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6 PART 1 The Nature of Contemporary Business

EXHIBIT 1.1
The Evolution of Business in the United States

1800 1825 1850 1875 1900 1925 1950 Present
The Industrial Revolution The Railroad Era The Assembly The Globalization Era
• Birth of the factory system • Coast to coast Line Era • Liberalization of
• Introduction of labor-saving business expansion • Introduction international trade and
equipment • Growth of of scientific investment regulations
monopolies and management in • Innovations in IT and
introduction of manufacturing the Internet
antitrust laws • Birth of labor • Tightening of corporate
laws and labor governance regulations
unions and ethics
1815 1875 1913 1944

The Industrial Revolution and the Growth of the Factory System in
the United States. During the 60 years between 1815 and 1875, the Industrial
Revolution, which began in Great Britain, transformed the United States from an
agrarian economy into an industrial giant. Britain’s Industrial Revolution had its
spillover effects in such areas as railways, roads, harbors, electric power plants, and
2
telephone and telegraph systems. The United States, with its continental-sized
land mass, large mineral deposits, relatively scarce but growing labor force, and
individualist philosophy, offered profit-seeking businesspeople the opportunity to
earn a high return on their investment. Agriculture in the United States was very
profitable and led to rising farm incomes and a strong demand for standardized
consumer products.
The Industrial Revolution brought with it new technologies that facilitated mass
factory system A method of mass production of standardized items beneath one roof—the factory system.Under the
production in which raw materials, factory system of mass production, raw materials, machinery, and labor were
machinery, and labor are brought brought together in large volumes in one location to produce goods less expen-
together in large volumes in one
location to produce goods less sively. Since production was on a large scale, raw materials and machinery could be
expensively than in dispersed locations purchased in bulk and at lower cost. However, the growing demand for mass-
produced goods led to labor shortages in factories. This caused labor cost to rise,
and this in turn forced businesses to invent and adopt labor-saving equipment and
manufacturing techniques that became a unique feature of “Yankee ingenuity.” The
new machines were capable of producing goods faster, cheaper, and more uni-
formly (and of better quality) than those produced by hand. Over time, this type of
specialization of labor Grouping manufacturing process led to the specialization of labor; that is, employees were
employees to work on assigned tasks grouped together on the basis of their skills and factory demand and were increas-
on the basis of their specific skills and ingly assigned to specific tasks.
factory demand

The Railroad Era. In the early 1870s, the railroad drove economic expansion,
encouraged massive speculation, and created fabulous wealth. Continental rail-
roads turned the United States into a unified market from coast to coast. Retailers
expanded to serve immigrants (including Chinese) who worked on building the
railroad system. Land values soared along the rail routes, and cargo that took weeks
to travel by boat and wagon could now be moved in days. The railroad era, like the
dotcom era of the late 1990s and early 2000, was riddled with speculation, corrup-
tion, and miscalculation. Rail barons worked political connections to obtain federal
land grants, and speculators grew rich. During this period, the advanced technolo-
gies developed by U.S. business made the United States the most important coun-
try among the industrialized nations of the world. For example, during the 1875 to
1913 period, the U.S. share of world manufactures rose from 23 to almost 36 per-
cent while Britain’s declined from nearly 32 to only 14 percent.

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