The Rise of Big Business

US economic system Private business run most industries, and competition determines how much goods cost and workers are paid In the late 1800s, entrepreneurs built industries that took advantage of the eras technological advancements

Laissez-faire “leave it alone” economics Most business leaders believed that the economy would prosper if businesses were left free from government regulation and allowed to compete in a free market

Karl Marx was a critic of capitalism Under communism, the individual ownership of property should not be allowed Property and the means of production are owned by everyone in the community The community in turn provides for the needs of all the people equally without regard to social rank

Business leaders embraced this theory Society progressed through natural competition The “fittest” people, businesses, or nations should and would rise to positions of wealth and power The “unfit” would fail

Existed in one form or another since colonial times Organizers raise money by selling shares of the stock, or certificates of ownership, in the company Stockholders receive a percentage of the corporation’s profits, known as dividends Andrew Carnegie-urged young men to invest in stocks as he had

Where competition was fierce, prices and profits tended to rise and fall wildly Corp. responded by forming trusts A group of companies turn control of their stock over to a common board of trustees The trustees then run all of the companies as a single enterprise The practice limits over production and other inefficient business practices by reproducing competition in an industry

If a trust gains exclusive control of an industry Little or no competition, a company with a monopoly has almost complete control over the price and equality of a product

Steel leader Invested in stock (bridges, RR, iron, oil, telegraph lines) Gave him the capital to invest in steel Reduced production cost “economies of scale”

Carnegie used this idea to control costs He acquired companies that provided the materials and services upon which his enterprises depended He purchased the iron and coal mines which provided raw materials necessary to run his steel mills He bought steamship lines and RR to transport the steel

Standard Oil Company He used vertical integration Horizontal integration-one company’s control of other companies producing the same product Standard Oil Company tried to control the oil refineries it didn’t own Developed the one of the nation’s first trusts

Pioneer of the railroad industry Controlled lines between Chicago, Cleveland, New York and Toledo Purchased smaller lines and then combined them By the time of his death in 1877, he controlled more than 4,500 miles of track Worth $100 million

Railroad giant Designed and manufactured railroad cars that made long- distance rail travel more comfortable Passenger-railroad- car- industry Sleeping cars, dining cars and luxurious cars