II. The Growth of Industry in the US & Rise of Big Business

A.The Industrial Revolution The Rise of Industry The Captains of Industry The Labor Force/ Working Conditions Inventions

1. The Rise of Industry a. Five features led the rise of industry in the late 19 th century: i. Abundant coal deposits (cheap energy) ii. Rapid spread of technological innovations

Inventors and Inventions Chart

iii. Pressure to cut costs & prices (eliminating competition & building monopolies) iv. Expanded labor force (Immigrants who were willing to work for CHEAP!) v. Continued governmental attitude of Laissez Faire toward businesses.

2. U.S. Economic System a. Capitalism: private businesses run most industries; competition drives the cost of goods/ wages of workers. b. Laissez Faire: “ Let alone ” / “ Hands off ” - No government intervention in the economy.

3. Economic Philosophies a.Karl Marx: Opposed capitalism (he said the business owners took advantage of the workers). 1. not be allowed. Property and means of production are owned by everyone. 1.COMMUNISM: Individual ownership of property should not be allowed. Property and means of production are owned by everyone.

b. Herbert Spencer: proposed Social Darwinism: 1. Society progresses through natural competition. The “ fittest ” people, businesses, or nations will rise to positions of wealth and power; the “ unfit ” will fail. 1. Society progresses through natural competition. The “ fittest ” people, businesses, or nations will rise to positions of wealth and power; the “ unfit ” will fail.

1. Social Darwinism: derived from Darwin’s “Survival of the fittest” in society; suggests that society (government) should have little to do with business (again- laissez faire) 2. Henry George wrote 2. Henry George wrote Progress Progress and and Poverty Poverty (1879)- (1879)- describing the describing the paradox in society paradox in society

4. The Corporation a.CORPORATION: organizers raise money by selling shares of stock, or certificates of ownership, in the company. ** Stockholders are those who buy shares and receive dividends (a % of corporation ’ s profits). They have little say (if any) in the affairs of the company

b. Trusts: a group of companies turn control of their stock over to a common board of trustees. c. Monopoly: when a trust gains exclusive control of an industry; marked by little to no competition - the company has almost complete control over the price and quality of a product.

5. Legislation- Government & Business a.US policies most often favored industrialists, not favored industrialists, not workers (because of laissez-faire). workers (because of laissez-faire). -As big business owners formed monopolies, Americans demanded that trusts and monopolies be outlawed

b. Sherman Anti-Trust Act: Congress ’ response to Americans ’ demands- passed in This law outlawed all monopolies and trusts that restrained trade. 1. However, law failed to define what was considered a monopoly or trust. 2. Law was difficult to enforce.

6. Railroads a. Railroads were the first monopoly in America. b. States developed railroad commissions to look into complaints. 1. Charging more for short hauls and less for long hauls 2. Offering rebates to favored customers

7. Mass Marketing a.Brand names and packaging played important roles in promoting goods. b.Advertising promoted products c.DEPARTMENT STORES: sold a variety of goods. Marshall Fields and RH Macy were among the first among the first department store department store owners. owners.

Innovators in Organization: Rockefeller and Carnegie 1.The Standard Oil Company was formed by John D. Rockefeller after he recognized the energy potential of the oil industry a.1870 – John D. Rockefeller incorporated his various interests into the Standard Oil Company of Ohio b.In 1882, all its properties were merged in the Standard Oil Trust, which had an initial capital of $70 million !

Standard Oil Co.

*January 2, 1882 :The Trust was valued quite conservatively at $70,000,000 – the true value was about $200,000,000. The nine Trustees controlled 23,314 of the 35,000 shares with J.D. Rockefeller holding 9585 shares. ($2,000 each in 1882, with Rockefeller’s share worth $19,170,000!!!)

Rockefeller was known to use the following tactics to ensure Standard Oil was #1: Monopolization — Bought up all of the components needed for the manufacture of oil barrels in order to prohibit his competitors from getting their product on the marketMonopolization — Bought up all of the components needed for the manufacture of oil barrels in order to prohibit his competitors from getting their product on the market Rate Wars — cutting the price of oil, forcing his competitors to go out of business or sell out to him!Rate Wars — cutting the price of oil, forcing his competitors to go out of business or sell out to him! Rebates — demanded a refund on public rates offered by the railroads, who agreed to this practice because of Standard's immense volumeRebates — demanded a refund on public rates offered by the railroads, who agreed to this practice because of Standard's immense volume Intimidation — On more than one occasion, Standard Oil dispatched thugs to break up competitors' operations that could not otherwise be controlled!Intimidation — On more than one occasion, Standard Oil dispatched thugs to break up competitors' operations that could not otherwise be controlled!

c. Rockefeller used Horizontal integration – the expansion of a business’s ownership and control over other similar businesses/industries - a strategy used by a business or corporation that seeks to sell a type of product in numerous markets. (Thus, the creation of an oil monopoly) d. He grew very unpopular until he began giving millions away to charity. Today he is known for his philanthropy.

2.Andrew Carnegie – born in Scotland, moved to PA at age 13. a. Intelligent and hard-working, he quickly worked his way up the ranks quickly worked his way up the ranks in every job he held. in every job he held. b. In 1872, he began focusing on the steel industry alone, and he opened his first steel plant in the steel industry alone, and he opened his first steel plant in 1875.

c – bought out the Homestead steel works d. Employed Vertical integration - The process in which several steps in the production and/or distribution of a product or service are controlled by a single company Ex: an oil refining business would be vertically integrated if it owned or controlled pipeline companies, railroads, barrel manufacturers, etc. Ex: an oil refining business would be vertically integrated if it owned or controlled pipeline companies, railroads, barrel manufacturers, etc.

One of the earliest, largest and most famous examples of vertical integration was the Carnegie Steel company. One of the earliest, largest and most famous examples of vertical integration was the Carnegie Steel company. Iron MineCoal Mine Carnegie Steel Works

(L) Rockefeller (R) Carnegie

Capitalists and Corporations

Captain of Industry Business leader who used his wealth and power to positively impact the country in some way, often through providing more jobs or through philanthropy.Business leader who used his wealth and power to positively impact the country in some way, often through providing more jobs or through philanthropy. Robber Baron? OR Business leader who dominated his industry, amassing great wealth, usually by unfair business practices that hurt the majority of Americans.Business leader who dominated his industry, amassing great wealth, usually by unfair business practices that hurt the majority of Americans.

Robber Baron or A Captain of Industry Analysis

The American Dream The American Dream Many people, including monopolists of the time, began pursing the idea of the American Dream.Many people, including monopolists of the time, began pursing the idea of the American Dream. The term was first used by James Truslow Adams in his book The Epic of America.

He states: The American Dream is "that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement…It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position." How would you describe the American Dream today?