Big Business Models and Mentality 1

After this lesson, you will be able to… Identify new business practices that aided in the rise of big business in the late 1800s Identify the most noted benefactors of these new models Analyze the terms Captains of Industry and Robber Barons Explain how the rise of big business forced new ideas about wealth in the American culture Evaluate the differing philosophies related to wealth prior to the Progressive era 2

Main Idea- New Business Models helped grow markets and wealth over a short period of time The Corporation What is a Corporation? What were the impacts of corporations? Managers, hired by the board of directors run the company The Business is its own entity, not an individual Entrepreneurship expands with growing markets Investors buy shares in a company Helped Expand Markets Instead of an owner boards of directors make decisions Small businesses become large businesses 3

Main Idea- Captains of Industry pioneered new business tactics by trying to maximize profits and minimize cost Rockefeller Carnegie Swift 4

Cornering the Market Oil company A Trust Monopoly Trust Oil company A company B Oil market Oil market Monopoly Trust Oil company A Trust Oil market Oil market Oil company C Oil company D A business model where a Single firm controls 90% or More of any market Stockholders of several competing corporations turn in their stock to trustees in exchange for a trust certificate entitling them to a dividend. 5

The Benefactors of Big Business The man of steel: Andrew Carnegie The Backer: John Pierpont Morgan The Transporter: Cornelius Vanderbilt The Oil man: John D. Rockefeller (worth $240 billion) 6

Were these men Captains of Industry or Robber Barons? “In 1870, when Rockefeller founded Standard Oil, kerosene was 30 cents a gallon. Twenty years later, Rockefeller had almost a 90 percent market share and kerosene was only eight cents a gallon. Customers were the real winners here, because Rockefeller’s size allowed him to cut costs…”- Burton W. Folsom, Jr. “To organize and exploit the resources of a nation upon a gigantic scale…and to do this only in the name of an uncontrolled appetite for private profit- here surely is the great inherent contradiction whence so much disaster outrage and misery has flowed.”- Matthew Josephson Captain of Industry- one who’s vision and work ethic creates wealth for all! Robber Baron- one who’s obsession with gaining wealth used their power to swindling the poor and cheat their competitors

US History Quizdom Choose which of the following statements best describes the political cartoon to the right? This cartoon shows the social benefits of vertical integration This cartoon is meant to criticize John Rockefeller’s business tactics This cartoon illustrates the importance of steel to American industry This cartoon shows the control Cornelius Vanderbilt had over the railroads

US History Quizdom Which of the following captains of industry was so successful in transportation of goods, he was actually known as “The Commodore” Rockefeller Ford Morgan Vanderbilt

US History Quizdom Investment banker The clues to the right point to… Entrepreneur who backed other capitalists like Thomas Edison Bought out Carnegie steel The clues to the right point to… JP Morgan Cornelius Vanderbilt John D Rockefeller Henry Ford 10

US History Quizdom The quote to the right is… Condemning the business practices of the Robber Barons Calling for greater regulation on fuel prices Promoting the benefits of “big business” Proposing laissez faire, and more socialism “In 1870, when Rockefeller founded Standard Oil, kerosene was 30 cents a gallon. Twenty years later, Rockefeller had almost a 90 percent market share and kerosene was only eight cents a gallon. Customers were the real winners here, because Rockefeller’s size allowed him to cut costs…”- Burton W. Folsom, Jr. 11

Main Idea- Big Business success challenged the cultural and moral views of Americans vs Social Darwinism The Gospel of Wealth 12

William Graham Sumner Folkways (1906) Social Darwinism Individuals must have absolute freedom to struggle, succeed or fail. Therefore, state intervention to reward society and the economy is futile! William Graham Sumner Folkways (1906) 13

The Gospel of Wealth: Definition- the idea that wealth is a blessing to be used to better all lives . Viewed wealth as a sign of God’s approval. Christian duty to accumulate wealth. Russell H. Conwell 14

“On Wealth” by Andrew Carnegie Backed the idea of the “Gospel of Wealth” The Wealthy should act as “trustees” for their “poorer brethren.” Started the trend of philanthropy- giving excess wealth to charitable causes or projects Andrew Carnegie 15

Wall Street – 1867 & 1900 Wall Street – 1867 & 1900 16

U. S. Corporate Mergers 17

Main Idea- A new movement known as “progressivism” or the era of “reform” forced government to take token steps to regulate trusts 1887  Interstate Commerce Commission- created an agency to investigate “unfair” rates on railroads 1890  Sherman Antitrust Act- outlawed “bad trusts” or trusts that operated in restraint of commerce or trade among the states”- (can you say LOOP HOLE??) 18

Government Loans and Subsidies Government Aids Big Business and immigration Homestead Act 1862 Government Loans and Subsidies Protective Tariffs 19

US History Quizdom Which of the following represented the greatest contribution corporations made to expanding businesses? They offered access to huge amounts of capital They offered an opportunity at creating cartels They linked business and government directly They limited businesses to specialize in one industry alone

US History Quizdom Chris Kanmore, wishing to not seem too tyrannical, buys a majority stock in multiple firms, forces those firms to turn their stock over to a board of trustees The description to the right is describing… A corporation A Trust A cartel A monopoly 21

US History Quizdom Social Darwinism… Championed the idea that those who are blessed with wealth are care-takers of the poor Promoted government intervention to protect consumers Proposed that there are those who are meant to be wealthy and those who were not Rallied many to fight back against unfair trusts 22

US History Quizdom Which movement is most related to the idea of the “gospel of wealth” Philanthropy Socialism Anarchism Laissez faire 23

US History Quizdom What did the Interstate Commerce Commission and the Sherman Anti-Trust Act have in common? Both were specifically aimed at railroads Both promoted monopolies amongst industrialists Neither were strong enough to effectively regulate big corporations In the case of Munn v. Illinois, the Supreme court declared both laws unconstitutional 24

US History Quizdom “Individualism will continue, but the millionaire will be but a trustee for the poor; instrusted for a season with a great part of the increased wealth of the community, but administrating it for the community far better than it could or would have done for itself.” Who is the likely source of the quote to the right? John D. Rockefeller Cornellius Vanderbilt Andrew Carnegie Frederick Taylor 25

US History Quizdom “Everyone in society has the absolute freedom to succeed or fail in accordance to their own struggles. Some are destined to succeed and some will inevitably fail according to natural selection. Any government intervention is useless given that this is a matter of nature.” The quote to the right reflects the ideas of… William Graham Sumner Benjamin Franklin Andrew Carnegie Nelley y’all 26

US History Quizdom The Business model to the right most closely reflects which business model? Corporations Cartels The Gospel of Wealth Monopolies 27

US History Quizdom ??????????????? Strategy Action Cut Costs Increase production lower wages Maximize Profits Reinvest in Advertisement Stay on the Edge Research and development Which of the following would be the best heading for the table above? The Gospel of Wealth c. Social Darwinism Corporate Strategies d. Vertical Integration 28

US History Quizdom Which of the following WAS NOT an ideology relating to the growth of big business? Those who gain wealth deserve to keep it because they are products of “natural selection” The attainment of wealth means we have an obligation to give to those less fortunate Business is a matter of cutting costs, maximizing profits and looking into new products for future growth Big Business should be owned by state and federal governments Investors Board of directors Managers Employees 29

US History Quizdom Which of the following best describes the author’s likely intent for the cartoon above? To promote the benefits of corporations To promote increased government regulation of big businesses To criticize the philosophy of Social Darwinism To criticize “Robber Barons” 30