CH. 14-2 THE RISE OF BIG BUSINESS AMERICAN HISTORY

A FAVORABLE BUSINESS CLIMATE ENTREPRENEURS—risk takers who use their money and talents to launch new ventures BELIEF IN FREE MARKETS CAPITALISM—an economic system in which private businesses run most industries. Competition determines prices and wages

Late 1800s, most business leaders believed in LAISSEZ-FAIRE (to let do) capitalism Companies to conduct business without government intervention Business leaders believed that government regulation would destroy individual self-reliance, reduce, profits, and harm the economy

SOCIAL DARWINISM There were inequalities under capitalism Adapted the ideas of British scientist Charles Darwin applied them to human society Darwin said members of a species compete for survival Social Darwinists believed that stronger people, nations, and businesses would survive

Weaker ones would fail “Survival of the fittest” There was opposition to any interference

BUSINESS STRUCTURES CHANGE Late 1800s—industrialization continues Businesses became larger and more complex PROPRIETORSHIPS AND PARTNERSHIPS Proprietorship—business run by a individual Partnership—business owned by 2 or more individuals

Owners were responsible for all debts and obligations of the business CORPORATIONS A business with the legal status of an individual It is owned by STOCKHOLDERS (people who buy shares in the company) Major business decisions are made by a board of directors

The board hires corporate executives to run the day-to-day operations Corporation Advantages: 1) raise large sums of money through stock sales 2) stock money used to expand the business 3) stockholders have limited responsibility for the corporate debt

4) Stockholders can only lose what they have invested Corporations continue on long after the original founders leave TRUSTS AND MONOPOLIES Companies agreed to merge and turn over their separate stocks to a board of directors

MONOPOLY—A company has no competition so it would have complete control of the market—prices, supply, etc.

INDUSTRIAL TYCOONS Late 1800s, many corporate leaders amassed staggering fortunes ROCKEFELLER AND OIL John D. Rockefeller entered oil business in 1863 with Standard Oil Company VERTICAL INTEGRATION—acquiring companies that supplied his business

Barrel factories, oil fields, oil-storage facilities, pipelines, railroad cars This allowed low cost and high profits HORIZONTAL INTEGRATION—take over other companies producing the same product Rockefeller bought other oil refineries 1879—Standard Oil was refining 90% of all oil in the USA

Rockefeller limited competition in other ways Special deals with railroads and shipping companies for the lowest shipping price Forced other companies out of business Fortune worth $900,000,000 More than half donated to worthy causes >$80,000,000 donated to the University of Chicago Millions more into education through his Rockefeller foundation

CARNEGIE AND STEEL Andrew Carnegie--Born in Scotland Immigrated to the USA at age 12 Began investing in iron, oil, railroad, telegraph Founded his own steel business Carnegie held costs down through vertical integration Buy supplies in bulk, producing items in large quantities

End of 1800s Carnegie Steel Company dominated the industry 1901—Carnegie sold the company to banker J.P. Morgan for $480,000,000 After retiring, he devoted time to philanthropy and charity work Gave away >$350,000,000 to support education He built public libraries, financed scientific work, and established Carnegie Mellon University in Pittsburgh

He also built Carnegie Hall, the famous concert site, in New York City Carnegie believed that wealthy people had a duty to society RAILROAD TYCOONS Cornelius Vanderbilt invested in railroads during the civil war 1872—owned New York Central Railroad He controlled 4,500 miles of railroad track

Vanderbilt didn’t do much charitable work Greatest donation was $1,000,000 to Central University in Tennessee, which was later renamed Vanderbilt University 1877-Vanderbilt died leaving an estate of $100,000,000 GEORGE PULLMAN made his fortune designing and building railroad cars

His company, Pullman Palace Car Company (Chicago 1887) created sleeper cars for comfortable long distance travel 1881—he built an entire town south of Chicago for his employees The town of Pullman had comfortable homes with indoor plumbing, shops, a church, and a library

No local government and no local newspapers People that criticized the company might be evicted from their house A MIXED LEGACY Some tycoons viewed as “robber barons” Critics say they squeezed out competition

Other people saw them as “captains of industry” They used business skills to make the American economy more productive Rockefeller and Carnegie won praise for generous donations

MASS MARKETING Retailers were looking for ways to maximize their profits Companies that advertised started targeting ads toward women Food companies used wholesome farm images to convey a sense of purity Clever brand names were developed to help people remember a product “Uneeda Biscuit Crackers”

The department store was created to make it easier to shop One-stop shopping Stores that bought in bulk passed savings on to customers Rural people could purchase items from mail-order companies 1895—Sears, Roebuck, Co. produced a 507-page catalog

1904—Montgomery Ward catalog weighed 4 pounds and was mailed to about 4 million homes THE END