Goal 5 Page 32

Captains of Industry or Robber Barons? “The man who dies leaving behind him millions of available wealth, which was his to administer during life, will pass away “unwept, unhonored, and unsung’…of such as these the public verdict will then be: ‘the man who dies thus rich dies disgraced.” Andrew Carnegie “Charity is injurious unless it helps the recipient to become independent of it.” John D. Rockefeller “Next to doing the right thing, the most important thing is to let people know you are doing the right thing.” John D. Rockefeller “There is no class so pitiably wretched as that which possesses money and nothing else.” Andrew Carnegie

Big Business -corporations develop Investors purchase stock in hopes of receiving dividends -limited liability leads to public investment People only risk the amount they personally invest Not responsible for company’s major losses -mass market selling People begin to see dividend payoffs and invest more More people investing in stock market Corporations begin with an idea put forward by an entrepreneur. That person then finds people to invest their money into their company by purchasing stock in that company. The company then uses that money to get started and continue operation. In return, the investor gets paid dividends (a percentage of the profits based on what they paid in) from the company they invested in.

Advantages -greater efficiency Electricity and innovations make production quick/cheap -economy of scale The more you produce, the easier and cheaper it is -manager system Owners can have multiple companies across the nation Appoint qualified employees to oversee production Andrew Carnegie perfects production and company organization to make major profits in his steel company.

Advantages -productivity studies Taylor To increase efficiency Studied time and motion limit excess movement and make production more efficient To increase productivity in factories, many mangers used Taylor’s productivity studies, which monitored every motion of an employee so that little to no production time was wasted.

Disadvantages -unfair competition practices Difficult for small businesses to compete -corruption and bribery No unemployment or welfare Citizens needed jobs Could fire them easily -destroyed labor union movements Many Americans began to distrust the big businessmen and the trusts they set up, claiming that they limited competition and held control over government officials and Congressmen. How is this represented in the cartoon presented above?

Public Reactions -mixed public feelings Some unhappy with rich getting richer and poor getting poorer -Social Darwinism -based on Darwin’s theory of evolution -survival of the fittest -also applies to the business world (supports laissez-faire) -the best businesses survive Those with the best resources and ideas win -justified their wealth -Gospel of Wealth (Carnegie) Donate money to society And while the law of competition may be sometimes hard for the individual, it is best for the race, because it ensures the survival of the fittest in every department. ~Andrew Carnegie

Some big businessmen, like Andrew Carnegie, believed in the “Gospel of Wealth,” in which they donated their money back to society. Carnegie was the most generous of these, donating 90% of his profits back to society by building centers for the arts across the country, like Carnegie Hall, pictured above in NYC. “There is no class so pitiably wretched as that which possesses money and nothing else.” “Surplus wealth is a sacred trust which its possessor is bound to administer in his lifetime for the good of the community.” ~ Andrew Carnegie

Public Reactions -rags to riches “American Dream” wealth and success in America Horatio Alger dime novels Famous rags-to-riches stories

Types of Big Businesses -monopoly Company controls all production and sales (high prices) -trust (Rockefeller) Corporations unite to reduce competition -merger Joining together two companies -holding company (Morgan) A company that buys out the stock of other companies J.P. Morgan made his fortune by purchasing and maintaining holding companies, gaining interest from stock dividends. He would own the stock of other companies, and he would make money from their profits.

Types of Big Businesses -horizontal integration Buy out similar competing producers to control industry -vertical integration Earn more money by buying out your suppliers Own all phases of production from start to finish Horizontal and Vertical Integration allowed big businessmen to increase their profits even more by limiting the amount of competition available.

McDonald’s Corporation: Example of Vertical Consolidation Phase: __________ Phase: ___________ Sample : _________

McDonald’s Corporation: Example of Horizontal Consolidation Business 1: _______ Business 2: ________ Business 4: ________ Business 3: ________ Business 5: ________ Sample : _________

Robber Barons -extreme profits made by business owners -Philanthropy??? Donate money to charities and back to society -big business practices exposed Ida Tarbell – Standard Oil -public calls for regulation Some saw the big businessmen as Robber Barons, who stole from society and took advantage of workers at their own benefit. Others, however, saw them as philanthropic “Captains of Industry.” What do you think? “The man who dies leaving behind him millions of available wealth, which was his to administer during life, will pass away “unwept, unhonored, and unsung’…Of such as these the public verdict will then be: ’The man who dies thus rich dies disgraced.” ~Andrew Carnegie, 1889

Robber Barons or Captains of Industry?

“The only question with wealth is, what do you do with it.” “Next to doing the right thing, the most important thing is to let people know you are doing the right thing.” ~John D. Rockefeller Although Rockefeller kept most of his assets, he still gave away over $500 million, establishing the Rockefeller Foundation, providing funds to found the University of Chicago (seen below), and creating a medical institute that helped find a cure for yellow fever.

Robber Barons -Sherman Anti-trust Act,1890 Illegal to form a trust that interferes with free trade -weak law but set a precedent for future regulation Never really broke up trusts “Competition is a sin.” ~John D. Rockefeller The Standard Oil Company took a different approach to mergers: they joined with competing companies in trust agreements. Trusts turned their stock over to a group of trustees— people who ran the separate companies as one large corporation. In return, the companies gained large dividends on profits. Trusts were not legal because they limited competition and free trade. “What a funny little government!”