An Age of Big Business Chapter 19 Section 3

The Corporation By becoming a corporation – a company that sells shares or stock of its business to the public – a company can raise capital, or money. Railroads were the first businesses to form corporations. The forming of corporations helped America’s industrial expansion after the Civil War. Businesses borrowed money from banks to start a company causing the banks to make a profit on the loans.

The Oil Business John D. Rockefeller made his fortune from oil. Rockefeller set up a plant to process oil – an oil refinery – in Cleveland, Ohio. The Standard Oil Company of Ohio was organized in 1870. Rockefeller used horizontal integration – the combining of competing firms into one corporation - to build his empire. The Standard Oil Trust: Rockefeller lowered his prices, which drove his competition out of business. In 1882 Rockefeller formed a trust – a group of companies manages by the same board of directors. By creating this trust, Rockefeller created a monopoly – total control by a single producer – of the oil industry.

The Steel Business Andrew Carnegie, John D. Rockefeller and other industrial millionaires became interested in philanthropy – the use of money to benefit the community. Steel is the ideal material for railroad tracks, bridges, and many other products. Two new methods of making steel were developed. As a result of these new methods, mills could produce steel in great quantities at affordable prices. Carnegie - Carnegie Hall in New York City and more than 2,000 libraries. Rockefeller – University of Chicago and New York’s Rockefeller Institute for Medical Research.

Andrew Carnegie In 1865 Carnegie invested in the iron industry. In 1890 Carnegie had dominated the steel industry through – vertical integration – acquiring companies that provided the equipment and services he needed. Carnegie bought iron and coal mines, warehouses, ships and railroads. By doing this Carnegie had gained control over all parts of the business of making and selling steel. In 1900 Carnegie combined all of his holdings = producer of 1/3 of the nation’s steel. In 1901 Carnegie sold his steel company to J.P. Morgan for $450 million. Morgan combined Carnegie’s business with others to form the first billion dollar company – the United States Steel Corporation.

Carnegie Hall, New York City Rockefeller Plaza, New York City Carnegie Hall, New York City

Corporations Grow Larger Corporate mergers – the combining of companies – were made easier by states passing laws. Mergers made the few people, like Rockefeller and Morgan, who owned giant corporations, more powerful. By 1900 1/3 of America’s manufacturing was controlled by 1% of the country’s corporations.

Opposition to Big Business Problem? Big businesses claimed that monopolies and trusts benefited society because they reduced competition and brought greater economic stability. Opposers of big business argued that the lack of competition hurt consumers because without competition corporations had no reason to keep their prices low or improve their goods and services. During the 1880’s 15 states passed laws that restricted business combinations. Congress passed the Sherman Antitrust Act in 1890. This act sought to “protect trade and commerce against unlawful restraint and monopoly.”