5.3The Rise of

Big Business in

America

By 1900 America was an Industrial super power

The Rise of Big Business• Technology allowed for huge factories to be built for

massive standardized items as opposed to the traditional personalized items

• Big Business dominated the economy with factories, warehouses, and distribution facilities.

• Corporations raised money by selling stocks (stockholders actually own the company) and then using that money to invest in new technologies, larger workforce, and new machines to impact efficiency

The Rise of Big Business

• Corporations had several advantages:1. Produce goods cheaply2. Cut prices to stay in operation during hard economic times.3. Negotiate rebates from the

large railroad companies.4. Spread out the financial risk to many people

• Many smaller businesses felt these larger corporations were driving them out of business.

How did this happen?• Business men learned and larger forms of

business organizations and new ways to promote their products.

–Business consolidation–Advertising and catalogs

Vertical Integration•A company buys or merges with companies that fill each need it relies on to do business

•Great at saving money because you own both the buyer and sellers

Industrial Leaders, the New Millionaires

Carnegie

Andrew Carnegie and Steel• “rags to riches” story• Scottish immigrant as a boy• 1st job = $1.20 per week• Age 33 he was worth 4 million• Opened a steel mill in Pittsburgh and then

began buying up quarries, mines, etc• By the 1890s, his company was the most

profitable industrial company in the world• 1900…Carnegie steel out produced all of

Britain• Sells company to JP Morgan for 480

million and then gives much of it away• “Gospel of Wealth”• “A man who dies rich dies disgraced”

The Growth of Railroads: Railway Mileage of the U.S. 1830 -1890

Central Pacific locomotive No. 1, the first engine to be placed in construction service on the western end of the transcontinental railroad.

1840

1850

1880

1890

50,000 miles 100,000 miles 150,000 miles

1860

1870

http://railroads.unl.edu/documents/view_document.php?id=rail.str.0252

American Heritage, October 1998.

Andrew Carnegie was one of the 40 Richest Americans in History

Andrew Carnegie

- From Explore PAHistory - http://explorepahistory.com/displayimage.php?imgId=2831

"Forty-Millionaire Carnegie in his Great Double Role. As the tight-fisted employer he reduces wages that he may play philanthropist and give away libraries, etc."

Videoizzle for my studentizzles

Horizontal Integration

• Horizontal integration – buying out your competitors.

• Occurred through competition, as one company would begin to lose market shares, they would often sell themselves to create large corporations

Horizontal IntegrationIndependent steel mills

Integrated steel company

John D. Rockefeller and Standard Oil• Oil discovered in Penn., he

decided to begin a oil refinery business

• 1870 he founded the Standard Oil Company which by 1890 controlled 90% of the oil business in the US

• Considered the richest man in the history of the world

• Worth $318 billion at death• Gave away $527 million• Philanthropist vs Robber Baron

His Parents

• Deaf, blind mute salesman• “Snake oils” for 25

bucks….2 months salary at the time

• Raped a women…left town and changed name…

• Never benefitted from his son’s wealth

• Said to be a bigomist• "I cheat my boys every

chance I get. I want to make ‘em sharp."

His Story• In spite of his father’s absences

and frequent family moves, young Rockefeller was a well-behaved, serious and studious boy.

• VERY religious guy saying “God gave me money”

• As a boy gave 6% of money to church…later it was 10%

Johnny Rock Video

Age 86…He wrote a poem about his life

“ I was early taught to work as well as play,My life has been one long, happy holiday;Full of work and full of play-I dropped the worry on the way-And God was good to me everyday.”

American Heritage, October 1998.

Rockefeller as the Richest Man in US History….BY A LOT!

Standard Oil

J.P. Morgan• The most successful banker

from the late 1800’s was John Pierpont Morgan.

• He made his fortune by buying and selling stock of large corporations.

• He bought out Andrew Carnegie in 1901 and created the largest company in America called United States Steel Company.

% of Billionaires in 1900% of Billionaires in 1900

% of Billionaires in 1918% of Billionaires in 1918

Relative Share of World Manufacturing

Relative Share of World Manufacturing

Millionaire's Row, New York City in the 1880s

The Carnegie Mansion, 5th Ave. & 91st St.The Frick Mansion, 5th Ave. & 70th St.

Mrs. Astor’s House, 5th Ave. & 65th St.The Vanderbilt Chateau, 5th Ave. & 52nd St.

- American Experience - http://www.pbs.org/wgbh/amex/carnegie/gallery/index.html

Advertising and Shopping• Advertising quickly became a

big money maker.• By 1900, retailers were

spending $90 million a year attracting new customers.

• Department stores became popular which helped make shopping more fun.

• These new stores offered a wide variety of products.

Singer Sewing Machines

“A Busy Bee Hive"

Interior of an early department store

Mail Order Catalogs

• Department stores would send out catalogs with colored pictures to people living in rural areas.

• The idea of “shopping from home” appealed to thousands of people.

• Two large mail-order retailers:1. Montgomery Ward2. Sears and Roebuck