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The Growth of Big Business in the Gilded Age Ch. 6, Sec 2
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The Industrialists Called “Robber Barons”. – Rose to wealth to by exploiting labor and bending laws. Called “Captains of Industry”. – Rose to wealth by increasing supply of goods, expanding markets, and creating jobs. – Created libraries, universities, were philanthropists. Both views are partially right.
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John D. Rockefeller and Standard Oil John D. Rockefeller founded Standard Oil Co. in 1870. – Made a fortune in grain, meat in Civil War. Became so large, was able to make deals with RR’s and sell oil at lower prices. – Led to horizontal consoldiation – bringing together many firms of same business. – Created a Trust – many companies turn over assets to a board of directors and share in profits. 40 companies joined Standard Oil Trust.
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John D. Rockefeller
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Andrew Carnegie and Carnegie Steel Andrew Carnegie started in railroads and later began Carnegie Steel. – First to use Bessemer Process. Used vertical consolidation. – Controlled businesses that made up all phases of a product’s development. Mines, steel mills, shipping, railroads. Charged less than competition because of economy of scale. – As production increases cost per item decreases.
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Andrew Carnegie
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Economy of Scale
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Business Practices Rockefeller, Carnegie, others used certain practices. Horizontal & vertical consolidation, trusts, economy of scale. Were Oligopolies – a few large business produce products profitably. – Ex – carmakers today. Some became Monopolies – had complete control of a product or service. Some formed Cartels – loose group of businesses that agree to limit supply and keep prices high.
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Government Response Gov’t was mostly pro-business, but worried about monopolies and trusts. Passed Sherman Anti-Trust Act in 1890. – Outlawed any combination of companies that restrained interstate trade or commerce. Ineffective until T. Roosevelt became president.
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