1. The Rise of Big Business
Chapter 4 Section 2
The Rise of Big Business

2. The Rise of Big Business
THE RISE OF BIG BUSINESS TURNED THE US INTO ONE OF THE MOST ECONOMICALLY POWERFUL COUNTRIES IN THE WORLD
UNTIL THE MID-NINETEENTH CENTURY MOST BUSINESSES WERE RUN BY ONE PERSON OR FAMILY
-INDUSTRIALIZATION CHANGED THIS

3. Development of Corporations
TO TAKE ADVANTAGE OF EXPANDING MARKETS INVESTORS DEVELOPED A FORM OF GROUP OWNERSHIP KNOWN AS CORPORATIONS
- A NUMBER OF PEOPLE SHARE THE
OWNERSHIP OF A BUSINESS
CORPORATIONS HAD THE SAME RIGHTS AS AN INDIVIDUAL:
1. COULD BUY AND SELL PROPERTY
2. COULD SUE IN COURTS
3. INTERESTS COULD BE BOUGHT BY OTHERS

4. Development of Corporations
CORPORATIONS WERE SUITED TO EXPANDING MARKETS:
1. HAD ACCESS TO HUGE AMOUNTS TO
CAPITAL (INVESTED MONEY) TO FUND
TECHNOLOGY, ENTER NEW INDUSTRIES
AND RUN LARGE PLANTS
2. HAD THE ABILITY TO OPERATE IN DIFFERENT
REGIONS WITH THE HELP OF RAILROADS AND
TELEGRAPH
CORPORATIONS WERE AN IMPORTANT PART OF
INDUSTRIAL CAPITALISM CENTERED AROUND BUSINESS

5. COMPETITION TO MAXIMIZE PROFITS CORPORATIONS:
1. DECREASED THE COST OF PRODUCTION BY
PAYING THE LOWEST WAGES AND
DECREASING THE PRICES PAID FOR RAW
MATERIALS
2. SUPPORTED RESEARCH LABS WHERE
INVENTORS COULD EXPERIMENT WITH
PRODUCTS THAT COULD BRING FUTURE
PROFITS
3. ADVERTISED TO INCREASE CUSTORMER BASE
4. CORNELIUS VANDERBILT (RAILROAD TYCOON) GOT
COMPETITORS TO PAY HIM TO RELOCATE BECAUSE HIS
LOW FARES WERE DRIVING THEM OUT OF BUSINESS

6. COMPETITION
SOME CORPORATIONS TRIED TO GAIN A MONOPOLY (COMPLETE CONTROL OF A PRODUCT OR SERVICE)
-WOULD EITHER BUY OUT COMPETITORS OR
DRIVE THEM OUT OF BUSINESS
-THIS ALLOWED THEM TO SET THEIR OWN
PRICES FOR PRODUCT OR SERVICE
SOME TRIED TO SET UP CARTELS (BUSINESSES MAKING THE SAME PRODUCT AGREED TO LIMIT PRODUCTION TO KEEP PRICES HIGH

7. HORIZONTAL AND VERTICAL INTEGRATION
BUSINESSMEN CONTINUED TO DEVELOP MORE EFFECTIVE WAYS TO INCREASE PROFITS AND DECREASE COST:
1. HORIZONTAL INTEGRATION (CREATE GIANT
COMPANY WITH LOWER PRODUCTIONS
COSTS BY CONSOLIDATING MANY FIRMS IN
THE SAME BUSINESS)

8. HORIZONTAL AND VERTICAL INTEGRATION
- John D. Rockefeller was one of the first to use this - Illegal in some states to own stocks in different companies - Rockefeller’s lawyer found way to get around law – TRUSTS (companies assign their stock to a Board of Trustees who combine them into a new organization

9. HORIZONTAL AND VERTICAL INTEGRATION
2. VERTICAL INTEGRATION (GAINING CONTROL OF THE MANY DIFFERENT BUSINESSES THAT MAKE UP ALL PHASES OF A PRODUCTS DEVELOPMENT) - USED BY ROCKEFELLER AND STEEL TYCOON ANDREW CARNEGIE - ALLOWED COMPANIES TO REDUCE COSTS AND CHARGE HIGHER PRICE TO COMPETITORS

10. ROBBER BARONS AND CAPTAINS OF INDUSTRY
CONSUMERS, WORKERS, AND THE GOVERNMENT THOUGHT TRUSTS, CARTELS, AND MONOPOLIES WERE UNFAIR
BECAUSE OF THE BIG BUSINESSMEN’s ABILITY TO SWINDLE THE POOR THEY BECAME KNOWN AS “ROBBER BARONS”

11. ROBBER BARONS AND CAPTAINS OF INDUSTRY
THOSE WHO BELIEVED THAT BUSINESS LEADERS SERVED THE NATION POSITIVELY REFERRED TO THE LEADERS AS
“CAPTAINS of INDUSTRY”

12. ROBBER BARONS AND CAPTAINS OF INDUSTRY (cont.)
REASONS FOR THEIR BELIEFS:
1. PROVIDED JOBS
2. SUPPORTED THE DEVELOPMENT OF
TECHNOLOGY BENEFITTING THE ECONOMY,
STIMULATING INNOVATIONS, AND HELPING
THE US BECOME A STRONG INTERNATIONAL
LEADER
3. CARNEGIE, ROCKEFELLER, AND VANDERBILT
WERE IMPORTANT PHILANTHROPISTS
- DONATING MONEY FOR SEVERAL PROJECTS LIKE
UNIVERSITIES, MUSEUMS, AND LIBRARIES THAT
WOULD HELP THE DISADVANTAGED RISE TO WEALTH

13. SOCIAL DARWINISM
1859 Charles Darwin wrote “On the Origin of Species” (animals evolve through natural selection and only the fittest survive to reproduce)

14. SOCIAL DARWINISM (cont.)
YALE PROFESSOR WILLIAM GRAHAM SUMNER APPLIED THE THEORY TO AMERICAN CAPITALISM
-SOCIAL DARWINISM – WEALTH WAS A MEASURE OF ONE’s VALUE AND THOSE WHO HAD IT WERE THE MOST FIT.

15. SOCIAL DARWINISM (CONT.)
SOCIAL DARWINISM WAS USED TO JUSTIFY MANY BELIEFS AND CONDITIONS:
SUPPORTERS OF THE LAISSEZ FAIRE ECONOMIC SYSTEM ARGUED THAT THE GOVERNMENT SHOULD STAY OUT OF PRIVATE BUSINESS
-INTERFERENCE WOULD DISRUPT NATURAL SELECTION

16. SOCIAL DARWINISM (cont.)
2. SUPPORTERS OF SOCIAL DARWINISM BELIEVED THE NATION
WOULD GROW STRONG BY ALLOWING MEMBERS TO RISE UP TO
THE TOP
-THROUGH PUBLIC FUNDS TO ASSIST THE POOR WAS WRONG
3. USED TO FUEL DISCIMINATION
-BELIEVED POOR LIVING CONDITIONS OF MINORITIES WAS
EVIDENCE OF THEIR UNFITNESS

17. Government Regulations
THE RAILROAD INDUSTRY WAS KNOWN FOR ITS UNFAIR BUSINESS PRACTICES
US SENATE CREATED THE “INTERSTATE COMMERCE COMMISION (ICC) TO OVERSEE RAILROAD OPERATIONS
-THE FIRST FEDERAL BODY TO OVERSEE AMERICAN BUSINESS OPERATIONS

18. Government Regulations
THE ICC:
COULD ONLY MONITOR RAILROADS THAT CROSSED STATE LINES
COULD NOT CONtROL OR MAKE LAWS ABOUT RAILROAD TRANSACTIONS.
COULD REQUIRE THE RAILROADS TO SEND RECORDS TO CONGRESS SO THEY COULD INVESTIGATE UNFAIRNESS

19. Government Regulations
GOVERNMENT ALSO BECAME INVOLVED IN REGULATING TRUSTS
-SENATE PASSED THE “SHERMAN ANTITRUST ACT”
THIS OUTLAWED ANY TRUST THAT OPERATED IN
RESTRAINT OF ANY TRADE OR COMMERCE
AMONG STATES
RARELY ENFORCED
THE “SHERMAN ANTITRUST ACT” BEGAN A TREND
TOWARD FEDERAL LIMITATIONS ON THE POWER
OF CORPORATION