1. The Rise of Big Business
Chapter 13 Section 2
The Rise of Big Business

2. The Rise of Big Business
Introduction - Expansion of the nation’s transportation and communication systems
allowed industrial leaders to conduct business on a large scale. Small companies were merged into national operations
Business leaders had great wealth and
power

3. A. Business leaders had great wealth and power
1. Critics called them “Robber Barons.”
Admirers called them “Captains of
Industry”

4. The Rise of Big Business
Business Expansion – Until 1800’s, most business were run by single owners or partnerships, with few employees, that served a local or regional customer

5. A. Corporations and Investment Bankers -
Business expansion in the late 1800’s
required large amounts of capital
To get capital industrialists created
Corporations
Businesses that are authorized by law
to act as one person
2. A corporation often sells stock
Shares of ownership in the business in
order to raise capital
b. Owners of stock are called shareholders
and share in the profits of the corporation

6. A. Corporations and Investment Bankers
2. A corporation often sells stock
c. Owners of stock are called shareholders
and share in the profits of the
corporation
Corporations are run by a board of
directors elected by the shareholders

7. A. Corporations and Investment Bankers
3. To acquire the huge sums of money needed,
corporations relied on investment bankers.
Investment bankers arrange for the sale of
stocks and negotiated loans
The most powerful investment banker
of the late 1800’s was J.P. Morgan
J.P. Morgan believed the most efficient
way to earn a profit was through merger
of businesses
c. Morgan called competition “wasteful”

8. A. Corporations and Investment Bankers
4. In 1890’s Morgan and other bankers
financed the growth of the railroad business
and bought control of the industry
They increased profits by cutting wages
and granting rebates
i. Partial refunds or discounts
ii. Offered to companies that promised
large amounts of business
iii. Smaller railroads could not compete
and would sell out to bankers

9. A. Corporations and Investment Bankers
b. By 1900, seven railroad systems controlled
nearly two thirds of the nations tracks
c. This pattern was repeated in other industries
John Pierpont Morgan
Born: April 17, 1837, Hartford, Connecticut
Died: March 31, 1913, Rome, Italy
Wall Street Banker
Once saved the federal government in 1895
when he loaned the United States more
than $60 million dollars
Bought Andrew Carnegie’s steel company
for $400 million and formed U.S. Steel
left much of his wealth to New York
Metropolitan Museum of Art,

10. B. Carnegie and Steel
1. Andrew Carnegie was the son of a poor
Scottish weaver
a. Became millionaire through investments
b. Used money to enter steel business
Arrived in America in 1848 at the age
of 13. Rose from cotton mill to telegraph
operator
Became private secretary to
superintendent of Pennsylvania Railroad

11. B. Carnegie and Steel
1. Andrew Carnegie
Used telegraph skills to untangle
freight and passenger trains. Given
stock tip as reward. Mortgaged family
home and made fortune

12. B. Carnegie and Steel
2. Carnegie took every opportunity to cut
prices and make a profit which drove out
competition
Between 1890 and 1900 Carnegie’s mills
increased from $5.4 million to $40 million
Carnegie invested in the businesses
producing the raw materials for his mills
Invested in the means of transporting raw
materials to factories

13. B. Carnegie and Steel
d. Vertical integration – controlling all aspects
of an industry, including raw materials,
transportation systems, and all stages of the
manufacturing process
In 1901 J.P. Morgan bought Carnegie’s
company for $1.4 billion
e. Carnegie spent the rest of his life as a
Philanthropist
A person who donates to museums, public
libraries and other public works

14. Andrew Carnegie 1835-1919 Spent life acquiring wealth
Retired one of wealthiest men in the World
Spent retirement helping others with his wealth
Gave to: Carnegie libraries, Carnegie Tech (now Carnegie-Mellon University) and Tuskegee Institute
“The man who dies rich dies a disgrace.”

15. C. Rockefeller and Oil
1. John D. Rockefeller
a. In 1860’s he visited Pennsylvania oil
fields. Realized that by controlling the
claims of several drillers a fortune could
be made
Horizontal integration – the merger of
competing businesses or individual claims
in the same business
c. Named company Standard Oil

16. C. Rockefeller and Oil
1. John D. Rockefeller
Controlled all aspects of the oil business
trying to cut expenses
Kept savings for himself
d. Created new business organization called
trust
A legal agreement under which
stockholders of different companies
in one industry turn over stock to one
group of directors called trustees

17. e. When Rockefeller retired he had a personal fortune of $1 billion
C. Rockefeller and Oil
1. John D. Rockefeller
e. When Rockefeller retired he had a
personal fortune of $1 billion
f. Reformers felt trusts endangered the
American system of free enterprise
John D. Rockefeller
( )
America’s first billionaire
Standard Oil broken up in 1911
Rockefeller spent last 40 years retired helping different
charities and organizations. Used money to help
education, medicine, and science. Help eradicate
hookworm and yellow fever. Gave away one-half billion
dollars.

18. III. The Antitrust Movement
A. Laissez-faire – Traditionally American’s
wanted the government to stay out of
business affairs. The policy was called
laissez-faire
Wealthy Americans felt government
should not interfere with capitalism
a. The system in which privately
owned businesses, farms, and
factories compete with one another
for profits

19. A. Laissez-faire
1. Wealthy Americans
b. Some business people justified
capitalism through the findings of
science
Charles Darwin’s 1859 theory of
evolution was applied to business
d. Social Darwinism – an extension of a
scientific theory into business, the strong
would survive and the weak would fail

20. A. Laissez-faire
1. Wealthy American
Many felt that government should not
tax the profits of the companies nor
should they interfere in the treatment
of workers

21. Regulating the Railroads –Many worried about the power of big business
1. Farmers were among the first to call for
regulation of big business
Because of corporate rebates farmers
would often have to pay higher rates than
businesses did to ship goods
b. Farmers also protested the lack of
competition among railroads

22. B. Regulating the Railroads
1. Farmers
c. In 1887, Congress responded with the
Interstate Commerce Act
Law stated that railroads traveling
through more than one state had to
set rates that were “reasonable and just”
ii. Rebates were outlawed
iii. Rail rates had to be made public
To enforce the terms of the Interstate
Commerce Act the Interstate Commerce
Commission (ICC) was created

23. B. Regulating the Railroads
1. Farmers
e. ICC lacked power to enforce law
Won only one out of sixteen cases
brought to court between 1887 and 1905

24. C. The Sherman Antitrust Act
1. The states tried unsuccessfully to prohibit
trusts
Because most trusts operated in more than
one state, the States turned to the federal
government
1890 – The Congress tried to protect free
competition by passing the Sherman Antitrust
Act
The act outlawed “every. . . Form of trust
or otherwise” that promoted the
“the restraint of trade”

25. 1890 – The Congress tried to protect free competition by passing the Sherman Antitrust Act
b. Interference of trade was outlawed
c. Act had loopholes
Didn’t define “trust” or “restraint of
trade”
Between 1890 and 1900 only 18 cases
under act were tried and government
lost most of them

26. 3. 1890- Congress tried to protect free competition
c. Act had loopholes
iii. Trusts could dissolve and reform into
new trusts or corporations
iv. Government stopped using the act to
fight trusts
v. Law was used to stop labor unions from
forming strikes, boycotts and other labor
tactics

27.
d. By 1900 giant businesses controlled nearly
two fifths of all capital invested in
American manufacturing
e. Growth of big business led to antitrust
movement among reformers