The Rise of Big Business

The Rise of Big Business Objectives To analyze the growth of corporations To describe monopolies and trusts and evaluate their effects To summarize the positive and negative aspects of the Gilded Age To evaluate the development of the economy of the South

Businesses Change in the Late 1800’s Until the late 1800’s, most businesses were owned directly by one person or by a few partners. New technology caused business owners to want to buy new equipment. To raise money business operators formed corporations. A corporation is a company that raises money by selling shares of stock. When a business holds stock in many companies, often in the same industry, it’s called a trust.

Advantages Corporations Have That Smaller Businesses Do Not Have? 1)By selling stock, a corporation can raise large amounts of money 2)A corporation has special legal status and continues to exist after its founders die. Banks are more likely to lend corporations money 3)A corporation limits the risks to its investors, who do not have to pay off the corporations debts

BLACK GOLD In 1859, Edwin Drake used a steam engine to drill for oil This breakthrough started an oil boom in the Midwest and later Texas At first the process was limited to transforming the oil into kerosene and throwing out the gasoline -- a by- product of the process Later, the gasoline was used for cars John D. Rockefeller soon started his oil business in 1863 EDWIN DRAKE PICTURED WITH BARRELS OF OIL

Rockefeller Uses Ruthless Methods To Gain Control of the Oil Industry He decided to put his competitors out of business by creating monopolies and forming trusts. John D. Rockefeller took a $2000 investment in 1859 and turned it into one of the most profitable businesses in the United States. Rockefeller became known as a robber baron but also gave away $500,000,000 to charity.

BUSINESS GROWTH & CONSOLIDATION Mergers could result in a monopoly (Trust) A monopoly is complete control over an industry by wiping out competition An example of consolidation: In 1870, Rockefeller’s Standard Oil Company owned 2% of the country’s crude oil By 1880 – it controlled 90% of U.S. crude oil That’s in 10 years! CHICAGO’S STANDARD OIL BUILDING IS ONE OF THE WORLD’S TALLEST

ROBBER BARONS Alarmed at the cut-throat tactics of industrialists, critics began to call them “Robber Barons” Famous “Robber Barons” included Carnegie (steel), Rockefeller (oil), Vanderbilt (RR), Stanford (RR), J.P. Morgan (Banking), and Jay Gould (RR) Robber Barons got richer while many Americans got poorer J.P MORGAN IN PHOTO AND CARTOON

Jay Gould Robber Baron Jay Gould used illegal tactics like bribing officials and selling fake stock to amass a fortune in excess of $77 million, mostly in the railroad industry. (Sound like Bernie Madoff?) Bernie Madoff is a present day robber baron

SHERMAN ANTI-TRUST ACT In 1890, the Sherman Anti-Trust Act made it illegal to form a monopoly (Trust) Prosecuting companies under the Act was not easy – a business would simply reorganize into single companies to avoid prosecution Seven of eight cases brought before the Supreme Court were thrown out

BIG BUSINESS AND LABOR Andrew Carnegie was one of the first industrial moguls He entered the steel industry in 1873 By 1899, the Carnegie Steel Company manufactured more steel than all the factories in Great Britain combined

Carnegie’s Methods of Gaining Control of the Steel Industry Differ From Rockefeller’s Andrew Carnegie believed in making the best and cheapest product. He did this by controlling all the processes related to the manufacture of the steel. By doing this, he was able to gain control over the steel industry.

The term "gilded age" was coined by Mark Twain and Charles Dudley Warner to describe the concentration of wealth in late nineteenth-century American society. During this period, industrial kingpins such as Andrew Carnegie, J.P. Morgan, and John D. Rockefeller amassed unprecedented fortunes. Meanwhile, the drive to accumulate wealth translated into miserable working conditions in factories, coal mines, and oil fields. Violent strikes broke out throughout the country. Of the thousands of strikes that erupted during the 1880's and 1890's, some of the most furious were the Great Railroad Strike of 1877, the Haymarket Riot of 1886, and the Pullman strike of The Guilded Age

Characteristics of the “Gilded Age” Many wealthy people had gained their wealth through inheritance and not working to obtain it. Few actually got rich through hard work. The number of wealthy people in America disguised society’s problems, such as corrupt politics and widespread poverty.

Why is its name appropriate for the era? To gild means to coat an object with gold. It appears that America was a nation of wealth; however, many Americans lived in horrible poverty.

ROBBER BARONS WERE GENEROUS, TOO Despite being labeled as greedy barons, rich industrialists did have a generous side When very rich people give away lots of money it is called “Philanthropy” Carnegie built libraries, Rockefeller, Leland Stanford, and Cornelius Vanderbilt built schools ROCKEFELLER CHAPEL – UNIVERSITY OF CHICAGO

The Economy of the South Grows Slowly The South had been left in ruins following the Civil War. It remained mostly an agricultural region with little industry. Also, the price of cotton, the South’s main crop, was very low.

Sharecropping is a system of agriculture in which a landowner allows a tenant to use the land in return for a share of the crops produced on the land.

The Sharecropping System Affect Workers Landowners rented their land to sharecroppers who paid a large portion of their crops as rent. Often they had to buy their seed and tools on credit. Sharecroppers made little money from the sale of cotton because of low prices. Merchants often cheated them, increasing their debt. Sharecropping kept poor Americans in constant poverty. Many never even learned to read or write.

Match the term in the second column with the description in the first column. Write the letter of your answer in the blank. ______ 1. A person who gives away a great deal of his or her money to charity. ______ 2. A company that raises money by selling shares of stock. ______ 3. A business leader who became wealthy by using dishonest methods. ______ 4. A company that wipes out it competitors and controls an industry. ______ 5. A wealthy businessman who controlled the oil industry. ______ 6. A legal body created to hold stock in many companies, often in the same industry. ______ 7. A wealthy businessman who controlled the steel industry. ______ 8. The era of the late 1800’s, which was a time of fabulous wealth for a few Americans. ______ 9. People who got richer while most Americans got poorer ______10. Land owners gave farm workers land, seed, and tools in return for a part of the crops they raised. a.Jay Gould b. robber baron c. corporation d.John D. Rockefeller e.sharecropping f.Andrew Carnegie g.monopoly h.trust i.philanthropist j.Guilded Age The Rise of Big Business Assessment