1. Rise of Big Business

2. Capitalism Privately owned business Pros? Cons? Laissez-faire –
Hands off policy of the government

3. Entrepreneurs Risk takers who start their own business
Andrew Carnegie –
John Rockefeller -

4. Andrew Carnegie
As railway supervisor, invested in iron mills, factories that made sleeper cars and locomotives, and companies that built railway bridges
Later opened own steel company in Pittsburg

5. John D. Rockefeller Built oil refineries
By 1870 Standard Oil was the largest oil refinery in the US
Bought out competition
By 1880 Standard Oil controlled 90% of oil refining industry in US

6. Corporation Organization owned by many but treated as one person
Own property, make contracts, pay taxes, sue, and be sued
Stockholders owned shares of stock thus owning part of the company
Advantages?
More money to invest in new technology, hire large workforce, purchase machines, and increase efficiency
Cost of manufacturing is decreased by producing goods faster in large quantities

7. Vertical Integration vs. Horizontal Integration
Vertical – Company owns all of the businesses it depends on for operation
Horizontal – Company buys out firms that do the same business to create one large corporation
Examples?
Carnegie = coal mines, limestone quarries, iron ore fields
Rockefeller = own 90% of oil refining industry by buying out competition

8. Vertical/ Horizontal Integration

9. Monopoly Single company controlling an entire market
Problem: price increases because no competition
States started to make it illegal for one company to own stock in another to prevent monopolies

10. Trusts New ways of merging businesses that did not violate new laws
Stockholders give stock to trustees
Stockholders would then receive a share of the trust which entitled them to a portion of the profits
Allows one person to manage another’s property
Trustees could control a group of companies as if they were one large merged company
Not illegal because trustees made the decisions and they did not own stock

11. Social Darwinism ‘Survival of the Fittest’
Stronger people, businesses, and nations would prosper. Weaker ones would fail.
Society progressed and became better because only the fittest survive

12. Robber Baron vs. Captain of Industry
Robber Baron – entrepreneurs that built fortunes by swindling investors and taxpayers, bribing gov’t officials and cheating
Captain of Industry – devoted time and fortune to helping society
Examples?

13. Holding Company Owns the stock of companies that produce goods
They do not produce anything
Manages companies it owns thus merging them into one large enterprise

14. Investment Banking Most successful was J.P. Morgan
Helped companies issue stock
Companies sell large amounts of stock to investment bank at a discount
Investment bank finds people willing to buy the stock
Ex. JP Morgan bought out Carnegie Steel and merged with other companies creating US Steel Company