1. Big Business and Labor Chapter 6.3

2. Big Business and Labor 6.3 Main Idea – The expanse of Industry resulted in the growth of big business and prompted laborers to form unions to better their lives. Why it Matters Now – Many of the strategies used today in Industry and in the labor movement, such as consolidation and the strike, have their origins in the late 19 th century. Term and Names – will be in blue.

3. Carnegie’s Innovations Andrew Carnegie was born in Scotland to penniless parents. He came to the United States in 1848 at the age of twelve. At the age of 18 he worked for the Pennsylvania Railroad and one day he single-handedly unsnarled a tangle of freight and passenger trains. The boss was so impressed he allowed him to buy stock in the company. By 1865 Carnegie was so busy managing his dividends from the stock that he quit his job and entered the steel business. By 1899, the Carnegie Steel Company manufactured more steel that all the factories in Great Britain.

4. Carnegie’s Innovations New Business Strategies Carnegie’s success was due in part to management practices that he initiated and that soon became widespread. He incorporated new machinery and techniques such as accounting systems that enabled him to track precise costs. Carnegie also was able to control the majority of the steel industry through vertical integration, a process in which he bought out his suppliers in order to control the raw materials and transportation systems. He also attempted to buy out competing companies and merge them, which is called horizontal integration.

5. Social Darwinism and Business Carnegie contributed his success to hard work, shrewd investments and innovative business practices. Late 19 th century social philosophers explained it scientifically be a new theory called Social Darwinism. The theory promotes the idea of “natural selection” in business. The idea was based on the book The Origins of Species by Charles Darwin. Natural selection is the process of weeding out less-suited individuals and enabled the best-adapted to survive. The idea pertained to the business world based on the notion that success and failure in business were governed by natural law and no one had the right to intervene. 4,000 millionaires had emerged since the Civil War that approved of this theory. According to Social Darwinism, riches were a sign of God’s favor, and therefore the poor must be lazy or inferior people who deserved their lot in life.

6. Fewer Control More Growth and Consolidation Many industrialists joined in and accepted the Social Darwinism theory. They often pursued horizontal integration in the form of mergers. A merger usually occurred when one corporation bought out the stock of another. A firm that bought out all its competitors could achieve a monopoly, or complete control over its industry’s production, wages and prices. Corporations such as the Standard Oil Company, established by John D. Rockefeller had a different approach to merger, they joined with competing companies in trust agreements. Participants in a trust turned their stock over to a board of trustees – people who ran the separate companies as one large corporation. Rockefeller used the trust system to gain total control of the oil industry in America.