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The Second Industrial

Part I
Factors Leading to SIR
1. Railroads
2. Resources
a. Abundance of natural resources
b. abundance of skilled and unskilled labor.
3. Government Policy Towards Business
a. Willing to help at all levels to stimulate growth.
b. Market keeps growing as the population grows.
4. Entrepreneurs
a. Large pool of talented businessmen and advisors.
5. New Inventions and Technology
The Railroads
- The factor MOST responsible for growth of American
- The Railroad fueled the growing US economy:
- First big business in the US.
- A magnet for financial investment.
- The key to opening the West.
- Aided the development of other industries
- Became a consumer of other industries.
- A focus is made to standardize and consolidate the rail
- Binds all sections of the country together into one market.
- Improvements in Service
- 4 track main lines
- Standard gauge tracks
- Use of Westinghouse air brakes allows all cars to stop
simultaneously. Allows them to carry heavier loads on longer
- Pullman Palace Cars - luxury travel
- Time Zones are developed to standardize
RR scheduling.
- Originally divided the US into 4 zones and
will eventually spread world wide.
Corruption in the Railroads
- Stock Watering
- Exaggerating RR assets, selling stock at higher prices than it was worth.
- Bribery
- of judges, legislature
- The pool
- An anti-competitive combination - group of RR companies agree to divide
business in a geographic area and share the profits. Keeping other companies
- Rebates and Kickbacks
- Reward powerful shippers for steady and assured traffic.
- Price Gouging
- Rates are low on competitive lines, but jacked up on non-competitive lines.
Government Regulation of RR
- State regulation - 1870s
- Encourages farmers to protest and organize (the
Grange) to pressure state legislatures into passing
regulations to control RR monopolies.
- Federal Regulation
- 1886 - Wabash v. Illinois
- SC ruls that states CANNOT regulate interstate
- 1887 - Interstate Commerce Act
- Prohibits rebates, pools and requires rates be
- Natural Resources:
- Coal - amount mined doubled each decade
between 1840 and 1890.
- Iron Ore
- Oil - first in Western PA, later in Texas.
- Human Resources
- Population doubles between 1860 and 1890.
- Immigrations - 14 million immigrants to the
US during this time.
- Many are new immigrants from south
and east Europe.
Favorable Government Policy Towards
- Laissez-Faire
- The ideology of the industrial age.
- Individuals should compete freely in the marketplace.
- Industry should have very few government regulations and
- Entrepreneurs
- Ones who take risks to start new businesses.
- Received help from the US government.
- High protective tariffs
- Cheap land
- Liberal immigration laws - cheap labor.