Lecture: Trusts & Government Corruption Standard Discuss corporate mergers that produced trusts and cartels and the economic and political policies of industrial leaders.

Rise of Industrial Trusts –Corporation: A form of business organization that enables a group of individuals to operate as a single “artificial legal person” It can sue and be sued, hire and fire, buy and sell, manufacture and trade. Advantages: –Securing of Capital: Can buy stocks and bonds –Limited liability –One can easily transfer out of corporation buy selling shares –Perpetual life

Merger: the consolidation of two companies into a single corporation –H–Horizontal Integration: Companies producing similar products merge –V–Vertical Integration: Companies producing different products merge Train Manufacturer Railroad Corporation Steel Corporation Stee l Co. A A Stee l Co. B B Stee l Co. C C

Monopoly –T–The elimination of competition. –C–Combined corporations in order to control prices, production, and sales of territory Pool: a secret agreement among competing companies to fix prices and output, or to divide sales territory. –B–By the Interstate Commerce Act (1887) railroad pools were declared illegal

Monopoly Trust: Stockholders of competing companies turned their stock over to a board of trustees and in exchange received trust certificates. In this way, the board of trustees gained full control and managed the member companies in such a way as to eliminate competition. –T–The Sherman Anti-Trust Act (1890) made trusts illegal

Examples of Business Consolidations –OIL: John D. Rockefeller: Standard Oil Comany By 1879 controlled 90% of the countries oil refineries –STEEL: Andrew Carnegie: Carnegie Steel Company 1900 – producing ¼ of countries steel J.P. Morgan: formed a steel monopoly: The U.S. Steel Corporation –RAILROAD: Cornelius Vanderbilt: Merged Eastern RR’s.

itical+cartoon+trusts#focal=e7e13f5b053c a8bcbb27b1020a&furl= usdoj.gov/atr/public/hearings/single_firm/d ocs/219389_6.gif 1. Who is this man? 2. What is he doing? 3.What type of merger does this cartoon represent?

Advantages of Big Business Mass Production –Ex. assembly line, division of labor, standardization of parts Wide Distribution: Used advertising and sold products across nation Efficient Management –Able to hire best executives, maintain costly research laboratories and raise capital for expansion

Abuses of Big Business Elimination of competition –Large corporations drove out small businesses Power over the consumer –Could force consumer to pay high prices and accept inferior quality

Abuses of Big Business Exploitation of workers –Pay low wages, long working hours, prevented them from forming unions Influence over the government –Manipulated government at federal, state and local levels –Industrial giants ran for government offices, made generous contributions to political candidates, and bribes legislatures –Political “Machines” and “bosses” – political favors given in exchange for votes

Trusts and Government Corruption What do you see here? What to the men wearing top hats represent? Who are the men at the desks? What is the intended message of the cartoonist?

Essential Question #2 Describe the corporate mergers that were produced by trusts and cartels and the policies of the industrial leaders.