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Robber Barons & Big Business

Robber Barons & Big Business. Corporations & Bankers. Big factories have now replaced small factories = cheaper goods, faster service Railroads distributed these goods across the nation. Corporations & Bankers.

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Robber Barons & Big Business

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  1. Robber Barons & Big Business

  2. Corporations & Bankers Big factories have now replaced small factories = cheaper goods, faster service Railroads distributed these goods across the nation

  3. Corporations & Bankers Now that a few large companies were running major industries, they needed capital • CAPITAL: money for investment that a company uses to buy raw materials, pay workers & cover shipping/ advertising costs

  4. Corporations & Bankers To raise capital, expanding businesses became corporations CORPORATION: business owned by investors • Sells STOCK: shares in the business to investors, or stockholders • This $$ can be used to build a new factory or buy machines

  5. Corporations & Bankers In exchange for investing, stockholders hope to receive DIVIDENDS: shares of a corporation’s profit

  6. Corporations & Bankers • To protect their investments, stockholders elect a board of directors to run the corporation • If the business goes bankrupt, the owner MUST pay all the debts of the business • By law, stockholders CAN NOT be held responsible for a corporation’s debts

  7. Corporations & Bankers • To be so successful, corporations had borrowed tons of $$ from banks, so bankers made huge profits • Most powerful banker late 1800s: • J.P. Morgan • Used banking profits to gain control of major corporations

  8. Corporations & Bankers During an economic loss in the 1890s, Morgan invested in the stock of troubled corporations • As large stockholders, they were on the corporations’ boards • By 1898 Morgan controlled most rail lines & steel companies (bought Carnegie) • By 1901 he combined all steel companies into one: U.S. Steel Company U.S. Steel Company becomes the 1st company in America to be worth over $1 Billion Dollars!

  9. Black Gold 1859- Discovery of oil. Valuable resource that could act as fuel

  10. Oil J.D. Rockefeller builds oil refinery • He knows oil is worthless until it is refined to make kerosene • Stoves/lamps I’ve got to get my hands on some of that black gold!

  11. J.D. Rockefeller Used profits from his refinery to create Standard Oil Co. of Ohio Grease me up, baby!

  12. J.D. Rockefeller Hated the idea of competition, thought it was a waste • Slashed prices to drive rivals out of business • Pressured customers with media • Cut a deal with railroads – supply for rebates on shipping Who has the Most effective Advertising today?

  13. J.D. Rockefeller 1882 creates Standard Oil trust • Trust: group of corporations run by a single board of directors • This created a monopoly of the oil industry Hey J.D. Thanks for being a billionaire tycoon and inspiring my record label!

  14. Cause & Effect • CAUSES: • Railroad boom spurs business • Businesses become corporations • Nation has rich supply of natural resources • New inventions make business more efficient • EFFECTS: • Steel & Oil become HUGE industries • Monopolies & trusts dominate important industries • Factory workers face harsh conditions • Membership in labor unions grows RISE OF INDUSTRY • EFFECTS TODAY: • U.S. is world’s leading economic power • U.S. corporations do business around the world • Government laws regulate monopolies

  15. Free enterprise system: businesses are owned by private citizens who decide what to produce, how much to produce & what prices to charge citizens

  16. Free enterprise system: *GOOD for entrepreneurs starting out* **CONTRAVERSIAL for our fat cats** Many thought leaders of giant corporations were abusing the free enterprise system Companies compete to win customers by making the best product at the lowest price VS.

  17. Against Trusts 1. Trusts/ monopolies reduce competition • Without competition there’s no reason for companies to keep prices low or improve products 2. Hard for new companies to compete with powerful trusts 3. Few Fabulous Wealthy vs. Majority Wretchedly Poor Political influence & wealth can sway people in power to buy or neglect certain companies

  18. Sherman Antitrust Act: 1890- banned formation of trusts and monopolies • Too weak to be effective since it spanned the whole nation • Some state gov’ts passed laws to regulate, but powerful, $$ corporations side-stepped them

  19. For Trusts • Too much competition ruins businesses & puts people out of work Are they really giving back? Or is Carnegie a rare example? • “It will be a great mistake for the community to shoot the millionaires, for they are the bees that make the most honey, and contribute most to the hive even after they have gorged themselves full” – Carnegie

  20. For Trusts 2. Growth of giant corporations brought • Lower production costs • Lower prices • Higher wages 3. Better quality of life for millions of Americans • By1900- Americans enjoy highest standard of living in the world

  21. http://www.youtube.com/watch?v=MnvPBYoJ_bY • http://www.youtube.com/watch?v=b-sR6W_fM-s

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