1. The Rise of Big Business and Government Support of the Industrial Economy

2. 2 Main Topics
“Big business“during the 2nd Industrial Revolution – Causes and Characteristics
Role of government in support of the Industrial Economy

3. Topic 1 – Big Business: Causes and Characteristics

4. 6 Factors making for industrial growth
natural resources: farm land, oil, coal, iron, copper, precious metals, other minerals, timber
work force with skills and experience
capital and the means of mobilizing capital
technology
a transportation system
Governmental assistance

5. Emergence of Big Business
Railroads
Steel, Oil, Chemicals, Heavy Industries
Key Leaders – Carnegie, Rockefeller, Morgan
Consolidation of business into Trusts and other monopolies

6. Economic Changes Development of the industrial corporation.
Emergence of finance capitalism.
Creation of a class of permanent wage-earners, a proletariat.
Rise of the industrial city and emergence of an urban- industrial belt.

7. Role of the Railroads in Creating 2nd Industrial Rev.
Stimulated the iron and steel industry – Why?
Stimulated settlement of the West – How?
Created the potential for a national market – How?
Became a model for other corporations

8. Railroads: America’s First Big Business
Helped to create knowledge and solutions for:
Administrative organization
Raising capital
Labor relations
Competition
Relation with government

9. Trust - Defined
A form of business merger in which the major stockholders in several companies turn over their stock to a group of trustees.
Used to create a semi-legal monopoly over key industries.
Advantage = eliminates competition and enhances profits.

10. Two Kinds of Trusts Trusts were organized in two ways
Vertical integration or consolidation – owner owns all the steps and resources that contribute to production
Horizontal Integration or consolidation – the owner monopolizes one step of the production process

12. Carnegie and Rockefeller
Vertical Integration = Carnegie. For Homestead Steel, Carnegie owned all the various businesses that helped him make steel – from mines to railroad to steel plant.
Horizontal Integration = Rockefeller. At Standard Oil he monopolized over 90% of all oil refineries in the US.

13. Steel: The Career of Andrew Carnegie

14. Previous
                                                                                                  
Homestead, PA.
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15. Carnegie’s formula for success:
Use innovation as a competitive device
Be an aggressive competitor: "Cut the prices; scoop the market; run the mills full."
Integrate operations vertically

16. Rockefeller’s Rise to Power
Began as a salesman for lamp oil.
Advocate of consolidation.
By 1877, controlled 95% of all oil refineries in America – horizontal integration and monopoly.
Architect of Standard Oil Trust.

17. John D. Rockefeller and Standard Oil

18. Finance: the career of John Pierpont Morgan

19. J.P. Morgan – The Banker’s Banker
Great advocate of merger
Opposed to competition
“I like a little competition now and then, I but I like combination a lot better.
Interlocking Directorates

20. Characteristics of Big Business by the early 20th century
Supported by government in 19th century, limited in 20th.
Vertical Integration
Consolidation or monopolization

21. Consequences of consolidation
"Big Business”
Bureaucratization
Imposed prices based on cost of production plus profit
Emergence of advertising as a competitive device
An somewhat improved level of stability
A long-term decline in the ability to compete

22. Exceptional Growth,
population increased by nearly 300%, from 36 million to 106 million
railroad mileage increased over 1,000%
output of manufacturing increased over 1,000%
Gross Domestic Product per capita, in constant dollars, increased over 300%

24. Economic transformation after the Civil War
New national market was created based upon the Republican economic agenda
Technological Developments allow for a national market to form RR
Telephone/Telegraph

25. Topic 2 - Role of Government
Federal Government supported rise of Big Business with:
tax policies
the tariff
immigration policies
distribution of the national domain

26. The tariff: percent of value collected on dutiable imports

28. The U.S. in 1850

29. Railroad Land Grants

30. Agriculture
Homestead Act, 1862 (160 acres free after 5 years & modest improvements)
Low prices on land for sale: $1.25 or $2.50 per acre

31. Education
Land Ordinance, 1785: reserved one square mile out of every 36 for support of a public school (applied to same territory as Northwest Ordinance)
Morrill Land-Grant College Act (1862): land given to states (30,000 acres for each senator and representative) to be used to create a public university

32. Other land distribution
Land given to new, western state governments
Coal, mineral, timber lands sold cheaply

33. Conclusion: Role of Federal Government in Economic Development
Not a period of laissez faire or hands off capitalism without government intervention
Federal government a full partner in economic growth.
Result: very rapid expansion of the entire economy.

34. American Business before the Civil War

35. Emergence of factories before the Civil War

36. Big Business after the Civil War

37. "Big Business" after the Civil War
Capital intensive
Separation of ownership and control
Vertical integration, bureaucratization, monopolization