Growth of Big Business

Captains of Industry or Robber Barons? “The man who dies leaving behind him millions of available wealth, which was his to administer during life, will pass away “unwept, unhonored, and unsung’…of such as these the public verdict will then be: ‘the man who dies thus rich dies disgraced.” Andrew Carnegie   “Charity is injurious unless it helps the recipient to become independent of it.” John D. Rockefeller “Next to doing the right thing, the most important thing is to let people know you are doing the right thing.” John D. Rockefeller “There is no class so pitiably wretched as that which possesses money and nothing else.”

-corporations develop Big Business -corporations develop Investors purchase stock in hopes of receiving dividends -limited liability leads to public investment Risk only the amount they personally invest -mass market selling People see dividend payoffs and invest more More people investing Corporations begin with an idea put forward by an entrepreneur. That person then finds people to invest their money into their company by purchasing stock in that company. The company then uses that money to get started and continue operation. In return, the investor gets paid dividends (a percentage of the profits based on what they paid in) from the company they invested in.

Electricity and innovations -economy of scale Advantages -greater efficiency Electricity and innovations -economy of scale The more you produce, the easier and cheaper it is -manager system Multiple companies with qualified employees to oversee Andrew Carnegie perfects production and company organization to make major profits in his steel company.

-productivity studies Taylor To increase efficiency Advantages -productivity studies Taylor To increase efficiency Studied each employee to limit excess movement To increase productivity in factories, many mangers used Taylor’s productivity studies, which monitored every motion of an employee so that little to no production time was wasted.

-unfair competition practices Disadvantages -unfair competition practices Corporations produce items cheaply, charge less Difficult for small businesses to compete -corruption and bribery Government officials -destroyed labor union movements No unemployment or welfare Many Americans began to distrust the big businessmen and the trusts they set up, claiming that they limited competition and held control over government officials and Congressmen. How is this represented in the cartoon presented above?

-mixed public feelings Public Reactions -mixed public feelings Some unhappy with rich getting richer and poor getting poorer -Social Darwinism -based on Darwin’s theory of evolution -survival of the fittest -also applies to the business world (supports laissez-faire) -the best businesses survive -justified their wealth -Gospel of Wealth (Carnegie) Donate money to society And while the law of competition may be sometimes hard for the individual, it is best for the race, because it ensures the survival of the fittest in every department. ~Andrew Carnegie

“There is no class so pitiably wretched as that which possesses money and nothing else.” “Surplus wealth is a sacred trust which its possessor is bound to administer in his lifetime for the good of the community.” ~ Andrew Carnegie Some big businessmen, like Andrew Carnegie, believed in the “Gospel of Wealth,” in which they donated their money back to society. Carnegie was the most generous of these, donating 90% of his profits back to society by building centers for the arts across the country, like Carnegie Hall, pictured above in NYC.

Public Reactions -rags to riches Poor to very rich “American Dream” Wealth and success in America Horatio Alger dime novels Famous rags-to-riches stories

Types of Big Businesses -monopoly Company controls all production and sales (high prices) -trust (Rockefeller) Corporations unite to reduce competition -merger Joining together two companies -holding company (Morgan) A company that buys out the stock of other companies A merger usually occurred when one corporation bought out the stock of another. A firm that bought out all its competitors could achieve a monopoly, or complete control over its industry’s production, wages, and prices. One way to create a monopoly was to set up a holding company, a corporation that did nothing but buy out the stock of other companies. Headed by investment banker J.P. Morgan, he owned one of the world’s largest businesses.

Types of Big Businesses -horizontal integration Buy out similar competing producers to control industry -vertical integration Earn more money by buying out your suppliers Own all phases of production from start to finish Horizontal and Vertical Integration allowed big businessmen to increase their profits even more by limiting the amount of competition available.

Robber Barons -extreme profits made by business owners Bought/forced out competition; angers Americans -Philanthropy??? Donate money to society -big business practices exposed Ida Tarbell – Standard Oil Taking advantage of workers -public calls for regulation “The man who dies leaving behind him millions of available wealth, which was his to administer during life, will pass away “unwept, unhonored, and unsung’…Of such as these the public verdict will then be: ’The man who dies thus rich dies disgraced.” ~Andrew Carnegie, 1889 Some saw the big businessmen as Robber Barons, who stole from society and took advantage of workers at their own benefit. Others, however, saw them as philanthropic “Captains of Industry.” What do you think?

Robber Baron or Captain of Industry?

“The only question with wealth is, what do you do with it.” Although Rockefeller kept most of his assets, he still gave away over $500 million, establishing the Rockefeller Foundation, providing funds to found the University of Chicago (seen below), and creating a medical institute that helped find a cure for yellow fever. “The only question with wealth is, what do you do with it.” “Next to doing the right thing, the most important thing is to let people know you are doing the right thing.” ~John D. Rockefeller

“What a funny little government!” Robber Barons The Standard Oil Company took a different approach to mergers: they joined with competing companies in trust agreements. Trusts turned their stock over to a group of trustees—people who ran the separate companies as one large corporation. In return, the companies gained large dividends on profits. Trusts were not legal because they limited competition and free trade. -Sherman Anti-trust Act,1890 Illegal to form a trust that interferes with free trade -weak law but set a precedent for future regulation Never really broke up trusts “What a funny little government!” “Competition is a sin.” ~John D. Rockefeller