The Big Business Boom Chapter 6 (1-3) Chapter 6 (1-3)

RR: The 1 st Big Business Pre-CW railroads CW Congress wants to expand RRs –Why? TCRR would strengthen the economic infrastructure –How? Hire 2 companies to build it Union Pacific (starts in Omaha) Central Pacific (starts in Sacramento) –Who? Most workers are immigrants Union Pac used Irish – 6 miles / day Central Pac used Chinese – thru Sierra Nevada

TCRR Completed Took 7 years ( ) The 2 crews met at Promontory Summit Golden spike, telegraph the news Impact –Standard gauges –Steel tracks –Time zones

RR Benefits Faster & more practical transportation of goods Lower costs of production Creation of national markets Model for big business Stimulation of other industries

The railroads showed the US just how massive business could get and how much money could be had by just a few individuals. There is a group of these guys, industrialists from this era, that amassed huge fortunes through various means. They are known by 2 different names: Robber Barons Captains of Industry (*Please note that these 2 names refer to the same group of people.)

Term #1: Robber Baron German nobles in 1200s that controlled the Rhine River Used strategic positioning to take advantage of passersby –Demanded tolls from everyone –Ships must pay or they can’t pass –Got RICH simply because of their strategic location

Term #1: Robber Baron In the Gilded Age, this was a negative term for rich industrialists. –Built their fortunes by stealing from the public (strategic locations in business world) –Drained natural resources –Drove competitors out of business –Paid workers minimally –Forced employees to work in dangerous & unhealthy conditions

Term #2: Captain of Industry This was a positive term for rich industrialists. –Captains Leading us into a new era of commerce Increasing the supply of goods by building factories Raising productivity Expanding markets Creating jobs (raising standard of living for many) –Philanthropists $billions in donations – museums, libraries, colleges

John D. Rockefeller Formed Standard Oil Company –Controlled up to 91% of oil industry Richest man ever Numerous enormous donations –University of Chicago

Andrew Carnegie’s “Gospel” Made money in steel industry “Gospel of Wealth” –Businessmen should accumulate as much wealth as they can & redistribute to society (1) make money (2) give it all away strategically –Flip side: Keep money away from ill-equipped people & organizations To benefit society as a whole

Social Darwinism Applied Darwin’s theory of natural selection to the business & social sectors –“Survival of the fittest” –Natural laws would dictate the success of those who deserve it JUST DON’T INTERFERE! The government would largely stay out of business’s way during this time.

Business on a Larger Scale Therefore, business grew. –No longer cottage industries (mom/pop shops) –Huge amt of capital needed –Difficult to enter  oligopolies –Nationwide businesses because of transportation & communication advances New form of management –Not knowing all employees or aspects of operation –“Professional manager”

2 distinct ways to create monopolies –Vertical consolidation Andrew Carnegie’s steel company controlled every aspect of the supply chain (production to delivery). –Horizontal consolidation John Rockefeller acquired all but 10% of the oil industry; if you wanted oil, you had to go thru him.

How did Rockefeller do it? –He often dropped prices to below cost to drive out competitors. –When the government cracked down on monopolies, they formed trusts instead. Merging companies under a board of trustees that acts as 1 accord but are technically not 1. –Gov’t response = Sherman Antitrust Act Enacted 1890, but poorly enforced; ineffective

How did Rockefeller do it? –He often dropped prices to below cost to drive out competitors. –When the government cracked down on monopolies, they formed trusts instead. Merging companies under a board of trustees that acts as 1 accord but are technically not 1. –Gov’t response = Sherman Antitrust Act Enacted 1890, but poorly enforced; ineffective

Great!! We have all this booming new business! But who do we have to do the actual work?

The Growing Work Force During CW, laborers were scarce. Laws passed to encourage immigration –14 million immigrants came by million Americans also migrated from rural to urban areas. Why? –Farmers were poor –Big drought (even poorer) –Too much foreign competition (poorer still)

What was work like? Law = 10 hrs/day (rarely enforced) In practice = 12 hrs/day, 6 days/week Wage by productivity, not hour –Called piecework –Location: sweatshop Division of labor –Frederick Winslow Taylor’s studies –Joyless, boring, repetitive –Dispensable workers

What was work like? Ruled by the clock Strict rules – no tardiness, no talking Very loud, dark, dirty, hot, poorly ventilated, w/ frequent fires & accidents No workers’ comp or insurance –Many young children had to work No help provided –Against “Social Darwinism” –Would only encourage idleness