1. L6: The Gilded Age: The Birth of the Corporation 1870s-1900
An Economic History of the United States
Agenda
Objective:
To understand
How the Industrial Revolution gave way to the Gilded Age
The structure of corporations.
The central role of corporations and corporate owners in the Gilded Age.
Schedule:
Discussions & Lecture
Homework:
Readings on laissez-faire and individualism Due L7
Green = Thurs 3/5
Purple = Fri 3/6

2. The Industrial Revolution Goes Full Steam Ahead
By 1870, the American economy was growing considerably into a national market providing mass produced products made in factories.
The growth and development of the national economy that Federalists/Republicans had long dreamed of was made possible by the invention of the railroad

3. Railroads Grow With Government Support
Government provided land and cash grants to companies to develop two railroad systems.
Central Pacific Railroad
Begin in Sacramento, CA
Broke ground January 1863
Union Pacific Railroad
Begin in Omaha, NE
Broke ground in late 1863 but no tracks laid until 1865
Transcontinental Railroad: Connecting of these two railroads
Meeting place: Promontory Summit, UT

5. Transcontinental Railroad
Central Pacific Railroad (Chinese immigrants) and Union Pacific Railroad (Irish immigrants)
Meet at Promontory Point, Utah in 1869
Casualties – 2,000 dead; 20,000 injured
Pay – Approx. $50.00/month (Irish); Approx. $ 35.00/month (Chinese)
Railroad lines now connect the Atlantic and Pacific

6. The Industrial Revolution Morphs Into A Gilded Age
By 1870, the American economy was growing considerably into a national market providing mass produced products made in factories.
But, most the ownership of these factories were still held as sole proprietorships.
What is a sole proprietorship?
Why is it difficult for a sole proprietorship to own run of these factories?
Consider: Costs?, What happens if there is a loss?, Raising capital? What happens if the owner retires or dies?

7. How does the Industrial Revolution Morph into the Gilded Age?
The problems associated with running a factory (or factories) under a sole proprietorship, give way to need to create a new business structure better matched to govern the needs of large, national, industrial enterprises.
That business model: The Corporation
It is the introduction of the corporation and its associated tensions that define the Gilded Age; that move us from the Industrial Revolution to the Gilded Age.

8. Corporation Ownership & Direction:
Share-Holders; in proportion to the number of shares owned
Profits Accrue To:
Losses Incurred To:
Share-Holders; losses cannot exceed the amount they paid for their share (limited liability)
Revenue is Raised By:
Selling Stock
Life of the Company:
Perpetuity

9. Corporations
Why is the creation of a corporation necessary in an industrializing, nationalizing economy?

10. Structure of Corporations During The Gilded Age
Corporations tended to be structure in one of three unique ways during the Gilded Age
We will talk about three structures:
Horizontal Integration
Vertical Integration
Monopoly

11. Vertical Integration

12. Horizontal Integration

13. Vertical and Horizontal Integration in the The Steel Industry: The Case of U.S. Steel
Companies incorporated by U.S. Steel (vertical integration), as well as related industries absorbed by the company (horizontal integration).

14. Monopoly

15. Andrew Carnegie Worked his way up in the factory system.
Started Carnegie Steel
Used vertical integration and low to keep costs and down and his profits up
Believed in the “social gospel”
Net worth $298.3 billion in todays dollars
Gave away 90% of his fortune

16. J.P. Morgan
He began a series of consolidations in the railroad and other industries, leading the formation of colossal corporations including US Steel and General Electric.
Controlled 70% of steel industry, 20% of all corporations trading on wall street, the 3 largest insurance companies in the country, and several banks.
His philosophy was that only ruthless competition would lead economic stability.
Net worth of $310 billion
Organized the Metropolitan Museum of Art and the Museum of Natural History

17. John D. Rockefeller
Rockefeller built a massive fortune in the oil industry using practices including swallowing up competitors and negotiating exclusive deals with railroad companies.
In 1911, Standard Oil's monopoly was dissolved in a Supreme Court decision based on the 1890 Sherman Anti-Trust Act.
Rockefeller was often maligned in the press and some perceive him as one of the most hated figures of his day.
Rockefeller’s net wroth was $318.3 billion, making him the richest person in all of world history
By the time of his death, Rockefeller, a devout Baptist, had given away over $500 million in philanthropic pursuits.

18. Cornelius Vanderbilt Born poor in 1794
Started working on ferries and rose his way up until he owned more than 100 ferries
Expanded into ocean liners
Expanded into railroads
Worth $185 billion dollars Gave very little away to charity
$50,000 church
$1 million to great Vanderbilt University
Disinherited all of his sons but 1, who inherited 95% of his estate

19. So What is The Gilded Age?
The ascendency of corporations helps usher in a new age in American history…Gilded Age!
Refers to the decades between the end of reconstruction and the turn of the century (about 1870 to 1900).
Defining feature is the creation of the corporation and its consequences

20. The Gilded Age: What is it? What makes it gilded?

21. Entities in American Society Post-Gilded Age
People
Corporations
Government