1. Chapter 6 Section 2
Rise of Big Business

2. New Capitalist Spirit Capitalism– private ownership of most industries
Competition determines price of goods and wages
By late 1800’s businesspeople looked to gain wealth by taking advantage of technological advances

3. Horatio Alger
Wrote books describing idea of self reliant individiualism
1869 Luck and Pluck series– based on a rags to riches theme

4. Laissez-Faire Capitalism
No government intervention in economy
Literal translation “hands off”
Businesses would let competition determine prices and wages
Free enterprise system– supply and demand, profit margin determine what and how much to produce

5. Critics Respond
Rapid industrialization is harmful and unjust to the working class
Karl Marx– German philosopher
Proposes a system that removes inequities of wealth
Communism proposes that individual ownership of property not be allowed
Property and production are owned by the community and it provides for needs of all
“capitalism allowed bourgeoisie to take advantage of proletariat”

6. Social Darwinism
Adapted Charles Darwin’s theory on natural selection and Evolution
Society progresses through natural selection
The “fittest” would and should rise to positions of wealth and power
The “unfit” would fail
Any attempt to assist poor or less capable would slow social progress
Religious leaders echoed support– wealth became a sign of Christian virtue

7. “Natures cure for most social and political diseases is better than man’s”
Nicholas Murray Butler

8. Corporations
At close of Civil War businesses are owned by individuals, families or partnerships
Not enough capital to manage new industries
Definition
Organizers raise money by selling shares of stock in company
Stockholders receive % of profits– called dividends
Stockholders had little or no part of daily operations

9. Advantages of corporations
Could raise large sums of money
Stockholders held limited liability– not responsible for corporations debt
Stable organization– not dependent on owner for its existence
Problems– where competition was fierce, prices and profits fluctuate

10. Jay Gould Worked as grocery clerk
Invested in railroad stock and earned $77 million

11. Trusts Corporations band together to form trusts
Turn control of business over to board of trustees
Trustees run business as one large company
Limits overproduction by reducing competition
Develops monopolies or complete control over price and quality of product

12. Andrew Carnegie Born in 1835 in Scotland
Immigrated to United States in 1848 at age of 12
Worked in cotton miles for $1.20/week in 1848
At 17 became private Secretary to railroad superintendent

13. Carnegie Steel
Began investing to raise money which he used to get into steel industry
Began empire in 1860’s
Knew nothing about production but hired experts to run company

14. Vertical Integration
Own the companies that provide materials and services you depend on
Iron and coal mines for ore
Steamships and railroads to transport products
By 1899 Carnegie organizes Carnegie Steel Company
Sold it to J.P. Morgan in 1901 for $500 million

15. Gospel of Wealth
“Rich are morally obligated to benefit their fellow citizens”
Donated $350 million to charities across the country

16. John D. Rockefeller Ran Standard Oil Company
Started in 1863 at beginning of oil boom
Practiced vertical integration like Carnegie
Set out to control the oil industry
“Competition was inefficient”

17. Horizontal Integration
Control of other companies producing oil
Drove others out of business by making deals with suppliers/transportation at cheaper rates than others
Became first trust in U.S. in 1899
By 1880 controlled 90% of all oil production
Like Carnegie– donated vast sums to charity
$530 million total

18. Cornelius Vanderbilt Prior to Railroad– operated shipping business
By 1869 gained control of New York Central and 2 others that connected New York City
Soon controlled lines between Chicago, Cleveland, New York, and Toledo
Provided more efficient service by combining small railroads
By 1877 controlled 4,500 miles of track
Personal fortune of $100 million

19. George Westinghouse
1869 at age of 23 established Westinghouse Air Brake Company
After public demonstration of effectiveness of air brake his business grew
By 1874 air brake was on 7,000 passenger cars

20. George Pullman Built Railroad cars to make travel more comfortable
Built company town south of Chicago in 1880
Hoped to encourage educated, healthy, peaceful and virtuous workers
Provided homes, stores, church, library, theatre, medical offices and athletic fields strictly controlled daily life in company town

21. Mass Marketing Persuade consumers to purchase products
Brand names– name recognition
“Standard Oil”– implies standard for industry
Packaging to set products apart
Helped create consumer culture
Montgomery Ward and Sears, Roebuck and Company– develop mail order catalogs

22. Department Store Variety of products under one store
Buy in bulk and set cheap prices
Marshall Field– Chicago
R.H. Macy– New York
John Wanamaker– Philadelphia
Becomes domain of women
Hired as workers
Enticed to shop

23. Chain Stores Branch stores in many cities
Woolworths– Frank Woolworth in 1879
By 1900 had 59 stores around country