Big Business Development of Basic American Industries- Corporations

Oil (drilling, refining, etc.) Refining- John D. Rockefeller, Standard Oil Company – used HORIZONTAL INTEGRATION= companies “merge” or consolidate – led to the creation of TRUSTS= business combination of companies in the same field for the purpose of reducing competition or creating a monopoly

Steel Andrew Carnegie - used VERTICAL INTEGRATION = buy out all suppliers, gaining total power over quality and cost of product – corporation owns all parts of the production process

Banking JP Morgan- US Steel (1901) largest business organization in US – INTERLOCKING DIRECTORATE= one individual serves on the boards of competing firms. – HOLDING COMPANY= corporation that does nothing but buy stock in other companies, able to dictate common policy

Advantages 1. Greater efficiency 2. Economies of scale: as production incr., cost of product decreases 3. High productivity Disadvantages 1. Unfair business practices 2. Led to corruption and bribery 3. Power sought to destroy labor movements- which protected workers

Public Sentiment- Robber Baron or Capt. Of Industry?? Criticized because made extreme profits using ruthless tactics – not passing on $ to employees – predatory pricing: selling cheaper to drive out competition Philanthropy??- donated $ to charity – Carnegie- “Gospel of Wealth”: responsibility of the wealthy to help the less fortunate Social Darwinism: survival of the fittest also applies to business, justifies wealth Call for regulation -> Gov’t action: – Sherman Anti-Trust Act: trusts deemed illegal b/c interferes w/ free trade - not specific, difficult to enforce Creation of the “American Dream”- rags to riches, Horatio Alger novels