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Growth of the Steel Industry  Civil War  Spurred the growth of the steel industry  Iron rails wore out quickly so they had to be replaced by steel  Steel costly and difficult to make 2

Making Steel a New Way  1850s  William Kelly – United States  Henry Bessemer – England  Discovered new way to make steel  Bessemer process  Enabled steel makers to produce strong steel at a lower cost  Manufacturers  Made steel nails, screws, and needles  Steel girders – used to support skyscrapers 3

Thriving Steel Mills  Steel mills  Sprang up in cities throughout the midwest  Pittsburgh became the steel-making capital of the nation  Coal mines and transportation helped steel mills thrive  Brought jobs and prosperity  Caused problems  Industrial waste poured into the water  Thick black smoke  Soot blanketed houses, trees, and streets 4

Andrew Carnegie’s Steel Empire  Andrew Carnegie  Scottish immigrant  Made fortune in steel industry 5

Controlling the Steel Industry  Carnegie  Saw the Bessemer process in action  Borrowed money and began his own steel mill  Bought out rivals  Bought iron mines, railroad and steamship lines, and warehouses  Controlled all phases of the steel industry – mining iron ore to shipping finished steel  Vertical integration  Changing raw materials into finished products 6

The “Gospel of Wealth”  Carnegie  Drove workers hard  Believed rich had a duty to help the poor and to improve society  “gospel of wealth”  Gave millions to charities 7

The Corporation and the Bankers  Railroad boom  Nearly every town had it own small factory  Big factories  Made goods more cheaply than small factories  Railroads distributed goods to nationwide markets  Demand for local goods fell  Small factories closed  Increased their output 8

The Corporation and the Bankers  Expanding Factories  Needed capital, or money for investment  Used capital to buy raw materials, pay workers, and cover shipping and advertising costs 9

The Rise of the Corporation  Expanding business became corporations  Corporation  Business owned by investors  Stock  Shares in the business  Dividends  Shares of a corporation ‘s profit  Stockholders  Elect board of directors to run the corporation  Face fewer risks than owners of private businesses 10

Banks and Industry  Corporations  Attracted large amts. of capital from investors  Borrowed millions of dollars from banks  Loans helped American industry grow  Bankers made huge profits  Bankers  J. Pierpont Morgan  Most powerful banker in the late 1800s  Used banking profits to gain control of major corporations 11

Banks and Industry - Continued  J.P. Morgan  Invested in the stock of troubled corporations  Won the seats on the board of directors  Adopted policies that reduced competition and ensured big profits   Gained control of most of the nation’s major rail lines  Began to buy up steel companies – including Carnegie Steel – merged it into a single large corporation  Became head of the United States Steel company  First American business worth more than $1 Billion 12

Rockefeller’s Oil Empire  Iron ore plentiful  Mesabi Range of Minnesota  Coal  Pennsylvania, West Virginia, and the Rocky Mountains  Rocky Mountains  Also contained other minerals such as gold, silver, and copper  Forests provided lumber for building 13

Rockefeller’s Oil Empire - Continued  1859  Oil discovered  Drillers near Titusville, Pennsylvania made the nation’s first oil strike  Oil boom follows 14

Rockefeller and Standard Oil  John D. Rockefeller  Went to Pennsylvania for the oil fields  Oil had little value until it was refined, or purified, to make kerosene  Builds an oil refinery  Competition was wasteful  Used profits from his refinery to buy other refineries  Combined companies into the Standard Oil Company of Ohio 15

Rockefeller and Standard Oil - Continued  Rockefeller  Shrew businessman  Improving the quality of his oil  Tried to get rid of competition  Standard Oil slashed prices to drive rivals out of business  Pressured customers  Forced railroad companies to grand rebates to Standard Oil 16

The Standard Oil Trust  1882  Rockefeller formed the Standard Oil trust  Group of corporations run by a single board of directors  Stockholders in smaller companies turned their stock over to Standard Oil  Received stock in the new trust  Paid high dividends  Created a monopoly of the oil industry  Controls all or nearly all the business of an industry  Controlled 95% of all oil refining in the U.S. 17

The Standard Oil Trust - Continued  Monopolies  Other companies began to set up trusts and build monopolies  1890s  monopolies and trusts controlled some of the nation’s most important industries 18

The Case For and Against Trusts  Americans  Leaders of giant corporations abusing free enterprise system  Businesses owned by private citizens 19

The Case Against Trusts  Trusts and monopolies reduced competition  Without competition thee was no reason for companies to keep prices low or to improve their products  Political influences of trusts  Government moves towards controlling giant corporations  Sherman Antitrust Act – 1890  Banned formation of trusts and monopolies  Too weak to be effective 20

The Case for Trusts  Some business leaders defended trusts  Andrew Carnegie published articles  Growth of giant corporations brought lower production costs, lower prices, higher wages, and a better quality of life for millions of Americans 21