The Rise of Big Business

I. Social Darwinism

II. Social Darwinism in Action

III. Robber Baron or Captain of Industry?

Social Darwinism

• Definition: society should do as little as possible to interfere with business

• Government policy: laissez-fair – no government regulations in economics

Social Darwinsim

• Businesses Boom because:– Larger pools of capital: entrepreneurs had to invest large sums

of own money or borrow from investors (sell stock)– Wider geographic span: expansion of railroads made it possible

for businesses to have offices in many regions– Broader range of operations: businesses performed all stages of

production– Revised role of ownership: owners could not oversee all areas of

business & hired professional managers who had no stake in the business to run it

– New methods of management: accounting, specialized departments

Social Darwinism in Action

• As big business flourished, only a few companies could compete in a given industry creating an oligopoly.

• Monopoly: exclusive control of an industry

• Cartel: loose association of businesses that make the same product; agree to limit supply of their products to keep prices high

Robber Baron

• Built their fortunes by stealing from public

• Drained country of natural resources

• Persuaded public officials to interpret laws in their favor

Captain of Industry

• Served nation in a positive way

• Increased supply of goods

• Raised productivity

• Expanded markets thus creating jobs

• Helped establish museums, libraries, universities, etc.

Robber Baron or Captain of Industry?

• John D. Rockefeller – formed Standard Oil Co.– Horizontal Consolidation: process of bringing

together many firms in the same business to form one large company

• Controlled all oil prices because he owned all refineries

– Standard Oil Co.: America’s 1st oil trust in 1880s

– Gave over $500 million to establish & improve charities & institutions he believed would help humanity

Robber Baron orCaptain of Industry?

• Andrew Carnegie – Carnegie Steel Co.– Established some of 1st steel monopolies in America in

1870s• Vertical consolidation: process of gaining control of many

different businesses that make up all phases of a product’s development

• Economies of Scale: phenomenon that as production increases, the cost of each item produced is often lowered

– Sold company to JP Morgan in 1901 for $500 million– Preached “Gospel of Wealth”– Gave over $350 million to free public libraries, supported

artistic & research institutes & set up fund to study how to abolish war.