1. The Rise of Big Business-
The Incorporation
of America

2. Causes of Rapid Industrialization
Steam Revolution of the 1830s-1850s
The Railroad fueled the growing US economy:
First big business in the US
A magnet for financial investment
The key to opening the West
Aided the development of other industries
Technological innovations
Bessemer and open hearth process
Refrigerated cars
Edison
“Wizard of Menlo Park”
light bulb, phonograph, motion pictures

3. Causes of Rapid Industrialization
Unskilled & semi-skilled labor in abundance
Abundant capital
New, talented group of businessmen [entrepreneurs] and advisors
Market growing as US population increased
Government willing to help at all levels to stimulate economic growth
Abundant natural resources

4. New Types of Business Entities
Pool:  Interstate Commerce Act  Interstate Commerce Commission created

5. New Types of Business Entities
Trust:
Horizontal Integration  John D Rockefeller and Andrew Carnegie
Vertical Integration:
Gustavus Swift - Meat-packing
Andrew Carnegie - Steel
John D. Rockefeller - Oil

6. New Types of Business Entities

7. New Business Culture
Laissez Faire  the ideology of the Industrial Age
Individual as a moral and economic ideal
Individuals should compete freely in the marketplace
The market was not man-made or invented
No room for government in the market

8. The Reorganization of Work
The Principles of Scientific Management (1911)
Replace rule-of-thumb work methods with methods based on a scientific study of the tasks
Scientifically select, train, and develop each employee rather than passively leaving them to train themselves
Provide "Detailed instruction and supervision of each worker in the performance of that worker's discrete task"
Divide work nearly equally between managers and workers, so that the managers apply scientific management principles to planning the work and the workers actually perform the tasks
Frederick W. Taylor

9. The Reorganization of Work
The Assembly Line

10. Social Darwinism British economist Advocate of laissez-faire
Adapted Darwin’s ideas from the “Origin of Species” to humans
Notion of “Survival of the Fittest”
Herbert Spencer

11. Social Darwinism in America
Individuals must have absolute freedom to struggle, succeed or fail.
Therefore, state intervention to reward society and the economy is futile!
William Graham Sumner

12. The Gospel of Wealth Wealth no longer looked upon as bad
Viewed as a sign of God’s approval
Christian duty to accumulate wealth
Should not help the poor
Russell H. Conwell

13. The Gospel of Wealth
"I say that you ought to get rich, and it is your duty to get rich.... The men who get rich may be the most honest men you find in the community. Let me say here clearly .. . ninety-eight out of one hundred of the rich men of America are honest. That is why they are rich. That is why they are trusted with money. That is why they carry on great enterprises and find plenty of people to work with them. It is because they are honest men I sympathize with the poor, but the number of poor who are to be sympathized with is very small. To sympathize with a man whom God has punished for his sins ... is to do wrong.... let us remember there is not a poor person in the United States who was not made poor by his own shortcomings. ..."
-Russell Conwell from his
speech- “Acres of Diamonds”

14. New Business Culture and the American Dream
Protestant (Puritan) “Work Ethic”
Horatio Alger (100+ novels)

15. Robber Barons or Captains of Industry?

16. Cornelius “Commodore” Vanderbilt
Becomes captain of the railroad industry by consolidating several of the major trunk lines
Most of these lines led into Chicago or New York
Reduced the amount of railroad companies, making coordinating transportation easier
Can’t I do what I want with my money?

17. William Vanderbilt The public be damned!
What do I care about the law? Ain’t I got the power?

18. John D. Rockefeller Becomes king of the oil industry
Takes advantage of the 1860s oil rush in PA by creating Standard Oil in 1870
Used the latest tech. and efficient practices
By 1881 S.O. controlled 90% of oil refineries

19. Standard Oil

20. Andrew Carnegie
Dominated the steel industry after coming to the U.S. as a poor Scottish immigrant-perfect example of the “American success story”
Worked his way up through the railroad industry and was able to purchase stock along the way
Started his own steel company in Pittsburgh using the Bessemer Process
Increased production of steel from 13,000 tons in 1860 to 1.4 million tons by 1880
By 1900 Carnegie Steel had 20,000 employees and was the largest steel company
Sold his company to JP Morgan in 1900 for $400 million

21. Iron and Steel Production

22. Carnegie’s Beliefs about Wealth
The Anglo-Saxon race is superior
“Gospel of Wealth” (1901)
Inequality is inevitable and good
Wealthy should act as “trustees” for their “poorer brethren”

23. John Pierpont (J.P.) Morgan
Gained prominence as an investment banker who invested European capital ($) in promising American businesses
Through his investments (ex. buying stock) he was able to gain positions on the boards of many of the companies- allowing him to shape the direction of the businesses
Bought what will become U.S. Steel which will become the first billion dollar corporation

24. Meat Packing Industry
Gustavus Swift (Chicago) and Philip Armour (Minneapolis) dominated the meat packing industry
Swift used Vertical Integration which allowed his company to control all of the steps in the process (from moo to chew)

25. % of Billionaires in 1900

26. % of Billionaires in 1918

27. Regulating the Trusts 1877  Munn. v. IL
1886  Wabash, St. Louis & Pacific Railroad Company v. IL
1890  Sherman Antitrust Act
in “restraint of trade”
“rule of reason” loophole
1895  US v. E. C. Knight Co.