Industrial Capitalism

Industrial Capitalism: Definition

Industrial capitalism began right after the Civil War as new technological advancements ushered in rapid mechanization.

The new production methods of the late 19^th and early 20^th centuries drastically increased production.

Fig. 1 - Photo of a Pullman sleeping car 1926 Source: Wikimedia Commons

After the war, America began focusing more on large factories that were capable of producing large quantities at a faster rate. Wealthy business people started seeking new international trade markets, even though the country remained largely isolationist. Though this period became lucrative for a few business people, many Americans experienced crippling poverty. This period of American industrialization had sweeping consequences on society and the economy.

The Rise of Industrial Capitalism

Fig. 2 - Panorama of Carnegie Steel Company, Ohio. Source: Wikimedia Commons

At the start of 1865, America was the fourth-largest industrial economy in the world, but moved into first place by 1898. America had moved from a largely agrarian society before the Civil War to an urban one by the 1890s. Businesses grew from small and self-paced to large corporate factories that moved at the company's pace. With this incredible transformation also came a drastic gap in social classes.

Fig. 3 - Standard Oil in Cleveland, Ohio Source: Wikimedia Commons

Towards the end of the 19^th century, small, local businesses practically became obsolete due to the rise of large corporations that grew into monopolies and trusts. For example, John Rockefeller, owner of Standard Oil, forced many of his competitors to sell out to him, nearly eliminating all competition. By the late 1880s, Rockefeller controlled almost 90% of America's oil industry. Another example is Andrew Carnegie, who consolidated his steel industry vertically, buying up companies that handled all methods of steel production. America began reaching internationally for trade and would become an empire by acquiring new territories.

The above quote discusses America's acquisition of the Philippines, Puerto Rico, and Hawaii. America gained access to new markets, natural resources, and trade routes when it annexed the above territories.

Development of Industrial Capitalism

To understand the development of industrial capitalism, it is important to understand the socioeconomic continuities and changes that accompany the period between 1865 and 1898. The table below demonstrates these factors and the corresponding key points of each factor.

Laissez-Faire

Many wealthy business owners, like Rockefeller and Carnegie, could reach an extreme level of wealth through America's embracing of Laissez-Faire policies. Politicians did not agree with any government intervention with the market. Many believed that any government regulation would impede free enterprise. Corruption also played a critical role in the adoption of these policies. Monopolists like Rockefeller and others would bribe politicians to continue laissez-faire practices.

Labor

A large influx of immigrants poured into America at the turn of the twentieth century. Many settled in urban, industrial areas where factories proliferated. Therefore, business owners had a large labor force to work in their factories and businesses.

Fig. 4 - Immigrants at Ellis Island 1900 Source: Wikimedia Commons

Immigrant workers were paid meager wages and were treated poorly by management. Owners hired women and children because they could get away with paying them 25% less than immigrant men. These types of business practices were allowed due to the social belief in Social Darwinism.

Social Darwinism

English philosopher Herbert Spencer began applying "survival of the fittest" to societal structures where only the fit would survive. During the Gilded Age, many business magnates believed in Social Darwinism due to its support of the wealthy.

Fig. 5 - Portrait of Herbert Spencer Source: Wikimedia Commons

Social Darwinism stated that the rich (fit) deserved to be, while the poor (weak) should be allowed to die out. Therefore, according to this social principle, the world's wealth would eventually be consolidated among a select few who would be smart enough to handle it.

Characteristics of Industrial Capitalism

Industrial capitalism is a mode of production that requires capital to produce goods that will be traded on the market. There are four main characteristics of industrial capitalism throughout this period.

Fig. 7 - Mr and Mrs Andrew Carnegie, 1910 Source: Wikimedia Commons

The list below explains the four main characteristics of Industrial Capitalism:

• Large Scale Industrial Production-a massive shift in technology, international communication grew, policies directed at government growth triggered economic development and the consolidation of businesses.
• Marketing advances were created, and a steady workforce allowed for the rapid production of goods.
• Business owners created trusts and monopolies; Wealth became concentrated, with only a small percentage of the population controlling majority of the wealth.
• American businesses began reaching outside the U.S. to obtain influence over international markets.

Rise of Industrial Capitalism: Summary

In Richard N. Langlois' book The Dynamics of Industrial Capitalism: Schumpeter, Chandler and the New Economy (2007), he describes how Industrial Capitalism can be divided into three distinct stages:

As America progressed after the Civil War, Industrial Capitalism shifted from the "Invisible Hand" to the "Visible Hand" as industry boomed and corporations became giants. This "Visible Hand" era lasted over 100 years, and originated with the Gilded Age in America. The key compromise to the rise of industrial capitalism and the booming economy can be seen at ground level, with the poor working conditions and the ever-increasing social gap between the rich and poor.