The Rise of INDUSTRIAL CAPITALISM [APUSH Review]

Understanding the Gilded Age: Industrialization in America

Introduction to the Gilded Age

• The Gilded Age marks a significant period of industrial growth in the United States, characterized by rapid changes and expansion in large-scale businesses.

• The term "Gilded Age," coined by Mark Twain, suggests a superficial layer of wealth covering underlying issues; it implies that while the era appeared prosperous, there were significant problems beneath.

Factors Contributing to Industrial Growth

• The Gilded Age is not when industrialization began; rather, it was an era of intensified growth following earlier developments like the market revolution.

• Four main causes contributed to this rapid industrial expansion:

• Technological advancements (e.g., railroads and electricity).

• Expansion of communication networks (notably the telegraph).

Urbanization and Territorial Expansion

• Urbanization and westward territorial expansion created job opportunities for immigrants and displaced farmers, fueling industrial growth.

• New markets for goods emerged as Americans moved westward, providing access to natural resources essential for industry.

Government Policies Favoring Business

• A series of pro-business government policies significantly influenced industrial growth during this period.

• While it's commonly believed that minimal government interference allowed businesses to thrive, many laws were enacted that actually supported big business interests.

Economic Practices and Regulation Challenges

• Examples include the McKinley Tariff of 1890, which raised import taxes benefiting domestic producers at consumers' expense.

• Farmers faced challenges due to unregulated railroad prices until pressure led to the Interstate Commerce Act of 1887 establishing regulatory oversight.

Impact of Government on Industrial Progress

• Despite attempts at regulation through agencies like the Interstate Commerce Commission, courts often sided with corporations over consumers.

• Overall, government actions both hindered and facilitated business growth; they did not just remove obstacles but actively promoted favorable conditions for industries.

The Rise of Corporations and Management in the Gilded Age

Understanding Corporations

• Corporations became the primary structure for large businesses during the Gilded Age, evolving from earlier joint stock companies.

• A corporation allows investors to have limited liability, meaning they can only lose their initial investment while having no cap on potential earnings.

The Management Revolution

• As corporations grew complex, a new layer of middle managers emerged to bridge top executives and workers, ensuring goals were met.

• Middle managers took on various roles such as accounting and purchasing, leading to the distinction between "white collar" (managers) and "blue collar" (workers).

Advances in Marketing

• With an abundance of goods, corporations pioneered advertising strategies to stimulate consumer purchases.

• The introduction of mail-order catalogs by companies like Montgomery Ward and Sears allowed consumers to buy products remotely, akin to early online shopping.

Labor Force Dynamics

• An influx of European and Asian immigrants seeking work significantly expanded the labor force during this period.

• The deskillment of labor due to factory mass production meant that jobs required minimal specialized skills, allowing corporations to hire broadly.

Techniques for Eliminating Competition

• Industrialists developed innovative methods for increasing wealth by reducing competition; three key techniques emerged.

Vertical Integration

• Vertical integration involves controlling every step in production; Andrew Carnegie exemplified this with his steel company by consolidating processes under one corporation.

Horizontal Integration

• Horizontal integration focuses on acquiring competing businesses; John D. Rockefeller used this method effectively with Standard Oil, dominating the oil industry through strategic acquisitions.

The Rise of Industrialists and Market Control

The Formation of Trusts and Holding Companies

• Industrialists eliminated competition by forming trusts, which are monopolies where multiple businesses collaborate to dominate the market, allowing them to set prices without competitive pressure.

• A holding company is created when significant shares of rival companies are purchased to control their decisions; Rockefeller was notably successful in this strategy.

• Despite the wealth concentration among a few tycoons during the Gilded Age, industrialization improved living standards for many Americans.

Expansion into International Markets

• As global interconnectivity increased, American business leaders sought new foreign markets and raw materials.

Investment in Pacific Rim Territories

• American industrialists heavily invested in Hawaii during the Gilded Age, with Castle and Cook establishing large sugar plantations that tied Hawaii's economy closely to that of the U.S.

• Economic dominance led to a coup against Queen Liliuokalani in 1893 and ultimately resulted in Hawaii's annexation by the U.S. in 1898.

Focus on China

• The 1800s were marked as China's "century of humiliation," where European powers imposed unequal treaties leading to economic spheres of influence.

• To secure access to China's vast market, the U.S. introduced the Open Door Policy, ensuring its participation despite being late to industrialize.

Influence in Latin America

• The United Fruit Company exemplified American economic control over Latin America by dominating territories like Costa Rica through agreements that favored U.S. interests while exploiting local economies.