The Great Industrialists and their Tactics

Andrew Carnegie  Scottish immigrant-”rags to riches” story  became a giant in the steel industry  built massive steel plant in Pittsburgh, PA to produce railroad tracks  used Bessemer converter to make steel efficiently and cheaply  #1 steel producer in the world- owned 80% of the steel market  donated $400 million to worthy causes; gave away 90% of his wealth

John D. Rockefeller  Started Standard oil company-today called Chevron  used ruthless tactics to beat his competition  controlled 90% of the oil industry  paid extremely low wages to his employees  gave away millions of $, but kept most for himself

Cornelius Vanderbilt  American entrepreneur who built his wealth in shipping and railroads  By age 16 he was operating his own ferrying business between Staten Island and Manhattan  Ruthless in business, very few friends; perceived as vulgar, mean-spirited, made life miserable for those around him, including his family  Died at 82 with a fortune of more than $100 million  Nicknamed the “The Commodore”  Vanderbilt University, Breakers mansion in Newport, RI

Trusts and Monopolies  entrepreneurs controlled competition by forming a monopoly; bought out competitors or drove them out of business  trusts were another type of monopoly  Rockefeller created the Standard Oil trust to almost completely control the oil industry.  To fight the “robber barons”, Congress passed the 1890 Sherman Antitrust Act, making it illegal to form monopolies and trusts.

Business Tactics  Vertical Integration- buying up all phases of production such as raw materials and distribution.  Horizontal Integration- buying up all similar industries  Social Darwinism- only the best run businesses will survive. Encouraged competition, hard work, and responsibility  Laissez-faire- US government should not interfere with the economy. “Hands off!”

In Vertical Integration the Company Owns the Whole Production Process  Andrew Carnegie owned the coalfields that supplied coal to his steel mills  Carnegie owned the iron mines that supplied the iron ore for his Bessemer converters  Carnegie owned the railroad tracks and railroad trains that brought raw materials in and finished steel out  Carnegie controlled “top to bottom”, or vertically, all the parts of the process needed to make steel  Can you think of an example of Vertical Integration in today’s economy?

What is Horizontal Integration?  If Coca Cola buys Pepsi  If McDonalds buys Burger King  If Starbucks buys Dunkin Donuts  If ATT buys Verizon  If Toyota buys Honda  What happened to the competition?

Robber Baron  A business leader who used unfair practices and had little sensitivity for the common worker  provided unsafe and unsanitary working conditions  low wages and long hours  used violence against workers  selfishly kept their wealth  controlled and bought out competition  What can be done to slow down the Robber Barons? The Unions!