The Rise of Big Business.

Secondary School № 8

The Ministry of Defence

Of the Russian Federation

                                  

The Economic Development of the USA in the First Half of the XX Century and the Great Depression.

Research paper by

Tsarev Dmitri

Grade 10”A”

Scientific adviser (teacher)

Nadezhda Prokosheva

Sevastopol

2006

The outline

Introduction.                                          p.2

Chapter I: The rise of industry.                       p.3

The rapid expansion of the railroads

The growth of big business and government’s control over it  

People’s struggle for a better life

Chapter II: The wave of the immigration and its influence on the social and economic life in the country.                                  p.6

The growth of the cities

The great inventions and a new way of life in cities

Trade unions and the era of fight for rights

Chapter III: World war I and its consequences for the USA.                                                        p.10

Labor unrest

Racial unrest (ku-klux Klan, anti – immigration laws)

The new era (jazz age)

Chapter IV. The Great Depression and The New Deal.:

                                                                      p.13                                                                                                                        

The beginning of the Great Depression and its reasons

2. F. D. Roosevelt and his New Deal

Government’s efforts to reduce the immigration

4. The opposition to the New Deal

5. The role of the New Deal in coping the depression

Conclusion.                                                  p.17

 

Introduction

 

The modern USA represents an interesting object of researches for economists of the whole world. The country that has managed for a rather short period of time to become the world’s economic leader should cause interest. Besides, nowadays America shows significant success in carrying out social programs: in supporting the poorest layers of the population, in solving the problems of unemployment, racial discrimination, criminality, etc. Certainly, a number of problems still remains, but the general dynamics of development are evident.

The 1920s were called the New Era in American life. This decade was the time of unprecedented social, economic and political change. It was the time when America was becoming a modern nation. It was a period of almost uninterrupted prosperity and economic expansion. In 1928 Herbert Hoover, President of the country, proclaimed,” We in America are nearer to the final triumph over poverty that ever before in the history of any land. The poorhouse is vanishing from among us”. Only fifteen months later, the nation plunged into the severest and most prolonged economic depression in its history-a depression that continued in one form or another for a full decade. The Depression was a traumatic experience for individual Americans, who faced unemployment, the loss of land and other property, and in some cases homelessness and starvation. But the country had been able to survive and recover.

There are a lot of problems in the national economy of Russia and Ukraine nowadays: the industrial production is decreasing, the prices are constantly rising, and the rate of inflation is very high. People are losing their jobs because many factories and plants are being closed. This process reminds the period of the Great Depression in the USA. I got interested in this theme for my research because I would like to understand the processes taking place in my country better.

So, the main aim of this research paper is to understand how America being influenced so much by the Depression in the first half of the century was able to become a super power again in the second half of the XX century. Also I want to understand why this depression began in the beginning of the XX century despite positive social and economic development in the country at that period of time.

In my research I would like to find out:

how the life of America changed after the Civil War of 1861-1865;

how America, being such a young country has become a super nation;

the processes in American life that preceded the Great Depression and how they influenced social and economic life of the United States;

if the Great Depression was an inevitable, or predictable phenomenon;

how the United States managed to cope with the Depression and its consequences.

 

 

Chapter 1

The Rise of Big Business.

Life in America changed very much after the Civil war. Americans lost no time in industrializing their nation and in building trade relations with other countries.

As a result of new inventions, economic activity increased. By the time Americans celebrated their first hundred years of independence in 1876, the US was one of the world’s leading industrialized powers. The American economy was booming and prosperity was spreading, though half of industrial workers lived in poverty.

The driving force behind the industrial growth of the United States was the booming railroad industry. As an example I can give the following statistics: in 1865 the nation had about 48.000 km of track and by the 1900 320.000 km of tracks covered the nation like a giant spider web. It was the biggest railroad in the world.

Some railroaders were laying tracks in the West; others were making lines in the East and the Midwest. The south repaired lines which were wrecked during the Civil War and added seven times more miles of tracks. As railroad crisscrossed the United States, they created a national market for the country’s raw materials and manufactured goods. Railroads carried coal from mines, oil from wells, etc.

Also railroads made life better for different merchants who could now deliver goods across the country, shopping by the mail again. In 1872 Aaron Montgomery Ward, a young salesman had an idea for giving farmers a greater selection of goods than they could find in local stores. That year he sent out one – page list of items for sale. By 1874 his single sheet had grown to a 72 – page catalog.

Ward soon had a competitor which rushed after the pioneer into this new field of work - Sears, Roebuck and Company. Their catalog including more 1000 pages of items was called “the Great Wish Book”.

Madame C. J. Walker created a national market for her hair – care products both by sending them through the mail and by hiring young women to sell these products door to door. Starting her company in the early 1900s with $1.50, she was the first African American women in the nation to become the millionaire.

 Of course, such a big system as the railroads of the United States needed very strict system of regulation. In the beginning of this system it was very difficult to regulate it. People had to risk helping trains to go on rails without failures or disasters on railroads. John Westinghouse’s air brakes and George M. Pullman’s sleeping cars made rail travels safer and more comfortable.

As the USA industrialized and broadened its trade links, a group of men emerged who would dominate the economic future of the country. These were the industrial giants. They had a sense of vision to see opportunities for production and marketing where others had not. And they had the willingness to take risks. The industrial giants were able to use new inventions and corporate systems to make production costs lower and provide products and services to growing numbers of consumers.

When America entered the 20^th century, industrial power became concentrated in the hands of fewer and fewer people.

Among them there were such people as Andrew Carnegie, John D. Rockefeller, J. Piermont Morgan and Henry Ford.

Andrew Carnegie was an immigrant from Scotland. When he was young his family emigrated from Scotland to the USA. His young life was very difficult. He tried so many different jobs that it is difficult to imagine how he could work so hard. He started to work, earning only $1.20 and then he earned $2.50 per week. It was hardly to imagine that this boy would be a millionaire in future. But suddenly his talent of being businessman was recovered with his employer which impressed him greatly – Thomas A. Scott. Than his career began growing rapidly.

Andrew Carnegie pioneered many of the changes in American business. He followed a simple formula for success: “Adopt every improvement, have the best machinery, and know the most” about your business. That formula made Carnegie into what admires called a “captain of the industry.” Carnegie’s first venture was building iron bridges. In 1865 Carnegie and four partners formed the Keystone Bridge Company.

Carnegie knew that steel was better than iron for large construction projects because it was stronger and more flexible. However, making iron into steel was expensive. But salvation of this problem came to him during the visit to the Britain to his colleague Henry Bessemer. Process that was invented by the Henry Bessemer reduced the cost of the making steel. Upon his return Carnegie began to produce steel instead of iron. A year later, Carnegie and several partners chose Pittsburg, Pennsylvania, as the site for a steel mill that used the Bessemer process.

Carnegie’s main wealth started in the period between 1870s and 1890s, in the period when steel production was growing rapidly. Competition for customers was fierce. Carnegie was determined to win only by selling a better product at a lower cost than other companies. He hired scientists to improve his steel and the best managers he could find to produce it. He also set out to control every step in the steelmaking process. He did not want to pay outsiders for work his own company could do at a lower cost. By the 1890s Carnegie’s company was mining all the ore it needed from its own mines. His own ships and railroad transported the ore to his Pittsburgh mill.

Carnegie was also gaining control of the steel industry through consolidation. In the 1870s and 1880s he bought out several rival companies. In 1892 he combined them to form giant Carnegie Steel Company. It produced 25 percent of the nation’s steel.

J. Piermont Morgan wasanother man to start new era of the American economy. In the late 1880s he was the most powerful investment banker in the United States. Believing that cutthroat competition was wasteful, he bought failing railroads and consolidated them.

Next Morgan decided to merge his railroads with steel companies into a single large corporation. Only Andrew Carnegie stood in his way. Instead of challenging Carnegie, the wily Morgan offered to buy him out. The idea appeared to Carnegie who was now 66 years old. He sent Morgan a scrap of paper with his paper with his price on it: $480 million. Morgan agreed on the spot.

In 1901 Morgan formed the United States Steel Corporation. The largest corporation in the world at that time, it made three-fifths of the nation’s steel.

John D. Rockefeller was a person that started his work in the unknown field of business – oil.

In 1855 a scientist reported that oil was a good lubricant for machinery. Refined oil also made an excellent source of light and heat.

In 1859 the nation’s first oil well was drilled in Pennsylvania, spurring a frantic rush for “black gold.” Soon oil wells were pumping in Kentucky, Ohio, Illinois, Indiana, and West Virginia. By the early 1900s huge new oil fields had been discovered in Texas, California, and Oklahoma.

One of the early visitors to Pennsylvania’s oil fields was John D. Rockefeller. Growing up in Cleveland, Ohio, he had started a business to sell farm produce when he was 20 years old. Instead of fighting in the Civil War, he paid for a substitute and expended his business. In 1862 Rockefeller established an oil-refinering business in Cleveland. Eight years later he reorganized the business as a corporation, Standard Oil of Ohio. Faced with intense competition and falling prices, Rockefeller set out to gain control of the oil-refinering industry. He made deals with railroads to give rebates to Standard Oil .He could then lower his prices and force rival refineries out of business. In a depression that began in 1873, he bought the bankrupt companies.

Henry Ford was another person who began to restore American economy. One of the greatest business successes of the 1920s – the “Automobile Boom” is closely connected with the name of Henry Ford. Automobile had been produced since 1890s but only the wealthy could afford them.

By the 1920s, however, automobile factories were using a less expensive production method. Developed by Henry Ford in 1913, the assembly line (conveyor belt) is a system which is used in different kinds of production all over the world even now. This system made the production of automobiles much cheaper and faster, so almost every American had an opportunity to buy a model of Ford’s production. The popularity of automobiles helped fuel the economic boom. Industries essential to auto manufacturing, such as steel, glass, rubber, oil refining, and road construction, experienced rapid growth and created thousands of new jobs. Gas stations and tourist courts (motels) – unknown in horse-and-buggy days – lined the roadsides. So, Henry Ford made his contribution into economic development and changing of the US.

 

Chapter 2