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1
Context• The Age of Monopolies, Trusts,
and Big Labor
• America accomplished heavy industrialization in the post-Civil War era. Spurred by the transcontinental rail network, business grew and consolidated into giant corporate trusts, especially in the oil and steel industries.
3
Experience
• When was the last time you felt that the “game was rigged”?
• Have you experienced the power of a monopoly?
• Do you trust “big business”?
4
Overview
• Efficient use of expensive machinery called for “bigness” and consolidation proved more profitable than ruinous price wars
5
• Monopoly = a firm that completely controls an industry
• Vertical integration = combining all phases of manufacturing in to one organization (Carnegie)
• Horizontal consolidation = allying with competitors to monopolize a market (Rockefeller)
• Trust = a board of directors/stockholders that coordinates companies within an industry to avoid competition
• Holding company = a corporation composed of various competing enterprises within one industry (JP Morgan’s US Steel)
6
Tycoons1. Profiteering from the Civil War gives rise to
millionaire class2. Millionaires capitalize on Transcontinental
railroad, mechanization, industrialization, & expansion of markets
3. Surplus of raw materials, cheap labor, foreign investment ENCOURAGE CAPITALISM
4. Inventions Industrialization More Inventions More
Industrialization
ALL OF THIS GIVES RISE TO TYCOONS
7
Key Inventors and Inventions
• Alexander Graham Bell = telephone• Thomas A. Edison = electric lights,
phonograph• Bessemer Process/William Kelley = process
to convert iron to steel• Kerosene lamp• Typewriter• automobile
8
The Manufacture of Iron
Manufacturing iron was a hot and strenuous process, requiring workers to spend longs hours stoking hot blast furnaces. (Library of Congress)
The Manufacture of Iron
Copyright © Houghton Mifflin Company. All rights reserved.
http://www.tiscali.co.uk/reference/encyclopaedia/hutchinson/images/c05312.jpg
Bessemer Process = process to convert iron to steel
9
Andrew Carnegie = Steel Kingpin
• Steel is King : US pouring out 1/3 of world’s steel by 1890’s
• “bootstrap” story: poor immigrant to tycoon
• Carnegie uses vertical integration with “Pittsburgh millionaires”
• Controls all means of production, eliminates middle man
• Sells to JP Morgan for 400 million
• Becomes a philanthropist
10
J P Morgan – Banker’s Banker
• Builds financial empire through railroads, banks, and holding companies
• Buys out Carnegie and enters steel business
• Uses trusts and holding companies to consolidate wealth and power
• Forms US Steel Corporation – 1st ever corporation worth more than one billion $
11
Rockefeller – Standard Oil Corp.
• Kerosene and then Automobiles drive up US oil consumption
• Rockefeller ruthlessly uses horizontal consolidation to create largest monopoly
• See “The Octopus,” 1904 - Cartoon
• 1877 controls 95% of US’s oil refineries
• Robber Baron’s Baron
12
Standard Oil MonopolyBelieving that Rockefeller's Standard Oil monopoly was exercising dangerous power, this political cartoonist depicts the trust as a greedy octopus whose sprawling tentacles already ensnare Congress, state legislatures, and the taxpayer, and are reaching for the White House. (Library of Congress)
Standard Oil Monopoly
Copyright © Houghton Mifflin Company. All rights reserved.
14
Justifications for Big Business
• Old Rich displaced by rule of the “new rich”
• Gospel of Wealth – discourages helping the poor by state
• Laissez faire = “let it be”• Justified by Social Darwinism –
survival of the fittest• Poor are poor due to lack of initiative
16
Taking on the Trusts
• Trusts and robber barons defended by 14th amendment’s due process clause
• Constitution’s “interstate commerce” clause inhibits states from controlling trusts
• Sherman Anti-Trust Act of 1890– Largely ineffective
IRONY: Used effectively against unions
17
Industry and the South• 1900: less manufacturing than before Civil
War
• South acts primarily as source of raw materials
• Northerners control stock in Southern industry, discourage industrialization
• Shift in cotton mills from NE to S in 1880’s
• Cheap labor (virtually sharecropping) brings rural white southerners to mill towns, and then traps them there