Lecture # 1 The Rise of American Business, Industry, and Labor: 1865-1920 the big idea

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Lecture # 1

The Rise of American Business, Industry, and Labor: 1865-1920


The US developed a prosperous new economy based on the mass production of goods. During this period: 1) economic development expanded in the North, but weakened in the South 2) entrepreneurs became wealthy and powerful 3) government began to regulate business and 4) labor unions formed to improve working conditions.


From Reconstruction through WWI, the US developed a prosperous industrial economy that revolutionized American society. New machines made possible the mass production of goods. Industrial growth led to a new type of business, the corporation, headed by a rising class of enterprising industrialists such as Henry Ford. With little government interference, these corporate giants created new business structures, some legal and some not, that brought them tremendous wealth. They used their riches both to benefit society and to increase their power. Industries attracted a new type of laborer (from rural areas and afar), the factory worker, who often worked long hours in hazardous conditions. These conditions spurred the growth of labor unions, which gradually gained the right to collectively bargain with employers.


  1. Science and Technology: How did technological developments lead to the growth of industrialization?

  2. Government: How did the government respond to the growth of powerful industries and to complaints about business practices (schemes)?

  3. Factors of Production: What factors led to the growth of the labor movement, and what strategies did unions pursue?


Andrew Carnegie, JD Rockefeller, JP Morgan, Henry Ford, Charles Darwin, Samuel Gompers

I. BUSINESS DEVELOPMENTS (Reconstruction to Gilded Age to WWI to today(?))

-Before the Civil War, sole proprietors, or single owners, and partnerships had controlled most American businesses. The mills and factories that came with industrialization, however, required greater capital, or money for investment, than one person or a few partners could raise.

A. The Growth of Corporations

B. Other Forms of Business Organization

1. Monopoly

2. Conglomerate

3. Pool

4. Trust

5. Holding Company

C. Innovation

-While these new forms of business organization helped young industries to get stared and to maximize profits, other innovations enabled businesses to market their products more effectively. In urban areas, new department stories offered customers a wide variety of goods under one roof. For rural areas, retailers developed mail-order catalogs that saved customers a trip to faraway stores. The items offered in these stores and catalogs expanded as well, thanks to new inventions such as the vacuum cleaner, the telephone, the electric light bulb, the electric iron, and the safety razor.

D. Entrepreneurs

-These new forms of business organization and innovative ideas from inventors helped American industry grow in the late 1800s and early 1900s. Yet without the business knowledge and daring of certain individuals, that growth would have been much slower. These individuals were entrepreneurs; people how take responsibility for the organization and operation of the new business venture. Entrepreneurs often risk large sums of venture capital in hopes of making enormous profits. The business decision made by the turn of the century entrepreneurs had great impact on the lives of most Americans. Some of the key entrepreneurs are:

1. Andrew Carnegie

2. JD Rockefeller

3. JP Morgan

4. Henry Ford

E. Attitudes Toward Business

-Industrialization and the changes associated with it caused American attitudes toward business to alter in the late 1800s. Traditional attitudes, of course, existed. They could be found in books by the popular writer Horatio Alger. Alger’s novels describe poor boys who become rich through hard work and luck. Alger’s novels illustrate what is known as the Puritan work ethic. This is the belief, brought with the Puritans to colonial New England and embodied in the preaching of Puritan minister Cotton Mather, that hard work builds character and is its own reward. The tremendous wealth some of entrepreneurs gained during ht elate 1800s, as well as the cut-throat business methods they used, led some Americans to rethink their ideas on the meaning of business success. New philosophies tried to explain and justify both the accumulation of wealth and the practices used to achieve it.

1. Laissez-Faire

2. Social Darwinism

3. Robber Barons or Philanthropists?

II. GOVERNMENT POLICIES TOWARD BUSINESS (protections and regulations)

-The federal government generally held a laissez-faire attitude toward business for much of this period. Expanding industries and growing foreign trade seemed to justify such an attitude. In addition, many business leaders made financial contributions, legal and illegal, to the politicians who set federal policies. A number of government policies were designed to aid the growth of business. These included loans and land grants to large railroad companies, high tariffs that discouraged competition from foreign manufactures, tight limits on the amount of money in? circulation, and few limits on immigration.

A. Steps Toward Government Regulation

-Several factors led the government to take the first steps in the late 1800s toward regulating business: 1) periodic downturns in the national economy 2) growing criticism of practices that saw big business profit as the expense of the poor and working class 3) increasing grassroots political pressure for change. Although government intervention at the is time had limited impact, it did set the course for more federal action in the years to come (i.e., the Progressive Era)

1. Supreme Court Decisions

2. Interstate Commerce Commission

3. Sherman Antitrust Act

III. LABOR ORGANIZATIONS (“We gave you weekends!”)

-Business growth in the late 1800s brought generally higher wages to American workers. Yet periodic unemployment and poor working conditions remained a fact of life for workers. In addition, employers held enormous power over the lives of their workers and could lower wages and fire employees at will.

A. The Growth of Unions

-To improve conditions, increasing numbers of American workers formed labor unions beginning in the 1820s. As working conditions changed with industrialization, many more workers became interested in unions. Americans had long understood the value of cooperation and association, and labor unions provide a means to put these values into action. In collective bargaining, union members representing workers negotiated labor issues with management/ownership. Instead of each worker trying to achieve individual aims, a united group would put pressure on management.

1. Knights of Labor (1869)

2. American Federation of Labor (1886)

3. International Ladies’ Garment Workers Union (1900)

B. Labor Conflict (Labor vs managers/owners/capitalists)

- If collective bargaining failed, labor unions often used strikes, or work stoppages, to achieve their aims. Strikes sometimes ended in union victories; often, however, they led to violence as business owners sought state and even federal support to end walkouts. The strikes and labor-associate violence described below sometimes advanced the cause of labor and sometimes set it back.

1. Great Railway Strike of 1877

2. Haymarket Riot of 1886

3. Homestead Strike of 1892

C. Pullman Strike of 1894

D. Lawrence Textile Strike of 1912 (IWW)

*Adapted from and courtesy of Prentice Hall’s Brief Review of USHG

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