Business Organizations of the Gilded Age

Corporations A corporation is a business owned by its stockholders. Stockholders elect a board of directors to supervise the president and other officers. Stockholders receive dividends (a share of the company’s profits).

Corporations Corporations often consolidate, which means they can create large industrial organizations. Horizontal integration allowed firms of the same types to be a single corporation. Vertical integration involves taking over all parts of your business from start to finish.

Traits of a “Titan” Traits

Big Business Leaders Andrew Carnegie: Steel Bought out rivals by controlling the processing of steel from mine to market (vertical integration) and getting rebates from the railroads to cut costs and prices. Sold to US Steel Devoted his life after this to philanthropy.

Big Business Leaders John D. Rockefeller: Standard Oil 40 corporations that controlled every phase of oil refining (horizontal integration). Created a trust to protect his interests, but it was eventually broken up by the government because of its monopoly (controlled 90% of the oil industry). Also devoted to philanthropy.

Big Business Leaders Cornelius Vanderbilt: JP Morgan Shipping and Railroads JP Morgan Banking and Finance

Pools and Trusts Pool: competing firms agree to divide the market, establish prices, place profits in a common fund, and pro-rate profits. Trust: business combination in which stockholders turn over their securities and authority to the board of trustees. Stockholders get some money, but the board has full control of the business.

Laissez-Faire Capitalism Adam Smith (1776) argued in The Wealth of Nations that business should be regulated by supply and demand, not the government. Government stays out of business, business would be motivated by their own self-interest to offer improved goods and services at low prices. Used as justification for American industrialists, even though they supported high protective tariffs and federal subsidies.

Social Darwinism and Laissez-Faire Used to promote laissez-faire capitalism The poor are poor because they are unfit, shouldn’t interfere with nature by helping them. The rich are rich because they are doing the right things and they are the most fit.

Social Darwinism and Laissez-Faire Competition is the mantra of big business. Social Darwinism was used by business leaders of the day because it supported their activities, legitimized their success, and confirmed their values. At the same time, some promoted “The Gospel of Wealth”

Gospel of Wealth Gospel of Wealth: Working hard, which leads to material success, is proof that God favors a person both in life and business. Carnegie argued in his “Wealth” article that it also meant the rich should carry out philanthropic works to benefit society.

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