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Industrialization Chapter 9 Petterson Railroads 9.2 Pacific Railway Act creates a transcontinental railroad. Union Pacific & Central Pacific build it. Union Pacific – Run by Grenville Dodge Began building westward from Omaha Nebraska, 1865 Workers: (10,000) civil war veterans, immigrants, ex- convicts, adventurers Daily Life: rough, blizzards, desert heat, problems with natives. Central Pacific – Started by Theodore Dehone Judah in California Workers: were in a shortage in CA, so they hired 10,000 from China. Supplies: Shipped (boats) from the east. Railroad Expansion Spurs Industrial Growth steel, coal, timber, services Opens up markets in new towns for new products and services – cattle & other markets Railroad Consolidation – create single rail system to link all disconnected rails to one transportation system. Ex: Cornelius Vanderbilt - centralized New York rail lines and extended it to Buffalo then Chicago. National Rail System - Safety – setting of 4 times zones across the country to avoid collisions on the tracks from scheduling errors. Speed up long distance transportation Average price per mile for a ton of freight went from two cents in 1860 to ¾ a cent in 1900. Technology: airbrakes allowed for longer/heavier trains = more efficient. Unites Americans in different regions and promotes mixing of cultures. Land Grants - large tracts of land given by the federal government to the railroad companies to promote growth. Railroads would then sell the land to settlers, real estate companies and business to raise money to continue building. Ex: 1850’s & 1860’s the Gov’t awarded 120 million acres of land. Robber Barons – Railroad entrepreneurs amassed great wealth in this time and were often accused of using unethical means when making their millions. Robber Barons vs. Captains of Industry Credit Mobilier: Construction company created by Union Pacific. Exploited government funds. The Great Northern: The Great Northern was the first transcontinental built without public money and just a few land grants. In 1893, when the government-subsidized railroads went bankrupt, Hill’s line was able both to cut rates and turn a substantial profit. Big Business Ch. 9, Section 3 The Rise of Big Business Major change in economic structure: small businesses and farming => huge, complex corporations The Role of Corporations Corporation – organization owned by many people but treated by law as though it were a single person. Can: own property make contracts pay taxes sue and be sued. Stockholders – owners of the corporation. Stock – shares of the ownership in the corporation that can be sold while spreading the financial risks involved in corporate ownership. Economies of Scale Corporations produce goods more cheaply because they produce quickly using new manufacturing facilities. • Fixed Costs – business has to pay these whether or not it is operating. Ex: rent, loans, taxes. • Operating Costs – occur when running a company. Ex: wages, shipping charges, raw materials. Which companies benefit based on cost: small vs. large? Why? Small: fixed – Operating – Production - Large: fixed – Operating – Production - Small corporations have difficult time competing with larger ones. Consolidation of Industry With the large number of companies competing, prices were falling. Companies form pools agreeing to maintain prices at a certain level. Were not supported by courts and the U.S. legislature. Often broke up easily because of infighting and lack of legal protection. By 1870’s only a select few large highly efficient corps. Remain. Vertical and Horizontal Integration Vertical Integration - company which owns all of the different businesses on which it depends for it’s operation. Horizontal Integration - company which combines many firms engaged in the same type of business into one large corporation. Result of these effective strategies for corporate growth: BIG Business! Ex: Standard Oil controlled approximately 90% of the oil refining industry by 1880. See graph on page 321 Monopoly – when a single company has control of an entire market. Feared by people – who controls price? Legislation in some states made it illegal for one company to own stock in another without permission from state legislature. Trust – business merger allowing one person to manage another person’s property as a “trustee”. Way for business to get around the laws against 1 company owning another. Holding Company – Does not produce anything itself, but just owns the stock of companies that do produce goods and controls all of the companies it owns. Basically merging all into one (huge giant super rich all powerful) enterprise.
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