also known as the Technological Revolution was a phase of rapid industrialization in the final third of the 19th century and the beginning of the 20th. The First Industrial Revolution, which ended in the early-mid 1800s, was punctuated by a slowdown in macro inventions before the Second Industrial Revolution in 1870. Though a number of its characteristic events can be traced to earlier innovations in manufacturing, such as the establishment of a machine tool industry, the development of methods for manufacturing interchangeable parts and the invention of the Bessemer Process, the Second Industrial Revolution is generally dated between 1870 and 1914 up to the start of World War I.
Advancements in manufacturing and production technology enabled the widespread adoption of preexisting technological systems such as telegraph and railroad networks, gas and water supply, and sewage systems, which had earlier been concentrated to a few select cities. The enormous expansion of rail and telegraph lines after 1870 allowed unprecedented movement of people and ideas, which culminated in a new wave of globalization. In the same period new systems were introduced, most significantly electrical power and telephones. The Second Industrial Revolution continued into the 20th century with early factory electrification and the production line, and ended at the start of the First World War.
A synergy between iron and steel, railroads and coal developed at the beginning of the Second Industrial Revolution. Railroads allowed cheap transportation of materials and products, which in turn led to cheap rails to build more roads. Railroads also benefited from cheap coal for their steam locomotives. This synergy led to the laying of 75,000 miles of track in the U.S. in the 1880s, the largest amount anywhere in world history.
A market economy is an economy in which decisions regarding investment, production, and distribution are based on market determined supply and demand, and prices of goods and services are determined in a free price system.]The major defining characteristic of a market economy is that investment decisions and the allocation of producer goods are mainly made by cooperative negotiation through markets. This is contrasted with a planned economy, where investment and production decisions are embodied in a plan of production established by a state or other body with control over economic resources.
Market economies can range from regulated markets to various forms of state-owned interventionist variants. In reality, market economies and free markets do not exist in "pure" form, since societies and governments all regulate them to varying degrees. Different perspectives exist as to how strong a role the government should have in both guiding and regulating the market economies and addressing (or not addressing) the inequalities the market naturally produces since some producers are always "better" than others. Most existing market economies include a degree of state economic planning or state-directed activity, and are thus classified as mixed economies. The term free-market economy is sometimes used synonymously with market economy.
Market economies do not logically presuppose the existence of private ownership of the means of production. A market economy can and often does consist of a mix of various types of cooperatives, collectives, or autonomous state agencies that acquire and exchange capital goods in capital markets. These all utilize a market determined free price system to allocate capital goods and labor. There are many variations of market socialism, some of which involve employee-owned enterprises based on self-management; as well as models that involve public ownership of the means of production where capital goods are allocated through markets.
Capitalism is an economic system based on private ownership of the means of production and their operation for profit. Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system, and competitive markets. In a capitalist market economy, decision-making and investment is determined by the owners of the factors of production in financial and capital markets, and prices and the distribution of goods are mainly determined by competition in the market.
Economists, political economists, and historians have adopted different perspectives in their analyses of capitalism and have recognized various forms of it in practice. These include laissez-faire or free market capitalism, welfare capitalism, and state capitalism. Different forms of capitalism feature varying degrees of free markets, public ownership, obstacles to free competition, and state-sanctioned social policies. The degree of competition in markets, the role of intervention and regulation, and the scope of state ownership vary across different models of capitalism; the extent to which different markets are free, as well as the rules defining private property, are matters of politics and of policy. Most existing capitalist economies are mixed economies, which combine elements of free markets with state intervention, and in some cases, with economic planning
Capitalism has existed under many forms of government, in many different times, places, and cultures. Following the decline of mercantilism, mixed capitalist systems became dominant in the Western world and continue to spread.
a legal entity that is separate and distinct from its owners. Corporationsenjoy most of the rights and responsibilities that an individual possesses; that is, acorporationhas the right to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets and pay taxes.
Astockis a type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings. There are two main types ofstock: common and preferred. Commonstockusually entitles the owner to vote at shareholders' meetings and to receive dividends.
a person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so.
a promoter in the entertainment industry.
November 25, 1835 – August 11, 1919) was a Scottish American industrialist who led the enormous expansion of the American steel industry in the late 19th century. He is often identified as one of the richest people and one of the richest Americans ever. He built a leadership role as a philanthropist for the United States and the British Empire. During the last 18 years of his life, he gave away to charities, foundations, and universities about $350 million (in 2015 share of GDP, $78.6 billion) – almost 90 percent of his fortune. His 1889 article proclaiming "The Gospel of Wealth" called on the rich to use their wealth to improve society, and it stimulated a wave of philanthropy.
Carnegie was born in Dunfermline, Scotland, and emigrated in 1848 to the United States with his very poor parents. Carnegie started work as a telegrapher and by the 1860s had investments in railroads, railroad sleeping cars, bridges and oil derricks. He accumulated further wealth as a bond salesman raising money for American enterprise in Europe. He built Pittsburgh's Carnegie Steel Company, which he sold to J.P. Morgan in 1901 for $480 million (2015 per share of GDP, $370 billion). It became the U.S. Steel Corporation. After selling Carnegie Steel, he surpassed Rockefeller as the richest American for the next couple of years, reaching a personal net worth of US$310 billion—a fortune not yet known to the modern world. Carnegie devoted the remainder of his life to large-scale philanthropy, with special emphasis on local libraries, world peace, education and scientific research. With the fortune he made from business, he built Carnegie Hall and founded the Carnegie Corporation of New York, Carnegie Endowment for International Peace, Carnegie Institution for Science, Carnegie Trust for the Universities of Scotland, Carnegie Hero Fund, Carnegie Mellon University and the Carnegie Museums of Pittsburgh, among others.
The Homestead strike
The Homestead strike, in Homestead, Pennsylvania, pitted one of the most powerful new corporations, Carnegie Steel Company, against the nation’s strongest trade union, the Amalgamated Association of Iron and Steel Workers. An 1889 strike had won the steelworkers a favorable three-year contract; but by 1892 Andrew Carnegie was determined to break the union. His plant manager, Henry Clay Frick, stepped up production demands, and when the union refused to accept the new conditions, Frick began locking the workers out of the plant.
On July 2 all were discharged. The union, limited to skilled tradesmen, represented less than one-fifth of the thirty-eight hundred workers at the plant, but the rest voted overwhelmingly to join the strike. An advisory committee was formed, which directed the strike and soon took over the company town as well. Frick sent for three hundred Pinkerton guards, but when they arrived by barge on July 6 they were met by ten thousand strikers, many of them armed. After an all-day battle, the Pinkertons surrendered and were forced to run a gauntlet through the crowd. In all, nine strikers and seven Pinkertons were killed; many strikers and most of the remaining Pinkertons were injured, some seriously. The sheriff, unable to recruit local residents against the strikers, appealed to Governor William Stone for support; eight thousand militia arrived on July 12. Gradually, under militia protection, strikebreakers got the plant running again. Frick’s intransigence had won sympathy for the strikers, but an attempt on his life by anarchist Alexander Berkman on July 23 caused most of it to evaporate. Meanwhile, the corporation had more than a hundred strikers arrested, some of them for murder; though most were finally released, each case consumed much of the union’s time, money, and energy. The strike lost momentum and ended on November 20, 1892. With the Amalgamated Association virtually destroyed, Carnegie Steel moved quickly to institute longer hours and lower wages. The Homestead strike inspired many workers, but it also underscored how difficult it was for any union to prevail against the combined power of the corporation and the government.
John Davison Rockefeller Sr. (July 8, 1839 – May 23, 1937)
was an American oil industry business magnate and philanthropist, who is considered to be the wealthiest American of all time by virtually every source, and—largely—the richest person in modern history. Born in upstate New York, he was shaped by his con man father and religious mother. His family moved several times before eventually settling in Cleveland, Ohio. He had many siblings, including William, who would enter the oil business with him. Rockefeller became an assistant bookkeeper at the age of 16, and went into a business partnership with Maurice B. Clark and his brothers at 20. He bought them out—a crucial step in his career. He went on founding Rockefeller & Andrews with his brother William and another shareholder—chemist Samuel Andrews. Instead of drilling for oil, he concentrated on refining. In 1867, Henry Flagler entered the partnership. The Rockefeller, Andrews & Flagler company prospered, incorporating local refineries, until the foundation of Standard Oil.
Rockefeller founded Standard Oil Company, Inc. in 1870 as an Ohio partnership with his brother William along with Henry Flagler, Jabez A. Bostwick, Samuel Andrews, and a silent partner, Stephen V. Harkness. He ran it until officially retiring in 1897. As kerosene and gasoline grew in importance, Rockefeller's wealth soared and he became the richest person in the country, controlling 90% of all oil in the United States at his peak. Oil was used throughout the country as a light source until the introduction of electricity and as a fuel after the invention of automobile. Rockefeller had enormous influence on the railroad industry, which transported his oil around the country. Standard Oil dominated the oil industry and was the first great business trust in the United States. Rockefeller revolutionized the petroleum industry, and along with other key contemporary industrialists such as steel magnate Andrew Carnegie, defined the structure of modern philanthropy.
The U.S. Supreme Court ruled in 1911 that Standard Oil must be dismantled because it violated federal anti-trust laws; it was broken up into 34 separate entities that included companies that would become ExxonMobil, Chevron, and others. Some of them are still among companies with the largest revenue. The individual pieces of the company were worth more than the whole, and as shares of the individual companies doubled and tripled in value in their early years, Rockefeller became the country’s first billionaire with a fortune worth nearly 2 percent of the national economy His peak net worth was estimated at $336 billion (in 2007 USD; inflation-adjusted) in 1913, two years after the dissolution of Standard Oil, at 74 years of age.
Rockefeller spent the last 40 years of his life in retirement at his estate, Kykuit, in Westchester County, New York. His fortune was mainly used to create the modern systematic approach of targeted philanthropy. He was able to do this through the creation of foundations that had a major effect on medicine, education and scientific research. His foundations pioneered the development of medical research and were instrumental in the eradication of hookworm and yellow fever.
Rockefeller was also the founder of both the University of Chicago and Rockefeller University and funded the establishment of Central Philippine University in the Philippines. He was a devout and devoted Northern Baptist, and supported many church-based institutions. Rockefeller adhered to total abstinence from alcohol and tobacco throughout his life. He was a faithful congregant of the Erie Street Baptist Mission Church, where he taught Sunday school, and served as a trustee, clerk, and occasional janitor. Religion was a guiding force throughout his life, and Rockefeller believed it to be the source of his success. Rockefeller was also considered a supporter of capitalism based on a perspective of social Darwinism, and was quoted often as saying "The growth of a large business is merely a survival of the fittest".
Ida Minerva Tarbell (November 5, 1857 – January 6, 1944) was an American teacher, author and journalist. She was one of the leading "muckrakers" of the progressive era of the late 19th and early 20th centuries and is thought to have pioneered investigative journalism. She is best known for her 1904 book, The History of the Standard Oil Company, which was listed as No. 5 in a 1999 list by New York University of the top 100 works of 20th-century American journalism. It was first serialized in McClure's Magazine from 1902 to 1904. She depicted John D. Rockefeller as crabbed, miserly, money-grabbing, and viciously effective at monopolizing the oil trade. She wrote many other notable magazine series and biographies, including several works on President Abraham Lincoln, revealing his early life.
John Pierpont "J.P." Morgan (April 17, 1837 – March 31, 1913)
was an American financier and banker who dominated corporate finance and industrial consolidation.
In 1892, Morgan arranged the merger of Edison General Electric and Thomson-Houston Electric Company to form General Electric. He was instrumental in the creation of the United States Steel Corporation, International Harvester and AT&T. At the height of Morgan's career during the early 1900s, he and his partners had financial investments in many large corporations and had significant influence over the nation's high finance and United States Congress members. He directed the banking coalition that stopped the Panic of 1907. He was the leading financier of the Progressive Era, and his dedication to efficiency and modernization helped transform American business. Morgan has been described as America’s greatest banker
Morgan died in Rome, Italy, in his sleep in 1913 at the age of 75, leaving his fortune and business to his son, John Pierpont Morgan, Jr. His fortune was estimated at "only" US$80 million, prompting John D. Rockefeller to say: and to think, he wasn't even a rich man.
Henry Morrison Flagler(January 2, 1830 – May 20, 1913)
was an American industrialist and a founder ofStandard Oil. He was also a key figure in the development of the Atlantic coast ofFloridaand founder of what became the Florida East Coast Railway. He is known as the father of bothMiamiandPalm Beach, Florida.
In microeconomics and management, vertical integration is an arrangement in which the supply chain of a company is owned by that company. Usually each member of the supply chain produces a different product or (market-specific) service, and the products combine to satisfy a common need. It is contrasted with horizontal integration, wherein a company produces several items which are related to one another. Vertical integration has also described management styles that bring large portions of the supply chain not only under a common ownership, but also into one corporation (as in the 1920s when the Ford River Rouge Complex began making much of its own steel rather than buying it from suppliers).
Vertical integration is one method of avoiding the hold-up problem. A monopoly produced through vertical integration is called a vertical monopoly.
Nineteenth-century steel tycoon Andrew Carnegie's example in the use of vertical integration led others to use the system to promote financial growth and efficiency in their businesses.
Vertical integration can be an important strategy, but it is notoriously difficult to implement successfully and—when it turns out to be the wrong strategy—costly to fix.
A diagram illustrating vertical integration and contrasting it with horizontal integration
Vertical integration is the degree to which a firm owns its upstream suppliers and its downstream buyers. Contrary to horizontal integration, which is a consolidation of many firms that handle the same part of the production process, vertical integration is typified by one firm engaged in different parts of production (e.g., growing raw materials, manufacturing, transporting, marketing, and/or retailing).
There are three varieties: backward (upstream) vertical integration, forward (downstream) vertical integration, and balanced (both upstream and downstream) vertical integration.
A company exhibits backward vertical integration when it controls subsidiaries that produce some of the inputs used in the production of its products. For example, an automobile company may own a tire company, a glass company, and a metal company. Control of these three subsidiaries is intended to create a stable supply of inputs and ensure a consistent quality in their final product. It was the main business approach of Ford and other car companies in the 1920s, who all sought to minimize costs by integrating the production of cars and car parts, as exemplified in the Ford River Rouge Complex.
A company tends toward forward vertical integration when it controls distribution centers and retailers where its products are sold.
During a hunting trip, an American explorer and scientist, Clarence Birdseye, discovered the beneficial effects of quick freezing. For example, fish caught a few days previously that were kept in ice remained in perfect condition.
In 1924, Clarence Birdseye patented the “Birdseye Plate Froster” and set up the General Seafood Corporation. In 1929, Birdseye’s company and the patent were bought by Postum Company and the Goldman-Sachs trading Corporation. It later came to be known as General Foods. They kept the same Birdseye name, but it was split into two words (Birds eye) for use as a trademark. Birdseye was paid $20 million for the patents and $2 million for the assets.
Birdseye was one of the pioneers in the frozen food industry. Birdseye Company used vertical integration to manage their business. Because of the fact that during these times, there was not a well developed infrastructure to produce and sell. Birdseye developed its own system by using vertical integration. As many members of the supply chain such as farmers and small food retailers, couldn't afford high costs to buy equipment, Birdseye provided them with equipment.
But until now, Birdseye has faded slowly because they have fixed costs associated with vertical integration, such as property, plants, and equipment that cannot be reduced significantly when production needs decrease. The Birdseye company used vertical integration to create a larger organization structure with more levels of command that produced a slower informational processing rate, with the side effect of making the company so slow, that it couldn't react quickly and didn't take advantages of the growth of supermarket, until ten years after the competition. The already-developed infrastructure did not allow Birdseye to quickly react to market changes.
In order to increase profits and gain more market share, Alibaba, a Chinese-based company, full use of vertical integration makes it more than an e-commerce stage. Alibaba has built its leadership in the market by gradually acquiring complementary companies in a variety of industries including delivery and payments.
Steel and oil
One of the earliest, largest and most famous examples of vertical integration was the Carnegie Steel company. The company controlled not only the mills where the steel was made, but also the mines where the iron ore was extracted, the coal mines that supplied the coal, the ships that transported the iron ore and the railroads that transported the coal to the factory, the coke ovens where the coal was cooked, etc. The company also focused heavily on developing talent internally from the bottom up, rather than importing it from other companies. Later on, Carnegie even established an institute of higher learning to teach the steel processes to the next generation.
Oil companies, both multinational (such as ExxonMobil, Royal Dutch Shell, ConocoPhillips or BP) and national (e.g., Petronas) often adopt a vertically integrated structure, meaning that they are active along the entire supply chain from locating deposits, drilling and extracting crude oil, transporting it around the world, refining it into petroleum products such as petrol/gasoline, to distributing the fuel to company-owned retail stations, for sale to consumers.
Telecommunications and computing
Telephone companies in most of the 20th century, especially the largest (the Bell System) were integrated, making their own telephones, telephone cables, telephone, exchange, equipment and other supplies.
From the early 1920s through the early 1950s, the American motion picture had evolved into an industry controlled by a few companies, a condition known as a "mature oligopoly", as it was led by eight major film studios, the most powerful of which were the "Big Five" studios: MGM, Warner Brothers, 20th Century Fox, Paramount Pictures, and RKO. These studios were fully integrated, not only producing and distributing films, but also operating their own movie theaters; the "Little Three," Universal Studios, Columbia Pictures, and United Artists, produced and distributed feature films but did not own theaters.
The issue of vertical integration (also known as common ownership) has been the main focus of policy makers because of the possibility of anti-competitive behaviors affiliated with market influence. For example, in United States v. Paramount Pictures, Inc., the Supreme Court ordered the five vertically integrated studios to sell off their theater chains and all trade practices were prohibited (United States v. Paramount Pictures, Inc., 1948). The prevalence of vertical integration wholly predetermined the relationships between both studios and networks,and modified criteria in financing. Networks began arranging content initiated by commonly owned studios and stipulated a portion of the syndication revenues in order for a show to gain a spot on the schedule if it was produced by a studio without common ownership. In response, the studios fundamentally changed the way they made movies and did business. Lacking the financial resources and contract talent they once controlled, the studios now relied on independent producers supplying some portion of the budget in exchange for distribution rights.
Certain media conglomerates may, in a similar manner, own television broadcasters (either over-the-air or on cable), production companies that produce content for their networks, and also own the services that distribute their content to viewers (such as television and internet service providers). Bell Canada, Comcast, Sky plc, and Rogers Communications are vertically integrated in such a manner—operating media subsidiaries (Bell Media, Rogers Media, and NBC Universal respectively), and provide "triple play" services of television, internet, and phone service in some markets (such as Bell TV/Bell Internet, Rogers Cable, Xfinity, and Sky's satellite TV services). Additionally, Bell and Rogers own wireless providers, Bell Mobility and Rogers Wireless; taking advantage of its vertical integration, Bell also offers its wireless subscribers a mobile television service.
Agriculture Vertical integration through production and marketing contracts have also become the dominant model for livestock production. Currently, 90% of poultry, 69% of hogs, and 29% of cattle are contractually produced through vertical integration. The USDA supports vertical integration because it has increased food productivity. However, ". contractors receive a large share of farm receipts, formerly assumed to go to the operator's family.
Under production contracts, growers raise animals owned by integrators. Farm contracts contain detailed conditions for growers, who are paid based on how efficiently they use feed, provided by the integrator, to raise the animals. The contract dictates how to construct the facilities, how to feed, house, and medicate the animals, and how to handle manure and dispose of carcasses. Generally, the contract also shields the integrator from liability. Jim Hightower, in his book, Eat Your Heart Out, discusses this liability role enacted by large food companies. He finds that in many cases of agricultural vertical integration, the integrator (food company) denies the farmer the right of entrepreneurship. This means that the farmer can only sell under and to the integrator. These restrictions on specified growth, Hightower argues, strips the selling and producing power of the farmer. The producer is ultimately limited by the established standards of the integrator. Yet, at the same time, the integrator still keeps the responsibility connected to the farmer. Hightower sees this as ownership without reliability.
Under marketing contracts, growers agree in advance to sell their animals to integrators under an agreed price system. Generally, these contracts shield the integrator from liability for the grower’s actions and the only negotiable item is a price
The process of a company increasing production of goods or services at the same part of the supply chain. A company may do this via internal expansion, acquisition or merger. The process can lead to monopoly if a company captures the vast majority of the market for that product or service.
An example of horizontal integration in the food industry was the Heinz and Kraft Foods merger. On March 25, 2015, Heinz and Kraft merged into one company. Both produce processed food for the consumer market.
Sysco had planned to acquire US Foods before a federal ruling against the deal. lt would have been horizontal integration, as both distribute food to restaurants, healthcare, and educational facilities.
What is a 'Trust'
A trust is a fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary. In finance, it can also be a type of closed-end collective investment fund built as a public limited company.
What is a 'Fiduciary'
Essentially, a fiduciary is a person or organization that owes to another the duties of good faith and trust. The highest legal duty of one party to another, it also involves being bound ethically to act in the other's best interests. A fiduciary might be responsible for general well-being, but often it involves finances – managing the assets of another person, or of a group of people, for example. Money managers, bankers, accountants, executors, board members, and corporate officers can all be considered fiduciaries.
What is a Monopoly
A situation in which a single company or group owns all or nearly all of the market for a given type of product or service. Monopolies are typically forced to divestassets to satisfy anti-monopoly laws. These antitrust laws were put in place to protect consumers and control companies from evil practices thanks to total control
: complete control of the entire supply of goods or of a service in a certain area or market
Congress passed this act in 1890, and this is the source of all American antimonopoly laws. The law forbids every contract, scheme, deal, conspiracy to restrain trade. It also forbids conspirations to secure monopoly of a given industry. The ideas were new and had to wait before they could achieve some efficiency. The Standard reorganized once more, in a holding in the Standard Oil Company (New Jersey) which now coordinated the whole machine, that is 70 companies and 23 refineries controlling 84% of the crude oil refined in the US in 1899. Ten years later, international competition (from Canada, Peru, Rumania, Poland, India or Russian) and the struggle of the independents lowered this percentage to 14 %. Theodore Roosevelt committed himself in 1901 and during both of his mandates to a strong war against monopolies, launching the federal government in 1906 in a lawsuit against the Standard because of discriminatory practices on the market, abuse of power and excessive control on the American oil industry.
7.10 Dismantling of the Standard Oil
In 1911, the Supreme Court finds the Standard Oil in violation of the 1890 Sherman Antitrust Act because of excessive restrictions to trade, and in particular its practice of buying out the small independent refiners or that of lowering the price in a given region to force bankruptcy of competitors. The court ordered the Standard Oil Company (New Jersey) to dismantle 33 of its most important affiliates, giving the stocks to its own shareholders and not to a new trust. From these offspring will come Exxon, Mobil, Chevron, American, Esso (that is SO).
This is a landmark ruling in the economic history of the USA, and is the basis for a new doctrine in American antitrust policy, called the rule of reason (because of the famous unreasonable restraints to trade mentioned in the Sherman Antitrust Act. Need for more solid juridical basis led to the Clayton Antitrust Act in 1914, which explicitly condemns commercial practices like price discrimination, exclusive commercial relations, the buying out of competitors and the incestuous boards
the introduction of something new
a new idea, method, or device George Mortimer Pullman (March 3, 1831 – October 19, 1897) was an American engineer and industrialist. He designed and manufactured the Pullman sleeping car and founded a company town, Pullman, for the workers who manufactured it. His Pullman Company also hired African-American men to staff the Pullman cars, who became known and widely respected as Pullman porters, providing elite service.
Struggling to maintain profitability during an 1894 downturn in manufacturing demand, he lowered wages and required workers to spend longer hours at the plant, but did not lower prices of rents and goods in his company town. He gained presidential support by Grover Cleveland for the use of federal military troops which left 30 strikers dead in the violent suppression of workers there to end the Pullman Strike of 1894. A national commission was appointed to investigate the strike, which included assessment of operations of the company town. In 1898 the Supreme Court of Illinois ordered the Pullman Company to divest itself of the town which became a neighborhood of the city of Chicago.
George Westinghouse, Jr.(October 6, 1846 – March 12, 1914) was an Americanentrepreneurandengineerwho invented therailway air brakeand was a pioneer of theelectrical industry, gaining his first patent at the age of 19 . Based inPittsburgh,Pennsylvaniafor much of his career, Westinghouse was one ofThomas Edison's main rivals in the early implementation of the American electricity system. Westinghouse'selectricity distribution system, based on alternating current, ultimately prevailed over Edison's insistence ondirect current. In 1911 Westinghouse received the AIEE'sEdison Medal"For meritorious achievement in connection with the development of thealternating current system.
The Bessemer process was the first inexpensive industrial process for the mass-production of steel from molten pig iron before the development of the open hearth furnace. The key principle is removal of impurities from the iron by oxidation with air being blown through the molten iron. The oxidation also raises the temperature of the iron mass and keeps it molten.
Related decarburizing with air processes had been used outside of Europe for hundreds of years, but not on an industrial scale. One such process has existed since the 11th century in East Asia, where the scholar Shen Kuo describes its use in the Chinese iron and steel industry. In the 17th century, accounts by European travelers detailed its possible use by the Japanese.
The modern process is named after its inventor, the Englishman Henry Bessemer, who took out a patent on the process in 1856. The process was claimed to be independently discovered in 1851 by the American inventor William Kelly though there is little to back up this claim.
The process using a basic refractory lining is known as the "basic Bessemer process" or "Gilchrist-Thomas process" after the discoverer Sidney Gilchrist Thomas.