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Age of Big Business Age of Monopolies

Age of Big Business Age of Monopolies. Background: Capitalism – economic system. Private ownership of the means of production Free enterprise – to meet the demands Profit motive – goal to make $ Market price – buyers & sellers Competition. New Business Culture.

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Age of Big Business Age of Monopolies

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  1. Age of Big Business Age of Monopolies

  2. Background:Capitalism – economic system • Private ownership of the means of production • Free enterprise – to meet the demands • Profit motive – goal to make $ • Market price – buyers & sellers • Competition

  3. New Business Culture 1. 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!

  4. 2.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

  5. 2.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 SumnerFolkways (1906)

  6. New Business Culture:“The American Dream?” 3. Protestant (Puritan) “Work Ethic” • Horatio Alger [100+ novels] Is the idea of the “self-made man” a MYTH??

  7. 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.

  8. Causes of Rapid Industrialization • Technological innovations. • Bessemer and open hearth process • Refrigerated cars • Edison • “Wizard of Menlo Park” • light bulb, phonograph, motion pictures.

  9. Thomas Alva Edison “Wizard of Menlo Park”

  10. The Light Bulb

  11. The Phonograph (1877)

  12. The Motion Picture Camera

  13. Alexander Graham Bell Telephone (1876)

  14. Alternate Current George Westinghouse

  15. The Airplane Wilbur Wright Orville Wright Kitty Hawk, NC – December 7, 1903

  16. Model T Automobile Henry FordI want to pay my workers so that they can afford my product!

  17. U. S. Patents Granted 1790s  276 patents issued. 1990s  1,119,220 patents issued.

  18. Essential Question Industrialization increased the standard of living and the opportunities of most Americans, but at what cost?

  19. 3 New Vocabulary words… • Monopoly: A company that completely dominates a particular industry • Trust: a set of companies managed by a small group known as trustees, who can prevent companies in the trust from competing with each other • Corporation: A company recognized by law to exist independently from its owners, with the ability to own property, borrow money, sue or be sued

  20. Corporate Monopolies Horizontal vs. Vertical Integration

  21. New Type of Business Entities

  22. Age of Big Business – Age of Monopolies • To gain control of a product or business • Types of monopolies • Pools (pooling agreements) RR’s – divide routes & agree not to compete • *Trusts – competing companies run by the same Board of Trustees • Holding companies • Interlocking directorates • Mergers/Consolidations * See slide # 23

  23. New Type of Business Entities • Trust: • Horizontal Integration John D. Rockefeller • Vertical Integration: • Gustavus Swift  Meat-packing • Andrew Carnegie  U. S. Steel

  24. American Business Leaders

  25. Andrew Carnegie$75 Billion • Andrew Carnegie came from Scotland with his parents in 1848. • In 1861, at the age of 26, he started up the Freedom Iron Company, and used the new Bessemer process for making steel • He formed all of his companies into the Carnegie Steel Company in 1899, which controlled raw materials, manufacturing, storage, and distribution for steel. • Merged steps of production to cut costs of production • Vertical Integration • Wrote “Gospel of Wealth” • Established free lending libraries

  26. “On 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.” Andrew Carnegie

  27. John D. Rockefeller$192 Billion • Born in 1839 -started as a bookkeeper • He established one of the first oil refineries • 1870—With partners, forms a business trust: Standard Oil • At its peak, controlled 90% of all oil companies • Noted for very ruthless tactics – price wars, intimidation • Merged companies that produced same product • Horizontal integration • Later established foundations, scholarships,

  28. John D. Rockefeller – Oil • Horizontal integration – merged companies that produced same product • At one point controlled 90% of the oil refineries in the US • Noted for very ruthless tactics – price wars, intimidation • Later established foundations, scholarships,

  29. Standard Oil Co.

  30. Cornelius Vanderbilt – Railroads • New York Central Railroad • Merged railroad lines between NY and Chicago

  31. Cornelius [“Commodore”] Vanderbilt Can’t I do what I want with my money?

  32. William Vanderbilt • The public be damned! • What do I care about the law? H’aint I got the power?

  33. JP Morgan – banking & finance • Loaned money to businesses • Took over bankrupt railroads and merged into profitable lines • Bought Carnegie Steel and merged with others to form US Steel

  34. The Reorganization of Work Frederick W. Taylor The Principles of Scientific Management (1911)

  35. “Model T” Prices & Sales • Revolutionized auto making by using the assembly line to produce more affordable cars

  36. Wall Street – 1867 & 1900

  37. % of Billionaires in 1900 % of Billionaires in 1918

  38. Robber Barons or Captains of Industry? Do millionaires/ billionaires have a responsibility to help the poor?

  39. Captain of Industry Entrepreneurs, risk takers Used the system & available resources to make a fortune Role model Philanthropist Robber Baron Ruthless businessmen Exploited workers & consumers in order to make a profit “Captains of Industry” or “Robber Barons”

  40. The ‘Robber Barons’ of the Past

  41. Who are the billionaires (Robber Barons) of today?

  42. Forbes 2011

  43. Need for Government Regulation of Business

  44. The Protectors of Our Industries

  45. Abuses by Railroads • Pooling Agreements • Divide the sales territory and fix prices • Long haul, short haul discrimination • Charge more for short distances where there is no competition • Rebates and kickbacks to special customers • Unannounced rate increases • Free passes to government officials

  46. Granger laws to help out farmers • Farmers complained about poor service and high rates charged by railroads • States passed “granger laws” to regulate railroads within the state • Granger laws were challenged in the Supreme Court (Court cases to follow)

  47. Federal Legislation

  48. Interstate Commerce Act – 1887 • Created the Interstate Commerce Commission to end abuse by railroads • No pools, rebates, special deals • Public posting of rates, must be fair and reasonable • Set precedent for federal regulation of interstate commerce

  49. Sherman Anti-Trust Act – 1890 • Declared combinations in the form of a trust in restraint of trade to be illegal (if it lessens competition) • Weak, vague language but set the principle that the government should break up monopolies

  50. Supreme Court Cases

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