1. Growth of Business and Monopolies
Do Now:
How do businesses become successful?
What components do they need to run smoothly and effectively?
Intro to the Gilded Age

2. Andrew Carnegie
Worked at the Pennsylvania RR, then entered the steel business in 1873.
(1899) The Carnegie Steel Company manufactured more steel than all the factories in Great Britain.
Steel

3. New Business Strategies
Carnegie searched for ways to make better products at a cheaper rate.
Incorporated new machinery and techniques
Accounting systems
Offered stocks in the company to persuade talented people to work for him
Encouraged competition among his assistants

4. Vertical and Horizontal Integration
Carnegie wanted to control as much of the steel industry as possible.
Vertical Integration: a process in which Carnegie bought out his suppliers in order to control the raw materials and transportation systems
Horizontal Integration: an attempt to buy out competing steel producers by merging companies that sell similar products

5. Vertical Horizontal RESOURCES
Raw materials, fields, forests, and farms
MANUFACT-URING
Production and processing
DISTRIBUTI-ON
Shipping transportation Delivery

6. Social Darwinism and Business
Philosophers explained Carnegie’s success as “Social Darwinism.”
Social Darwinism: from Darwin’s theory of evolution
“natural selection”
“survival of the fittest”
Riches were a sign of God’s favor, so the poor must be lazy or inferior to the wealthy.

7. Growth and Consolidation
“If you can’t beat ‘em, join ‘em.”
A firm that bought out all its competitors could achieve a monopoly: complete control over its industry’s production, wages, and prices.

8. Monopolies
One way to create a monopoly was to set up a holding company: a corporation who bought out the stocks of other companies.
Banker, J.P. Morgan was the head of United States Steel’s holding company.
(1901) Bought out Carnegie Steel to become the world’s largest business

9. Monopolies, cont’d
John D. Rockefeller, head of the Standard Oil Company, joined with competing companies in trust agreements: participants turn their stocks over to trustees (people who ran the separate companies as one large corporation).
In return, the companies were entitled to dividends on profits earned by the trusts.
Rockefeller used a trust to gain total control of the oil industry in America.

10. “Robber Barons”
Rockefeller’s profits came from paying his employees extremely low wages and driving competitors out of business by selling his oil at a lower price than it costs to produce it.
How could this work?
As soon as e controlled the market, he hiked his prices far above original prices.

12. Philanthropists
Industrialists believed in giving back to the community.
Rockefeller gave away over $500 million to establish the Rockefeller Foundation, providing funds to form the University of Chicago and create a medical institute to help find the cure for yellow fever.
Rockefeller

13. Sherman Anti-Trust Act
(1890) Sherman Anti-Trust Act: made it illegal to form a trust that interfered with free trade between states or with other countries
Problems:
act didn’t define trust
Firms reorganized when they felt pressure from the government
Government couldn’t enforce it

14. “It will be a great mistake for the community to shoot the millionaires for they are the bees that make the most honey, and contribute most to the hive even after they have gorged themselves full.”
- Andrew Carnegie
Do you agree with this statement? Why, or why not?