The Growth of Big Business in the Gilded Age Ch. 6, Sec 2

The Industrialists Called “Robber Barons”. – Rose to wealth to by exploiting labor and bending laws. Called “Captains of Industry”. – Rose to wealth by increasing supply of goods, expanding markets, and creating jobs. – Created libraries, universities, were philanthropists. Both views are partially right.

John D. Rockefeller and Standard Oil John D. Rockefeller founded Standard Oil Co. in – Made a fortune in grain, meat in Civil War. Became so large, was able to make deals with RR’s and sell oil at lower prices. – Led to horizontal consoldiation – bringing together many firms of same business. – Created a Trust – many companies turn over assets to a board of directors and share in profits. 40 companies joined Standard Oil Trust.

John D. Rockefeller

Andrew Carnegie and Carnegie Steel Andrew Carnegie started in railroads and later began Carnegie Steel. – First to use Bessemer Process. Used vertical consolidation. – Controlled businesses that made up all phases of a product’s development. Mines, steel mills, shipping, railroads. Charged less than competition because of economy of scale. – As production increases cost per item decreases.

Andrew Carnegie

Economy of Scale

Business Practices Rockefeller, Carnegie, others used certain practices. Horizontal & vertical consolidation, trusts, economy of scale. Were Oligopolies – a few large business produce products profitably. – Ex – carmakers today. Some became Monopolies – had complete control of a product or service. Some formed Cartels – loose group of businesses that agree to limit supply and keep prices high.

Government Response Gov’t was mostly pro-business, but worried about monopolies and trusts. Passed Sherman Anti-Trust Act in – Outlawed any combination of companies that restrained interstate trade or commerce. Ineffective until T. Roosevelt became president.