The Growth of Big Business The Rise of Big Business The Growth of Big Business Gilded Age 1870s-1900

The Rise of Big Business Warm Up Imagine you are Bill Gates – What would you do with your money? Write it down on a separate sheet of paper. Read the “Gospel of Wealth” and answer the 3 questions. Compare your response to question 1 and question 2. Would Carnegie approve of your decisions??? Why or why not.

Robber Baron or Captains of Industry 1: an American capitalist of the latter part of the 19th century who became wealthy through exploitation (as of natural resources, governmental influence, or low wage scales) 2: a business owner or executive who acquires wealth through ethically questionable tactics Captain of Industry : the head of a great industrial enterprise

Robber Barons or Captains of Industry The Rise of Big Business Robber Barons or Captains of Industry Robber Barons – negative view of big business As cruel and ruthless Would stop at nothing to achieve great wealth

Robber Barons or Captains of Industry The Rise of Big Business Robber Barons or Captains of Industry Captain of Industry – view that the same men were ingenious and industrial leaders Transformed the American economy Praised for their charity

The Rise of Big Business

Trust v Monopoly Trust Stockholders of several competing corporations turn in their stock to trustees in exchange for a trust certificate entitling them to a dividend. Trustees ran the companies as if they were one. Monopoly The natural goal of any business to make as much profit as it can and to eliminate its competition. When a corporation eliminates its competition it becomes what is known as a "monopoly."

Entrepreneurs Risk-Takers Businessmen who took their money and talents to launch new ventures Capitalism: 1800 businessmen believed in private businesses running industries without government intervention Competition determines prices and wages Market Economy: Supply & Demand

Social Darwinism Origins of Species 1859 Charles Darwin The Rise of Big Business Social Darwinism Origins of Species 1859 Charles Darwin All animal life had evolved by a process of Natural Selection Only the strong survive to reproduce

The Rise of Big Business Social Darwinism Free Competition in the economy, like natural selection, would ensure survival of the fittest Society should do as little as possible to interfere with people’s pursuit of success

Robber Barons or Captains of Industry The Rise of Big Business Robber Barons or Captains of Industry Andrew Carnegie Gospel of Wealth – people should be free to make as much money as they can. However, after they make it, they should give it away

Carnegie Steel Arrive in American as a penniless Scottish immigrant The Rise of Big Business Carnegie Steel Arrive in American as a penniless Scottish immigrant Began to work to assist his family 1865 Andrew Carnegie was making $50,000

Carnegie Steel Entered steel business The Rise of Big Business Carnegie Steel Entered steel business Stole Bessemer Process from Brits 1889 Established Carnegie Steel Company Controlled suppliers and competition 1899 Carnegie Steel produced more than Great Britain Carnegie Steel produced 80% of nation’s steel

Robber Barons or Captains of Industry The Rise of Big Business Robber Barons or Captains of Industry Carnegie once stated, “I entered this life poor and I wish to leave it the same.” Gave away $325 million = 90% of his wealth Carnegie Hall in NY City Carnegie Foundation 3,000 libraries across the US

The Rise of Big Business Vertical Integration Controlling all steps to change raw materials into finished products

Vertical Integration Own iron and coal mines The Rise of Big Business Vertical Integration Own iron and coal mines Bought railroads, trucking and shipping lines Bought warehouses

Growth and Consolidation The Rise of Big Business Growth and Consolidation Monopoly- complete control over production, quality, wages, and prices

Holding Company J.P. Morgan very successful banker The Rise of Big Business Holding Company J.P. Morgan very successful banker Bought Carnegie Steel in 1901 for $500 million Changed name to US Steel Became the largest business organization

Cornelius Vanderbilt Built his wealth in railroads and shipping He began his business by ferrying freight and passengers between Staten Island and Manhattan New York Central Railroad

Vanderbilt against Fisk

Standard Oil Trust Established by John D. Rockefeller The Rise of Big Business Standard Oil Trust Established by John D. Rockefeller Was able to undersell his competitors by charging less Purchased oil refineries and created horizontal consolidation

Horizontal Consolidation The Rise of Big Business Horizontal Consolidation Buy out competitors Companies making similar products merge

The Rise of Big Business Standard Oil Trust Drove competitors out of business by selling oil lower than cost to make it After competitor are driven out prices skyrocketed to recoup loss

Horizontal Merger

John D. Rockefeller Rockefeller gave away $500 million The Rise of Big Business John D. Rockefeller Rockefeller gave away $500 million Founded the University of Chicago which found cure for yellow fever Land for United Nations

The Rise of Big Business Standard Oil Trust Rockefeller was so successful at his death his personal fortune was estimated at $815,647,796

The Government Response The Rise of Big Business The Government Response 1890 Sherman Antitrust Act Outlawed any combination of companies that restrained interstate trade Was not effective against trusts Pro business courts had to interpret law Federal officials rarely invoked it until after WWI