Chapter 14 Section 3 – Big Business

I. The Rise of Big Businessa. Corporations

i. Owned by many people called stock holdersii. Much more common starting in the 1830’s

b. Economies of Scalei. Could produce many products quickly and cheaply because of large

manufacturing facilitiesii. Small Businesses = Low Fixed Costs – High Operating Costsiii. Big Businesses = High Fixes Costs – Low Operating Costs

II. The Consolidation of Industryi. Formed pools to fix prices (Vanderbilt and Scott)ii. No legal protection and often didn’t last long

a. Carnegie and Steeli. Started by investing in companies that served the railroad industryii. Moved to steel after learning the Bessemer process (could produce steel much more efficiently)iii. Opened his first steel company in Pittsburgh in 1875

b. Vertical and Horizontal Integrationi. Vertical Integration – Combining all the businesses on which a company depends on for operation (lime, coal, iron)ii. Horizontal Integration – Combining many companies involved in the same business.

iii. In the 1880’s Rockefeller’s Standard Oil controlled over 90% of the oil refining capabilities in the U.S. iv. When one company can control the entire market it becomes a monopoly

c. Trustsi. People became suspicious about the power of monopoliesii. Companies like Standard Oil formed trusts to get around law put in place to control monopolies

a. One person could manage another’s propertyb. Standard Oil had stockholders give their stocks to trustees in exchange for a portion of the profits of the trust

d. Holding Companiesi. Companies that produce nothing themselves but hold the stock of many businesses that do.

III. Selling the Producta. Illustrations replace small type line advertisementsb. 10 fold increase in advertising from 1865-1900c. Department stores cropped up by the late 1870’sd. Chain stores offered lower prices than department stores (Woolworth’s)e. Mail Order Catalogs (Sears)

Chapter 14 Section 4 – Unions

I. Working in the United StatesI. Standard of living increased dramatically, but working conditions were often

monotonous, dangerous and unhealthy II. Real wages increased 50% from 1860-1890III. In 1900 the average worked made 22 cents an hour and worked 59 hours a weekIV. Falling wages due to inflation caused workers to believe they needed to organize to

unions so they could negotiate working conditions and pay collectively.II. Early Unions

i. Workers began to form trade unions (around a specific job/field)

a. Industry Opposes Unionsi. Thought industrial unions were illegitimateii. Companies hired detectivesiii. Made workers sign contracts saying they wouldn’t join a unioniv. Companies used lockouts to break the

Unions if formed

b. Political and Social Oppositioni. No laws protecting unionsii. Courts often ruled in favor of the companyiii. Marxism became influential in Europe

a. Class struggle between workers and ownersb. Elimination of private property

iv. Anarchists thought there should be no governmentv. These immigrants began coming to the U.S. which increased suspicion and nativism

III. The Struggle to Organizea. Great Railroad Strike of 1877

i. In response to the recession of 1873ii. Involved 80,000 railroad workers in 11 statesiii. President Hayes sent troops to restore order

b. The Knights of Labori. Eight hour workday, elimination of child labor, equal pay and arbitrationii. Convinced Jay Gould to reverse wage cutsiii. Membership then exploded from 100k to 700k

IV. American Federation of Labori. Twenty trade unions organized the AFL in 1886ii. Samuel Gompers was the first leaderiii. Rejected communist and socialist ideasiv. Three goals

a. Eight hour workdayb. Closed Shops (had to hire union members)c. Recognition and collective bargaining

v. Largest union in the nation by 1900 a. Over 50,000 members