1. The Second Industrial Revolution

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1.1. Innovations and changes

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New sources of finance

In order to be able to set up, renovate or maintain a factory, business owners had to find new sources of finance.

• A joint-stock company was a company made up of individuals who each contributed a part of the capital. Each investor bought shares in the business, and received a proportional part of the profits or losses.
• The bank lent money to businesses in return for interest. Banks started to buy shares in businesses, and became investors. This led to a union between financial and industrial capital.
• The stock exchange was a marketplace where shares in companies were bought and sold.

New business structures

Businesses joined to become associations in order to reduce competition, by limiting production, establishing fixed prices and dividing the market between them. They included the following structures.

• Cartels: horizontal associations of different companies working in the same industry, which made collective decisions about production and prices.
• Trusts: vertical associations formed by various companies working in different industries, which used their size to control the market for their products and eliminate their competitors.
• Holding companies: large financial companies that earned profits by buying and holding shares in other companies.

   

New technological advances

Great technological advances and their application to industry, led to an increase in production and industrial development.

One of the most significant innovations was the improvement of the Bessemer converter. This helped lower the cost of producing steel, which was an important material for railways, cars and skyscrapers.

Other important innovations and inventions of this era include dynamite, stainless steel, and artificial fibres, such as artificial silk made from cellulose, which revolutionised the textile industry.

   

New sources of energy

In addition to coal and gas, which were important sources of energy in the First Industrial Revolution, electricity and oil were new sources of energy.

• Electricity: in 1869, Berges designed a hydroelectric generator to produce electricity for factories. This led to the construction of large hydroelectric power plants and the installation of electric cables to provide homes and factories with electricity. In 1879, Thomas Edison invented the electric light bulb, which soon replaced gaslights in factories, streets and homes.
• Oil: new fuels such as kerosene and petrol were produced from oil in oil refineries. The first oil refinery was built in Cleveland, USA, in 1889, with money invested by John D. Rockefeller, an American businessman. The importance of petrol grew with the development of the petrol-powered car in the late 19th century. Rockefeller later founded the Standard Oil Company, the world's largest oil company.

New industries

One of the most important new industries was the electricity industry, which produced equipment such as cables, bulbs and lamps. The German companies AEG and Siemens were established during this period.

Other important industries included the food industry, which preserved food in metal tins; the chemical industry, which manufactured a diversity of products, such as perfume, dynamite and medicine; and the automobile industry: Henry Ford began the mass production of cars with the Model T. Consumer goods industries were also established, which produced goods for direct consumption by the public, such as food, cosmetics, medicines, footwear and clothing.

1.2. The consequences of the Second Industrial Revolution

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Did you know?

The origin of design

Design was born in the 19th century as a consequence of industrialisation. Its objective was to create useful, attractive objects that could be manufactured in large quantities. Industrial design was used in many different industries, such as the car industry, the textile industry (clothes) and the media industry (magazines and posters).

Graphic design was particularly important in the development of advertising.

The organisation of work

The organisation of work changed and the assembly line developed: each worker specialised in a specific task, such as placing a nut and screwing a nut. This saved time and meant more products could be manufactured. Henry Ford was the first to use the assembly line in his car manufacturing company, the Ford Motor Company, in 1913.

The birth of the consumer society

The consumer society developed due to the increase in production. It led to a new way of thinking; people began to value material well-being highly.

• The upper class was the only social group that could afford luxury items, such as a car or telephone. The acquisition of these items became a sign of their social status.
• The lower class had lower wages and couldn't afford consumer goods. Window shopping became popular, where people went to look at products on display in the windows of large department stores. These department stores opened in 1890 in France and the United States.

Companies used advertising to tell people about their products, in order to sell everything they produced to avoid an accumulation of unsold products. This was particularly important in the consumer goods industries, such as the food, textiles, footwear, electricity, chemical and car industries.

Economic crisis and cycles

Economic crises arose from the excess of products that the market could not consume, which resulted in an imbalance between supply and demand. Cycles of economic growth followed by crisis became a characteristic feature of capitalism.

Important

The evolution of the economic cycle

An economic cycle is made up of different stages.

• Economic expansion or growth: there is an increase in investment, production and employment; salaries increase and there is a growth in demand and in companies' profits.
• Crisis: production (supply) is higher than demand; prices fall, profits decrease and salaries are reduced.
• Recession or depression: investment falls, companies close down; there is mass unemployment and consumption stagnates.
• Recovery: supply balances with demand and the economy begins to expand.

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THE GROWTH OF INTERNATIONAL TRADE​ International trade increased due to the growth in industrial production; the improvement of transport systems, such as railways and shipping; and the construction of tunnels and canals. Dynamite enabled the construction of large tunnels through mountainous areas such as the Mont Cenis Tunnel in France, in 1873 and the Simplon Tunnel through the Swiss and Italian Alps, in 1906. Dynamite also made it possible to build huge canals, such as the Suez Canal in Egypt, and the Panama Canal. The Suez Canal was built between 1859 and 1869, by the French engineer Ferdinand de Lesseps. It is about 160 km long and 125 m wide. The Suez Canal allowed large ships to cross from the Mediterranean Sea to the Red Sea, without having to sail around the coast of Africa. In 1874, the British bought the canal in order to improve communications between Great Britain and India.     The Panama Canal The Panama Canal was begun by the French in 1880. It was impossible to build a sea-level canal like the Suez Canal, so the French engineer Philippe Bunau-Varilla designed a system of locks and two lakes that would raise or lower the ships to get them across the mountain range in Panama. The United States was keen to acquire an inter-oceanic route, and bought the construction rights for the canal. Between 1904 and 1914, the United States finalised construction of the canal at a cost of approximately 400 million dollars. With the signing of the Hay-Burnau-Varilla Treaty, the United States gained permanent ownership of the canal. http://www.rtve.es/noticias/ (Translated)