1. Industrialization in the United States 1860s – 1900s

2. “Captains of Industry” Railroads Cornelius Vanderbilt Steel Andrew Carnegie Oil John D. Rockefeller Banking J.P. Morgan Technology Thomas Edison Unions Samuel Gompers Andrew Carnegie John D. Rockefeller Samuel Gompers Cornelius Vanderbilt Thomas Edison J. P. Morgan

3.  Businessmen such as Carnegie, Rockefeller, Ford and Morgan developed new methods to expand business!  New business methods, help from the gov’t and “Captains of Industry” begin to take control of the U.S. economy...

4. Department Stores… 1862, A.T. Stewart, NYC Shopping becomes a pastime! Urban consumers. Mail-Order Catalogs… Montgomery Ward, Chicago Sears & Roebuck, 1890s Rural consumers.

5. Rise of corporations fueled the rise of “big business…” Small businesses could not compete! Shut down in “hard times” ProprietorshipPartnershipCorporation Who owns it? 1 person2 or moreInvestors, stockholders How is money raised? * Savings, loans from banks* Partners invest own money, loans from bank * Stock is sold, loans from bank Advantages * Easy! * Low fixed cost… * Small facilities! * Partners share resp… * Low fixed cost… * Limited liability for investors… * Low operating cost… Disadvantages * Difficult to raise money… * Limited opportunities for growth… * Owner has unlimited liability… * High operating costs… * Disagreeing partners… * Owners have unlimited liability… * High operating costs… * High fixed costs… * Large facilities and equipment…

6. Corporation: organization owned by many people but treated by law as though it were a person. Stockholders buy stock… Raise money, spread the risk! (vs. partnership, proprietorship) Created Economies of Scale…  Could produce goods more efficiently, which allowed to the rise of “big business” Produce more goods @ cheaper price, continue to operate in harsh economic times, drive out small competition!

7. Santa Clara County v. Southern Pacific Railroad Company SCOTUS, 14 th Amendment and Corporations…  Received protection just as individuals would!

8. Competition created problems; low prices for consumers!!! Railroad pools: associations of competing railroads “for the purpose of a proper division of the traffic at competitive points and the maintenance of equitable rates that may be agreed upon.” Interstate Commerce Act, 1887

9. By 1870s, competing businesses were merging together, creating “big business” 1. Mergers, Consolidation of Industry 2. Creation of Trusts 3. Holding Companies Example of consolidation: 1870, Rockefeller’s Standard Oil Company owned 2% of the country’s crude oil… By 1880 – it controlled 90% of U.S. crude oil!

10. How did it do so???

11. Monopolies: Single company achieves control of an entire market! Many states begin outlawing… Trusts: Legal maneuver allowing trustee to control several companies & run them as one. Holding Companies: Produce no actual product. Controls several companies, merging into one large enterprise!

12. 1. Monopolies

13. “Carnegie Steel” Steel Refineries Railroad Lines Raw Materials Limestone Quarries Iron Ore Fields Coal Mines

14. “Standard Oil Company” Refinery

15. 2.Trusts

16. … by creating Trusts! Stocks would be traded in for trust certificates. “Super-Corporation” created from many small corporations! Standard Oil, 1882 – first TRUST!

18. J.P. Morgan Buy large blocks of stock from companies looking to sell… (discounted) Re-sell the stock for profit! These investment bankers became interested in holding companies and trusts… United States Steel, 1901