Creation of Monopolies Big Business Creation of Monopolies

Second Industrial Revolution Before Civil War industry Textiles, clothing and leather During and After Civil War Steel, petroleum, electricity, and machinery

American System of Economics Capitalism – private ownership of factors of production – competition sets prices and wages Laissez-faire – “Hands –off” NO GOVERNMENT INTERVENTION

American System Cont. Prior to Civil War Post Civil War Small business Corporations – owned by stock holders Monopolies or Trust – merger of several companies

Social Darwinism Based on Darwin’s Theory of Evolution Survival of the fittest. Used to justify beliefs in laissez-faire government.

Industrial Tycoons Andrew Carnegie – Steel Cornelius Vanderbilt – Railroads John D. Rockefeller – Oil J.P. Morgan – Banking James Duke – Tobacco and Electric Power

Andrew Carnegie Inspired by Henry Bessemer and his new process for making steel. Formed Carnegie Steel in 1889.

John D. Rockefeller Standard Oil tycoon. His business was later declared illegal by the Sherman Anti-Trust Act and busted up into several small business. Later becomes Exxon-Mobil

Two Ways to Form a Monopoly

Vertical Consolidation Process used by Carnegie to become wealthy and establish a monopoly. Bought out suppliers for steel industry. Coal fields, iron ore mines, storage, transportation, pipelines, tanker trucks to haul it….etc.

Horizontal Consolidation Purchase of companies producing the same good then merge together. Lower prices until competition goes bankrupt. Buy stock and form trusts.

Robber Baron or Captain of Industry Employees of Carnegie and Rockefeller called them robber barons. Owners reap large profits from paying workers low wages. Carnegie and Rockefeller considered themselves to be captains of industry. Those who help the poor by providing them with a job. Both men donated millions of dollars to libraries and educational institutions-philanthropists.

The effects of Big Business Monopolies drive up prices Government intervention in business Wide gap between rich and poor/working class Development of middle class Labor Unions