The Reader’s Companion to American History. <http://college.hmco.com/history/readerscomp/rcah/html/rc_073400_railroads.htm&gt;.

Woloch, Nancy and Johnson, Paul E. “United States (History).” MSN Encarta. <http://encarta.msn.com/encyclopedia_1741500823_1/United_States_(History).html>.

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3 Comments »

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