1. BUSINESS and INDUSTRY

2. NEW PROCESSES Steel Oil Expansion of railroad industry
Effects on Industry
Effects on Industry
Expansion of railroad industry
Stronger material for building bridges and taller buildings
Allowed construction of machinery for factories
,000 tons of steel produced
1910 – 24 million tons of steel produced
U.S. was now worlds top producer of steel
U.S. transformed by steel into a modern industrial economy
Oil used as lubricant for factory machinery
Resulted in production of kerosene for light
Led to development of gasoline and other fuels
Major sources of energy, fueling a revolution in transportation and industry
Exxon Mobil, Gulf Oil, Texaco

3. Big business thrived during the late 1800’s
Huge inequalities between the rich and the poor – unequal distribution of wealth
Corporations
Industries grew, need for more expert management
Began to organize as corporations – business with legal status of an individual
Owned by people who buy stock, board of directors makes decisions, corporate officers run day to day operations
Can raise large sums of money by selling stock in a company
Use money earned from stock sale to expand
Not dependent upon a single owner for it’s existence
To gain control of an industry some formed trusts – companies agree to merge, company run by board of trustees, all participants split profits
Monopoly – trust gained complete control over an industry eliminating all competition

4. BIG BUSINESS BARONS Rockefeller Carnegie Vanderbilt
Oil
Steel
Shipping
Standard Oil – started as a refinery
Vertical integration – acquiring companies that support his business which kept costs low and profits high
Horizontal integration – taking over companies in the same business
1879-Standard Oil refined 90% of all U.S. oil
Gave away over half of his earnings to charities
Telegraph operator
Formed Carnegie Steel Company
Vertical integration, buying in bulk, producing in large quantities
Owned what he needed to produce – raw materials, railroads for transporting, coal fields to fuel furnace
By end of century Carnegie Steel dominated steel industry
Wealthy had a duty towards the rest of society
Education, music, libraries
Began investing in railroads during the Civil War
4500 miles of track
Steamship lines dominated shipping
Supported very few charities
Gave only $1 million ($260 million today) to Central University – now Vanderbilt University

5. LABOR PRODUCTIVITY
Discuss specific factors that impact labor productivity.
Analyze how the demand for labor is influenced by labor productivity.

6. What is labor productivity?
output per worker – how much does each worker in a factory produce in a given period of time

7. EFFECTS OF INCREASED LABOR PRODUCTIVITY ON COSTS:
Lowers average costs
Competition amongst factories
Business longevity
Higher profits
EFFECTS OF INCREASED LABOR PRODUCTIVITY ON WAGES:
Higher wages and job security for more productive workers
Unemployment for less productive
Decrease in workers if additional output cannot be sold

8. Advantages of Specialization and Division of Labor:
Very skilled workers at one particular step
New equipment and machinery to enhance specialization
Improved product quality
Rise in productivity
Disadvantages of Specialization and Division of Labor:
Lack of employee motivation
Lack of knowledge for multiple jobs/skills
Loss of jobs

9. Why is increasing labor productivity important to individuals and to the economy?
Higher output = Higher consumption=highly productive labor force
Higher Income Levels = higher standard of living
both personal living standards and national living standards related directly to labor productivity

10. Effects of the 19th Century Monopolies

11. Monopoly – complete control over an industry
19th Century big business leaders established monopolies
iron, steel, oil, railroads
Railroads prominent among these industries
Massive consolidations
Some Americans feared economic power of large corporations (farmers)
reduce competition
restrict trade
redistribute income away from workers and farmers
Fear of business collusion (secret agreements) motivated federal government

12. Government Action Trusts had become very popular
Trust – arrangement between two or more firms in the same industry to reduce competition
Trusts also formed in an attempt to increase profits
Farmers angry about monopolies and trusts in railroad and financial industries
railroads charged higher rates for farmers to ship
govt. gave land grants and low interest loans to RR
Influenced Government to pass antitrust laws
1890 – Sherman Anti-Trust Act
govt. break up businesses with market domination
regulate economic power for big business

13. Sherman Act and Clayton Act of 1914
continue to be in use today
government still prohibits formation of monopolies
Competition – big businesses now faced with more competition
Forced to reduce costs – savings to consumers – increase sales – more profit
Fear of reduced profits and competition motivated many U.S. companies
Behavior is opposite of what monopolists would do

14. Costs and Benefits of Anti-Trust Laws
Large scale production much more efficient for businesses
Potentially lower cost to produce
Larger firms can possibly produce a larger amount of goods than smaller businesses
Difficult for small businesses to succeed
Consumer choices narrowed
Consumer purchasing power reduced
Competition can keep prices low
Businesses unable to restrict the amount of output in order to boost profits
Consumers can pay less for goods
Consumers can purchase more of a product if prices are lower