Big Business

Factors Supporting Industrialization:• Western Mining• Immigration• Government subsidies and tax concession to railroad• Advances in communication• Corporation Charters• Laissez faire attitude of government• Bessemer process• High tariffs • Entrepreneurs• Vertical and horizontal integration• National markets• Civil War profits and foreign investment

Industrialism and Big Business

• Industrial expansion changed American after the Civil War.– HUGE businesses formed– Railroads, Oil and Steel

• Industrialists (owners) bought up small companies and merged them into large corporations.

• These business owners became known as Robber Barons.

Captains of Industry or Robber Barons?

• Wealthy industrialists who used ruthless business tactics to drive competitors out and get rich. – Paid low wages– Did not allow strikes– Secret agreements

• Big 4 Robber Barons:– Vanderbilt– Andrew Carnegie– John D. Rockefeller– J.P. Morgan

Robber Baron #1: Vanderbilt

• Remember the transcontinental railroad?• Railroads– Lowered prices to drive people out of business– …then raised prices!

Robber Baron #2: Carnegie• Andrew Carnegie was a poor Scottish

Immigrant who struck it rich!• Forms U.S. Steel Company– New machines made products more cheaply• Bessemer Process – mass production of steel

– Horizontal and Vertical Integration• Buy out all of your competition

Companies like Carnegie Steel used vertical integration

to buy companies in order to gain materials needed to make or deliver their products

Companies like Standard Oil used horizontal integration to buy similar companies to reduce competition

Gospel of Wealth

• Andrew Carnegie wanted to give back to the people and wrote the “Gospel of Wealth”– It is the duty of rich people to give away their

wealth– Gave away 90% of his money to the poor.• Set up schools, libraries, art centers.

Robber Baron #3: Rockefeller

• Standard Oil Company– Unified many oil refineries in Cleveland – Gained control of 90% of the industry

• How did he do it?

Rockefeller’s Riches

• Created Trusts-Group of people who ran separate companies in one large corporation

• Low wages for workers• Low prices drove competitors

out of business raise prices

Oil • 1859 Edwin Drake invented the oil well. • 1859 produced 2,000 barrels of oil a year• By 1900 produced 64 million barrels of oil a

year. • “Black Gold”

• By 1880s US had surpassed Britain economically

Robber Baron #4: Morgan• J.P. Morgan• Investment Banking– Large corporations needed money to finance their

growth. – “Holding companies” would buy up stock of

other businesses to get their profits

Industrialists like Vanderbilt, Carnegie, Rockefeller changed the way businesses were organized

Businesses hired professional managers to oversee employees, improve efficiency, and manage finances

Corporations became a more common business structure

Corporations used boards of trustees

(“trusts”) to manage the company…

…and holding companies to manage other

subsidiary companies

Board of Trustees

Company Manager

Employees Employees Employees Employees

Holding Company

Company A

Company D

Company E

Company B

Company F

Company C

Company G

Company H

Corporations used mergers to increase profits

Monopolies!• Robber Barons created

monopolies.– Rockefeller was criticized for

being a monopolist.• Monopoly - Corporation

that is so powerful it can block competition.

• What are the advantages of being a monopoly?– Total Control!!– Set prices!!

Differences in Society• The Robber Barons were becoming VERY

wealthy. • But, most people worked in mills and factories.• To justify the difference between the rich and

poor, they turned to...

VS

Darwin• Darwin's Theory of Evolution - “Survival of

the Fittest”• Social Darwinism– Whoever got rich deserved it– Poor people are lazy and undeserving– Wanted “laissez faire” government

Monopolists justified their wealth in a variety of ways

The “Gospel of Wealth” argued that it is God's will

for some men to gain great wealth so they could serve the public

Social Darwinism taught that natural

competition weeds out the weak and allows the strong to survive

The government used laissez faire policies

toward big business…

…the lack of regulation allowed businesses to become very powerful

and exploitive

Government Position

• Usually supported businesses– Protective tariff to help business grow and

develop– Gave money and land to support railroad growth– Unlimited immigration• Made sure there was a cheap labor supply

Government eventually responded

• Sherman Anti-Trust Act– Tried to break up monopolies and trusts to

increase competition-out lawed monopolies-Vague and unclear-Generally unsuccessful-But does lay ground work for first attempt by gov’t to do something about monopolies and restrictions on free trade

Conclusions• America was changed by the Industrial Revolution:– The United States led the world in industry,

innovation, and wealth– Laissez-faire gov’t policies and new business

tactics led to monopolies –But the gap between the wealthy monopolists

and their poor immigrant workers grew wider

“Robber Barons” of the Gilded AgeWere the industrial capitalists of the Gilded Age “robber barons” or “captains of industry”?

Weigh their positive and negative effects

Political Cartoon Analysis

• For each cartoon answer the following questions:– What imagery is used to display power? – Who are the victims and how are they portrayed?

• Then answer this overall question: – Why do they use the octopus?

• Make sure to write the cartoon number near the answer to each question

Make sure to look at all labels in the cartoon

• Why an octopus?• What symbols are used to show power?• What is the overall message?