all right this is open stocks us history chapter 18 section 2 from invention to industrial growth so last section in 1801 we talked about some inventions that were created in the post-civil war period now we're going to look at how those inventions translated into industrial growth that is the way that production expanded in the united states of mostly goods now the individuals who capitalized on these new inventions and really use business business practices to enrich themselves are referred to as robber barons and so a robber baron is a very rich and wealthy and powerful person and some of these robber barons during the gilded age sometimes what this period is called were some of the richest people of all time so not just you know an incredibly rich person for that particular era which they were but we're talking about some of the richest people who have ever lived in the history of the world now this term robber baron is a negative term used to describe these individuals robber meaning essentially that they robbed the wealth off the backs of their workers and bear into uh baron is a term of royalty so that these people were pretty much untouchable like you know royalty was back in europe so it's a negative term and one of the very first big businesses we're talking about ultra wealthy ultra powerful was the railroad company right so the railroads were really the first big mega business and that was in part because the railroads affected really every other industry so the railroad industry railroads were connected to all other parts of the economy anything that you transferred via railroad the railroad company would take some part of that so it really didn't matter what you were producing from agriculture to factory made goods et cetera et cetera and the railroads were able to build these huge uh you know really economic empires through private capital which of course capital is just money it's investments from you know private business owners but also government loans and incentives you know recall back when we talked about the west and how that was developed that you had some of the largest government loans and government subsidies in the history of the united states and so it was a combination of capital government loans and inventives that allowed businesses to become really the first big business one of these robber barons was jay gould so he is a railroad robber baron and he became one of the richest people in the united states and he was a good example of why this term robert baron has a negative connotation because he would price gouge that is to change the prices to exploit those rely on railroads and a constituency that time and time and time again is continued to be exploited by the railroad companies is the farmers and a good example is that you know during the springtime when farmers are planting their crops the railroad prices were very cheap but when it was fall when it was time for harvest and farmers needed to transfer their agriculture um you know these railroad companies and robber barons like jay gold would jack up the price and and price gouging uh other railroad uh robber barons include cornelius vanderbilt he was also tied to the railroad industry a little bit we might call him a little bit less cutthroat than a guy like gold and here is a political cartoon kind of poking fun at these competing railroad businesses but you know once you had a railroad industry established in a certain part of the united states let's say the pacific northwest uh there really is no other competition and then you are free to charge whatever price you want and you can see how these individuals would become some of the richest people of all time uh now there are other individuals probably the most famous robber barons include carnegie and rockefeller but we'll talk about morgan as well so andrew carnegie he was one of the rare instances of you know someone achieving a rags-to-riches story so rag to riches is to go from very poor to very rich most robber barons typically didn't take that route most were already born with some investment money and made money off their investments but both carnegie and rockefeller to a certain degree built their own uh industries and businesses from the ground up andrew carnegie himself was an immigrant i believe coming from scotland and he was able in his early years to accumulate he worked for the railroad company accumulate a pretty decent amount of money and eventually got involved in steel right so andrew carnegie is responsible for producing steel and at a certain point was responsible for producing about 80 of all the steel in the us and kind of like railroads you know railroads maybe to a larger degree but everything you steal right the railroad company you steal buildings bridges you know steel was used in the united states it was used overseas and so andrew carnegie built an enormous amount of wealth on that carnegie was also unlike robber barons like gold in that he believed in philanthropy philanthropy is like charity he published the work called the sorry the gospel of wealth which essentially said that the super rich have an obligation obligation to give back to society and during the course of his lifetime andrew carnegie gave back you know millions he established universities libraries um carnegie hall was uh built by andrew carnegie and so this idea that the super rich have an obligation to give back to society was held by a certain you know constituency of these you know super rich robber baron types um but at the same time while also saying that um uh you know the super rich have an obligation to give back uh andrew carnegie would also said that he certainly is deserving of all of his wealth and a lot of these robber barons use the ideology of social darwinism to justify their wealth and power so social darwinism first of all what it is it's sort of an offshoot of charles darwin charles darwin in 1858 put for the origins of species which essentially before the ideas relating to evolution and those ideas regarding evolution were incredibly important social darwinism which was pioneered by herbert spencer so spencer is the essentially the creator of social darwinism took darwin's ideas oops darwin's ideas and applied them to human society so charles darwin what he talked about was the evolution of species and he had used this term fit and that the most fit are the ones who pass their genetic material down to the next generation therefore influencing future generations and you know giving rise to this theory of evolution well herbert spencer's idea of social darwinism more or less looked at human society and said well it's the most fit who are the richest it's the most fit who are the most powerful so this like we said before justified the wealth and power of robber barons right justified the wealth and power of robber baron so you know if carnegie if you were to ask andrew carnegie you know are you deserving of all of your wealth and power carnegie would say yes i am because i am simply the most fit and the most fit rise to the top and those who are unfit fall to the bottom of society and this was a view that was held by robber barons but also held by a large swath of the american population in fact this idea of rags the riches was incredibly helpful or not incredibly popular horatio alger he was an author who published rags the richest stories and the idea in the united states here's one example the messenger boy by horatio alger the idea in the united states that you could start off from very uh you know very sort of humble origins and make it to become a guy like andrew carnegie uh was widely held and people you know read and bought horatio alger in the stories that he uh that he produced so carnegie is the steel uh you know let's go ahead and write steel right that's what he built his fortune on uh johnny rockefeller did it on black gold or what was also called oil now oil at this time was used primarily for lighting right lights but not too long would be used for the automobile which uh isn't quite invented yet but is on the horizon john rockefeller established the standard oil company and rather than drilling oil like most people looking to get in on this black gold rockefeller took to the process of refining oil which is when you take the oil out of the ground and you turn it into you know so for example you just get the oil off the ground and then you turn it into something like i don't know kerosene however you spell kerosene um and then that process you know you couldn't just take oil out of the ground and just burn it or take oil out of the ground and then you know stick it in an automobile you have to refine it and so that's the industry that john rockefeller got in is refining the oil not necessarily drilling it at one point he controlled approximately 95 percent of all the oil refining in the united states this is what we might call a true monopoly or monopoly a monopoly is when one person owns the entire entire industry right and so you know if you're the only person in the united states that refines oil you can essentially charge whatever you want right so with a monopoly because you're the only person in that industry you can essentially charge whatever you want and that's where john rockefeller really made his you know millions of dollars and why he's one of the richest people of all time he built his industry by integrating various other businesses one way was called horizontal integration so horizontal integration would have been the process of refining so we're going to actually draw kind of a a model here to show exactly what this integration looks like so you can think of uh you know the oil company right these are supposed to be oil drills you know look very good but on the one hand you drill the oil right so you drill oil out of the ground let's go down a little bit and there could be a whole various number of people who drill oil out of the ground and then you have to take it to a factory to refine the oil because again you can't just take the oil and uh and and you know put it right in the car so you have to refine it and then you sell it right then you go to uh sales place i don't know factory store whatever it is uh let's go sell right so this would be an oil industry you got a lot of people drilling oil a lot of people refining oil and a lot of people selling oil so for horizontal integration it means that you control horizontally across a production uh industry all of the same processes right so john rockefeller in this case owned all the refining so a lot of different people drilled the oil a lot of people maybe have sold the oil but rockefeller himself made sure that he was the only one in town that could essentially refine so that is horizontal integration vertical integration means that you try and control the company from bottom up and so once standard oil was created as a you know a much more powerful company once rockefeller owned 95 of the refining process he also bought up places where the oil was drilled he also bought up places where it was sold that way the oil never leaves rockefeller's control and that's the way of vertically integrating an industry and so whether it was vertical integration or horizontal integration you know these robber barons use such tactics to build enormous business empires there's a couple of other um ways that rockefeller controlled uh oil in the u.s this is a political cartoon showing exactly how big uh reach was rockefeller invented the trust which was a legal entity which owns multiple businesses right so you might have just one single trust and there might be you know nine people on the trust and then they would own multiple businesses a lot of times multiple competing businesses so it would look like a lot of these companies were in competition but at the end of the day they were all owned by the same company when rockefeller's trust was broken up by the state of ohio which said that he had too much power uh in his oil company rockefeller just you know played sort of legal games and created the holding company which was essentially the same thing a holding company is a an entity which owns multiple businesses and multiple corporations so rockefeller could essentially maintain his profit he actually moved to new jersey right his holding company could be stationed in new jersey that way they were free from any sort of legal prosecution in ohio now the federal government did pass a law the sherman antitrust act of 1890 so this was a law to target people like standard oil company but mostly monopolies to try and break it up however though it was very weak and did not really yield any practical results but you can see as early as 1890 there are some efforts to at least try and tackle the problem of concentrated economic power in too few hands one last um robber baron that we'll talk about here is jay pierre pierpont morgan otherwise known as jp morgan uh morgan unlike rockefeller unlike carnegie did not build an empire from the ground up instead he used investment banking he purchased carnegie skila in 1901 so he bought carnegie skill see i'm just about carnegie uh c a r n e g i e n e bought carnegie steel in 1901 renamed it to the u.s steel corporation this was essentially the business that carnegie had built from the beginning and of course his steel company was utilizing you know the bessemer process and you know the new ways of making steel and eventually that became worth 1.4 billion dollars which was the first 1 billion dollar company in the u.s right so morgan is banking and investments so he would buy companies rather than build them