Trust Titans Economics and Economic Leaders of the Gilded Age
Rise of the Corporation In order to create the large industries that the growing nation needed, a more refined business model was required. The corporation was used. Sells stock, or a portion of the company, to investors who receive a portion of the profit the company makes and/or can sell their shares for a profit if the company does well.
Corporations Corporations allowed many people to participate in a company, but only risk their investment. Investors do not lose any more money if the company goes bankrupt. Corporations were ideal for Railroads, Steel, and many other new industries of the Gilded Age.
Captains of Industry The richest business leaders became known as “Captains of Industry” “Trust Titans” and “Robber Barons.” Andrew Carnegie invested in steel mills. John D. Rockefeller invested in oil. George Pullman invented sleeper cars for railroads. J.P. Morgan invested in banks, railroads, and steel. Cornelius Vanderbilt invested in railroads, particularly in the Northeast.
George Pullman Invented a sleeper car for trains. These luxury cars were used by nearly all the railroads. Pullman built a town for his workers to live.
Cornelius Vanderbilt Amassed fortune of $100 million in the railroads. Donated money to start Vanderbilt University. Helped Consolidate railroads in the East. Had a hand in over 16 different Railroads, mostly located in NY.
Andrew Carnegie Scottish immigrant. Worked his way up from a clerk to head of his own steel company. Used the Bessemer process to produce cheap steel. Founded Carnegie Steel Co. Bought up resources needed to produce steel: iron fields, coal mines, railroads. Known as Vertical Integration Gave away most of his fortune.
John D. Rockefeller Grew up in rural New York State. Invested in oil refineries. Founded Standard Oil Co. Bought up nearly every refinery in the US to dominate the industry. Known as Horizontal Integration Helped start the University of Chicago.
John P. Morgan Banker. He bought up railroads, steel plants, and other industries. Bought out Carnegie Steel and several other steel companies to form US Steel—largest company in the world at that time. Biggest driver in the use of Trusts.
Robber Barons These Trust Titans did not always use legal ways to build their fortunes. Rockefeller dropped prices below cost in order to drive his competition out of business. Used their size to force railroads to give them cheaper rates than their competitors.
Trusts Trusts were used to get around prohibitions against monopolies. Monopolies are when one company/person controls all or most of the market for a product or industry. –A present day example: Microsoft for computers; Apple for MP3 Players. A small group controlled all (or most) of the companies in a particular industry. Can fix prices, control competition so that the individual companies do not hurt each other. Trusts enabled Morgan to control most of America’s basic industries by 1900.
Captains of Industry Some believed in Social Darwinism, the idea that only fittest people survived—that poor people were that way because they were lazy or incapable. Others believed in the “Gospel of Wealth,” that it was the responsibility of the rich to help bring up the lower classes. Many of the Trust Titans donated much of their fortunes to philanthropy, particularly to education and the fine arts.
Horatio Alger Wrote books which detailed the American Dream—a young boy who works his way up from poverty to be a success and rich. Andrew Carnegie was a real life example. Many people believed in Alger’s ideal, although few actually were able to do so.
Attempts at Regulation Eventually the Trusts go too far, the Railroads take too much advantage of the public. Groups like the Grange (a farmer’s coop and political association) get states to pass laws to regulate railroads within their states. Problem: Who can regulate interstate commerce? –O–Only the Federal government.
Interstate Commerce Commission Passed in 1887. Intended to regulate railroads to prevent discrimination against small shippers, end the freewheeling nature of the railroads, and ensure fair business practices. Had little teeth to it, was ineffective for much of the early years of the commission.
Sherman Anti-Trust Act Passed in 1890. Was intended to prevent monopolies, trusts, and combinations which controlled whole industries. Like the ICC, the Anti-Trust Act had little teeth and was ineffective until the early 1900s.
Is Regulation Legal? These Supreme Court Cases addressed the legality of state and federal regulation. Munn V. Illinois (1877) Wabash V. Illinois (1886) US V. E.C. Knight (1894) Northern Securities Co. V US (1904) Swift V. United States (1904)