The Rise of Big Business APUSH

The “Gilded Age” was coined by Samuel Clemens in his book of the same name. Explored political and economic corruption in the United States. The central characters were tied together in a government railroad bribery scheme. Depicted an American society that, despite its appearance of promise and prosperity, was riddled with corruption and scandal.

Causes of Rapid Industrialization More advanced machinery Quicker Production First big business in the U.S. Great opportunity for financial investment Aided development of other industries 1. Steam Revolution of the 1830’s-1850’s 2. The Railroad fueled the growing U.S. economy

Cause 3: Technological Innovations The Bessemer Process of purifying steel helped to make America the top producer of steel, and transformed the U.S. into a modern industrial economy Construction companies could build bigger bridges and taller buildings The low cost of steel made ordinary items affordable

Cause 3: Technological Innovations Refrigerated Railroad Cars Thomas Edison - “Wizard of Menlo Park” - light-bulb, phonograph, motion pictures

Cause 3: Technological Innovations Alexander Graham Bell - Telephone (1876) George Westinghouse - Alternating Current

Cause 3: Technological Innovations The Airplane Wilbur Wright Orville Wright Kitty Hawk, NC – December 7, 1903

Cause 3: Technological Innovations Henry Ford: Model T Automobile

U. S. Patents Granted 1790s  276 patents issued.

Causes of Rapid Industrialization Unskilled & semi-skilled labor in abundance. Abundant capital. New, talented group of businessmen [entrepreneurs] and advisors. Market growing as US population increased. Government willing to help at all levels to stimulate economic growth. Abundant natural resources.

Causes of Rapid Industrialization # 10- Oil Industry Begins Oil was a key commodity as a fuel Edwin Drake drilled the first commercial oil well Oil prospectors or Wildcatters looked for oil in other regions Major sources of energy from oil fueled a revolution in transportation and industry

A favorable climate for business 1- Free markets With capitalism, competition determines prices and wages, and most industries are run by private businesses. In the 1800s, business leaders believed in laissez-faire capitalism with no government intervention. They believed government regulation would destroy self-reliance, reduce profits, and harm the economy. 2- Social Darwinism Many thinkers believed that inequalities were part of the natural order. Charles Darwin believed that members of a species complete for survival in a natural selection process. Applied to society, stronger people, businesses, and nations would prosper, and weaker ones would fail in a “survival of the fittest.”

New Business Culture: “The American Dream?” Protestant (Puritan) “Work Ethic” Horatio Alger [100+ novels] Is the idea of the “self-made man” a MYTH??

Changing business structure The way business were organized was changing rapidly Proprietorships and Partnerships Small business run by individuals or partnerships Owners personally responsible for business debt Corporations As companies grew, structure of ownership changed Owned by stockholders, decisions made by board of directors Investors only are bound by the amount of the investment Trusts and Monopolies Some companies merged and turned their stocks over to a board of trustees who ran the group of companies as one giant entity Some became monopolies, which meant they could raise/lower prices at will

How were corporations able to form monopolies? Let’s Use McDonald’s as an example

Beef Cheese Lettuce Onion Sauce Bread Sesame Seeds Pickles What Ingredients are necessary to make a big mac? Beef Cheese Lettuce Onion Sauce Bread Sesame Seeds Pickles How does McDonald’s get all of their ingredients? Do they own their own lettuce farms? Do they own their own cattle ranches? Do they own their own bakery?

NO!! They pay other companies to grow their produce, raise the cattle, bake the bread, and produce all of the other ingredients they need The price McDonald’s charges is driven, in part, by what they have to pay these companies And… in part by the need to attract customers who might, go to the competition instead

What companies does McDonald's compete with? How can McDonald’s attract customers who might go to the competition? 1. Make a better product 2. Lower the price

What can McDonald's do to attract customers? Use cheaper ingredients Operate at a loss Cut down on costs

If McDonald’s was going to cut down on costs without sacrificing product or service, what could they do? Buy up all the other companies they deal with, giving McDonald’s control of the entire process of making and delivering hamburgers

* Buy up all the cattle ranches * Buy up the transport companies * Buy up the farms * Buy up the bakeries * Buy up the transport companies Result? Lower Long-Term Costs

With Lower Costs, McDonald's can lower their prices If they lower their prices enough, what will happen to the competition?

With no competition, what can McDonald's do to prices?

With high prices, consumers lose Monopoly With high prices, consumers lose When one company takes control of the entire market, it is called a monopoly

New Type of Business Entities How Trusts Work: Horizontal Integration  John D. Rockefeller Vertical Integration: Gustavus Swift  Meat-packing Andrew Carnegie  U. S. Steel

John D. Rockefeller Industrial Tycoons By 1879, had captured 90% of all US Oil refinery business “Standard Oil” Gave over half of fortune away to charity

Andrew Carnegie Industrial Tycoons Used profits from business investments to found own company “Carnegie Steel” Dominated Steel Industry After retiring, devoted time and money to support education and build public libraries

Cornelius Vanderbilt Industrial Tycoons Began investing in railroads during the Civil War By 1872, owned the New York Central Railroad Supported few charities but gave money for what would become Vanderbilt University Died leaving a $100 million estate

JP Morgan Industrial Tycoons Financier Created General Electric in 1891 Consolidated Steel Industry (United States Steel) Controlled over 100 corporations

George Pullman Industrial Tycoons Designed sleeper cars that made long distance travel more comfortable Built a town south of Chicago to house workers Controlled aspects of life in the town, and criticism was not tolerated

Vs. Critics saw tycoons as “robber barons” Cons Pros Critics saw tycoons as “robber barons” Profited unfairly by squeezing out competitors Lived lavish life-styles at the expense of the American people Supporters saw as “Captains of Industry” Used their business skills to make the American economy more productive This made the economy stronger

% of Billionaires in 1900

% of Billionaires in 1918

The Protectors of Our Industries

The ‘Bosses’ of the Senate

The ‘Robber Barons’ of the Past

The Gospel of Wealth: Religion in the Era of Industrialization Wealth no longer looked upon as bad. Viewed as a sign of God’s approval. Christian duty to accumulate wealth. Should not help the poor. Russell H. Conwell

The Gospel of wealth The Anglo-Saxon race is superior. Inequality is inevitable and good. Wealthy should act as “trustees” for their “poorer brethren.” Andrew Carnegie