Questions• What is the most important invention of today?• Who was the first billionaire in U.S. History?• Why do we have time zones?• Who had more money: Rockefeller or Bill Gates?• How did industrialists create monopolies?• Is the game “Monopoly” related to this time

period?• Were men like Carnegie and Rockefeller positive

or negative for the country?• What were the causes and effects of

industrialization?

Industrialization

Industrialists, Wealth & Power

1865-1920

Innovations/Inventions

• Bessemer Process• Electricity• Telephone• Escalator• Elevator• Light bulb• Electric sewing

machine

• Assembly line• Central heating• Electric trolley cars• Refrigerated rail cars

What was the most important innovation of the “Gilded Age”?

Steel

Andrew Carnegie

U.S. Steel

Brooklyn Bridge

• Built 1883• Suspension bridge• Symbol• Impact of industry

– Manufacturing

– Fortunes made by few

– Hard labor

Steel Workers & Production

• Bessemer Process– Refine iron into steel

– Large quantities cheaply (2,000 tons in 1867 to 7 million tons in 1900)

– Steel more durable than iron (train tracks, girders, beams, cables)

Skyscraper

• Flatiron building NYC (1901)

• Steel structure

• Steel fueled growth of construction

• Changes in American cities– Growth, need for space

– Taller buildings = profit for developers

Andrew Carnegie & Fellow Businessmen

• Innovation & invention sparked growth

• By 1900 4,000 millionaires • Andrew Carnegie

– Immigrant– Bessemer process, wealth

through steel– Philanthropist in later life– Millionaire” a trustee for his

poorer brethren”– Produced 80% of nation’s

steel

Carnegie

• Sold the company to J.P. Morgan in 1901 for $480 million

• He gave away over $350 million

– Carnegie Hall

– Carnegie Library

– The Carnegie Endowment for International Peace

– The Carnegie Institution of Washington

– The Carnegie Foundation for the Advancement of Teaching

– The Carnegie Hero Funds

– Built 2,509 libraries

Oil

John D. Rockefeller, Sr.

Standard Oil Co.

Pennsylvania Oil Field

• First successful well in Titusville, PA in 1859

• Industrialists raced to exploit oil reserves refining became big business

Refining

• One barrel yielded:– 60-65% illuminating oil

– 10% gasoline

– 5-10% benzoyl or naphtha (volatile inflammable liquid used as a solvent in dry cleaning, varnish making, etc.)

– with the remainder tar and wastes

John D. Rockefeller, Sr.• Began as a bookkeeper• Went into refining with

partners• Bought out partners for

$72,500• Partnered with brother called

company “Standard Works”• Bought refineries to

eliminate “wasteful” competition

• By 1879, controlled over 90% of American refining (he was only 40 years old!)

Why?

• the state of the oil business was chaotic

• entry costs were so low in both oil drilling and oil refining, the market was glutted with crude oil with an accompanying high level of waste

• weak firms in their attempts to survive drove prices down below production costs hurting even the well managed firms such as his own

How Rockefeller did it…

• Created a “trust”– Stockholders of indep.

Companies agree to exchange shares of stock for trust certificates issued by firms such as Standard Oil

– Shareholders receive dividends, but lost control of management

– Gained a virtual monopoly over oil industry

Rockefeller cont’d

• By making its own barrels, glue, hoods, pipelines, food for horses, etc... 

• Standard Oil enlarged each time his profit margin

• The costs of barrels dropped of $1.25 each, sparing $4 million per year

• price of metal boxes was lowered of 15 cents, sparing $5 million per year

• Used oil byproducts (gasoline - when gas engine became available)

Rockefeller Philanthropy• $75 million to University

of Chicago• Rockefeller Institute for

Medical Research• $50 million to General

Education Board (to improve schools in the South)

• Rockefeller Sanitary Commission (to eradicate hookworm)

• Rockefeller Foundation (food, health and work for poor)

Standard Oil Advertisement

Railroads

Cornelius Vanderbilt

NY and Harlem RR

Hudson RR

New York Central Railroad Co.

"I have been insane on the subject of moneymaking all my life."

-- Vanderbilt, quoted in the New York Daily Tribune, March 23, 1878.

Railroad

• Transportation was key to industrialization– Move freight and

passengers

• 1860 only 30,000 miles of track (most in East)

• Needed to load, unload several times to move it (why is this bad?)

“The Commodore”Cornelius Vanderbilt

• After Civil War

• Quit school at 11 to help his poor family

• 1810 $100 loan and started his first boating business

• Steamship route through Nicaragua to compete with Panama route (This netted $1 million/year)

• Age 70 switched to RR business

1876

1893

How he did it…

• Builders began consolidating rail lines

• “Vandy” bought rails between NY & Chicago

• NY Central RR refused to sell, he refused to let passengers and freight transfer from NY Central to his

• NY Central finally sold• By 1877, controlled 4,500

mi. of track

Consolidated Rail Lines

• Inexpensive and faster shipping

• RR companies laid track side-by-side so traffic could move in both directions

• Caused Time Zones to be created!

Vanderbilt’s Philanthropy

• $50,000 to the Church of Strangers

• $1 million to Central University (now Vanderbilt University)

• Left the rest of his fortune to his son William

William H.

• William Henry Vanderbilt (above) • Also, Jay Gould (right leg), who

handed Vanderbilt's father, Cornelius, two of his rare defeats in building a railroad empire.

• Gould indirectly forced the younger Vanderbilt and others to build larger integrated rail systems.

• Cyrus W. Field (left leg), developer of the New York Elevated Railroad (and the first transatlantic cable).

• Field was the brother of Stephen J. Field, a Justice of the U.S. Supreme Court.

A Footnote to the Vanderbilt Fortune

When asked by a reporter whether railroads should be run for the public benefit,

William Vanderbilt responded,

"The public be damned!"

Today’s Dollars

$100 billion= – GDP of Portugal– Could pay 7 times over for the recovery of W. Europe

after WWII– Could pay to send a man to the moon 4 times– Could pay for 5 international space stations

Wealth Rankings (today’s dollars)

1. Rockefeller $189.6 billion2. Carnegie $100.5 billion3. Vanderbilt $95.9 billion - began with $100 loan!4. Astor $78 billion (fur trading)5. Bill Gates’ Microsoft stock worth $29.93 billion

(down from over $100 billion before the tech. stock plunge)

Do the following at the bottom of your notes…

• Write a one-sentence summary of what you learned so far

• Write a one-sentence reaction to the information• Make a Prediction: Predict which factors you

think allowed these men to do all of this.• Make a Prediction: What effect do you think they

will have on American society?• Evaluate: So far, do you think men like Carnegie

and Rockefeller were positive or negative for the country? Why?

Key Factors• Natural resources

– Coal, oil, iron ore

• Improved transportation – railroad, mechanized farming equipment

• Growing labor force - immigration• Innovation in technology (inventions)• “Social Darwinism” philosophy• Laissez-faire government policies

– No income tax, no environmental controls– Backed management over labor

Robber Barons or

Captains of Industry?• Drove companies out of

business• Exploited workers• Cut corners on quality• “bought” government

officials• Overcharged for goods• Polluted environment• Used natural resources• Industrial espionage

Robber Barons or

Captains of Industry?• Willing to gamble• Philanthropy• Inventions/innovations• Lowered cost of

products (economies of scale)

• Improved overall quality of life

Trusts & Gov’t Corruption

• By 1904, 319 industrial trusts swallowed 5300 independent companies

• Oil, steel, tobacco, whiskey, sugar, banking, farm machinery

• High tariffs (steel/ton $28)

• Anti-union police, courts

• City bosses

Impact of Industrialism

• Benefited middle class with mid-level jobs

• Poor water, sewage systems

• Little education among factory workers

• Disease typhoid, cholera in filthy cities

• Inflated prices at company stores

• Long hours, injuries on job

• Low pay but better than Europe

Change and Discrimination

• Women entered work force but paid less

• Women in textile mills 50% of men’s pay

• Child labor - almost 2 million children

• Minorities and immigrants - CA Chinese self-employed to make more $

• Businesses pitted minorities against each other

Organized labor

• Shorter hours

• More pay

• Elimination of child labor

• Some unions discriminated

• Strikes and violence

Food Contamination

• Fraud - narcotics sold as cures

• Canned foods - dangerous additives

• Muckrakers - The Jungle, McClure’s– Used writing to expose corruption, wrongdoing

Toll on Environment

• Mining

• Clear-cutting forests

• Overgrazing livestock

• Chicago River - “great open sewer”

• Air pollution from burning coal to power machines