1. THE RISE OF BIG BUSINESS
13.2
ANDREW CARNEGIE
JOHN D ROCKEFELLER
CORNELIUS VANDERBILT
JP MORGAN

2. THE RISE OF BIG BUSINESS
VOCABULARY
CORPORATION
MONOPOLY
CARTEL
HORIZONTAL INTEGRATION
TRUST
VERTICAL INTEGRATION
SOCIAL DARWINISM
ICC
SHERMAN ANTITRUST ACT

3. THE CORPORATION DEVELOPS
Investors developed a form of group ownership known as a corporation in order to take advantage of expanding markets.
Corporation- a number of people share ownership of a company
Corporations had the same rights as individuals
They could buy and sell property
They could sue in court

4. Corporations had access to huge amounts of capital
This allowed them to fund new technology
They could expand into new industries
They could operate ventures in many different areas of the country and around the world
Corporations became the backbone of the global free market system
Standard Oil Refinery

5. GAINING A COMPETITIVE EDGE
Corporations worked to maximize profits
Paid lowest wages possible
Advertised widely
Invested in research and development (R&D)
Cut prices to drive out competition
Cornelius Vanderbilt built his $143 billion dollar fortune starting with a steamship line. He lowered his fares so much so that his competitors paid him to leave.

6. Corporations tried to gain a monopoly
Monopoly- complete control of a product or service
Corporations either bought competitors or drove them out of business
Once the competition was eliminated, they could set their own prices

7. Some corporations worked with other businesses to form a cartel
Cartel- Businesses making the same product agree to limit production in order to keep prices high
John D Rockefeller made deals with railroads to refuse service to his rivals in the oil industry, thereby driving them out of business

8. HORIZONTAL AND VERTICAL INTEGRATION
Horizontal Integration
Consolidating many firms in the same business
To circumvent laws forbidding corporations owning stock in other corporations, Rockefeller devised the trust
Trust- Companies assign their stock to a board of trustees, who combine them into a new corporation. The trustees run the organization, paying themselves dividends on the profits.
Vertical Integration
Control of the many different businesses that make up all phases of a product’s development

9. DEBATING THE ROLE OF BIG BUSINESS
“Robber Barons” or “Captains of Industry?”
Trusts, cartels and monopolies gave an unfair advantage to big business
Small businesses were bought up or squeezed out
Consumers were harmed by high prices set by cartels and monopolies
Factories, steel mills and railroads provided jobs for an expanding workforce
The development of efficient business practices and support for R&D benefitted the economy, stimulated innovation and made the US an economic leader
Many business leaders were philanthropists

10. SOCIAL DARWINISM CATCHES ON
Charles Darwin published On the Origin of Species (1859)
Natural Selection-only the fittest animals survive
Social Darwinism-Wealth is a measure of one’s inherent value and those that have it are most fit
Social Darwinists believed that government interference in business would disrupt natural selection
They believed the most ambitious people would rise to the top, therefore, the government should not waste public funds on the poor
This theory sparked economic, ethnic, racial and sexual discrimination

13. THE GOVERNMENT IMPOSES REGULATIONS
Due to complaints of unfair business practices in the RR industry, the US Senate created the Interstate Commerce Commission (ICC) in 1887
Set up to monitor business operations
Could only monitor RR’s that crossed state lines
Could require all RR’s to send records to Congress for review
In 1890, the Senate passed the Sherman Antitrust Act
Outlawed any trust that restrained trade or commerce
Largely ineffective, as businesses claimed labor unions restrained trade

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