The Industrial Revolution

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The Industrial Revolution first started in 1790 in the United States. When that happened, it brought a new age of increased productivity and with that bigger economic growth.

The textile industry

The textile industry helped pave the road for the industrialization in the United States. One of the earliest industrial advances in the United States was the advance of the machinery required to operate a textile mill. The inventor of that machinery was Samuel Slater (1768-1835) who came to the United States from England. He used to worked in a textile mill with mechanical spinning machine, also other mechanical equipment, that were invented by one of the owners, Richard Arkwright. With his experience, Slater assisted the construction of a mill in Pawtucket, Rhode Island, using Arkwright’s designs. In 1973, the mill was fully mechanized and that was the first true factory in the United States.

In 1798, Eli Whitney (1765-1825) invented the cotton gin that allows the cotton industry to expand across the country. The invention of the cotton gin was even greater contribution than the textile mill. During that time the government order 10,000 muskets, to accomplish that Whitney changed the manufacture procedure into specific tasks and separated those tasks with his workers. The workers would perform the same single task repeatedly. Then Whitney designed the tools necessary to produce all the parts of a musket where each parts are the same and interchangeable. This lead the way to the factory system with specialize tasks and interchangeable parts.

Steam power

While the early industrial America need waterpower to function the factories, this mean factories need be located close to rivers. The invention of steam engines allow factories to be built anywhere, this allows factories to be built closer to available labor, raw materials, and markets.

Advancement in transportation and communication

With the introduction of steam power, it also made national transportation system possible with steam trains. Before steam power, most products were transported by ships in water or transported by wagons overland. The transportation of goods to areas faraway from rivers proves to be difficult and very slow. However, that changed when railroads were built.

During the 1830’s, railroads connected main business areas of the eastern seaboard. In 1869, the Union Pacific Railroad and the Southern Pacific Railroad were connected in Utah, connecting the East and West coasts. That was a great accomplishment allowing goods and people to be transported inland across the country within a week. This open up new markets to manufacturers and made raw materials more accessible. For instance, customers in New York can buy goods coming from in New England and vice versa. The entire U.S. economy was in the new era with the entire economy being integrated.

The development of the telegraph also helped economic growth by making information regarding markets more available to producers, who could then take advantage of those markets through improved transportation facilities.

During the American Civil War, increased the expansion of industrial development. The requirement of producing huge amount of military products in relatively small period need new industrial advancements for the production processes. American factories became more efficient and productive to meet the demand of the Civil War. Following the Civil War, these factories no longer require to produce military products and their technology were used to produce non-military, household products.

There were a relatively small group of entrepreneurs and sometimes brutal business people referred as Robber Barons. Who were responsible for the economic productivity during the 19th and early 20th centuries. They helped built the industrial system that served as the groundwork for future economic growth in America.

The start of the corporations

Even though business that form the corporations were known back in the previous era in the colonial period, it was not common. The majority of corporations were religious organizations or educational or groups, responsible for the operations of public services like the toll bridges and canals.

During the 1800’s, there were many large businesses in partnerships. When the 19th century ended, corporations came into play. Advocates of the partnership were form and felt that executives would be more attached to their company as partners rather than as corporate officers. However, as long as profits were sufficient for their business, the partnership would work out fine. In the late 1800’s, many businesses decided the profits were enough to finance more expansions. The corporate structure of business provided a better way to capital markets than with partnerships.

During the 1890’s, many larger industrialized businesses, like Procter & Gamble, P. Lorillard, and Westinghouse Electric, all form the corporation structure. Near the opening of the 20th century, many corporations were formed and dominated the manufacturing, mining, transportation, and utilities industries.

Monopolies and trusts

Because of the industrial and technological progress of the 19th century, access to resources, a good political environment, and entrepreneurial skills. Many monopolies existed in all sort of industries by the turn of the century. Monopoly conditions were also existed in industries that were not dominated by a single company, most often through the use of business pools. A business pool was an agreement between companies in an industry that restricted competition among them. Marketing areas were divided into territories, each territory was assigned to a particular company that sell its product free of rivalry from other competitions. The business pools were normal between the 1880’s and 1890’s in metal, steel, explosives, meat products, tobacco products, and other industries.

Ultimately, numerous of pools transformed into business trusts. This is the arrangements where the stockholders of the competing companies give over their shares to a group of trustees who controlled the companies in a manner as to removing the competition among the formerly independent company. In the late 1800’s, the business trusts normally occur in the sugar, whiskey, cottonseed oil, lead, and the salt industries. Trusts were referred as illegal in various states and it were replaced by the holding companies that still occur today with in various industries.

There was a huge cost to pay with the industrial expansion in the 19th century. The cost of the labor was high. John D. Rockefeller was starting to become a billionaire, while the working conditions in the factories floor were poor and wages were low. There were children workers working about 70 hours a week in the coalmines for $2 a day. During 1865 to 1900, the separation among the rich and the poor increased. When the 1900 came, 10% of the population owned 90% of the wealth.

Because of the appalling labor conditions contributed to the significant economic expansion during that time. With low wages allow greater investment structures to take place; without the low wages, the development of the 19th century industrial would not have been achievable. Instead of increasing wages with their profits or develop better working conditions, most companies were using their money to expand their businesses.

In the 1900, monopolies continued to rise as well as the public and government concern. In 1890, Congress passed the Sherman Antitrust Act. This act, contracts, conspiracies, and combinations in restraint of trade were prohibited, as were monopolies and attempts to monopolize. Even though it was many more years before monopolies were efficiently controlled, the passing of the Sherman Act started the greater participation by government in the affairs of business.

Still new technologies were constantly developing throughout the 20th century, with daring entrepreneurs once more play the key role. Henry Ford was the most important entrepreneur during this period. In 1913, Ford introduced the production line, it was a breakthrough in the manufacture of automobiles and it changed the way American manufacture goods. Ford assembly line increased worker efficiency and productivity that made mass production feasible.

The start of consumer credit

For the first time in 1920’s, there were a big increase in consumer purchases as wages increased and consumer credit became important. Before 1913, banks usually lent money to businesses and not individual consumer. Even getting mortgages were uncommon.

Later in the late 1800’s and beginning of 1900’s, there was a large boost in the supply of money. One of the main reasons for that were the enormous gold discoveries in the West. Between the 1890 to 1914, the gold supply in the United States nearly tripled. This quickly boosted the supply of money, which drove the interest rates down and more loans were accessible to the public.

The fall of the tycoons

The time between 1900 and 1929 was a time during which ownership of the biggest companies scatter. The ownership of these companies were passed from the hands of a few men into the hands of thousands of corporate shareholders and their professional managers. Production and more business expansion continued during this period, however the structure of American’s industry had altered forever.

World War II (left), the war resulted in the demand for war products such as tanks, air-crafts, which helped boosted the U.S. economy lifting it out of the Great Depression.