Chapter 17 The Growth of Industry



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Chapter 17

The Growth of Industry

---One of the first big businesses in America was in oil. This photograph, made in 1865, shows an oil field in Pioneer Run, Pennsylvania.

After the Civil War, inventors developed many inventions that completely changed how Americans lived, worked, and traveled. Those inventions helped create many new kinds of businesses.

Americans also began to develop new ideas about how to start and run businesses. Because of those new ideas, many small businesses rapidly grew and spread. Those businesses quickly became huge industries that needed thousands of workers. Soon, more Americans would be working on jobs in industries than on farms.


  • What important inventions were developed between 1850 and 1900?

  • What industries developed after the Civil War?

  • How did American life change after the Civil War?

Key Words

You will be using these words in this chapter. Look them up in the glossary at the back of Part 2.



competition

manufacture

industry

product

New Inventions Change America

Probably the greatest inventor of his time was Thomas Alva Edison. Between 1869 and 1931, the year of his death, he created hundreds of inventions. Every time you turn on a light, listen to a phonograph, or watch a movie, you are using one of Edison's inventions.

In 1879, Edison invented a lamp that turned electrical energy into light. Then he built electric power plants to bring electricity for the lamp to homes and businesses.

Americans soon found other uses for the electricity. They used it to run machines. People all across the nation began using electric machines in homes, mills, factories, and business offices.



The Typewriter and the Telephone

New inventions were also improving the ways people could communicate. Two were the typewriter and the telephone.

The typewriter was invented in 1867 by Christopher L. Sholes, Carlos Glidden, and Samuel W. Soule. In the 1870s, people began using the typewriter in business and government offices.

In 1876, Alexander Graham Bell invented the telephone. It carried speech over an electric wire. A year later, the Bell Telephone Company was started. Soon, people would be able to talk to each other across a town or across a continent.



Other Inventions

Some other inventions that were developed between 1850 and 1900 were the elevator, the cash register, dynamite, the diesel engine, the zipper, the radio, and the x-ray machine. How do you think each changed American life?

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---Left: This photograph shows the historic first flight of the Wright brothers on December 17, 1903. Middle: By the 1890s, about 4 million Americans were riding bicycles. The bikes in this photograph are unusual in that the small wheel is in front. Right: In the 1890s, early cars were called "horseless carriages" because they still looked like the carriages that were pulled by horses.

Inventions in Transportation

By the end of the 1800s, railroad lines were all over the country. Using those railroad lines, Americans could travel from one part of the country to another. But Americans also wanted to get around the towns and cities they lived in. They began using a European invention, the bicycle. By 1900, ten million bicycles were being used in the United States.



Automobiles Come to America

In the 1890s, another European invention came to America-the automobile. It was faster than the bicycle and could carry more people. At first, only the rich had automobiles. Still, by 1900, more than 8000 automobiles were being used in the nation.

Pioneers in Powered Flight

For years, inventors in Europe and the United States had been experimenting with machines that could fly. During the late 1800s, French inventors developed airships that were made from huge balloons filled with a gas. Those airships had engines and propellors. At the same time, inventors in France, England, and the United States were experimenting with airplanes flying machines that were powered by steam or gasoline engines. So far, no one had been successful in keeping an airplane up in the air.



The First Successful Airplane Flight

Orville Wright and Wilbur Wright were American brothers who owned a bicycle repair shop. They became interested in airplanes. In 1899, they began to build and experiment with airplanes that had gasoline engines. On December 17, 1903, Orville Wright flew one of those airplanes at Kitty Hawk, North Carolina. The airplane was in the air for 12 seconds. It was the Wrights' first successful flight. On later flights, they flew the airplane for longer and longer periods of time.

The Wright brothers showed that airplanes could travel in the air. They and other inventors worked to develop airplanes that could make longer flights. In a few years, airplanes would become an important form of transportation for the world.



Looking Back

1. What inventions helped Americans get around in cities and towns?

2. How did the Wright brothers help to change the way people traveled?

136


Organizing Big Businesses

Before the Civil War, most businesses were small. They hired only a few workers. The businesses were usually started by one person or a few people who were partners. Those people put together the money that was needed to start the business. They shared the profit made by the business. A profit is the money a business has left after it pays all its expenses.

But that way of starting didn't work for businesses such as railroads. Those businesses cost millions of dollars to start. That was more money than one person or a few partners could raise. So, people began to organize those businesses in a new way. They formed corporations. Most new businesses after the Civil War began as corporations.

Corporations: Businesses with Many Owners

A corporation is a business that is owned by many people. It is started by someone who has the idea for the business. That person then sells shares of the business to other people. The shares are called stock. The more shares of stock the person sells, the more money he or she can raise. That money is used to build the business.

The people who buy shares in the business are called stockholders. Together, stockholders own the corporation. Those who own the most shares of stock own most of the business. When the corporation makes a profit, that money is divided among the stockholders. Stockholders with more stock get more of the profit.

When a corporation does well, the price of a share goes up. (The price falls when business is bad.) Stockholders can sell their stock. They make money when they sell their stock for more money than they paid to buy it.



Carnegie Steel Corporation

One of the largest corporations formed after the Civil War was the Carnegie Steel Company. It was organized by Andrew Carnegie in 1873. Carnegie was an immigrant from Scotland.

When Carnegie organized the corporation, steel was expensive to manufacture, so its price was high. Carnegie used a new method of making steel that was fast and cheap. He then sold his steel at prices most businesses could afford. Manufacturers in many businesses began using steel. The steel business became an important industry for the nation.

One of the First Big Businesses

Carnegie's first steel mill was built near Pittsburgh, Pennsylvania. At first, Carnegie bought the iron ore needed to make steel from mining companies in Minnesota. He paid shipping and railroad companies to send the ore to his mill. Then Carnegie bought his own Minnesota iron mines. He bought his own ships and railroads to carry the ore. He took control of every step in the production of steel.

Such methods allowed Carnegie to keep his prices low and still make a profit. With that profit, he bought smaller steel companies. By 1900, the Carnegie Steel Company was the nation's largest steelmaker and one of the nation's first big businesses. The corporation produced one-fourth of all the nation's steel. In 1901, Carnegie sold his stock in the corporation. He made $250 million from the sale.

Looking Back

1. Why did people begin to form corporations?

2. How did corporations raise money to

build businesses?

3. How did Andrew Carnegie help the steel industry grow?

137


Controlling Competition

Many of the businesses that sprang up after the Civil War made the same products. To get customers to buy their products, companies went into competition with each other. They improved their products. They also lowered their prices.



Competition Leads to Price Wars

Competition was good for customers. They had many well-made products to choose from. And they could buy things cheaply.

But competition often led to price wars that were bad for some companies. In those price wars, each company tried to make its products or services the cheapest by constantly cutting prices. Sometimes, prices dropped far below the cost of running the company. Only the strongest companies could survive a long price war. The weak ones ran out of money and went out of business.

The Standard Oil Trust

In 1859, many people were in the oil refinery business. An oil refinery is a factory that makes products, such as kerosene, from oil. Too many refineries produced too much kerosene. A price war broke out, and everyone lost money.

One of the people who owned a refinery was a businessman named John D. Rockefeller. Rockefeller thought such competition was wasteful. He decided that it made more sense for one business to control all the nation's refineries. He formed the Standard Oil Company in 1870. Standard Oil then tried to buy competing refineries or to drive them out of business.

In 1882, Rockefeller organized the Standard Oil Trust. The trust was another new way to organize a business: It let people who owned stock in one company trade it for stock in another company.

Many refinery owners traded their stock for Standard Oil stock in that way. Standard Oil became the owner of almost all the refineries in the United States.

The Rise of Monopolies

Standard Oil soon had a monopoly of the oil business. When a company has a monopoly, it has practically no competition. It is nearly the only company that makes and sells certain products.

Many companies followed the example of Standard Oil. They also formed trusts and took control of competing companies. Soon, trusts controlled the manufacture of whiskey, lead, sugar, and other important products.

Railroads Agree to Control Competition

Railroads also wanted to control competition. Competition was fierce in the railroad industry, and price wars went on all the time. Many railroad companies failed or were in danger of failing.

To solve their problems, managers of different railroad companies agreed to end the price wars. They agreed that only certain companies would do business in certain areas. And they agreed to charge the same rates. In that way, each company could make money.

The end of competition meant good business for all the railroad companies. But it meant higher prices for customers. Because they had no competition, the companies could raise their prices as high as they pleased.



Looking Back

1. Why is competition among businesses good for customers?

2. How did John D. Rockefeller end competition in the oil business?

3. What happens when a company has a monopoly?

4. Why are monopolies bad for customers?

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Controlling Big Business

---This political cartoon was drawn in 1889. The artist shows how huge monopolies have grown. At right is little Uncle Sam.

Big businesses grew rapidly after the Civil War under a system of free enterprise. In a free enterprise system, the government has very little to do with the nation's businesses. People can go into any business they wish. They can decide what to produce, how much to produce, and what prices to charge. They can compete in any way they choose. For example, if they wish to change their prices, they can do so at any time.

Americans believed in the free enterprise system. They believed people should be left alone to run their businesses. But by the 1880s, some people were worried about the power of big businesses.

Unfair Business Competition

Big companies at that time used many unfair business practices to take business away from their competitors. They made secret deals with transportation companies to ship their products at special rates. They hired spies. They bribed lawmakers to pass laws that helped one company over another.



Monopolies End Competition

Many Americans also began to worry about monopolies. As you read, many companies ended competition in their business by forming trusts. Those trusts became monopolies.

People began to say that monopolies were not good for free enterprise. Monopolies drove too many small companies out of business. Without competition, there was nothing to keep the big businesses from raising their prices. There was also no reason for the businesses to improve their products or services.

The Government Tries to Regulate Business

Americans began to demand that Congress do something to regulate, or control, the giant corporations.

Congress looked first at the railroads. In 1887, it passed a law that set up the Interstate Commerce Commission (ICC). A commission is a group of people chosen to do a job. The Interstate Commerce Commission's job was to make sure that railroad rates were fair.

Then Congress attacked the trusts. In 1890, it passed a law called the Sherman Antitrust Act. The purpose of the law was to break up monopolies into smaller businesses. Those smaller businesses would have to compete with each other.

The railroads and trusts fought the new laws in the federal courts. The courts sided with the businesses. Judges ruled that people and businesses should be free to do as they wanted. The judges said that was the idea of the free enterprise system.

Even so, those two laws were important. For the first time, Congress had said that the government should regulate business for the good of the people. In the future, government control would increase.



Looking Back

1. How does the free enterprise system work?

2. How did some big businesses compete unfairly?

3. How did Congress try to regulate big business?

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New City Skylines

America's new industries caused cities to grow rapidly. Most businesses were started in cities, where they could find workers and transportation systems. When the businesses grew, they created many jobs. Those jobs brought more people into the cities.



Chicago: Big City of the Midwest

The city that grew most rapidly after the Civil War was Chicago. In 1830, Chicago was a village of log huts. Just 40 years later, it had become a city of 300,000 people. It had also become the nation's transportation and industrial center.

Chicago grew rapidly because of railroads. By 1856, ten main railroad lines went through the city. Almost 100 trains came and went every day. They could move people and goods to other cities in all parts of the country.

Cattle ranchers, farmers, and lumber companies in the West shipped their products to the East through Chicago. Factories in the East shipped goods to the West through Chicago. By 1870, Chicago was the center for the livestock, meatĀ­packing, grain, farm machinery, and lumber industries.

The excellent transportation network caused many other industries to develop in Chicago. One of the new businesses was Montgomery Ward and Company. It was a mail-order business that sold goods by advertising them in a catalog. It shipped goods to customers all over the nation.

In 1871, a fire broke out that destroyed most of the city. Over the next few years, Chicago was quickly rebuilt. By 1890, over a million people were living in Chicago. It was the second largest city in the United States.



Buildings Scrape the Sky

As the nation's cities grew, they became more and more crowded. People who moved to the cities wanted to live and work right in the center of those cities.

The cities needed new buildings for businesses and homes. But the cities were running out of space. Builders began to talk of building upward. They wanted to build very tall buildings that could hold hundreds of people.

Until the 1880s, most large buildings were made of bricks. Very few buildings were as much as five stories high. Tall buildings had to have very thick lower walls that could support the weight of the upper stories. The taller the buildings, the thicker the walls had to be.



A New Kind of Building

The new iron and steel industries gave builders a way to make buildings that could be unbelievably tall. Builders first made a metal frame for the building. Then they covered the frame with thin walls of bricks or concrete. Those buildings were so tall that they were called skyscrapers.

The first skyscraper was built in Chicago, after the great fire. By 1900, skyscrapers were all over Chicago and New York City. Thousands of people worked and lived in the tall buildings.

Looking Back

1. How did new industries help cities grow?

2. Why did Chicago become the nation's industrial center?

3. Why were skyscrapers built in cities?

4. What are the largest businesses and industries in your town or city?

Chapter 17

Review

Facts First

Use words below to complete each sentence.



Andrew Carnegie

free enterprise

Antitrust Act

industry

automobile

skyscrapers

competition

stockholders

electric light

trusts

1. Edison's led to the creation of the electric power industry.

2. built the nation's largest steel corporation.

3. The gave people new freedom to travel.

4. People who buy shares of a company are .

5. The system left people free to run their businesses as they pleased.

6. The public liked among businesses because it usually kept prices low.

7. Some business people tried to reduce competition by forming .

8. Congress passed the Sherman to try to break up monopolies.

9. The growth of brought people to cities seeking jobs.

10. More people could live and work in the city centers after were built.

Word Check

Write the meaning of each of these words. Then use each word in a sentence.



competition

manufacture

industry

product

Skill Builder

Make an "Invention Timeline" that shows each invention below. Begin with the year 1852. End with the year 1903.

electric light (1879)

typewriter (1867)

phonograph (1877)

automobile (1886)

passenger elevator (1852)

airplane (1903)

skyscraper (1884)

telephone (1876)



Chapter 17 Notes

Read over the chapter. Find answers to these questions:

l. What were three important inventions of the late 1800s? How did each change the way people lived?

2. What are stockholders? How can they make money from their stock?

3. How was competition good for customers but harmful for some businesses?

4. Why did people think monopolies were not good for the free enterprise system?

5. What two actions did Congress take to try to regulate big business?

Be a Historian

Find out how important electric power is to you. Go through your house and garage. List everything that uses electricity. List everything that plugs into an outlet or uses batteries.



Bonus

In the 1880s, government began to try to regulate businesses. Today, the government still wants to make sure businesses are responsible and treat customers fairly. Call the Food and Drug Administration or the Consumer Product Safety Commission in your city or town. Find out what they do to help customers.



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