The Rise of Big Business American History

Goals Students will be able to: Terms to know: Examine causes and consequences of the second Industrial Revolution Determine how new industry, technology, and business changed the economy Analyze changes as the United States became and industrial society Review different economic and philosophic ideologies Terms to know: Corporation, monopoly, cartel, John D. Rockefeller, horizontal integration, trust, Andrew Carnegie, vertical integration, Social Darwinism, ICC, Sherman Antitrust Act

Corporations In the late 1800s and early 1900s, the United States began to see an expansion of corporations Corporations are run by multiple owners who pool resources to reach different markets Corporations limit ones risk because one can only lose what they have invested in the company originally and the company itself assumes all liability Corporations helped American business expand to new areas helping to fund technology, start new industries, or run large plants across the country This was due to the large amount of capital corporations had access to

Corporations Corporations were able to reduce the amount of money it cost to produce an item because it bought materials in mass amounts and paid workers low wages This also allowed corporations to lower the price of goods sold, helping to improve the cost of living in the United States Some corporations tried to establish monopolies, or become the only business that created a certain good or provided a certain service Without any competition, business have the ability to set prices at any level, hurt the consumer Some corporations established cartels This is when businesses make the same product and mutually agree to sell their goods for a certain price, in order to keep prices high John D. Rockefeller made deals with railroads so that they would transport only his oil and not that of his competitors

Integration Businesses continued to look for ways to cut costs so that they could increase profit Some business set up a system of horizontal integration This is when one company tries to buy all of the companies that make the same product This is largely done through the creation of trusts This is when companies assign their stock to a board of trustees, who combine them into a new organization This would allow one business to own the stock of another Others, such as Andrew Carnegie, setup businesses using vertical integration Vertical integration is a system where a business buys all of the businesses that are used to create their product This allows a business to control every aspect of the creation of a product. From the collection of raw materials to the complete product.

The Role of Big Business As cartels, trusts, and monopolies gained more power, many consumers began to view these practices as unfair Smaller businesses who joined cartels found that they were also being squeezed out of the profits These individuals viewed the leaders of these businesses as “robber barons” There were those, however, who felt that these individuals were leading the nation and creating a better society These individuals referred to people like Rockefeller and Carnegie as “captains of industry” Through this time period, the idea of social Darwinism began to take hold William Graham Sumner stated that it was wealth that measured one’s inherent value and those who had it were more fit to live in modern society Those who supported a more laissez-faire system of economy celebrate social Darwinism as it provided them a justification for why government involvement in the economy was not needed

Government Regulations In 1887, the government began to step in and reel back some of the power that had been developed by corporations The U.S. Senate created the Interstate Commerce Commission to oversee all railroad operations This organization could require railroad to send their records to congress so that their actions could be monitored for fair practice In 1890, the Senate passed the Sherman Antitrust Act This act outlawed the use of any trust that “operated in restraining of trade or commerce among the several states” While these acts were largely unsuccessful, the began a movement to end the over reach of corporate power