UNITED STATES HISTORY AND THE

CONSTITUTION South Carolina

Standard USHC-4.3Mr. Hoover, Abbeville High

School

Capitalism

Capitalism has played a central role in the development of the United States and the American economy since the first settlers landed.

Capitalism is an economic system that is characterized by private ownership of property and the use of that property to make a profit for the individual or the corporation acting as an individual.

As such, capitalism supports the democratic ideal of individual freedom and opportunity.

What is Stock?

Corporations promoted early industrialization before the Civil War by raising capital through the sale of stock to invest in large scale business ventures.

In the post Civil War period, corporations became larger and more powerful through mergers and monopoly and had a greater influence on the economy, politics and government policy.

Large Industries

Consequently, critics began to question the compatibility of large unfettered corporations and the rights of workers and consumers in a democracy.

New industries rose to prominence in the post Civil War period.

Railroads

The railroad was the economic engine that drove the economy.

The establishment of several transcontinental routes helped to unite the country and promoted economic growth and the development of a national market.

Railroads Build Other Industries

The industry’s need for steel rails, wooden railroad ties and railroad cars and its ability to transport goods contributed to the growth of the steel, the lumber, the meat packing, and the coal industries and many others.

It was also the Railroads that setup our current time zones.

Cut-throat Competition

The railroad brought new settlers through aggressive advertising and land sales and provided farmers access to markets.

New towns grew along its routes and older ones were able to specialize in particular products.

When the cut-throat competition drove some railroad companies into bankruptcy; the national economy was thrown into depression. 

Entrepreneurs

Entrepreneurs used new technologies and new business tactics to create large corporations to control their industry.

Major players in the industrial race include Andrew Carnegie (Steel), and John D. Rockefeller (Standard Oil)

These are some examples of some of the most powerful entrepreneurs in United States history.

Bessemer process

The introduction of the Bessemer process and astute business practices prompted the ascendancy of Andrew Carnegie to control of the steel industry through a vertical integration of his business that gave him a monopoly.

Carnegie controlled the steel industry from the mining of iron ore and coal to the steel mill.

John D. Rockefeller

John D. Rockefeller used a variety of tactics in his struggle against his competitors to gain control of the oil industry.

He forced railroads to give him kickbacks and rebates that hurt his competitors.

Economic Battle Grounds

He controlled retail outlets and forced them not to sell the products of his competitors.

He undersold the market until he drove his competition out and then increased the price of oil.

He initiated the business device known as the trust to gain control of the oil refining industry through a horizontal integration.

Sherman Anti-Trust Act

When public concern over monopoly led to the passage of the Sherman Anti-Trust Act, Rockefeller turned to the holding company to continue his monopoly.

Critics of these entrepreneurs and unfettered capitalism questioned whether the interests of the so-called “Robber Barons” were protected too much by government.

Robber Barons?

Whether the business leaders in this period should be labeled robber barons or captains of industry can be debated.

It is important for students to understand that unfettered competition led to economic uncertainty and periodic depressions and eventually to a public call for government regulation of monopolistic practices.

Big Business

Through the democratic process, the voting public pressured the Congress to assert limited control over the power of Big Business through the Sherman Anti-Trust Act.

Concerns of the public over the political power of the monopolies later contributed to the Progressive Movement

laissez faire capitalism

Public concerns over monopoly were offset by the popularity of pro-business ideologies.

Captains of industry justified their sometime use of cut-throat practices with the ideologies of Social Darwinism (survival of the fittest) and laissez faire capitalism (government hands off).

“Anyone could make it”

However, contrary to both of these ideologies, captains of industry also advocated government protection of the rights of management against labor and called for high tariffs to protect their monopolies.

Popular literature such as the Horatio Alger stories of “rags to riches” success provided support for the myth that anyone could make it if they worked hard enough.

Gospel of Wealth

Andrew Carnegie improved his public image with his advocacy of the Gospel of Wealth and gave away millions to libraries and universities.

John D. Rockefeller was also a philanthropist, especially after his business practices came under public scrutiny and the threat of anti-trust action during the early 20th century.

Consumer Products

Despite the higher prices that monopolies were able to charge for their products, the period ushered in a rise in the standard of living and new consumer products for many Americans.

The harnessing of electricity and the invention of the typewriter and the telephone provided new opportunities for women in the workplace and new conveniences in the home.

Assembly Line

Deflation and mass production lowered the price of goods.

Although mass production was in use in this time period, the assembly line was not introduced until 1913 by Henry Ford.

This is a common confusion that should be avoided.

However, some Americans, including farmers and factory workers, did not enjoy this improved standard of living because of low prices for their crops and low wages for their labor.