The Rise of Big Business Main Idea: Corporations run by powerful business leaders became a dominant force in the American economy.

Free Markets Capitalism: economic system in which private businesses run most industries. -competition determines prices & wages Most business leaders in late 1800s believed in laissez-faire: allows companies to conduct business without intervention by the gov’t Social Darwinism: idea that the stronger businesses, people, & nations will prosper while the weaker ones would fail -”natural selection” & “survival of the fittest”

Business Structures Change Most businesses by end of civil war were proprieterships (1 owner) or partnerships (2 person) Corporations: business owned by stockholders -advantage of being able to raise $$$ by selling stock -also, investors have limited responsibility for co. Late 1800s some companies merged and turned over their separate stocks to a board of trustees (Trust) Monopoly: when a trust gained complete control over an industry -effects: it could raise prices or lower quality of product (since there was no competing businesses)

John D. Rockefeller He started Standard Oil company as a refinery To increase profits, he engaged in vertical integration (acquiring companies that supplied his business) -bought barrel factories, oil fields, oil storage facilities, pipelines, and railroad cars To expand his business, he engaged in horizontal integration (taking over companies producing the same product) -he bought as many refineries as he could -by 1879, Standard Oil refined 90% of all US oil

Rockefeller tried limiting competition in other ways -made deals w/ railroads & shipping co. to get lowest possible prices for transporting his oil He could sell oil much cheaper than his competitors -drove them out of business Gave over half of his $900 million to good causes

Andrew Carnegie Born dirt poor in Scotland; parents came to US when 12 Found own steel company Carnegie Steel He sold it to banker J.P. Morgan in 1901 for $480 million -Carnegie then devoted his life to philanthropy -supported education, built public libraries, financed scientific work, and founded Carnegie Mellon University -funded international peace efforts He believed that wealthy people had a duty toward the rest of society (“Gospel of Wealth”)

Railroad Tycoons Cornelius Vanderbilt – invested in RR in 1860s -controlled NY Central RR; in MI, Canada -also invested in steamship lines (Atlantic Coast) Not a big philanthropist George Pullman – designed & built RR cars -Pullman Palace Car Co. (Chicago 1867) -created sleeper cars that were comfortable built a town south of Chicago for employees -comfortable houses & indoor plumbing – luxuries -downside: no self-gov’t, no newspapers, no speaking out against the company policies

Mixed Legacy Some viewed tycoons as “robber barons” -unfair monopolies, mansions, and luxurious lives Others viewed them as captains of industry who made the American economy more productive Advertisers tried new approaches to win customers Also, the department store was born in the cities -customers could now buy different products from the same store Rural customers could buy many items mail order -you could even buy a home by way of mail order -1895: Sears made a 507 pg catalogue