Big Business Section 5.3

What was America like before the Industrial Revolution? Rural Agricultural Local markets Independent craftsmen Traditional Anglo-Saxon

How did the US change economically after the Civil War? Changed from nation of farms to a nation of factories, mines, and railroads (industrialization) Mass production made skilled craftsmen obsolete Demand for factory workers led to immigration from S+E Europe Became more urban

Brooklyn Bridge Presentation

Louis Sullivan Presentation

Thomas Edison Presentation

List some of Edison’s accomplishments as an inventor. Created a ‘factory’ for inventions at Menlo Park, NJ Over 1 thousand patents Incandescent light bulb Phonograph (grandfather of a record player) Kinetoscope –Prelude to movie projector Click for more detail

The Wizard of Menlo Park

Describe the technology boom: Patents skyrocketed – = 36 thousand patents – = 676 thousand patents Telephone- Alexander Graham Bell 1876) Faster textile machinery, typewriter, electric motor, iron and steel ships, camera, etc.

What impact did the expansion of the railroad have on America? Created a national market –Goods could be delivered anywhere, anytime, quickly and cheaply Gustavus Swift –Used refrigerated rr cars to revolutionize meat packing industry Fruit industry –Florida oranges, California grapes could now be delivered to East Chain Stores –Woolworth –Great Atlantic and Pacific Tea Co. –Macy’s

Railroads

How did businesses change as a result of the Industrial Revolution? Became big businesses Heavy industry (RR, factories) were expensive Managerial revolution –Created supervisors for various departments Mergers –When several companies join under a common head to avoid destructive competition Is this a bad thing?

Presentations on Horizontal and Vertical Integration

What are monopolies? Monopolies exist when only one business provides a good or service that is in demand. Because they can limit the supply of the good or service, they can raise prices to suit themselves (increase their profits). If just a few sellers exist, and they agree on price, it’s called oligopoly, and has the same basic effect: high prices/ bad for consumers! Monopolies and oligopoly form over time in capitalist economies like ours, unless the government stops them. Mergers absorb smaller companies, and others go out of business on their own. In the later 1800s, government tried half-heartedly to ban mergers (one company owning stock in another). But big business quickly found a loophole.

What are trusts? What are holding companies? Are the latter any different? Trusts were the first response to anti-merger laws. In 1882 Standard Oil became the first trust. John D. Rockefeller figured out that if he merely managed other companies, and had his management trust (not his original oil company) make the profit, he would control US oil without breaking the law. Others followed, which led Congress to pass the Sherman Anti-Trust Act (1890), but big business already had a way around the Sherman Act before it was even law.

What are trusts? What are holding companies? Are the latter any different? The holding company was based on the idea of one company owning stock in others. This was legal in New Jersey, so many would-be monopolists set up holding companies in New Jersey, which bought up a controlling interest in all of the major competitors. In short, those who wanted to avoid competition were able to keep one step ahead of the law during the Gilded Age.

Business Merger/Combination/ Consolidation/Integration/Trust/ Holding Co.: Think of them as the same. The last quarter of the 19 th century was a time of business consolidation or mergers. Companies were said to be integrated or combined to create more efficiency. These combinations limited competition between businesses.

Healthy competition is good for two reasons: Higher Quality Lower Prices An absence of competition can lead to? Lower Quality Higher Prices

Competitive Market =Consumer choice= price comparisons, corporate policy comparisons, nutritional comparisons, product selections.

Horizontal Integration/Mergers A company acquires other companies in the same competitive market. Bye bye Burger King, watch out Wendy’s…

Non-competitive Market (Monopoly) Consumer choice? Price breaks? Influence on corporate policy? Product choices? Nutritional choices?

Non-competitive Market (Monopoly) How might Carnegie and Rockefeller justify this setup?

Non-competitive Market (Monopoly) How might Carnegie and Rockefeller justify this setup? More efficient/ Survival of the fittest

Vertical Integration Through mergers and acquisitions, the company owns all phases of the business process.

Which is better for the economy?