The Growth of Big Business in the Gilded Age

Ch. 6, Sec 2

The Industrialists

• Called “Robber Barons”.– Rose to wealth to by exploiting labor and bending

laws.• Called “Captains of Industry”.– Rose to wealth by increasing supply of goods,

expanding markets, and creating jobs.– Created libraries, universities, were

philanthropists.• Both views are partially right.

John D. Rockefeller and Standard Oil• John D. Rockefeller founded Standard Oil Co.

in 1870.– Made a fortune in grain, meat in Civil War.

• Became so large, was able to make deals with RR’s and sell oil at lower prices.– Led to horizontal consoldiation – bringing

together many firms of same business.– Created a Trust – many companies turn over

assets to a board of directors and share in profits.• 40 companies joined Standard Oil Trust.

John D. Rockefeller

Andrew Carnegie and Carnegie Steel• Andrew Carnegie started in railroads and later

began Carnegie Steel.– First to use Bessemer Process.

• Used vertical consolidation.– Controlled businesses that made up all phases of a

product’s development.• Mines, steel mills, shipping, railroads.

• Charged less than competition because of economy of scale.– As production increases cost per item decreases.

Andrew Carnegie

Economy of Scale

Business Practices• Rockefeller, Carnegie, others used certain

practices.• Horizontal & vertical consolidation, trusts,

economy of scale.• Were Oligopolies – a few large business produce

products profitably.– Ex – carmakers today.

• Some became Monopolies – had complete control of a product or service.

• Some formed Cartels – loose group of businesses that agree to limit supply and keep prices high.

Government Response

• Gov’t was mostly pro-business, but worried about monopolies and trusts.

• Passed Sherman Anti-Trust Act in 1890.– Outlawed any combination of companies that

restrained interstate trade or commerce.• Ineffective until T. Roosevelt became president.