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The rise of industrial capitalism | AP US History


- [Instructor] The periodfrom the end of the Civil War to the start of the20th Century was one of incredible economic transformationin the United States.

In 1865 the United Stateswas the 4th largest industrial economy in the world. By the 1890s, it had leapt to 1st place. At the same time, where peopleworked, how people worked, and how much money they made,all changed drastically. During the Gilded Age, theUnited States went from being a nation of farmers toa nation of factory workers. The nature of work itself also changed as large corporations began to implement management techniques aimed at increasing efficiency and profit. The gap between richand poor also increasedconsiderably during this era.

So what caused thiseconomic transformation?In this video I want toexplore some of the factors that contributed to thesechanges in work and the economy: technological advancements,new business strategies, business consolidation, andpro-growth government policies. So let's dive a littledeeper into each of these.One of the biggest factorscontributing to the rise of industrial capitalism was technology. The late 19th Centurywas an era of innovation. Nearly half a million patents were issued between 1860 and 1900.Improvements in machineryand manufacturing processes, like the Bessemer process to make steel, increased productivity. And there were new technologiesthat helped business:the telephone to coordinatetransactions over long distances, the typewriterto speed up record keeping, and electricity which made it possible to work safely after dark.

And the expansion of therailroad, made it easy to get raw materials to factories and finished goods to markets.Corporations also devised new strategies to cope with doing businessat a national scale.In this era the firstnational brands emerged.Companies like Coca-Colaand Kellogg's Corn Flakesbegan advertising to national audiences. And mail order catalogs likeMontgomery Ward and Searssold products across the country.An integrated nation-widesystem of business and shipping made it easy for customersand companies to connect.During the Gilded Agecoordinating supplies and workers,time tables and sales, became its ownfull time job called management.Managers worked to increaseefficiency and cut costs.They did this in a number of ways: by replacing workers with machines,increasing working hours, anddecreasing wages for laborers.

The titans of industry used other measures to maximize profits as well.The Gilded Age was an era ofruthless business competition and the magnates of each industry set out to crush their enemies.Many of the men who made fabulous fortunes during the Gilded Age, startedout in the railroad industry taking advantage of governmentsubsidies and land grants. The U.S. Government took a laissez faire,or hands off, approach toregulating business at this time.And there were nocorporate or income taxes so it was possible for a fewindividuals and companies to amass enormous wealth. They did so by consolidatingtheir businesses,reducing competition,and controlling markets.Steel baron Andrew Carnegiewas one of the first businessmen to employ verticalintegration in his companies. The goal of verticalintegration is to control every part of the supplychain for a product.For example, Carnegieowned not just steel mills,but the mines that producedthe iron ore and coal necessary for making steel,and the ships andrailroads that transported raw materials to the factories,and finished steel from the factories.This cut out middlemen and ensured that Carnegie never had towait for other companies to send him supplies.Big businesses in theGilded Age also reduced competition through holdingcompanies, trusts, and pools.

Holding companies andtrusts allowed mergers that put many companies under the control of one parent company.Using these tactics, John D. Rockefeller who owned Standard Oil, controlled 95%of the country's oil supply bythe end of the 19th Century. Standard Oil become the nation's first billion dollar company.Some companies realized that cooperation was better than competitionand simply agreed to divide markets andprofits between them. These groups of supposedlycompeting business entities were known as pools.The rise of industrialcapitalism had major consequences on American life, politics,and foreign policy. 

For some, this new economy meant a higherstandard of living than ever before,with cheap and plentifulmaterial comforts.But this new way of doingbusiness came at the expense  of wages and working conditions, leading workers to begin organizing unionsand advocating for politicalsolutions to economic problems.And as the United Statesproduced more and more, it would begin lookingabroad for new markets to sell its goods and consequently,for greater influence in the world.

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