1. Chapter 14 Sect. 3 Objectives:
Identify Management and business strategies that contributed to the success of business tycoons such as Andrew Carnegie.
Explain Social Darwinism and its effects on society.
Cite methods used by ruthless businessmen to eliminate free competition.
Describe the reasons for the slow industrialization of the south.
Chapter 14 Sect. 3

2. Map: Industrial Production, 1919
Copyright © Houghton Mifflin Company. All rights reserved.

3. ALL OF THIS GIVES RISE TO TYCOONS
Profiteering from the Civil War gives rise to millionaire class
Millionaires capitalize on Transcontinental railroad, mechanization, industrialization, & expansion of markets
Surplus of raw materials, cheap labor, foreign investment ENCOURAGE CAPITALISM
Inventions  Industrialization 
More Inventions  More Industrialization
ALL OF THIS GIVES RISE TO TYCOONS

4. The Manufacture of Iron
Manufacturing iron was a hot and strenuous process, requiring workers to spend longs hours stoking hot blast furnaces. (Library of Congress)
Bessemer Process =
process to convert iron to steel
Copyright © Houghton Mifflin Company. All rights reserved.

5. Andrew Carnegie = Steel Kingpin
Steel is King : US pouring out 1/3 of world’s steel by 1890’s
“bootstrap” story: poor immigrant to tycoon
Carnegie uses vertical integration to make more profit
Controls all means of production, eliminates middle man
Also uses horizontal consolidation to eliminate competition.
Sells to JP Morgan for 400 million
Becomes a philanthropist
How do horizontal consolidation and vertical integration help business??

6. J P Morgan – Banker’s Banker
Builds financial empire through railroads, banks, and holding companies
Buys out Carnegie and enters steel business
Uses trusts and holding companies to consolidate wealth and power
What are trusts and holding companies?
Forms US Steel Corporation – 1st ever corporation worth more than $1 billion!

7. Rockefeller – Standard Oil Corp.
Kerosene and then Automobiles drive up US oil consumption
Rockefeller ruthlessly uses horizontal consolidation to create largest monopoly
1877 controls 95% of US’s oil refineries
Robber Baron’s Baron

8. Standard Oil Monopoly
Standard Oil Monopoly
Believing that Rockefeller's Standard Oil monopoly was exercising dangerous power, this political cartoonist depicts the trust as a greedy octopus whose sprawling tentacles already ensnare Congress, state legislatures, and the taxpayer, and are reaching for the White House. (Library of Congress)
Copyright © Houghton Mifflin Company. All rights reserved.

9. HOW MUCH WOULD THEY BE WORTH TODAY??
J.P. Morgan - $139 BILLION
Andrew Carnegie - $189.6 BILLION
John D. Rockefeller - $262 BILLION
COMPARE:
Bill Gates - $76 BILLION

10. Monopoly = a firm that completely controls an industry
Vertical integration = combining all phases of manufacturing in to one organization (Carnegie)
Horizontal consolidation = allying with competitors to monopolize a market (Rockefeller)
Trust = a board of directors/stockholders that coordinates companies within an industry to avoid competition
Holding company = a corporation composed of various competing enterprises within one industry (JP Morgan’s US Steel)

11. Compare the lives and beliefs of Carnegie and Rockefeller
using a Venn Diagram

12. Justifications for Big Business
Old Rich displaced by rule of the “new rich”
Gospel of Wealth – discourages helping the poor by state
Laissez faire = “let it be”
Justified by Social Darwinism – survival of the fittest
Poor are poor due to lack of initiative

13. Taking on the Trusts
Trusts and robber barons defended by 14th amendment’s due process clause
Constitution’s “interstate commerce” clause inhibits states from controlling trusts
Sherman Anti-Trust Act of 1890
Largely ineffective

14. Industry and the South 1900: less manufacturing than before Civil War
South acts primarily as source of raw materials
Northerners control stock in Southern industry, discourage industrialization
Shift in cotton mills from NE to S in 1880’s
Cheap labor (virtually sharecropping) brings rural white southerners to mill towns, and then traps them there

15. TERMS
Andrew Carnegie
Vertical integration
Horizontal consolidation
Social Darwinism
Monopoly
Holding company
John D. Rockefeller
Trust
Sherman Antitrust Act
Objectives:
Identify Management and business strategies that contributed to the success of business tycoons such as Andrew Carnegie.
Explain Social Darwinism and its effects on society.
Cite methods used by ruthless businessmen to eliminate free competition.
Describe the reasons for the slow industrialization of the south.