The Big Business Boom Chapter 6 (1-3) Chapter 6 (1-3)

The Big Business BoomThe Big Business Boom

Chapter 6 (1-3)Chapter 6 (1-3)

RR: The 1RR: The 1stst Big Business Big Business

• Pre-CW railroads

• CW Congress wants to expand RRs– Why? TCRR would strengthen the economic

infrastructure– How? Hire 2 companies to build it

• Union Pacific (starts in Omaha)• Central Pacific (starts in Sacramento)

– Who? Most workers are immigrants• Union Pac used Irish – plains @ 6 miles / day• Central Pac used Chinese – thru Sierra Nevada

TCRR CompletedTCRR Completed

• Took 7 years (1862-1869)

• The 2 crews met at Promontory Summit

• Golden spike, telegraph the news

• Impact– Standard gauges– Steel tracks– Time zones

RR BenefitsRR Benefits

• Faster & more practical transportation of goods

• Lower costs of production

• Creation of national markets

• Model for big business

• Stimulation of other industries

The railroads showed the US just how massive business could get and how much money could be had by just a few individuals.

There is a group of these guys, industrialists from this era, that amassed huge fortunes through various means.

They are known by 2 different names:• Robber Barons• Captains of Industry

(*Please note that these 2 names refer to the same group of people.)

Term #1:Term #1: Robber Baron Robber Baron

• German nobles in 1200s that controlled the Rhine River

• Used strategic positioning to take advantage of passersby– Demanded tolls from everyone– Ships must pay or they can’t pass– Got RICH simply because of their strategic

location

Term #1:Term #1: Robber Baron Robber Baron

• In the Gilded Age, this was a negative term for rich industrialists.– Built their fortunes by stealing from the public

(strategic locations in business world)– Drained natural resources– Drove competitors out of business– Paid workers minimally– Forced employees to work in dangerous &

unhealthy conditions

Term #2:Term #2: Captain of Industry Captain of Industry

• This was a positive term for rich industrialists.– Captains

• Leading us into a new era of commerce• Increasing the supply of goods by building factories• Raising productivity• Expanding markets• Creating jobs (raising standard of living for many)

– Philanthropists• $billions in donations – museums, libraries, colleges

John D. RockefellerJohn D. Rockefeller

• Formed Standard Oil Company– Controlled up to 91% of oil industry

• Richest man ever

• Numerous enormous donations– University of Chicago

Andrew Carnegie’s “Gospel”Andrew Carnegie’s “Gospel”

• Made money in steel industry

• “Gospel of Wealth”– Businessmen should accumulate as much

wealth as they can & redistribute to society• (1) make money• (2) give it all away strategically

– Flip side: Keep money away from ill-equipped people & organizations

• To benefit society as a whole

Social DarwinismSocial Darwinism

• Applied Darwin’s theory of natural selection to the business & social sectors– “Survival of the fittest”– Natural laws would dictate the success of

those who deserve it• JUST DON’T INTERFERE!

• The government would largely stay out of business’s way during this time.

Business on a Larger ScaleBusiness on a Larger Scale

• Therefore, business grew.– No longer cottage industries (mom/pop shops)

– Huge amt of capital needed– Difficult to enter oligopolies– Nationwide businesses because of

transportation & communication advances

• New form of management– Not knowing all employees or aspects of

operation– “Professional manager”

• 2 distinct ways to create monopolies– Vertical consolidation

• Andrew Carnegie’s steel company controlled every aspect of the supply chain (production to delivery).

– Horizontal consolidation• John Rockefeller acquired all but 10% of the oil

industry; if you wanted oil, you had to go thru him.

• How did Rockefeller do it?– He often dropped prices to below cost to drive

out competitors.– When the government cracked down on

monopolies, they formed trusts instead.• Merging companies under a board of trustees that

acts as 1 accord but are technically not 1.

– Gov’t response = Sherman Antitrust Act• Enacted 1890, but poorly enforced; ineffective

• How did Rockefeller do it?– He often dropped prices to below cost to drive

out competitors.– When the government cracked down on

monopolies, they formed trusts instead.• Merging companies under a board of trustees that

acts as 1 accord but are technically not 1.

– Gov’t response = Sherman Antitrust Act• Enacted 1890, but poorly enforced; ineffective

Great!!

We have all this booming new business!

But who do we have to do the actual work?

The Growing Work ForceThe Growing Work Force

• During CW, laborers were scarce.

• Laws passed to encourage immigration– 14 million immigrants came by 1900.

• 10 million Americans also migrated from rural to urban areas. Why?– Farmers were poor– Big drought (even poorer)– Too much foreign competition (poorer still)

What was work like?What was work like?

• Law = 10 hrs/day (rarely enforced)

• In practice = 12 hrs/day, 6 days/week

• Wage by productivity, not hour– Called piecework– Location: sweatshop

• Division of labor– Frederick Winslow Taylor’s studies– Joyless, boring, repetitive– Dispensable workers

What was work like?What was work like?

• Ruled by the clock• Strict rules – no tardiness, no talking

• Very loud, dark, dirty, hot, poorly ventilated, w/ frequent fires & accidents

• No workers’ comp or insurance– Many young children had to work

• No help provided– Against “Social Darwinism”– Would only encourage idleness