The United States and other nations worldwide suffered from an economic recession in the late nineteenth century. Falling prices typically signal economic stagnation: insufficient demand for the available goods and services. In the United States, however, industrial expansion went into high gear during this period. Manufacturing efficiencies enabled American firms to profit and invest in innovations even as prices fell. The industrializing economy generated wealth and production never before seen.
Heavy Industry: History
Two key factors created the foundation for the rapid growth of the heavy industry in the late 1800s: the growth of the steel industry and the expansion of the railroad networks throughout the United States.
Heavy Industry: Refers to the form of business, usually focused on the manufacturing of “heavy” products such as iron, coal, steel, oil, etc., or the mass production of goods, that incurs a high capital cost and barriers to entry as the industry is established.
Fig. 1- This photograph, taken in 1889, shows the industrial scale of Standard Oil's Refinery Number 1 in Cleveland, Ohio.
Heavy Industry: Formation - the growth of the steel industry
Factories were a familiar sight in America by the 1870s. These factories mainly produced textiles, food, shoes, paper, and furniture to replace similar goods made at home. Gradually, however, a different type of demand emerged as the economy developed, the need for goods to support the industry.
Central to this increase in demand was a technological revolution in steel production. A large iron industry already existed, turning out wrought iron, a malleable metal easily worked by blacksmiths and farmers. But wrought iron was not suited for industrial uses and could not withstand high volumes of railroad traffic. In 1856, Henry Bessemer designed a refining furnace that turned raw iron into a new product: steel, a metal more durable than iron and, on top of that, much cheaper to produce.
Andrew Carnegie and the Steel industry
Fig. 2 - The image above from the 1903 book "The Inside History of the Carnegie Steel Company" shows the scale of the Bessemer furnaces at the leading steel plant of the Carnegie company
The Bessemer converter attracted many users, but Andrew Carnegie fully exploited its potential. Carnegie was a great example of an American success story. He arrived on the shores of the United States from Scotland in 1848 at 12, impoverished and in need of work. He became a telegraph operator, then went to work for the Pennsylvania Railroad and rapidly climbed the management ladder. In 1865, Carnegie struck out on his own as an iron manufacturer, selling mainly to his connections and associates in the railroad industry.
In 1872, Carnegie constructed a massive steel mill outside Pittsburgh, with a Bessemer furnace as its centerpiece. Through innovation in the refining process and attention to detail focused on efficiency, Carnegie constructed an integrated plant, with iron entering one end and coming out the other as finished steel rails. Carnegie’s new plant became the industry standard, soon displacing smaller iron mill operations in western Pennsylvania.
The United States has rich mineral resources for steel production. The Midwest and Northeast held vast quantities of iron ore and coal - both needed large amounts to produce steel. In addition, steam engines became the essential power source for these immense factories, consuming prodigious amounts of coal; steam engines soon replaced waterpower as the primary source of industrial power until electrification in the 1900s.
Heavy Industry: Formation - Growth of the Railroad
Water transportation met the country’s needs before the Civil War. However, by 1860, as a network of tracks crisscrossed the eastern half of the country, the railroad was on its way to becoming industrial America’s mode of transportation.
Railroad development in the U.S. was often fiercely competitive and subject to boom and bust. Yet industrialists raised vast sums of money and built a network of railroads more extensive than the rest of the world’s railroads combined. By 1900, almost every region of the United States could be reached by rail.
Fig. 3 - This map from 1918 shows the extent and growth of the railroad industry and rail networks across the United States, which was essential to the growth of the heavy industry
In 1883, railroad companies divided the nation into time zones. By the 1880s, railroads adopted a nationwide standardized track gauge, and tracks and locomotives saw innovations that made them faster and more reliable. By the late 1800s, an established transportation system to bring raw minerals to the expanding industrial centers and transport their finished goods, such as steel rails, to other regions.
Heavy Industry: Expansion
Manufacturing was primarily small-scale until the industrial age, with most products going to nearby markets. In the following decades, substantial business investments were available after the Civil War. Thus, the capital was needed to build large factories, pay for massive industrial machines, and allow investors to enter the market.
Heavy industry and "big business" expansion were inevitable because of the American market. Unlike Europe, the U.S. was not fractured by national borders that impeded the flow of goods. The population, bolstered by immigration, grew by more than 20 million people from 1870 to 1890. Railroads lined the expanding cities to distant producers. Nowhere else did manufacturers have a vast and receptive market for standardized products.
Birth of a Heavy Industry: John D. Rockefeller and Standard Oil - Case Study
Fig. 4 - A portrait of John D. Rockefeller from 1888
There had long been reports of petroleum pools oozing from the earth's bowels by rural Americans. Farmers used it to grease their wagons. Mostly, it was just a nuisance. Then, in the 1850s, experiments figured out how to extract kerosene from oil, a clean-burning fuel that was excellent for heating and lighting homes.
The only thing they needed was crude oil to start an industry. It is likely that petroleum was found near the surface near Titusville, Pennsylvania, if not in pools.
Overnight, a forest of derricks and small-scale refineries sprang up. However, the refining soon shifted to center around transportation hubs, primarily the rail line from Pennsylvania to Cleveland, Ohio.
At that time, John D. Rockefeller was a small-scale Cleveland grain dealer, 24 years old and having a modest business. Rockefeller borrowed heavily to get into the oil refining business to expand capacity. Within a few years, his firm - Stand Oil of Ohio - was Cleveland's largest refinery, and Rockefeller cast his eye on the entire industry.
In the 1870s, Rockefeller struck a deal with the railroad industry in Ohio that offered secret rebates that gave him a decisive advantage over his competitors. With this deal done, Rockefeller offered his Cleveland competitors the choice of selling their refineries to him or being forced out of business. By the early 1880s, Standard Oil controlled nearly 95 percent of the nation's refineries, not just Cleveland.
Rockefeller was not satisfied with just controlling the nation’s refineries. Rockefeller began to design his business structure to serve a national and international market. Starting with refining, Standard Oil quickly added a distribution network, oil pipelines, and tankers and invested in the oil fields themselves. Rockefeller created the first heavy industry of oil production. High production rates, massive amounts of product produced and shipped, and the need for large factories, refineries, and transportation networks.
Heavy Industry: Overview
The hundred largest companies controlled a third of the nation's total productive capacity by the turn of the century. There was little left for small manufacturing. They still flourished in some regions or at least survived. However, the dominant form had become the large-scale heavy industry. Laying the groundwork for the mass production of products, the growth of urban cities and skyscrapers, and establishing the supply network that would feed the consumerism of the early twentieth century.
Expansion of Heavy Industry - Key takeaways
- Heavy Industry refers to the form of business usually focused on manufacturing “heavy” products such as iron, coal, steel, oil, etc., or the mass production of goods, which incurs a high capital cost and barriers to entry as the industry is established.
- Two key factors created the foundation for the rapid growth of the heavy industry in the late 1800s: the growth of the steel industry and the expansion of the railroad networks throughout the United States.
- The expansion of heavy industry and big business was inevitable because of the American market due to the nation's rapid population growth, access to raw materials, and growing railroad networks.
- By the 1900s, the most prominent companies controlled one-third of the nation’s total productive capacity, and the dominant form of industrial organization had become. It would long remain as large-scale heavy industry.
References
- Morris, C. R. (2014b). The Dawn of Innovation: The First American Industrial Revolution (Reprint ed.). PublicAffairs.
Explanations 
Exams 
Magazine 
