The Second Industrial Revolution: Finance, Innovation, and Global Impact (1870-1914)

Between 1870 and 1914, the Second Industrial Revolution transformed global economies, characterized by rapid industrialization driven by the growth of the financial sector and the rise of finance capitalism.

Financial Innovations and Capital Growth

This era saw significant innovations in finance, providing new sources of capital for burgeoning industries:

• Joint-Stock Company: A company formed by individuals who invested by buying shares, receiving a proportionate part of the company’s profits and losses.
• Banks: Financial institutions began to lend money to businesses in return for interest and started investing in shares. These changes fostered a closer union between financial and industrial capital.
• Stock Exchange: A marketplace where shares and companies were traded, facilitating investment and capital formation.

New Business Structures and Market Control

Businesses adopted new structures to reduce competition and gain market control:

• Cartels: Companies selling similar products organized to establish a common range of prices for their goods, limiting competition.
• Trusts: Vertical associations formed by multiple companies that sought to control the market by eliminating competitors.
• Holding Companies: Large financial entities that earned profits by investing in, buying, and holding shares of other companies.

Technological Advances and Production Boost

Numerous technological advancements led to a significant increase in production:

• Improved Bessemer Converter: This innovation drastically lowered the cost of steel production, a crucial material for infrastructure like roads, skyscrapers, and machinery.
• Other key innovations included dynamite, stainless steel, and artificial fibers, which revolutionized industries, particularly textiles.

Emergence of New Energy Sources

The period also witnessed the invention and widespread adoption of new energy sources:

• Electricity: Berges invented the hydroelectric generator, providing energy to homes and improving factory operations. Thomas Edison's invention of the light bulb subsequently replaced gaslights.
• Oil: New types of oil emerged, notably petrol, which became the primary fuel for automobiles.

Rise of New Industries

The Second Industrial Revolution spurred the creation and expansion of several new industries:

• Food Industries: Focused on preserved food in tins, extending shelf life and distribution.
• Chemical Industry: Manufactured new products such as perfumes, dynamite, and medicines.
• Automobile Industry: Pioneered the mass production of cars, transforming transportation.
• Consumer Goods Industry: Produced a wide array of products including food, cosmetics, medicines, footwear, and clothing, catering to a growing consumer market.

Major Consequences of the Era

The changes brought about by the Second Industrial Revolution had profound consequences:

• Rise of Financial Capitalism: This was a primary driver for many changes, including the organization of work, the development of consumerism, economic instability, and the expansion of international trade.
• Organization of Work: The assembly line developed, with each worker specializing in a different task to save time and assemble more products efficiently. Henry Ford was a pioneer in implementing this system.
• Birth of Consumer Society: A new mindset emerged where people began to view owning desirable products as a sign of wealth and social status.
  • The upper class could afford luxury items like phones or cars, which conferred social status.
  • While the lower class often could not afford such items, window shopping became popular. Shops displayed their products in large front windows as a form of advertising, aiming to sell rather than accumulate inventory.
• Economic Crises and Cycles: The period was marked by an excess of products that the market could not consume, leading to a fundamental imbalance between supply and demand, resulting in economic downturns.