1. SECTION 1 Corporations Gain Power Economic Growth Brings Wealth and Poverty November 2011

2. KEY QUESTIONS: What is a corporation? How did corporations affect business competition? What is a monopoly? What is a trust?

3. Rise of Corporations: Corporation – business owned by investors through shares of stock. (shareholders or stockholders) allows pooling of money (capital) for larger factories or expansion of factories

4. Rise of Corporations: corporations can put smaller competitors out of business, or buy them out (can out-produce them) Dividends = payments to shareholders out of profits after expenses are paid

5. The Oil Industry: Natural resource discovered in Pennsylvania in 1859 John D. Rockefeller and Standard Oil Co. control the industry Eliminate competition

6. The Oil Industry: Developed Standard Oil Trust 1882 Controlled 95% of oil industry Becomes a “Robber Baron”

7. Trust: a group of corporations run by a single board of directors. Creates a monopoly (control of all or nearly all of the business of an industry (think Microsoft!)

8. Reasons for Opposition to Trusts: 1. Reduces competition 2. Prices are higher 3. Companies have no reason to improve products or advance technology

9. Reasons for Opposition to Trusts: 4. Difficult for new companies to start up 5. Workers felt larger corporations did not care about them, treated them badly

10. Reasons for Opposition to Trusts: 6. Leaders of big business could buy favors from politicians (government corruption, bribery)

11. “Bosses of the Senate” – 1889 from Puck Magazine

12. The Steel Industry: Andrew Carnegie controls steel industry by making best, cheapest steel Uses “vertical integration” to do this. Control every step in the process of making steel

13. Banks & Industry: large banks loaned money to corporations for expansion J. P. Morgan – most powerful banker of late 1800s-early 1900s bankers helped business during economic hard times with investments

14. 1800s = Unregulated Economy in US. Industries had “ups and downs” of good/bad times. Called the business cycle (“boom and bust”). Depression = long period of very bad times (1873, 1893) characterized by: Spending & investing decrease Workers laid off Reduce production Some businesses close

15. The Gilded Age: The wealth of a few masked society’s problems: Corrupt politics & politicians Poverty South’s economy & industries grew very slowly