1. Test Tuesday12/4 Rise of Industry & Big Business Chapter 19

2. Big Business Section2

3. Agenda Wednesday, November 28, 2012 DO NOW: Sit Quietly CLASS ACTIVITY: 1)Homework Questions Review HOMEWORK: None

4. Introduction John D. Rockefeller was one of a new breed of business leaders who grew up in the late 1880 ’ s. They were ruthless, had imagination and vision about the future of big business. Together, these leaders shaped the emerging businesses and industries.

5. I. The Steel Industry Growing railroads after the Civil War fueled the growth of the steel industry Reason: Steel rails did not wear as quickly as iron rails A.Bessemer Process Steel makers produced strong steel at a lower cost 1. Steel makers produced strong steel at a lower cost = railroads began to use steel rails

6. One thing leads to another … 2. New steel mills sprang up throughout the mid-west. *Pittsburgh, PA became the steel making capitol of the nation 3. Steel brought jobs and prosperity to Pittsburgh and other steel towns

7. Sounds good, so what are the negatives? Negatives a) Air pollution from smoke stacks b) Soot became a prevalent sight c)Water pollution B. Andrew Carnagie: Scottish immigrant turned millionaire 1. Career defined the “ History of American Industry ” ; a complete success story

8. What a Guy! …Carnagie, that is.. In Homestead, PA, steel mills used the Bessemer Process to manufacture steel. 2. In Homestead, PA, steel mills used the Bessemer Process to manufacture steel. 3. Good relationships with railroad owners lead to HUGE profits. 4. Barons used profits to buy out competition in other phases of industry (like steamships) 5. Vertical integration allowed Carnagie to gain an advantage over other steel companies

9. vertical integration What is vertical integration? Vertical integration: having control of all the steps required to change raw materials to finished products 6. 1862: Carnagie formed the Carnagie Steel Company. 7. By 1900: Carnagie ’ s steel company was turning out more steel than all of Great Britain.

10. Like I said … What a guy! 8. Carnagie felt that he had a “ duty to society ” a) built public libraries b) donated charities c) Post retirement, he donated time to helping people

11. New Ways of Doing Business 1.Small factories close due to big factories producing goods more cheaply 2.Big factories/companies look to expand in marketplace (Sears, Montgomery Ward) 3.First “ Mail Order ” in U.S. sold goods to western farmers via the railroad

12. Investment in Business 1.As factories expanded, they needed capital What is capital? Money! 2. To raise capital, American businesses became corporations What is a corporation? A business owned by investors

13. corporation How does a corporation work? Corporation sells stock (shares) to investors (stockholders) Profits from stock are used to expand (buy new factories) or equipment As a return for their investment, stockholders receive dividends (shares of the profit from business) Stockholders choose a board of directors to run corporation (protection for investment) ** Rise of corporations helped American industry grow as thousands invested in stock

14. But, what if the company goes bankrupt? Stockholders are not liable(responsible) for the debts of corporations, but they DO share in their profits. II. Role of Banks After the Civil War, corporations attracted large amounts of money from 1. Investors 2. Loans from banks *Bankers became leaders of business due to profits made from corporate loans.

15. J.P. Morgan 1)Morgan was the most dominant figure in the American Banking Industry. 2)1890 ’ s: Morgan Associates invested large sums of $$ in “ troubled ” corporations 3)Morgan generates huge profits from his vision of “ troubled companies ” 4)1894-98: Morgan gains control of most major rail lines and steel corporations in United States. 5)By 1901: Morgan became head of U.S. Steel Company – worth a cool million $$$

16. Plentiful Resources Industry could not have expanded so quickly in the United States without the nation ’ s rich supply of natural resources. A.Oil “ Boom ” 1) 1859: Titusville, PA was the nation ’ s first oil strike. B. Rockefeller and Standard Oil Company 1) Rockefeller invested in first refinery at age 23 2) Rockefeller knew oil had to be refined (purified) for it to be valuable.

17. So, how did Standard Oil become a trust? 3) Rockefeller used profits from his refinery to buy competition. 4) After consolidation of competition, he formed the Standard Oil Company of Ohio 5) A clever businessman, he always had an edge on his competition. Standard Oil quickly became a trust.

18. What is a trust? A trust is a group of corporations run by a single board of directors 1)Standard Oil trust helped Rockefeller to control the industry. 2)Standard Oil drew investors from smaller companies looking for higher dividends (more $), but they could not choose the board of directors. (traded privilege for profit) 3)Board of Standard Oil took over management of competition *Standard Oil Trust ended competition in the oil industry.

19. The Game of Monopoly … Standard Oil Trust created a monopoly that controlled 95% of the oil refining business in the U.S. What is a monopoly? A company that controls all or nearly all of a business By the late 1890 ’ s many of the nation ’ s most important industries had decided to follow Rockefeller ’ s lead to become monopolies themselves.

20. Big Business: Good or Bad? Free-enterprise system – businesses that are owned by private citizens. Main Idea: companies compete to win customers through making the best product at a lower price. A)Trusts and monopolies often put an end to competition

21. B) Arguments for Competition Without Competition 1) There was no reason for companies to keep low prices or improve products. 2) Hard for new companies to start up or compete with trusts 3) Many workers were treated badly by large corporations. 4) People often worried that rich men would raise prices and influence to buy off elected officials.

22. “ Liberty and monopoly cannot live together ”. What does this mean?

23. Arguments for Trusts 1)Competition ruins business 2)Competition puts people out of work 3)Large corporations made goods cheaply and so helped the customer Government reaction 1)Very little intervention 2)Corporations side stepped many laws passed by other governments

24. Arguments for Trusts 3) 1890 ’ s: Sherman Antitrust Act was passed to ban the formation of trusts and monopolies 4) Unfortunately, the Sherman Antitrust Act was too weak to be effective.

25. Agenda Thursday, November 29, 2012 DO NOW: Field Trip Money Field Trip Money CLASS ACTIVITY: Cartoon Analysis Age of Invention Packet HOMEWORK: Age of Invention Homework

26. Observations: Standard Oil Trust Develop a list of 3 main points that the cartoonist was making about the Standard Oil Company and Big Business