Chapter 19

The Growth of Industry

Section 3

An Age of Big Business 1859 - 1900

• In the hills of Pennsylvania a black sticky substance seeped from the ground and at first was sold as medicine.

• In 1850 researchers found out they could burn the stuff to produce heat and used to lubricate machines.

• In 1859 Edwin I. Drake drilled the first oil well.

1. The Corporation

• A corporation is a company that sells stocks to the public.

Edwin Drake

1st oil well

• People who buy these stocks are called shareholders and when a company was making money shareholders earn dividends and when a company lost money, so do stockholders.

• Buying and selling stocks is done on the stock exchange.

A. Growth of Corporations • Railroads were the first to form corporations. • Banks loaned businesses money to start or expand.

New York Stock Exchange

• Banks make profits from the interest on those loans.

2. The Oil Business

• Edwin Drake’s oil well in Pennsylvania produced 15 barrels of oil a day.

Titusville, Pennsylvania

• The word of his success spread and the “Oil Rush” to western Pennsylvania was started.

A. John D. Rockefeller

• Rockefeller and four partners

organized the Standard Oil

Company of Ohio and set out to

dominate the oil industry.

John D. Rockefeller

• Rockefeller built his empire by acquiring other oil companies and combined them into one large corporation.• The corporation built and used its own oil tank cars, pipelines, they even owned the forests to make the wooden barrels for the oil.

B. The Standard Oil Trust • To strengthen Standard Oil in the oil industry, Rockefeller lowered prices to drive competitors out of business. • Rockefeller formed a trust, a group of companies managed by the same board of directors.

• Rockefeller bought stock in many different oil companies.• Shareholders of those companies traded their stock for Standard Oil stock.• This gave Standard Oil ownership of the other oil companies.

• Rockefeller had created a monopoly on the oil industry.

3. The Steel Business

A. Steel Industry Growth • The Bessemer process and the Open-hearth process made steel affordable.

• By the 1870s large steel mills opened in western Pennsylvania and eastern Ohio because they were close to sources of iron ore.• Pittsburgh, Pennsylvania became the steel capital of the United States.

B. Andrew Carnegie • Carnegie became the leading figure of the American steel Industry. • Carnegie controlled the steel industry by acquiring companies that provided the equipment he needed.

Andrew Carnegie

• He bought iron and coal mines, warehouses, ore ships, and railroads.• By 1900, the Carnegie Steel Company was producing 1/3 of the nation’s steel.

• In 1901, Carnegie sold his company to banker J. Pierpont Morgan for $450 million.

• Morgan formed the United States Steel Corporation, the world’s first Billion dollar corporation.

J. Pierpont Morgan

C. Philanthropists

• Andrew Carnegie, John D.

Rockefeller and other

millionaires became interested

in philanthropists (charities).

• They built schools, colleges, and other civic institutions across the United States.• Carnegie donated $ 350 million to different organizations.• He also built more than 2,000 libraries worldwide.

Carnegie Hall

• Rockefeller built the University of Chicago in 1892 and New York’s Rockefeller Institute for Medical research.

University of Chicago

4. Corporations Grow Larger

A. Corporate Mergers • Mergers concentrated economic power into a few giant corporations. • These corporations were the driving force in America’s economic growth, but they also posed a number of problems.

B. Opposition to Big Business

• Defenders of big business believed monopolies and trusts benefited society because they reduced competition and brought economic stability.

• Those opposed to monopolies believed the lack of competition hurt consumers.

C. Government Regulation • 15 states passed laws restricting business combinations that limited competition.

• Corporations avoided these laws by moving their business to a state with no restrictions.• In 1890, Congress passed the Sherman Antitrust Act against monopolies.

United States v. Microsoft

• The Act did little against big business but it was used by the government to stop a strike by railroad workers.