Chapter 20, Section 2: The Rise of Big Business Main Idea: As industry boomed, American businesses grew and developed new ways of organizing and limiting competition.

A. The Steel Industry Growth of RRs boosted the steel industry (needed rails, locomotives, etc) Bessemer Process – made steel stronger & less expensive. As a result, many things began to made of steel. Pittsburgh becomes the steel capital of US

The Steel Industry 1850’s – The Bessemer Process allowed steel to be produced cheaply. Therefore, the steel industry grew rapidly. Examples: railroads, skyscrapers, nails, pins Bessemer converter, Kelham Island Museum, Sheffield, England (2002) Henry Bessemer

B. King of Steel Andrew Carnegie – created a monopoly in steel through vertical integration (control all phases of manufacturing) Philanthropist – he spent his later years giving tens of millions of dollars to charity (“ I started life as a poor man, and I wish to end it that way.”)

· Carnegie reportedly gave $350 million of his $400 million fortune to charities, including $60 million to build libraries. By 1919, 2,811 libraries had been founded at a total cost of $56,704,188. Harper's Weekly April 11, 1903

C. New Ways of Doing Business Catalog shopping by mail – Sears, Wards Capital = money (needed to expand) Corporation = business owned by investors Stock = shares in a business owned by investors (or stockholders) Dividend = profit shared with investors Buying stock is less risky than starting your own business (can only lose what you invest) J.P. Morgan – investment banker, bought US Steel

operate for profit in a competitive system without an economic system in which resources and means of production are privately owned and prices, production, and the distribution of goods are determined mainly by competition in a free market U.S. Economy Free Enterprise Capitalism Private Property & Enterprise Competition Driven Profit Driven Consumer Driven freedom of private business to organize and operate for profit in a competitive system without interference by government beyond regulation necessary to protect public interest

· Most large businesses are corporations owned by stockholders. Shares of stock - a unit of ownership in a company

· Some corporations issue dividends to their stockholders. Dividend – payment to stockholders from a corporation’s profits

D. Plentiful Resources US was rich w/ raw materials (iron ore, coal, lumber, minerals, etc) Oil Boom – John D. Rockefeller & the Standard Oil Company Trust = smaller corporations turn control of their stock over to a large trust Monopoly = control of an industry by one corporation

Vertical and Horizontal Integration

Standard Oil Co. John Rockefeller

E. Big Business: Good or Bad? --- Lack of competition drives up prices Smaller businesses can’t compete & are put out Workers of corporations are often exploited Trusts had too much political influence ($ = power) + Carnegie (Gospel of Wealth) argued that competition ruined businesses & put people out of work Goods could be made cheaply to keep prices down

“On Wealth” Andrew Carnegie “Gospel of Wealth” (1901): Inequality is inevitable and good. Wealthy should act as “trustees” for their “poorer brethren.” Wealth no longer looked upon as bad. Viewed as a sign of God’s approval. Christian duty to accumulate wealth. Andrew Carnegie

F. Captains of Industry or Robber Barons? Their leadership made the US the #1 industrial giant of the world They were self-made (rags to riches) They gave back to charity later (philanthropists) Robber Barons (---) They used cutthroat tactics to drive others out (many now illegal) They had too much $ & power (political infl.) They were ruthless businessmen whose workers were often exploited (hard work, low pay, unsafe cond.)

Andrew Carnegie in his “Great Double Role” Caption reads: "Forty-Millionaire Carnegie in his Great Double Role. As the tight-fisted employer he reduces wages that he may play philanthropist and give away libraries, etc.”

The Protectors of Our Industries

“Congress—Who’s In It and Who Owns It”

The World’s 20 Largest Corporations by Market Value, 2003 ($US millions) Market Value - The number of shares in issue multiplied by their current market price Source: Financial Times Global 500, May 28th, 2003.

The Bosses of the Senate