Global Economic Transformation: The Second Industrial Revolution
The Development of Large-Scale Capitalism (1870-1914)
From 1870 onwards, Europe, the USA, and Japan experienced a strong development of economic activity. This period is often referred to as Big Business or the Second Phase of the Industrial Revolution.
Key Factors of Industrial Capitalism
Industrial capitalism significantly contributed to economic growth through several key factors:
New Sources of Funding
Large amounts of money were required for the installation and renovation of factories. This capital was primarily obtained through bank loans granted to companies and by pooling private capital, leading to the formation of various types of firms, including the corporation.
Business Concentration
This involved the merger of several companies to limit competition and avoid overproduction. The goal was to establish fixed prices and find new markets. Business concentration took two primary forms:
- Vertical Concentration: Companies manufacturing different but complementary products merged to control the entire production process.
- Horizontal Concentration: Companies engaged in the same industrial activity associated to avoid competition.
These groups ultimately led to the formation of monopolies.
Internationalization of the Market
Trade between countries worldwide increased, albeit unevenly. Industrial powers marketed their manufactured products, while other countries supplied raw materials. The development of international trade was boosted by the growth of industrial production, the abundance of precious metals, and advancements in communications through the steamboat, the railroad, and the appearance of the automobile.
Technological Advances
Important technical advances emerged, such as the Bessemer converter, which significantly improved steel production. New metals like nickel and aluminum also came into widespread use.
New Sources of Energy
Electricity and oil supplemented and eventually replaced coal as primary energy sources.
- Electricity developed rapidly with Edison’s invention of the light bulb. Furthermore, Berger’s discovery of how to generate electricity from hydropower (the force of water) expanded its applications, including lighting and transportation.
- Oil became increasingly important when used as a fuel for transportation.
New Branches of Industry
The Second Industrial Revolution saw the rise of new industrial sectors:
Chemical Industry
It offered a wide range of products, from dyes to pharmaceuticals.
Electrical Industry
Manufactured electrical equipment, utilizing large amounts of copper and lead.
Food Industry
New techniques allowed for the conservation, canning, and packaging of food in sealed containers, revolutionizing food distribution.
Industrialization’s Global Impact and Shifting Powers
While Great Britain had been a pioneer in the early stage of industrialization, it lost its lead due to outdated facilities and equipment, as well as a lack of investment in new industries.
Germany
Experienced dramatic industrial expansion through the adoption of new technologies, development of new industries, growth of heavy industry, promotion of industrial concentration, and favorable state measures, all linked to significant bank funding.
Other Industrializing Nations
Belgium and France continued their industrialization. Russia also managed to industrialize. The United States emerged as the hegemon of the global economy. Japan successfully industrialized through state intervention, which provided capital and technical resources.