BIG BUSINESS EMERGES

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CHAPTER 6 SECTION 3 BIG BUSINESS EMERGES
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Objective

• To understand Social Darwinism, the rise of big
  business, and the governments attempts to
  regulate big business

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BILL GATES- Founder Microsoft Most successful
company in the history of the world.
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Costing 97 million It took seven years to build
the 40,000-square-foot mansion on a wooded
five-acre compound in the moneyed Seattle suburb
of Medina
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Carnegies Innovations

• Andrew Carnegie was an immigrant who received
  employment at the Pennsylvania Railroad.
• Carnegie became wealthy by investing in the
  stock market.
• In 1873 Carnegie opened a steel factory.
• Carnegies steel factories by 1899 were
  producing more steel than the entire nation of
  Great Britain.

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• Carnegies residence

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Vanderbilts on 52nd

• Homes from millionaires row

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William Vanderbilt
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Vanderbilt MansionHyde Park, NY
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• Biltmore Estate Summer home of the Vanderbilt
  family

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Library
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Winery
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Gardens
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Carnegies Management Techniques

• Carnegies success was due to his management
  techniques, that were borrowed by other
  companies.
• 1. cut production costs- making goods cheaper.
• latest production techniques and machines.
• 2. Hired best people to improve the quality of
  his steel.

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• Maintained detailed accounting methods to track
  the production costs of each process and item.
• Forced company executives to continue finding new
  ways to cut production costs.

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Business Strategies

• Carnegie also wanted to create a monopoly of the
  steel industry.
• Carnegie created a monopoly through the process
  of vertical integration.

• buying out all his suppliers
• control of every stage of manufacturing process

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• Carnegie also attempted to create a monopoly
  through horizontal integration.
• Buy out all competitors.

• When Carnegie sold his company in 1901 Carnegie
  Steel produced 80 of nations steel.

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Andrew Carnegie
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Social Darwinism and Business

• Carnegie explained his success through hard work
  and innovation.
• Social philosophers explained Carnegies success
  through Social Darwinism.

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Principles of Social Darwinism

• Charles Darwins theories of evolution and
  natural selection.

• Through natural selection only strong would
  reproduce and survive.

• BUSSINESS- only strong businesses would profit in
  free market and the weak would go under or be
  bought out.

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The Popularity of Social Darwinism

• Social Darwinism was accepted widely.

• 4000 new millionaires
• SUCCESS- Protestant work ethic, wealth was gods
  grace, you earned it through hard work- if you
  were poor your lazy
• Horatio Alger- Popular literature- rags-to
  riches stories- no shame in being poor as long as
  you work hard you will become successful

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Fewer Control More

• key to capitalism/free market competition
• Most economists and businessmen argued for
  support of laissez faire principles, but
  secretly undermined competition.

• Businessmen not only wanted to restrict
  competition but wanted to eliminate competition.

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Growth and Consolidation

• oligopoly is a market dominated by only a few
  sellers.
• Oligopolies were created by companies producing
  similar products joining together or merging.
• Small companies that did not compete well with
  larger companies often voluntarily accepted a
  merger.

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• Fair competition was further restrained by the
  formation of monopolies.

• monopoly is company that controls 90 or more of
  the market of a particular product.
• has complete control of a industrys production,
  quality, wages, and prices.

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• monopolies were formed by holding companies.
• Holding companies- corporation that existed only
  to buy stock of industrial competitors.
• J.P. Morgan bought out Carnegie Steel 500
  million and resulting monopolistic company was
  known as United States Steel Corporation.

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• Some monopolies were formed by trusts.

• Trust- agreement by stockholders to transfer
  stock over to group of trustees who ran the
  separate companies as one giant corporation.
• John D. Rockefellers Standard Oil Company
  monopolized petroleum industry through trusts.

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Rockefeller and the Robber Barons

• Rockefeller used ruthless methods to monopolize
  the petroleum industry.

• Employees paid low wages
• Competitors driven out of business as
  Rockefeller would sell oil below the cost of
  production.
• Once competitors were driven out of business
  Rockefeller would hike prices to absurd levels to
  recover his losses.
• Railroads were forced to give Standard Oil
  rebates

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John D. Rockefeller
Owner of Standard Oil
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J.P. Morgan
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• robber barons-Industrialists like Carnegie, JP
  Morgan, and Rockefeller who used ruthless tactics
  to created monopolies

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Philanthropists- donates money to charity

• Industrialists defended fortunes through
  charitable donation and philanthropy.
• Rockefeller established University of Chicago
• Carnegie Foundation established Carnegie Hall and
  3000 libraries by time he died in 1919, gave away
  350,695,653

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Sherman Antitrust Act

• In 1890 Congress ratified the Sherman Antitrust
  Act.

• any attempt to restrict competition in the market
  was illegal.

• Enforcement of the Sherman Antitrust Act was
  difficult.

• Companies that felt pressure could dissolve the
  trust and form one company.
• Supreme Court did not support the law.

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Business Boom Bypasses the South

• The industrialization that created economic
  growth and controversy were concentrated in the
  Northeast United States.
• The South was trying to recover from the
  physical destruction of the Civil War.
• Economic growth in the South was retarded by the
  lack of capital and large cities.

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Economic Causes

• Banks were unwilling to submit loans to Southern
  business owners as they were considered poor
  risks.
• 90 of Southern railroads were owned by
  Northerners
• Southern farmers were charged exorbitant rates
  by the Northern owned railroads
• High tariffs injured Southerners who depended on
  imported raw materials and manufactured goods.

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Social Causes

• The best technical workers and skilled craftsman
  concentrated in the North for employment.