An Age of Big Business Chapter 19 Section 3. The Corporation By becoming a corporation – a company...
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Transcript of An Age of Big Business Chapter 19 Section 3. The Corporation By becoming a corporation – a company...
An Age of Big Business
Chapter 19Section 3
The The CorporationCorporation
• By becoming a corporation – a company that sells shares or stock of its business to the public – a company can raise capital, or money.
• Railroads were the first businesses to form corporations.
• The forming of corporations helped America’s industrial expansion after the Civil War.
• Businesses borrowed money from banks to start a company causing the banks to make a profit on the loans.
The Oil Business• John D. Rockefeller made his fortune from oil.• Rockefeller set up a plant to process oil – an oil
refinery – in Cleveland, Ohio.• The Standard Oil Company of Ohio was organized in
1870.• Rockefeller used horizontal integration – the
combining of competing firms into one corporation - to build his empire.
• The Standard Oil Trust:– Rockefeller lowered his prices, which drove his
competition out of business.– In 1882 Rockefeller formed a trust – a group of
companies manages by the same board of directors.• By creating this trust, Rockefeller created a
monopoly – total control by a single producer – of the oil industry.
• Andrew Carnegie, John D. Rockefeller and other industrial millionaires became interested in philanthropy – the use of money to benefit the community.
The Steel Business
• Steel is the ideal material for railroad tracks, bridges, and many other products.
• Two new methods of making steel were developed.
• As a result of these new methods, mills could produce steel in great quantities at affordable prices.
• Carnegie - Carnegie Hall in New York City and more than 2,000 libraries.• Rockefeller – University of Chicago and New York’s Rockefeller Institute for Medical Research.
Andrew Carnegie• In 1865 Carnegie invested in the iron industry.• In 1890 Carnegie had dominated the steel industry
through – vertical integration – acquiring companies that provided the equipment and services he needed.
• Carnegie bought iron and coal mines, warehouses, ships and railroads.
• By doing this Carnegie had gained control over all parts of the business of making and selling steel.
• In 1900 Carnegie combined all of his holdings = producer of 1/3 of the nation’s steel.
• In 1901 Carnegie sold his steel company to J.P. Morgan for $450 million.
• Morgan combined Carnegie’s business with others to form the first billion dollar company – the United States Steel Corporation.
Rockefeller Plaza, New York City
Carnegie Hall, New York City
Corporations Grow Larger
• Corporate mergers – the combining of companies – were made easier by states passing laws.
• Mergers made the few people, like Rockefeller and Morgan, who owned giant corporations, more powerful.
• By 1900 1/3 of America’s manufacturing was controlled by 1% of the country’s corporations.
Opposition to Big Business
• Problem? – Big businesses claimed that monopolies and
trusts benefited society because they reduced competition and brought greater economic stability.
– Opposers of big business argued that the lack of competition hurt consumers because without competition corporations had no reason to keep their prices low or improve their goods and services.
• During the 1880’s 15 states passed laws that restricted business combinations.
• Congress passed the Sherman Antitrust Act in 1890.– This act sought to “protect trade and commerce
against unlawful restraint and monopoly.”