IndustrializationThe Rise of American Big Business

Industrialization

Urbanization

New Tools of IndustrializationBefore the Civil War, most American

businesses were owned by a single person or a partnership

After the Civil War, industry (mills, factories, railroads, mines) now needed more capital (money) for investment than one person or a few partners could raise.

What’s the solution???

CORPORATIONSPurposeTo raise capital (money $$) It is a business in which

many investors own shares called stocks

In exchange for their investment, each stockholder receives a dividend, or part of the corporation’s profits

This limits investor losses If a corporation fails,

each investor only loses his or her investment

$$$

Limited Liability

Wall Street $$

MONOPOLYPurpose

Company or small group of companies that has complete control over a particular industry

A monopoly often allowed a company to raise prices to almost any level it desired

OUTCOMES: Competitors forced out of

businessGovernment tried to control

them

What do you see?

What do you think the cartoon is saying about these men?

TRUSTSPurposeTo get around

government regulation of monopolies, companies combined their management into trusts

Shareholders in the corporations received dividends from the trust but lost any say in its operation

A way to get around laws regulating monopolies

Standard Oil Trust

Who were the industrial leaders?J.P. Morgan –

Finance (Investment Banker)

Andrew Carnegie – Steel

Who were the industrial leaders?

John D. Rockefeller – Oil

Cornelius Vanderbilt - Railroads

How did they get so powerful?Maximized profits

Controlled entire industries Got rid of competitorsControlled prices

Minimized costsKept worker pay very low with long hoursControlled suppliers and transportation costs

(they owned all parts of their industry)Had no government interference!

LAISSEZ-FAIRE

Government should not interfere with business

FREE-ENTERPRISE SYSTEM – private individuals make the economic decisions

Government is hands-off

SOCIAL DARWINISMBased on Charles Darwin's theory of

evolutionSocial Darwinists thought life was a

struggle for the “survival of the fittest”Free-enterprise competition (laissez-

faire) would lead to the strongest businesses surviving – that’s good.

Government regulation would let the weak survive, so it was bad.

Government programs to aid the poor or workers would let the weak survive, so they were bad.

How laissez-faire was it really?Govt Policy towards business – Was it really “laissez-faire”?Land grants to railroadsNo limits on immigration (at first)

Supported business owners during strikes

ROBBER BARONS?Those who got rich at the expense of the

poor and the working classFancy lifestyles of the rich – mansions,

show off their wealth

Carnegie’s Mansion in NYC

Vanderbilt Mansion, NY

Rockefeller Mansion

or Philanthropists?But the Robber Barons also used their

money to help society (philanthropy): Can you think of places/things with the

names Rockefeller, Carnegie, Vanderbilt?

1st try: Sherman Anti-Trust Act (1890)

Tried to prohibit monopolies and trusts. It prevented any business structure that “restrained trade”

Problem: It was too vague. Corporations got around the act by forming other types of companies.

2nd try: Clayton Anti-Trust Act (1914)

“Fixed” the Sherman Anti-Trust Act This one worked.

Gov’t Regulates Monopolies