AIM How did Robber Barons gain so much wealth during the gilded age? A long time ago in the United States of America… Businessmen saw an opportunity to make lots of money and concentrate their power and influence over the nations economy. New inventions and new production techniques made it possible to reduce manufacturing costs and transportation costs. The country was changing, changing fast. Unfortunately the laws regulating business practices weren’t changing at the same pace… The “Gilded Age” as it came to be known is named for the extreme wealth that some men built for themselves on the backs of the workers and using ruthlessly competitive practices.

Goals of a Gilded Age Business Owner Step 1 = create a product Step 2 = reduce manufacturing costs Step 3 = crush the competition Step 4 = become a monopoly

Three ways to create a MONOPOLY? Horizontal Integration Vertical Integration Conglomeration

Horizontal Integration Combining Several Competing Companies in the Same Industry Oil Company A Oil Company B Oil Company C

Vertical Integration MARKET WIRE FACTORY STEEL MILL IRON FURNACE When one business controls various elements of the production & distribution process MARKET WIRE FACTORY RAILROADS STEEL MILL IRON FURNACE IRON MINE COAL MINE

Rockefeller’s Problem: NJ Law Prohibited Corporations from Owning Other Corporations Trusts A smaller corporation allows a larger corporation to control (but not own) its stock “in trust.” STANDARD OIL HELD IN TRUST Co. A Co. B Co. C Co. D Co. E

Interlocking Directorates When the same people serve on the Board of Directors of Corporations in the same industry Board of Directors Co. A Co. B Co. C Co. D Co. E

Conglomerate Companies Also called “Holding Companies”

Holding Companies In 1888 NJ law changed to allow corporations to actually own (not just control) stock in other corporations. Holding Company: When a one corporation owns a controlling percentage of another corporation’s stock STANDARD OIL OWNERSHIP Co. A Co. B Co. C Co. D Co. E

Holding Companies Example from Today Philip Morris OWNERSHIP Kraft (Tobacco Company) Kraft Foods Nabisco Miller Brewing Altria Capital Various Wineries OWNERSHIP