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American Industry Development in the Gilded Age: Bessemer Process, Scientific Management & New Business Models

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  • 0:05 The Bessemer Process…
  • 1:22 Changing Management Styles
  • 3:14 New Forms of Business…
  • 6:00 Government's Response
  • 6:40 Lesson Summary
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Lesson Transcript
Instructor: Alexandra Lutz

Alexandra has taught students at every age level from pre-school through adult. She has a BSEd in English Education.

American industry was transformed in the Second Industrial Revolution but not just through mechanization. Find out how new methods of management and organization helped the development of big business.

The Bessemer Process Transforms Industry

Between the Civil War and the beginning of the 20th century, the Second Industrial Revolution marked the transformation from craft production to mass production in the United States. American factories began churning out all kinds of consumer and industrial goods. American wages, wealth, capital and GDP all rose at the fastest rate in the nation's history and outpaced the rest of the world. And the men at the helm of these enterprises were devising new strategies to put themselves and their companies at the top.

Though there were several well-known inventors who revolutionized important aspects of home and business, such as Thomas Edison, Alexander Graham Bell and George Westinghouse, the Second Industrial Revolution wouldn't have been possible if it weren't for Henry Bessemer - a name you've likely never heard.

In 1855, Bessemer patented an inexpensive way to process steel, so it could be produced and used on a massive, industrial scale. The Bessemer steel process, in turn, allowed for the mechanization of industry. This alone began to change the composition of the labor force. Increasingly, factories were staffed by masses of unskilled laborers who performed repetitive tasks at machines.

Changing Management Styles

The next important step in America's manufacturing transformation was a distinct new style of management. Beginning with the railroads in the 1870s, large enterprises created bureaucracies with a systematic chain of command, statistical reporting and bookkeeping, and career tracks. And then came scientific management.

An engineer named Frederick Taylor applied scientific and industrial concepts to making human workers more efficient. After careful observations, he identified several principles that changed the nature of factory work and transformed the relationship between management and labor. Industrial leaders loved it; workers hated it.

Most significantly, Taylor believed that every process in a factory could be streamlined. A manager had to observe every task, analyze each individual motion needed to perform it, use a stopwatch to calculate efficiency and then determine the best process for completing the task. A manager then had to provide the proper tools, training and incentives to each employee. Workers were expected to eliminate unnecessary movements to perform more like machines and increase their productivity. Their pay became tied to their output, rather than the time they put in.

Although scientific management was developed strictly as a way to make factories more efficient, it inevitably caused friction between management and labor. The process increased the ratio of supervisors to workers and required a high degree of manager input and oversight. It also presumed that workers were slow and inefficient without constant supervision, and completely dehumanized unskilled labor by reducing them to a series of timed movements.

New Forms of Business Organization

Finally, the American economy was transformed by new business models. Corporations weren't new; they'd been around since the 1600s. But since the early 19th century, the U.S. Supreme Court had treated corporations as individuals - with all of their rights and limitations. Then, in the excited frenzy of the Gilded Age, corporations found new ways to gain an edge over the market, through a number of anti-competitive organizational structures.

In a free market, consumers benefit from competition. Let's use gas stations as an example. If Station A is the only place in town that sells gasoline, then you have to pay whatever price it's asking. This situation is a very simple monopoly. But then if Station B opens up and sells gas for 15 cents less, then you and a lot of other people will go there; eventually, Station A will probably drop its price.

One simple way for corporations to work against free market forces was through pools, where the owners of related companies made informal agreements about production levels or prices. An example would be if all of the gas stations in a certain part of town agree to sell gasoline at $5 per gallon, even if market conditions would otherwise allow gas prices to drop.

But pools don't always work. During the Second Industrial Revolution, some large corporations simply tried to buy out all of their competitors or run them out of business. This is called horizontal integration. In our example, there might be several gas stations in town, but one man buys and runs all of them. A trust is a related strategy. Basically, there are several different corporations, officially with different management, but all of them hand over their stock to a 'trust' - a sort of holding company - that exchanges the company shares for shares in the larger trust. And the board of trustees oversees the operations of each of them.

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