The Rise of Big Business Chapter 14 Section 2 The Second Industrial Revolution Riddlebarger

Capitalism An economic system in which private businesses run most industries. Competition determines prices and wages.

Age of Big Business The period of invention after the Civil War sets the stage for great industrial growth Huge amounts of capital ($$)needed, along with human labor and natural resources

Robber Barons/ Captain of Industry Powerful Industrialists of late 1800’s ｷ perception of stealing from public ｷ ruin competition, bribe public officials, pay low wages, unhealthy workplace Captain of Industry ｷ Perception of serving nation in positive way ｷ Creating jobs, donating money, increase public supply of goods and jobs

Robber Baron or Captain of Industry??? Morgan Carnegie Vanderbilt Rockefeller

Social Darwinism Who is most likely to advocate Social Darwinism? A. idea popular in late 1800’s B. Government shouldn’t interfere with people’s success; if so, the most “fit” would succeed and become rich Society would benefit from success of fit & weeding out of unfit C. Most Americans agree at the time that government should not interfere with private business Who is most likely to advocate Social Darwinism? Industrialists or Workers?

What Is a Monopoly?

Monopoly & Cartels A. Many industrialists use whatever means necessary to gain competitive edge B. monopoly- controlling entire industry or product Buy them or drive them out, then you can charge any price you like C. cartel- loose association of businesses that make the same product Members agree to limit production and keep prices high

Trusts A group of companies placed under the control of a single managing board

Growth of Big Business (2 strategies) Vertical Consolidation ∙ Gaining control of many businesses that make up all phases of product’s production Railroads Carnegie Steel Company Owns all phases of production Coke Fields Iron Ore Deposits Steel Mills Ships

Growth of Big Business (2 strategies) What problems might a business face that must compete against a company with a vertical monopoly? Railroads Carnegie Steel Company Owns all phases of production Coke Fields Iron Ore Deposits Steel Mills Ships

Growth of Big Business (2 strategies) Horizontal Consolidation Joining competing firms in the same business Example: Standard Oil Standard Oil Company Purchased by Rockefeller Independent Oil Refineries

Growth of Big Business (2 strategies) Why were companies at a disadvantage when facing a company with horizontal consolidation? Standard Oil Company Purchased by Rockefeller Independent Oil Refineries

Growth of Big Business Economies of Scale- As production increases, the cost of each additional item produced is lower D. Effects of big business on American Society Few like trusts or other large businesses Politicians don’t crack down- continue to allow industrialists to operate at will Disparity in wealth (gap between rich & poor grows) Boom & bust-good times followed by bad Business Cycle

Standard Oil Company John D. Rockefeller Built oil refinery in Cleveland (1863) Forms Standard Oil (1870) Persuades railroads to give refunds on shipping- Allows him to lower prices Over $2 billion fortune B. The Trust Law prevents buying out competition Allows them to get around the law Control of most of nations oil refining

Sherman Anti-Trust Act Outlaws any combination of companies (monopolies) Rarely enforced

Andrew Carnegie Made millions in steel industry by bringing Bessemer Process to America. Scottish immigrant Sold his company for $492 million to JP Morgan in 1900. Paid low wages to workers Donated millions to charity.

US Steel Industry

Looking Ahead What effects did the growth of big business have on workers?