The Rise of American Big Business Industrialization The Rise of American Big Business Industrialization Urbanization

New Tools of Industrialization Before the Civil War, most American businesses were owned by a single person or a partnership After the Civil War, industry (mills, factories, railroads, mines) now needed more capital (money) for investment than one person or a few partners could raise. What’s the solution???

$$$ CORPORATIONS Purpose To raise capital (money $$) It is a business in which many investors own shares called stocks In exchange for their investment, each stockholder receives a dividend, or part of the corporation’s profits This limits investor losses If a corporation fails, each investor only loses his or her investment Limited Liability

Wall Street $$

MONOPOLY Purpose Company or small group of companies that has complete control over a particular industry A monopoly often allowed a company to raise prices to almost any level it desired OUTCOMES: Competitors forced out of business Government tried to control them

What do you see? What do you think the cartoon is saying about these men?

TRUSTS Standard Oil Trust Purpose To get around government regulation of monopolies, companies combined their management into trusts Shareholders in the corporations received dividends from the trust but lost any say in its operation A way to get around laws regulating monopolies

Who were the industrial leaders? Andrew Carnegie – Steel J.P. Morgan – Finance (Investment Banker)

Who were the industrial leaders? Cornelius Vanderbilt - Railroads John D. Rockefeller – Oil

How did they get so powerful? Maximized profits Controlled entire industries Got rid of competitors Controlled prices Minimized costs Kept worker pay very low with long hours Controlled suppliers and transportation costs (they owned all parts of their industry) Had no government interference!

LAISSEZ-FAIRE Government should not interfere with business FREE-ENTERPRISE SYSTEM – private individuals make the economic decisions Government is hands-off

SOCIAL DARWINISM Based on Charles Darwin's theory of evolution Social Darwinists thought life was a struggle for the “survival of the fittest” Free-enterprise competition (laissez-faire) would lead to the strongest businesses surviving – that’s good. Government regulation would let the weak survive, so it was bad. Government programs to aid the poor or workers would let the weak survive, so they were bad.

How laissez-faire was it really? Govt Policy towards business – Was it really “laissez-faire”? Land grants to railroads No limits on immigration (at first) Supported business owners during strikes

ROBBER BARONS? Those who got rich at the expense of the poor and the working class Fancy lifestyles of the rich – mansions, show off their wealth

Carnegie’s Mansion in NYC

Vanderbilt Mansion, NY

Rockefeller Mansion

or Philanthropists? But the Robber Barons also used their money to help society (philanthropy): Can you think of places/things with the names Rockefeller, Carnegie, Vanderbilt?

Gov’t Regulates Monopolies 1st try: Sherman Anti-Trust Act (1890) Tried to prohibit monopolies and trusts. It prevented any business structure that “restrained trade” Problem: It was too vague. Corporations got around the act by forming other types of companies. 2nd try: Clayton Anti-Trust Act (1914) “Fixed” the Sherman Anti-Trust Act This one worked.