Ch 17 Industrial Expansion and Concentration Focus is on production not necessarily consumption What were the main manufacturing productivity advances 1850 of all power was generated by animals human energy machine energy Manufacturing was not rising while agriculture was falling manufacturing just rose at a quicker rate than agriculture and eventually outgrew it Innovations of energy o Steam engine coal kerosene oil natural gas electricity Innovations of mass production o Continuous flow production scientific management Frederick W Taylor most important contributor to scientific management and o Interchangeable parts product standardization mechanization mass production and efficiency assembly lines o Refrigerated railcars sealed cans long distance pipelines steel tank cars for oil industry the typewriter the cash register o New technologies led to mass production and lowered costs through economies of scale o From 1860 to 1910 the most rapid advance per worker was in men s clothing Railroads were the leaders in new management structures The new scale and size of business required new practices Scientific management began to dominate business procedures with a laboratory like exactness US innovation and invention was largely imported o The United States was a beneficiary of those extensive technological innovations in Great Britain which we now call the industrial revolution The early American experience with industrialization therefore did not necessarily involve an inventive process but more commonly the transfer of technologies which had already been developed elsewhere However although the early dependence upon European technology was very great it was not total o In numerous ways therefore resource abundance and labor scarcity and the nature of industrial technology thrust the American economy very quickly toward the capital and resource intensive end of the spectrum of techniques I would like to suggest that the American experience with standardization uniformity and interchangeability shaped the development of the capital goods sector in ways which subsequently made it an unusually effective agent for the generation and transmission of technological innovation How and why were business organizations changed Early business practices o 1 Gentlemen s agreements used for setting prices o 2 Pooling dividing a market and assigning each seller a portion used for prices and or market territory o Typical issues with cartels arose incentive to cheat and inability to enforce agreements Later business practices o 1 Trusts o 2 Holding Companies Why business organizations changed o 1 The rise of mass production as a result of continuous flow production methods and new forms of management o 2 The relentless search for monopoly profits that was often made possible by the development of new legal arrangements Two phases of the concentration movement o Phase I Horizontal Mergers 1879 1893 Combine small firms into larger firms to create economies of scale i e Standard Oil John Rockerfeller o Phase II Vertical Mergers 1898 1904 One firm controls all phases of production i e from raw materials to retail sales i e American Tobacco Company Carnegie Company steel How did the change in organization affect government regulation 2 The Sherman Antitrust Act o Passed in 1890 o Declared illegal every contract combination in the form of trust or otherwise or conspiracy in restraint of trade among the several states o Prescribed punishment for every person who shall monopolize or attempt to monopolize or combine or conspire to monopolize any part of the trade or commerce among the several states o Landmark Supreme Court Cases in 1911 1 Standard Oil Standard Oil of New Jersey renamed Exxon now part of ExxonMobil Standard Oil of New York renamed Mobil now part of ExxonMobil Standard Oil of California renamed Chevron became Chevron Texaco but returned to Chevron Standard Oil of Indiana renamed Amoco now part of BP Standard Oil of Kentucky currently Chevron Continental Oil Company or Conoco now part of ConocoPhillips The Ohio Oil Company or The Ohio now known as Marathon Oil Standard Oil of Ohio acquired by BP in 1987 Company 2 American Tobacco Company American Tobacco Company R J Reynolds Liggett Myers Tobacco Company Lorillard o Federal Trade Commission created in 1914 with the Clayton Act Attempted to fill holes from Sherman Act Price discrimination was key illegal practice 3 Ch 19 Money Prices and Finance in the Postbellum Era Between the Civil War and WWI two issues in the monetary system were dominant 1 Deflation 2 Banking panics How did the banking system become a dual banking system Dual banking system state and national banks The goal was to convert all state banks to national banks o March 1865 tax of 10 levied against state bank notes o Not all state banks were eliminated State banks could do well only by issuing deposits Regulations were less strict for state banks Tradeoffs for state banks prestige of membership in national system versus stricter regulations Tradeoffs for regulators higher standards for the soundness of banks and the system versus losing members By 1914 there were more state banks than national banks Why couldn t the US return to the Gold Standard after the Civil War The debate What should the monetary system be based upon o 1 Keep the greenback o 2 Gold Standard o 3 Bimetallic system gold and silver Why not continue with the greenback o With no central bank the Treasury would have been responsible for making decisions about how much money to print o Congress was concerned about the incentive to print too much money 5 Why couldn t the US simply return to the Gold Standard o During the Civil War US prices increased much more than British prices If the greenbacks were converted to gold at the prewar exchange rate there would have been a flood of conversions in order to obtain the English Pound o Imports would have soared and gold would have left the country very quickly Although not officially the US acted as if they were on the Gold Standard The federal government had to decrease the money supply in order to reduce the amount of The Crime of 1873 the silver exchange rate made it more valuable in the market than to trade gold going overseas it for currency o Western states and silver advocates wanted the Treasury to buy more silver Advantages of the Gold Standard o Reduced risk of rapid monetary growth o International exchange rates were essentially fixed o Increased public