Explosion of Industrial Growth

​An Explosion of Industrial Growth

​The influx of technological innovation and the creation of communication and electric power networks helped fuel the expansion of American industry in the late 1800s. Companies that had once served mainly local markets expanded to sell their goods nationwide. In order to meet the demands of this growing national market, companies developed new ways of operating.

New Ways to Manage Work
 Farsighted business owners realized they could profit from serving customers nationwide, but to do this, they had to develop systems of mass production that would enable them to supply a much larger market. The basic elements of this system already existed. In the early 1800s, factories were using interchangeable parts to produce goods in large quantities.

​After the Civil War, factory owners improved these methods of mass production, by building specialized machinery that could produce identical parts for quick assembly into finished products. They no longer needed skilled artisans to craft individual parts. Instead, they could use unskilled workers to run the machines and hire supervisors to manage the day-to-day operations.

Engineers reorganized factory work to increase productivity, dividing up the production process so that each worker did a single task. One engineer, Frederick W. Taylor, used scientific techniques to analyze these tasks. He watched workers and timed them with a stopwatch. Through these time-and motion studies, he determined the most efficient way to perform each task, and he trained workers to work faster by reducing wasted motion. This method of greater speed boosted productivity, which in turn increased profits.

​Later, Taylor published his findings in a book he called The Principles of Scientific Management, which had a profound effect on industry in the early 1900s. One person who took Taylor’s findings very seriously was Henry Ford, who then pioneered the moving assembly line to mass-produce automobiles. In a Ford plant, there was no wasted motion. Instead, workers stood in one place all day, while a conveyor belt brought the work to them. Furthermore, each employee did one or two small tasks before the belt moved the car to the next station. For example, one worker might put bolts in the frame, while the next tightened them down. This process continued, part by part, until the car rolled off the assembly line, ready to be driven away.

Increased productivity resulted in cheaper goods. It also meant that a factory could operate with fewer workers. Those who remained had to perform the same dull task all day long, at a faster pace. In this way, assembly-line workers felt as though they had become machines.

New Ways to Finance and Organize Businesses 
Before the Civil War, individual owners oversaw most businesses. As businesses grew larger, however, their need for the three basic factors of production—land, labor, and capital—increased as well. Land, which includes resources such as soil, forests, and minerals, was still abundant. Labor was plentiful as well, thanks to a steady stream of immigrants into the country during this period. However, capital, or any asset that can be used to produce an income—including money, buildings, tools, and machinery—remained a glaring problem.

​Small business owners did not have all the capital they needed to expand, and for this reason, many of them formed corporations— companies that are recognized by law as existing independently from its owners. A corporation can own property, borrow money, sue, or be sued. People invest in corporations by buying stock, or a share in the ownership of the business. In purchasing stock, investors become owners of the company, and the money they pay for their stock helps to finance the corporation in turn. Therefore, wealthy capitalists controlled corporations by generally acquiring great amounts of stock.

As owners of a corporation, stockholders could profit from its success. However, unlike the owners of small businesses, investors were not liable for a corporation’s debts, and the most money they could lose was the amount they invested. Also, these owners did not run the daily operations. Instead, the corporation hired managers, accountants, engineers, and others to further production.

​In the late 1800s,competition among corporations provided consumers with a wide choice of new products, but it created headaches for business owners. In the battle to sell products, companies slashed prices. As a result, profits fell, debts rose, and many companies went bankrupt. Cutthroat competition threatened to demolish even the best-run companies. Some powerful capitalists decided that to stay in business, they would have to limit competition.

So, business owners began devising ways to reduce competition. One method was to buy or bankrupt competitors, an approach with which John D. Rockefeller had great success in the oil industry. During the 1860s, Rockefeller earned a fortune refining oil in Cleveland, Ohio, and in 1870, he formed a corporation called Standard Oil, which expanded by buying out or merging with other companies. Rockefeller’s company also undercut its competitors by making deals with railroads, which agreed to ship its oil at discount prices. The savings on shipping allowed Standard Oil to cut its oil prices significantly. These price reductions forced smaller oil companies to drop prices too, causing many of them to either be sold to Standard Oil or go bankrupt. Rockefeller told one independent oil refiner, “You can’t compete with the Standard . . . If you refuse to sell, it will end in your being crushed.”

By 1882, Standard Oil had become a monopoly, or a company that completely dominates a particular industry. In its monopolized state, Standard Oil controlled 90 percent of the nation’s oil production. With its competitors out of the way, it could then raise prices and reap vast profits.

Another approach to reducing competition was to form business trusts, or a set of companies that are managed by a small group known as trustees. The trustees have the power to prevent companies in the trust from competing with one another.

Multiple Choice

What was one of the main reasons for the expansion of American industry in the late 1800s?

• The decrease in technological innovation

• The creation of communication and electric power networks

• The decline of local markets

• The reduction of nationwide customer service

Drag and Drop

What did factories use in the early 1800s to produce goods in large quantities?

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Specialized machinery for each product

Skilled artisans for each part

Interchangeable parts

Manual labor without machinery

Multiple Choice

How did factory owners improve mass production methods after the Civil War?

• By hiring more skilled artisans

• By building specialized machinery for identical parts

• By reducing the number of supervisors

• By slowing down the production process

Multiple Choice

What was Frederick W. Taylor known for in the context of factory work?

• Inventing the conveyor belt

• Creating the first automobile

• Using scientific techniques to analyze and improve work tasks

• Opposing the use of specialized machinery

Dropdown

What book did Taylor publish that had a profound effect on industry in the early 1900s?

Select answer

Drag and Drop

Who took Taylor's findings seriously and applied them to mass-produce automobiles?

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Frederick W. Taylor

An unnamed factory owner

Henry Ford

A business owner from the late 1800s

Multiple Select

Before the Civil War, what were the three basic factors of production that businesses needed as they grew larger?

• Land

• Corporations

• Labor

• Capital

• Resources

Dropdown

What was a significant problem for businesses despite the abundance of land, labor, and resources?

Select answer

Multiple Choice

What is a corporation?

• A small business that is owned by individual owners

• A company that is recognized by law as existing independently from its owners

• A group of workers protesting for better working conditions

• A business that operates without the need for capital

Multiple Choice

How do people invest in corporations?

• By working as managers or accountants

• By lending money to the corporation

• By buying stock, or a share in the ownership of the business

• By providing labor and machinery

Drag and Drop

What is the most money that investors in a corporation can lose?

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The total value of the corporation's assets

The amount they invested in the corporation

The corporation's yearly profit

The amount equal to the corporation's debts

Dropdown

What was one of the methods business owners used in the late 1800s to reduce competition?

Select answer

Dropdown

What did John D. Rockefeller's Standard Oil do to undercut its competitors?

Select answer

Drag and Drop

By 1882, what had Standard Oil become?

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A partnership

A monopoly

A non-profit organization

A small business

Dropdown

What percentage of the nation's oil production was controlled by Standard Oil at its monopolized state?

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Drag and Drop

What is a business trust?

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A government regulatory body

A set of companies managed by trustees

A group of investors sharing profits

A charity organization