Robber BaronsRobber Barons  The wealth of many railroad entrepreneurs led to accusations that they built their fortunes by swindling investors and taxpayers, bribing government officials, and cheating on their contracts and debts.  Corruption in the railroad industry became public and created the impression that all railroad entrepreneurs were “robber barons.”  Robber Barons : people who loot an industry and give nothing back.  By 1900, big business dominated the economy, operating vast complexes of factories, warehouses, offices, and distribution facilities.

The Role of CorporationsThe Role of Corporations  Corporation : an organization owned by many people but treated by law as though it were a single person.  Stockholders: people who own the corporation because they own shares of ownership called stock.  This raises large amounts of money for big projects while spreading out financial risk.

The Role of CorporationsThe Role of Corporations  By the 1830s, states began passing general incorporation laws, allowing companies to become corporations and issue stocks.  With money raised from selling stock, corporations would invest in new technologies, hire a large workforce, and purchase many machines.  This greatly hurt small businesses with high operating costs— forcing many out of business.  Corporations were criticized for cutting prices and negotiating rebates.

Andrew CarnegieAndrew Carnegie  Scottish immigrant who started small and became the owner of a steel company in Pittsburg.  Began vertical integration - owns all of the different businesses on which it depends for its operation.  Ex) Instead of buying coal from a company, Carnegie bought the actual coal mine.

The Consolidation of Industry  Business leaders also pushed for horizontal integration - combining many firms engaged in the same type of business into one, large corporation.  This happened often and when a company began to lose market share, it would sell to its competitors and create a large organization.

John D. RockefellerJohn D. Rockefeller  U.S. industrialist who made a fortune in the oil business.  By 1880, Standard Oil controlled almost 90% of the oil refining industry in the U.S.  When a single company achieves control of an entire market, this is called a monopoly.

The Consolidation of Industry  By the late 1800s, Americans grew suspicious of large corporations and monopolies.  To preserve competition, many states made it illegal for one company to own stock in another without permission from state legislature.

Trusts  In 1882 Standard Oil formed the first trust—a new way of merging businesses without violating the law of owning other companies.  Trust : a legal concept that allows one person to manage another person’s property (called a trustee).  Ex) Standard Oil trustees were able to control a group of companies as if they were one large merged company.

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