Benefits of Big Business Large companies could manufacture enough products to meet national demand. Produced better products for lower cost. Paid high salaries to get experts. Increased efficiency

Big Business Tactics Demand volume discounts. Sell at a loss until their competition shuts down. IF/when it becomes a monopoly, it controls prices.

Mixed Feelings Toward Big Business Worried about corrupting influence of power and wealth, but liked the low prices, efficiency, and national markets. Same as feelings toward outsourcing today.

Role of Corporations Corporation is an organization owned by many but treated by law as an individual. Can own property, sue/be sued, enter into contracts. Owners are called stockholders; own shares of partnership called stock. Issuing stock allows the corporation to raise money, or financial capital, while diluting the risk.

Limited Liability Stockholder risks no more than the sum originally invested. If the corporation cannot pay its debts and goes bankrupt, stockholders (owners) are not personally responsible for paying its debts.

Economies of Scale With large capital, corporations could invest in new technologies, hire large workforce, purchase more machines. Corporations can make goods more cheaply because they produce so much so quickly using large manufacturing facilities. Small companies could not compete and went bankrupt.

America’s Industrialists: Captains of Industry Or Robber Barons? America’s Industrialists: Captains of Industry Or Robber Barons?

The ‘Robber Barons’ of the Past

Robber Barons : term implies that leaders built their businesses by stealing from the public & using unfair business practices Captains of Industry: credits these Industrialists with creating the industrial power of the US

New Business Culture 1. Laissez Faire  the economic theory of the Industrial Age.  Individuals should compete freely in the marketplace.  No room for government in the market!  Individuals should compete freely in the marketplace.  No room for government in the market!

2. Social Darwinism × British economist. × Advocate of laissez-faire. × Adapted Darwin’s ideas from the “Origin of Species” to humans. × “Survival of the Fittest” applied to business × British economist. × Advocate of laissez-faire. × Adapted Darwin’s ideas from the “Origin of Species” to humans. × “Survival of the Fittest” applied to business Herbert Spencer

Social Darwinism in America $Individuals must have absolute freedom to struggle, succeed or fail. $Wealth is a reward for “smarts” and hard work. $The strongest companies will survive, the weak ones will perish. $Gov’t should not interfere with the “natural selection” of successful businesses. $Individuals must have absolute freedom to struggle, succeed or fail. $Wealth is a reward for “smarts” and hard work. $The strongest companies will survive, the weak ones will perish. $Gov’t should not interfere with the “natural selection” of successful businesses.

Cornelius [“Commodore”] Vanderbilt Can’t I do what I want with my money?

William Vanderbilt $ The public be damned! $ What do I care about the law? H’aint I got the power? $ The public be damned! $ What do I care about the law? H’aint I got the power?

Andrew Carnegie Scottish immigrant “Rags to Riches” 1 st major steel company in US (now US Steel) Vertical Integration Gospel of Wealth Philanthropist

Vertical Integration Owns all of the businesses that its needs in order to operate Saves company money even while company becomes bigger Carnegie Steel bought coal mines, limestone quarries, iron ore fields.

The Gospel of Wealth: $ Wealth is not looked upon as bad. but is $ Viewed as a sign of God’s approval. $ Christian duty to accumulate wealth. (Protestant work ethic) $ Wealthy people have responsibility to use their wealth for the benefit of society. Thus many endowed colleges, libraries, scholarships, etc. $ Wealth is not looked upon as bad. but is $ Viewed as a sign of God’s approval. $ Christian duty to accumulate wealth. (Protestant work ethic) $ Wealthy people have responsibility to use their wealth for the benefit of society. Thus many endowed colleges, libraries, scholarships, etc.

John D. Rockefeller Founder of Standard Oil controlled 90% of US oil refining Widely criticized for his business practices – √horizontal consolidation √ forced rebates √ trusts Legacy as philanthropist

Horizontal Integration Buys out same type of business. Big oil company (Standard Oil) buys out little oil companies. When owns all of same type of companies, has a monopoly. With no competition, can set prices where it wants.

Standard Oil Co.

TRUSTS A trust is formed when several companies give control of their corporations to a single board of trustees. Did not violate state laws forbidding one company to own stock in another company without first getting permission from state Enabled trustees to control a group of companies as if they were one large merged company

BILL GATES Chairman and chief architect of Microsoft Richest man in world Bill and Melinda Gates Foundation