1. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Industrial Expansion and Concentration

2. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Focus is on production; not necessarily consumption What were the main productivity advances? How and why were business organizations changed? How did the change in organization affect government regulation?

3. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. U.S. Commodity Production YearAgricultureManufacturing 186953%33% 189933%53%

4. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. What was the reason for the shift? Was manufacturing rising and agriculture falling? What changed the relative position?

5. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

8. Some data: 1895- US is leading industrial power 1910- US factory output value more than twice that of 2 nd place country, Germany 1913- US accounted for more than 1/3 of industrial production

9. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Interchangeable parts, product standardization, mechanization, mass production, and assembly lines were all critical components

10. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 1850- ¾ of all power was generated by animals; human energy > machine energy Innovations of energy: Steam engine Coal Kerosene Oil Natural gas Electricity

11. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Innovations: 1)Continuous-flow production 2)Scientific management

12. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Name to know: Frederick W. Taylor Most important contributor to scientific management and efficiency

13. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Railroads were the leaders in new management structures The new scale and size of business required new practices Scientific management began to dominate

14. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

15. Was our invention and innovation “home-grown” or was it imported? See Rosenberg (1977) “American Technology: Imported or Indigenous?”

16. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 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. Nathan Rosenberg, 1977

17. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 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. Nathan Rosenberg, 1977

18. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Early business practices: 1)Gentlemen’s agreements; used for setting prices 2)Pooling; used for prices and/or market territory Typical issues with cartels arose- incentive to cheat and inability to enforce agreements

19. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Later business practices: 1)Trust 2)Holding Company

20. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Phase I: Horizontal Mergers (1879-1893) Combine small firms into larger firms to create economies of scale Example: Standard Oil

21. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Substitutes and Complements: Was Standard guaranteed profits in the long run? Did monopoly power protect Standard?

22. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Phase 2: Vertical Mergers (1898-1904) One firm controls all phases of production; i.e. from raw materials to retail sales See Chandler and Galambos (1970) “The Development of Large-Scale Economic Organizations in Modern America”

23. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Examples: American Tobacco Company, Carnegie Company

24. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Passed in 1890 Declared illegal “every contract, combination in the form of trust, or otherwise, or conspiracy in restraint of trade among the several states.” 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.”

25. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Landmark Supreme Court Cases in 1911: 1)Standard Oil 2)American Tobacco Company

26. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Major breakup companies: 1)Standard Oil of New Jersey - renamed Exxon, now part of ExxonMobil.Standard Oil of New JerseyExxon ExxonMobil 2)Standard Oil of New York– renamed Mobil, now part of ExxonMobil.Standard Oil of New YorkMobil ExxonMobil 3)Standard Oil of California –renamed Chevron, became ChevronTexaco, but returned to Chevron.Standard Oil of CaliforniaChevron ChevronTexaco 4)Standard Oil of Indiana - renamed Amoco, now part of BP.Standard Oil of IndianaAmocoBP 5)Standard Oil of Kentucky – currently Chevron.Standard Oil of KentuckyChevron 6)Continental Oil Company – or Conoco now part of ConocoPhillips.Continental Oil CompanyConoco ConocoPhillips 7)Standard Oil of Ohio – acquired by BP in 1987.Standard Oil of OhioBP 8)The Ohio Oil Company – or The Ohio, now known as Marathon Oil CompanyThe Ohio Oil Company Marathon Oil Company

27. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Major breakup companies:  American Tobacco Company  R.J. Reynolds  Liggett & Myers Tobacco Company  Lorillard

28. © 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Federal Trade Commission created in 1914 with the Clayton Act Attempted to fill in holes from Sherman Act Price discrimination was key illegal practice