The Rise of Big Business

Chapter 14

Section 2The Second Industrial Revolution

Riddlebarger

Capitalism

An economic system in which private businesses run most industries.

Competition determines prices and wages.

Laissez-faire: no government interference in business activities.

Age of Big Business

• The period of invention after the Civil War sets the stage for great industrial growth

• Huge amounts of capital ($$)needed, along with human labor and natural resources

Robber Barons/ Captain of Industry

Powerful Industrialists of late 1800’sRobber Baron

• ｷperception of stealing from public

• ｷruin competition, bribe public officials, pay low wages, unhealthy workplace

Captain of Industry• ｷPerception of

serving nation in positive way

• ｷCreating jobs, donating money, increase public supply of goods and jobs

Robber Baron or Captain of Industry???

Carnegie Morgan

Vanderbilt Rockefeller

Social Darwinism

– A. idea popular in late 1800’s– B. Government shouldn’t interfere with people’s

success; if so, the most “fit” would succeed and become rich

» Society would benefit from success of fit & weeding out of unfit

– C. Most Americans agree at the time that government should not interfere with private business

Who is most likely to advocate Social Darwinism?

•Industrialists or Workers?

What Is a Monopoly?

–A. Many industrialists use whatever means necessary to gain competitive edge

Monopoly & Cartels

–B. monopoly- controlling entire industry or product

»Buy them or drive them out, then you can charge any price you like

–C. cartel- loose association of businesses that make the same product

»Members agree to limit production and keep prices high

Trusts

• A group of companies

placed under the control of a single managing board

Vertical

Consolidation

–∙ Gaining

control of

many

businesses

that make up

all phases of

product’s

production

Growth of Big Business

(2 strategies)

Iron OreDeposits

SteelMills

Ships

Coke Fields

Railroads

Carnegie Steel Company

Owns all phases of production

What

problems

might a

business face

that must

compete

against a

company with

a vertical

monopoly?

Growth of Big Business

(2 strategies)

Iron OreDeposits

SteelMills

Ships

Coke Fields

Railroads

Carnegie Steel Company

Owns all phases of production

Horizontal

Consolidation

● Joining competing

firms in the same

business

•Example:

Standard Oil

Growth of Big

Business

(2 strategies)

Independent Oil

Refineries

Purchased by

Rockefeller

Standard OilCompany

Why were

companies at a

disadvantage

when facing a

company with

horizontal

consolidation?

Growth of Big

Business

(2 strategies)

Independent Oil

Refineries

Purchased by

Rockefeller

Standard OilCompany

Growth of Big Business

• Economies of Scale- As production increases,

the cost of each additional item produced is

lower•D.Effects of big business on American

Society

•Few like trusts or other large

businesses

•Politicians don’t crack

down-continue to allow

industrialists to operate at will

•Disparity in wealth (gap between

rich & poor grows)

•Boom & bust-good times followed

by bad

•Business Cycle

Standard Oil Company•John D. Rockefeller

–Built oil refinery in Cleveland (1863)

–Forms Standard Oil (1870)

–Persuades railroads to give refunds on shipping-

Allows him to lower prices

–Over $2 billion fortune

•

•B. The Trust

–Law prevents buying out

competition

–Allows them to get around the law

–Control of most of nations oil

refining

Andrew Carnegie

• Made millions in steel industry by bringing Bessemer Process to America.

• Scottish immigrant• Sold his company for

$492 million to JP Morgan in 1900.

• Paid low wages to workers

• Donated millions to charity.

http://www.youtube.com/watch?v=st3_8LEQvck

Mass Marketing

Retailers also look for new ways to maximize profits

• May new approaches used to win customers– Department Stores in urban areas

• One-stop shopping; lower prices– Mail-order catalogs in rural areas

• Now any American has access to wide range of goods

Looking Ahead

What effects did the growth of big business have on workers?