Robber Barons or Captains of Industry?

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Robber Barons or Captains of Industry?

• 11.2.5 Discuss corporate mergers that produced
  trusts and cartels and the economic and political
  policies of industrial leaders.

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Homework

• Read and take STAR Notes on sections 14.1 14.2
  to prepare for an activity Tuesday.
• Make sure to summarize the section at the bottom
  of your notes.

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HOT ROC

• Do billionaires have a responsibility to help the
  poor?
• Do millionaires?
• HW Check
• Organizational Categories for your project.
• Project Reminder
• Essay outline with a thesis statement for the
  project is due on Friday

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Who are the billionaires (Robber Barons) of today?
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Who are the billionaires?
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Forbes 2011
Rank Name Worth Age Source Country
1 Carlos Slim Helu family 74 B 71 telecom Mexico
2 Bill Gates 56 B 55 Microsoft USA
3 Warren Buffett 50 B 81 Berkshire Hathaway USA
4 Bernard Arnault 41 B 62 LVMH France
5 Larry Ellison 39.5 B 67 Oracle USA
6 Lakshmi Mittal 31.1 B 61 Steel India
7 Amancio Ortega 31 B 75 Zara Spain
8 Eike Batista 30 B 54 mining, oil Brazil
9 Mukesh Ambani 27 B 54 petrochemicals, oil gas India
10 Christy Walton family 26.5 B 56 Walmart USA
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3 New Vocabulary words

• Monopoly A company that completely dominates a
  particular industry
• Trust a set of companies managed by a small
  group known as trustees, who can prevent
  companies in the trust from competing with each
  other
• Corporation A company recognized by law to exist
  independently from its owners, with the ability
  to own property, borrow money, sue or be sued

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Corporate Monopolies

• Horizontal and Vertical Integration
• Textbook, page 171

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Andrew Carnegie75 Billion

• Andrew Carnegie came from Scotland with his
  parents in 1848.
• In 1861, at the age of 26, he started up the
  Freedom Iron Company, and used the new Bessemer
  process for making steel
• He formed all of his companies into the Carnegie
  Steel Company in 1899, which controlled raw
  materials, manufacturing, storage, and
  distribution for steel.
• Vertical Integration

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John D. Rockefeller192 Billion

• Born in 1839
• His working life started as a bookkeeper
• He established one of the first oil refineries
• 1870With partners, forms a business trust
  Standard Oil
• At its peak, controls 90 of all oil companies
• Horizontal Integration

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Big Business and the Government POV

• Leave Business Alone

• Limit Business

• Laissez-faire
• Social Darwinism

• Sherman Anti-Trust Act
• 1911--Splits Rockefellers Standard Oil into 34
  companies
• (A U.S. Court of Appeals found in 2001 that
  Microsoft violated the Sherman Act antitrust
  law.)

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The Gilded Age1870s-1900

• Where was the most money made?
• Was this positive or negative for America?

1870 1900
Steel Production 77,000 tons 11 million tons
Oil production 5 million barrels 63 million barrels
Railroad track 53,000 miles 200,000 miles
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Simulation

• Business A
• 3 volunteers (owner)
• Business B
• 5 volunteers (shareholders)
• Step 1 (August)
• Business A, set the price for t-shirts
• Step 2 (September)
• Business B opens up a store across the street,
  set the price for t-shirts at store B
• Class Which store will you shop at?

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Simulation

• Step 3 (October)
• Business A, respond to the t-shirt price of
  Business B
• Class Which store will you shop at?
• Step 4 (November)
• Business B, respond to the t-shirt price of
  Business A
• Class Which store will you shop at?
• Step 5 (December)
• Repeat process
• Class Which store will you shop at?

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• Business Person A
• You own a successful t-shirt shop on Castro
  Street. You are just one shop but youve managed
  to stay in business because you are the only
  t-shirt shop on Castro Street. Recently, a
  t-shirt shop opened up across the street and its
  part of the national chain, Shirt Me Up, that has
  stores all over the nation. You are worried
  about losing some of your customers to them but
  you are willing to cut prices and offer sales if
  it will keep you in business.
• Basics t-shirts cost 6 to manufacture and you
  currently sell them for 12.
• You need to make at least a 2 profit on each
  t-shirt in order cover the cost of your rent and
  pay your employees.
• If you lose money for more than a month then you
  will not be able to pay for your rent.
• Task Respond to the sales ideas from Person B
  in competitive ways in order to stay open.

• Business Person B
• You are a local manager for the national t-shirt
  company, Shirt Me Up, that has stores all over
  the nation. You are currently managing the new
  store that just opened up on Castro Street.
  There is a t-shirt shop already on Castro Street,
  but you are pretty confident you can drive them
  out of business since you can draw on money from
  the national office.
• Basics t-shirts cost 6 to manufacture and your
  competitor currently sells them for 12. They
  need to make at least 2 profit on each t-shirt
  to cover the cost of rent and employees. This is
  true for you also, but you can lose money for
  several months in a row because your national
  office will cover your costs.
• Task Start the competition by telling the
  shoppers in your group that you are willing to
  offer t-shirts for 10 and ask if they will shop
  at your store instead. No matter what your
  competitor does, respond by offering your
  t-shirts for less money. It doesnt matter if
  you lose money, because eventually theyll go
  bankrupt and then you wont have to compete with
  them anymore. When they go out of business,
  raise your prices to 20 a t-shirt.

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What would Rockefeller say

• Monopolies are good because we can produce goods
  at a lower cost to consumers!
• Now everyone can have cheap oil and gas.

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What would the Populists (poor farmers) say?

• Monopolies are bad because they control the whole
  industry and there is no competition over prices.
  
• We have to pay high prices to ship our wheat on
  the trains!
• And these companies pay low wages to their
  workers!

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