Monopolies,AND

Trusts

A Monopoly: What Is It?

• A single seller of a product (good or service).–Monos: single, alone– Polo: to sell

• Lack of Competition means– Higher Prices– Inferior Goods and Services– Less Innovation

• Competition is the rivalry of two or more parties over something.

Here’s an analogy: There are two runners in a race, and both are competing to win the race and get the prize. The two runners run as fast as they can competing for that prize. They train for months; they invest in good running shoes and aerodynamic clothing; they pace themselves with precision during the race—all these efforts to beat the other runner and win the prize.

• Now think of two competing companies as those runners. They are competing for YOUR money! The prize the companies get for “winning” is a greater share of the market (more money and business). Those two companies are going to do everything they can to win and that includes making better products and selling them at a lower price.

Trusts

• Intended to monopolize business• Standard Oil Trust: first well-known trust

• a combination of businesses whose intent is to diminish competition.

• Companies assign their stock to a board of trustees, who combine them into a new organization. The trustees run the organization, paying themselves dividends on profits

Trusts (Monopolies)

• Trust Tactics:–Buy outs–Price undercuts–Long-term customer contracts–Forced customer purchases– Intimidation and violence

• Famous Trusts:–Standard Oil, US Steel, American Tobacco

Company

John D. Rockefeller

• John D. Rockefeller became the richest man in the world in the oil business.

• He created Standard Oil Company.

• Oil began being used in all types of machines, like cars

• .

Industrialization led to a demand for oil for lubrication and kerosene lighting

The oil industry during the Gilded Age was dominated

John D. Rockefeller’s Standard Oil Company

Rockefeller used ruthless tactics to buy out

competing companies

Standard Oil lowered costs and improved the quality

of its oil products

By 1879, Standard Oil sold 90% of the oil in America

John D. Rockefeller (2.51)

Rockefeller took advantage of his

workers and used his fortune to influence the national gov’t…

…but Rockefeller gave away $500 million

to charities, created the Rockefeller

Foundation, and founded the

University of Chicago

Andrew Carnegie

• Andrew Carnegie became a millionaire in the steel business by putting all his competitors out of business.

• He created U.S. Steel in Pittsburg.

Steel led to skyscrapers, longer bridges, stronger railroads, and heavier machinery

The iron and steel industries were dominated by

Andrew Carnegie

Carnegie best represented the American dream by

rising from poor a immigrant to richest man in the world

Carnegie converted his mills to the Bessemer process and

made the highest quality steel at the lowest price

Carnegie Steel Company produced more steel than

all the steel factories in Great Britain combined

Cornelius Vanderbilt

• began investing in railroads during the Civil War.

• By 1872, he owned the New York Central Railroad.

• At the height of his career he controlled 4,500 miles of track.

• He supported few charities, but gave money to what would come to be Vanderbilt University.

• He died leaving an estate of $100 million.