BIG BUSINESS EMERGES Bessemer Process Steel Industry Big Business

ANDREW CARNEGIE - BUSINESS TYCOON AND PHILANTHROPIST What is a philanthropist? The Steel Industry

NEW BUSINESS STRATEGIES Andrew Carnegie’s Business practices vertical integration vertical integration –bought companies that sold supplies Coal, iron mines, a railroad lineCoal, iron mines, a railroad line –Carnegie thereby controlled every stage of the productive process from raw materials to marketing. horizontal consolidationhorizontal consolidation –Bought out his competitors. By 1899 Carnegie’s company was the world’s biggest industrial corporation and produced one-fourth of the nation’s steel.By 1899 Carnegie’s company was the world’s biggest industrial corporation and produced one-fourth of the nation’s steel. Result: helped to concentrate power in a few giant corporations and limited competition.Result: helped to concentrate power in a few giant corporations and limited competition.

? Business Practices ? EXAMPLE:? - Carnegie Steel company. Carnegie SteelCarnegie Steel The company controlled: * the mills where the steel was manufactured * the mills where the steel was manufacturedsteel * the mines where the iron ore was extracted iron oreiron ore * the coal mines that supplied the coal, coal * the railroads that transported the coal to the factory * the ovens where the coal was cooked, etc. vertical integration

? Business Technique ? Example: Carnegie SteelExample: Carnegie Steel –? acquiring competitors by pricing products so low that competitors could not compete and make a profit - Then buying them out. pricing products so low that competitors could not compete and make a profit - Then buying them out. By 1899 Carnegie’s company was the world’s biggest industrial corporation and produced one-fourth of the nation’s steel.By 1899 Carnegie’s company was the world’s biggest industrial corporation and produced one-fourth of the nation’s steel. HORIZONTAL CONSOLIDATION

RESULT Vertical integration and horizontal consolidation helped to concentrate power within a few giant corporations and limited competition.Vertical integration and horizontal consolidation helped to concentrate power within a few giant corporations and limited competition.Monopolies

What Factors Contributed to Carnegie’s Success? (According to him) 1.Hard Work 2.Shrewd Investment 3.Innovative Business Practices  Better Products  Lower Production Cost  Hired talented people

HOW DID PHILOSOPHERS EXPLAIN CARNEGIE’S SUCCESS? SOCIAL DARWINISM 1.PRINCIPLES OF SOCIAL DARWINISM Enables the strongest to survive Justifies Laissez faire "allow to do" Unregulated business/marketplace 2.SUPPORT FOR SOCIAL DARWINISM * Supported idea of responsibility and blame * Protestant work ethic of many Americans * Poor must be lazy & inferior * Enforced by popular literature "Rags to Riches" stories

Supporters of Social Darwinism Believed in a Laissez-faire capitalismBelieved in a Laissez-faire capitalismCapitalism an economic system in which most means of production are owned and controlled privately, and capital is invested in the production, distribution and other trade of goods and services, for profit.an economic system in which most means of production are owned and controlled privately, and capital is invested in the production, distribution and other trade of goods and services, for profit.

TYPES OF BIG BUSINESSES 1.OLIGOPOLY Businesses producing similar products joined together –Businesses producing similar products joined together – only a few sellers in a marketonly a few sellers in a market 2.MERGERS - one corporation bought out stock of another 3.MONOPOLY - complete control over its industry: production, quality, wages paid, & pricesproduction, quality, wages paid, & prices Eliminates competitorsEliminates competitors only one seller in a marketonly one seller in a market 4.HOLDING COMPANIES

STANDARD OIL COMPANY (Trust) EST. BY JOHN D. ROCKEFELLER joined competing companies in a trust agreementjoined competing companies in a trust agreement Rockefeller gained control of the Oil Industry in AmericaRockefeller gained control of the Oil Industry in America trust = people turn their stock over to a group of trustees (group that runs separate companies as one company) 5. trust = people turn their stock over to a group of trustees (group that runs separate companies as one company)

What message is this political cartoon trying to convey?

“Robber Barons” OR “Captains of Industry”? (22) American billionaires by 1900(22) American billionaires by 1900 Debate: Corrupt businessmen OR Corrupt system which they were embedded.Debate: Corrupt businessmen OR Corrupt system which they were embedded. Coined by Matthew Josephson (European history – stealing)

UNREGULATED BUSINESSES Ex. Of a ROBBER BARON: ROCKEFELLERROCKEFELLER Standard Oil Company of Ohio -. Controlled 90% of the refining business Standard Oil Company of Ohio -. Controlled 90% of the refining business. Didn't pass along profitsDidn't pass along profits Uneven distribution of Income in the U.S.Uneven distribution of Income in the U.S.

FIRST ATTEMPTS GOVERNMENT REGULATION 1.supreme court case MUNN v. ILLINOIS Established the gov’t. right to ?  INTERSTATE COMMERCE ACT – SHERMAN ANTI-TRUST ACT  Federal gov’t. law - made monopolies & trusts illegal  Hard to enforce (almost impossible)

PROBLEMS OF INDUSTRY 1.Poor working conditions: low wages, long hours, dangerous  Led to Unions being formed within the labor force. Organized workers fighting for better wages and working conditions.Organized workers fighting for better wages and working conditions. 2.Pollution 3.Overcrowding in Cities 4.Crime and Corruption 5.Poverty 6.Unregulated Businesses – led to corruption