Aim: What factors led to the growth of big business in the late 1800’s? Do Now: Imagine that you have designed a new video game that is unlike all others currently on the market. Would it be easier to sell your game if there was only one company or several companies that sold video games like yours? Why?

A stage of economic development in which most goods are produced on a large scale in factories. The U.S. started the process in the early 1800’s. It exploded after the Civil War. Starting in 1870, Large corporations became very powerful…smaller corporations failed. Although these big businesses helped to make America rich and powerful (as well as themselves) – they did so at the expense of the common person. We call this… THE GILDED AGE

1.) Natural resources Coal, oil, iron ore 2.) Labor Supply Immigrants, former farmers, former slaves 3.) Consumers People to buy the manufactured goods 4.) New Technology New tools and inventions 5.) Free Enterprise Individuals and private businesses are free to operate for profit in competition with others 6.) Transcontinental Railroad West is linked to the East for the first time Allows for an exchange or swapping of goods

7.) Cattle Industry Cattle drives and shipment of meat results in more meat arriving in the cities 8.) Decreasing Threat of an Indian Attack 9.) Farming Machines were replacing the work of men 10.) Civil War created demand for goods Methods of production became more efficient in order to meet war needs 11.) America has the capital ($$$) to invest 12.) High Tariffs protect U.S. Businesses 13.) Corporations form This type of business allows new companies to quickly form and grow

The Bessemer Process enabled steel makers to produce strong steel at a lower cost This caused the railroad companies to begin to lay steel rails. The steel industry underwent major changes as a result. Steel mills sprung up in cities throughout the U.S. Pittsburgh became the steel making capital in the nation Steel making brought jobs and economic prosperity to towns, but it also caused severe pollution

He saw the benefits of the Bessemer process in England and put it in action in America He used the money from his early profits to buy out his rivals. He also bought iron mines, railroad and steamship lines, and warehouses. He soon controlled all phases of the steel industry Vertical Integration gaining control of all steps used to change raw materials into finished products He believed in the “gospel of wealth” The rich has a duty to help the poor and improve society

By the late 1800’s big factories were producing goods more cheaply than small factories. Eventually the small factories closed In order for the big factories to expand – they needed capital or money for investment Businesses became corporations A company owned by many people (called stockholders) Different from other businesses because the U.S. government thinks of the corporation as a person. It gets taxed, can have insurance, and can get sued The owners of a corporation can only lose what the corporation is worth, not what each owner personally owns.

$1000 to invest If the business makes a profit (extra money after bills), each shareholder /stockholder/investor gets a percentage or part, according to their percent of shares Becky TJ Gary Suzy Jess $100$300 $100 $400

If the profit is $10,000… Becky TJ Gary Suzy Jess $1,000 $3,000$4,000 These separate payments are called DIVIDENDS

Corporations borrowed millions of dollars from banks in the 1800’s as businesses were expanding. Loans helped industry grow at a rapid pace and bankers made huge profits. Morgan invested in the stock of troubled corporations and became a member on the board of directors. He would then adopt policies that reduced competition and ensured big profits Between 1894 and 1898 he gained control of most of the nation’s major rail lines, he bought Carnegie Steel and other steel companies and merged them into a single large corporation. He became the head of the U.S. Steel Company in It was the first American business worth more than $1 billion.

In 1859, Americans discovered oil in Pennsylvania. Rockefeller knew that oil wasn’t valuable until it was refined and purified to make kerosene He built an oil refinery and used his profits to buy up other refineries To him competition was wasteful and he eventually combined the companies into the Standard Oil Company of Ohio.

In 1882, to tighten his hold over the oil industry, Rockefeller formed the Standard Oil Trust. Stockholders in smaller companies turned over their stock to Standard Oil. In return, they got stock in the trust, which paid high dividends The board of directors now managed all companies that had previously been rivals. This created a monopoly over the oil industry Standard Oil controlled 95% of the nation’s oil refineries

Pros Built modern, efficient, state of the art plants Developed specialized machinery Could purchase raw materials in large quantities Has money to conduct scientific research Can change industrial waste to useful products Increased sales through advertising Becomes monopolistic and destroys the competition Drives out small businesses Concentrates wealth and power in the hands of a very few** These men had excessive power over government officials Cons

Some Americans felt that these business practices were violating the free enterprise system. Businesses are owned by private citizens Owners decide what products to make, how much to produce, where to sell the products, and what prices to charge Companies compete to win customers by making the best product at the lowest price.

For Trusts Too much competition ruined businesses and put people out of work Growth of giant corporations brought lower production costs, lower prices, higher wages, and better quality of life By 1900 people were enjoying the highest standard of living in the world It reduces competition Without competition, there is no reason for companies to keep prices low or try and improve their products New companies will have difficulty competing against trusts Against Trusts

The public was pressuring the government to do something to control corporations Congress passed the Sherman Anti-Trust Act in 1890, which banned the formation of trusts and monopolies It was too weak to be effective Some state governments passed laws to regulate business, but the corporations usually sidestepped them