1. The Growth of Big Business
Chapter 13 Section2
The Growth of Big Business

2. Social Darwinism Survival of the fittest
Believed in little government interference
The best will thrive
The unfit will be weeded out
Everyone would benefit
The theory of evolution applied to society

3. How did the theory of social Darwinism affect the government’s relationship to big business?
It encouraged government to take a hands-off approach to big business
Promoted a belief that society should not interfere with peoples success

4. Oligopoly
Occurs when to cost of starting a certain type of business is high
A market structure which is dominated by only a few large, profitable firms
Modern examples: cereals, cars, appliances

5. Monopoly
When a business gains complete control of a product or service
To achieve this, a company must buy competitors, or drive them out of business

6. Cartel A loose association of businesses that make the same product
Members of cartels agree to limit the supply of their product in order to keep prices high

7. Andrew Carnegie
Founded first plants to use Bessemer Process to produce steel
Founded Carnegie Steel in 1889
Became very wealthy

8. Gospel of Wealth A personal philosophy of Andrew Carnegie
Became a movement of the early 20th century
People should be free to make as much money as they want, but give it away after they make it

9. Gospel of Wealth Carnegie donated money to build 3,000 libraries
Supported art and research institutes
Set up a fund to study how to abolish war
Had given away $350 million by the time he died in 1919

10. Vertical Consolidation
Business tactic of Andrew Carnegie
Gaining control of the many different businesses that make up all phases of a product’s development

11. Economies of Scale
As production increases, the cost of each item produced is lower
Vertical Consolidation allowed Carnegie to maintain low production costs
Allowing him to cut his prices
put less wealthy competitors at a disadvantage

12. John D. Rockefeller Founded Standard Oil in 1870
Used questionable business tactics
Gave $500,000 to charity
Helped found the University of Chicago

13. Horizontal Consolidation
Business tactic of Rockefeller
Bringing together many firms in the same business (taking over your competitors)
Allowed Rockefeller to control an extremely high percentage of the oil industry

14. How did methods such as vertical and horizontal consolidation, and factors such as economies of scale help companies dominate their markets?
Through horizontal consolidation, companies purchased competing companies
Through vertical consolidation and economies of scale, companies lowered production costs so much that other companies could not compete

15. Trust
Different firms in the same business (oil for example) being run as one company by a board of trustees
Rockefeller was able to combine 40 oil businesses into his trust

16. Sherman Antitrust Act
Outlawed any combination of companies that restrained interstate trade or commerce
The law was rarely enforced by pro-business courts

17. Why did the Sherman Antitrust Act seek to stop big business from forming trusts?
Trusts threatened fair competition in industry
Trusts may cause prices to rise due to lack of competition

18. What were some features of the new big businesses?
Large amounts of capital
Wider geographic span
Broader range of operations (they make more than one thing)
Revised role of ownership (business too big for an owner to run, so they hired managers)
New methods of management (in order to keep track of all the was being produced and spent)