An Age of Big Business

1. An Age of Big Business Chapter 19 Section 3

2. The Corporation • By becoming a corporation – a company that sells shares or stock of its business to the public – a company can raise capital, or money. • Railroads were the first businesses to form corporations. • The forming of corporations helped America’s industrial expansion after the Civil War. • Businesses borrowed money from banks to start a company causing the banks to make a profit on the loans.

3. The Oil Business • John D. Rockefeller made his fortune from oil. • Rockefeller set up a plant to process oil – an oil refinery – in Cleveland, Ohio. • The Standard Oil Company of Ohio was organized in 1870. • Rockefeller used horizontal integration – the combining of competing firms into one corporation - to build his empire. • The Standard Oil Trust: • Rockefeller lowered his prices, which drove his competition out of business. • In 1882 Rockefeller formed a trust – a group of companies manages by the same board of directors. • By creating this trust, Rockefeller created a monopoly – total control by a single producer – of the oil industry.

4. Steel is the ideal material for railroad tracks, bridges, and many other products. Two new methods of making steel were developed. As a result of these new methods, mills could produce steel in great quantities at affordable prices. The Steel Business • Andrew Carnegie, John D. Rockefeller and other industrial millionaires became interested in philanthropy – the use of money to benefit the community. • Carnegie - Carnegie Hall in New York City and more than 2,000 libraries. • Rockefeller – University of Chicago and New York’s Rockefeller Institute for Medical Research.

5. Andrew Carnegie • In 1865 Carnegie invested in the iron industry. • In 1890 Carnegie had dominated the steel industry through – vertical integration – acquiring companies that provided the equipment and services he needed. • Carnegie bought iron and coal mines, warehouses, ships and railroads. • By doing this Carnegie had gained control over all parts of the business of making and selling steel. • In 1900 Carnegie combined all of his holdings = producer of 1/3 of the nation’s steel. • In 1901 Carnegie sold his steel company to J.P. Morgan for $450 million. • Morgan combined Carnegie’s business with others to form the first billion dollar company – the United States Steel Corporation.

6. Rockefeller Plaza, New York City Carnegie Hall, New York City

7. Corporations Grow Larger • Corporate mergers – the combining of companies – were made easier by states passing laws. • Mergers made the few people, like Rockefeller and Morgan, who owned giant corporations, more powerful. • By 1900 1/3 of America’s manufacturing was controlled by 1% of the country’s corporations.

8. Opposition to Big Business • Problem? • Big businesses claimed that monopolies and trusts benefited society because they reduced competition and brought greater economic stability. • Opposers of big business argued that the lack of competition hurt consumers because without competition corporations had no reason to keep their prices low or improve their goods and services. • During the 1880’s 15 states passed laws that restricted business combinations. • Congress passed the Sherman Antitrust Act in 1890. • This act sought to “protect trade and commerce against unlawful restraint and monopoly.”