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The Expansion of American Industry The Growth of Big Business.

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1 The Expansion of American Industry The Growth of Big Business

2 Robber Barons or Captains of Industry  Robber baron implies that business leaders built their fortunes by stealing from the public.  They drained the country of resources & told officials to interpret the laws in their favor.  They paid low wages & forced workers to work under dangerous conditions.  A Captain of Industry implies business leaders served their nation in a positive way.  They increased the supply of goods, expanded markets & created jobs.  Many founded museums, libraries & universities.

3 Andrew Carnegie  The invention of the Bessemer process convinced Carnegie steel would replace iron.  In the early 1870’s, Carnegie opened the first steel plants using the Bessemer process in Pittsburgh.  Carnegie Steel was created in 1889.  Carnegie soon owned the mines, the steel mills and the railroads that shipped the finished product.  By controlling all stages of production, Carnegie could lower his costs & drive out his competitors.  As production increases, the cost of each item produced is often lower.

4 Social Darwinism  Theory emerged to describe the relationship and struggle between workers & employers.  Theory held that society should do as little as possible to interfere with people's pursuit of success.  Those who were most ‘fit’ would succeed & become rich.  Society would benefit from the successes of the fit and the weeding out of the unfit.  The government did not tax businesses profits or regulate relations between workers & employers.  Unchecked, Industrialists used whatever means to gain a competitive edge.

5 Monopolies & Cartels  A monopoly is the complete control of a product or service by one producer.  In order to form monopolies, companies bought their competitors or drove them out of business.  As the sole supplier of a product or service, companies could charge whatever they wished.  Eventually, federal and state laws were created to prevent and destroy monopolies.  However, most political leaders refused to attack the powerful business leaders.

6  A cartel is a loose association of businesses that make the same product.  Members of a cartel agreed limit the supply of their product to keep prices high.  money-and-power#john-d-rockefeller-oil-money-and- power money-and-power#john-d-rockefeller-oil-money-and- power

7 The Standard Oil Trust  John D. Rockefeller became rich from a grain & meat partnership during the Civil War.  In 1863, he built an oil refinery near Cleveland.  The refinery expanded so in 1870 Rockefeller and several associates formed the Standard Oil Company of Ohio.  Rockefeller persuaded his railroad friends to give him illegal refunds on part of the cost of shipping his oil.  As a result, Standard Oil could set its prices lower than its competition.  Eventually, Rockefeller had enough money to buy out his competitors but he couldn’t.  State law prohibited one company from owning stock in another.

8  Rockefeller’s lawyer, Samuel Dodd devised a way to circumvent state laws called a Trust  In 1882, the owners of Standard Oil agreed to combine their operations.  All owners would turn over control to a board of nine trustees in return for a portion of the profit.  The board of trustees, controlled by Rockefeller, would manage the oil companies as a single unit.  Eventually, 40 companies joined the trust.  By the 1890’s Rockefeller controlled almost all of the nation's oil refining capacity.

9  In 1890, the government created the Sherman Antitrust Act.  The act outlawed combinations of companies that restrained interstate trade or commerce.  The act was very ineffective against trusts for 15 years.  The government rarely enforced it.  The law’s vague wording made it hard to apply in court.

10 Methods of Industrial Control  1. Horizontal Consolidation  Bringing businesses in the same industry together into one giant company.  Example: Rockefeller’s Standard Oil Trust

11  2. Vertical Consolidation  Controlling all the businesses needed in an industry.  Example: Andrew Carnegie’s steel business

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