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Standard 5.1 – Developments in Business and Industry

Discover the evolution of corporations in the United States, focusing on the monopolistic practices of powerful figures like Rockefeller and Carnegie. This exploration covers the emergence of joint-stock companies, the crucial role of railroads in economic growth, and the shift toward vertical and horizontal integration that defined the late 19th century. Examine the legal and social implications of monopolies, such as the Sherman Anti-Trust Act and the concept of "Robber Barons." Delve into how these developments elevated living standards while spurring significant conflict between workers, industry, and government.

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Standard 5.1 – Developments in Business and Industry

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  1. Standard 5.1 – Developments in Business and Industry Monopolies, Rockefeller, Carnegie, and a rising standard of living

  2. The Rise of the “Corporation” • Will also be called monopolies, holding companies, trusts, “management” and “Big Business” • Business oganization • Has legal rights • Limited liability of owners • Raises revenue through sale of stock • A group of owners

  3. Early Corporate history • Joint Stock Companies • During 1600s Virginia company settled in new world • Wealthy pooled money to limit risks • Pre-Civil War corporations functioned in same way • In late 19th century new industries emerged because of government help • Became much more powerful and thus we see a “rise” in corporations

  4. New Industries of the Post-Civil War period • The Railroad drove the US Economy • Transcontinental routes united the country • Promoted a national ‘market’

  5. Land Grant System

  6. Railroads and industry • Steel, coal & wood needed for RRs • Quicker transport allowed meatpacking industry

  7. Railroads and settlers • RRs granted about 1 mile on both sides of tracks • Needed settlers to make it valuable • Aggressively advertised • Especially in Europe which led to higher immigration • Led to New towns along the routes • Older towns could specialize in specific products • Farmers had new access to markets • RRs will eventually be accused of price gouging

  8. How important were the Railroads?

  9. RRs and Competition • RRs had to compete with each other for potential customers

  10. Railroads and competition • Railroads competed for people’s businesses • Led to cuts in rates (prices) • Some went bankrupt • Others forced to merge together • When several RRs went bankrupt the nation was thrown into depression

  11. A revelation in the RR business model • Some RRs realized that a merger could lead to a monopoly • A monopoly could lead to very high profits • Used rebates (bribes) and kickbacks to manipulate the law • Pushed supporters into office • Could drive out competitors by slashing prices • Meanwhile keep a profit by raising rates elsewhere • Western Farmers felt the main force of these tactics

  12. More entrepreneurs - Carnegie • 1st to utilize the Bessemer Process to make STEEL • Technical innovations are vital to economic success! • Used Vertical Integration to develop a Monopoly

  13. Vertical Integration • Controlled the steel industry from the mining of iron ore to the steel mill to the transportation systems taking the steel to market

  14. Rockefeller (“Reck-a-fellow”) • Controlled the Oil Industry • Used “dirty” tactics to create a Horizontal Monopoly • Forced RRs to provide Kickbacks and rebates • He got better rates which hurt competitors • Controlled retail outlets and refused to sell to competitors • Drove competition out of business by slashing prices • Then increased prices soon after

  15. Rockefeller’s legal manipulations “Let us Prey” • Horizontal Integration • Owned all of the production of one product • Created the “Trust” • Small oil company stockholders gave their control to a board of directors in Standard Oil Company • This board would then consolidate and eliminate competition in given areas • Allowed higher prices and no alternatives Oil Plant A Oil Plant C Oil Plant B Oil Plant D

  16. The Government attempts to control monopolies • The Sherman Anti-Trust Act • Concerned about the corruption of “bad” monopolies • Failed to differentiate between good and bad though • Needed a controlling device • “forbade combinations in restraint of trade” • No organizing to eliminate competition • Wait, isn’t this what a labor union does? (yup) • Too many loopholes to be effective • The holding company – similar to a trust

  17. Robber Barrons • Industrialists had to fight a bad image • Robber-Barons that stole from the public

  18. Captain of Industries • Wanted to be seen as smarter and more talented (Social Darwinism) • Had been created with inherent talents to be successful • Part of Social Darwinism • Only the “fittest survive” • They were successful because they were better • Conversely poor were poor because of some “natural” weakness or flaw • Disregards social, cultural, legal factors

  19. Carnegie and the Gospel of Wealth • Gospel of Wealth • Carnegie wrote a letter saying it since God had provided them with the ability to make money they had a duty to prove themselves morally responsible • Give to charities, take care of poor, etc…

  20. Why did the “people” put up with this? • We will see later that they all didn’t • Unions, strikes, anti-trust acts, etc… • Those that did bought in to several myths • Social Darwinism – thought that they were talented and could thus become one of the rich • Horatio Alger and “rags-to-riches” stories – anyone can become rich and powerful if they work hard enough • Carnegie was an example of rags-to-riches • Can it happen? Yes. Will it? Probably Not • Think High School Basketball player becoming next Lebron…

  21. Contradictions of the Monopolist • Government should stay out of their way! • Wanted to be seen as height of Social Darwin pyramid • Advocated laissez-faire capitalism • Government should not regulate businesses • But, Government should help when… • Labor unions threatened their business • They wanted tariffs to protect monopolies

  22. Still this time period is not all bad • There is a rise in Standard of Living • Many new consumer products • Electricity was harnessed • Typewriters and telephones are debuted • Allows new opportunities for women in the workplace • Deflation and mass production allowed lower prices on the new goods • No assembly line yet (Ford in 1913 is first use)

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