Chapter 15: The Second Industrial Revolution Section 2: The Rise of Big Business

Chapter 15: The Second Industrial Revolution

Section 2: The Rise of Big Business

A New Capitalist Spirit

• What is capitalism, you might ask?

Well…• Private business and business owners run

most industries.• Competition determines how much goods

cost and workers are paid.


• In the late 1800s, entrepreneurs (risk-taking business people) set out to gain economic wealth by building industries that took advantage of all of the new technologies being discovered.• Such as…??


• Business leaders shared an American ideal of self-reliant individualism…

…they attributed their success to their work ethic.

• They believed that you can improve your social and financial status through hard work and self-motivation.

A New Spirit of Capitalism

• They believed in laissez-faire capitalism.• “to let people do as they choose”

• This theory calls for NO government intervention in the economy.

A New Spirit of Capitalism

• Free enterprise• The economy would prosper if businesses

were left free from government regulation and allowed to compete in a free market.

Critics Respond

• Some argued that the rapid industrialization of factory life was harmful and unjust to the working class.

Critics Respond

• Karl Marx, a German philosopher, proposed a political system to remove the inequalities of wealth.• He developed a political

theory, called Marxism, that

called for the overthrow of the

capitalist economic system.

Critics Respond

• Marx believed that capitalism allowed those who owned the means of production to take advantage of the workers.

• Marx advocated the political theory of communism.

Critics Respond

• So, what exactly is communism?• Individual ownership is not allowed.• Everyone has equal wealth and status.

• Marx’s version of communism involved a revolution in which the working class overthrew the owners of production.

Questions questions questions…

• Can anyone guess how many communist countries exist in the world today?• 5

• Can you name them?• China, Cuba, Laos, North Korea, and

Vietnam



Social Darwinism

• American business leaders responded to Marx’s ideas with the theory of Social Darwinism.• This theory uses Charles Darwin’s

biological theory of natural selection and evolution and applies it to society.

Social Darwinism

• How?• Social Darwinists argued that the “fittest”

people, businesses, or nations should and would rise to positions of wealth and power, and the “unfit” would fail.

The Corporation

• At the end of the Civil War, most businesses were small companies owned by individuals, families, or two or more partners.

• These small organizations were unable to manage the new giant industries such as oil, railroads, or steel.

The Corporation

• Business leaders then formed corporations.• What is a corporation?

• a company that raises money by selling shares of stock (certificates of ownership in the company) to stockholders

• stockholders receive a percentage of the corporation’s profits – known as dividends

Advantages of a Corporation

1. raise large sums of money by selling stock to many people

2. limited liability – stockholders are not responsible for a corporation’s debt

3. stability – not dependent on aspecific owner for its existence

Also…owning stock became another

source of income for the entrepreneurs.

The Corporation

• In the late 1800s, where competition was fierce, prices and profits tended to rise and fall rapidly.

• Some corporations responded by forming trusts.

(not as good as they sound)

Trusts

• What is a trust?• an arrangement grouping several

companies under one board of directors in order to eliminate competition and to regulate production

• This might sound good for the business, but most trusts were created to later form…

…a monopoly.

• A monopoly occurs when a trust or company gains exclusive control on an entire industry.

• The game Monopoly is named that for a reason…

Monopoly

• The object of the game is to get

sets of same-colored properties.

• Once you do that, you can make the

most money if someone lands on any one of those spaces.

Monopoly

• If one company controls every aspect of an industry, then they can charge whatever they want for their product or service, because buyers have no choice but to pay it – they have no where else to go.

Trust Busters

• The public demanded action against trusts however, and the Government passed the Sherman Antitrust Act in 1890.

More fun economic terms for ya…

• Corporations could expand, using horizontal integration.• when a corporation gains control of other

companies that produce the same product

• For example…

Small Pudding Factories

Miss Zielinski’s

Pudding Factory

Horizontal Integration

…and another…

• In order to reduce costs, many large corporations used vertical integration.• when a corporation acquires companies

that provide the materials and services upon which an enterprise depends

• Meaning…

Vertical Integration

Miss Zielinski’s

Pudding Factory

Dairy Farm

Trucking Company

Sugar Refinery

Packaging Company



Robber Barons or Captains of Industry?• Robber Barons:

Business leaders who became successful by taking advantage of the public, laws, and workers.

• Barons drove competitors out of the market in order to create as much profits as possible.

Robber Barons or Captains of Industry?

• However, they were also considered Captains of Industry.

• These same men created new factories and industry for the country.

• Business leaders created jobs, new consumer goods for the public, and gave money to fund libraries, museums, and universities.

I am Captain Industry!!

Robber Barons or Captains of Industry?

• Which characterization is true?

• Like many things in history, there is no easy answer.

The Railroad Giants

• Andrew Carnegie and John D. Rockefeller profited greatly from technological innovations in the steel and oil-refining industries.

• Other entrepreneurs built large fortunes by capitalizing on the booming railroad industry.

Cornelius Vanderbilt

• Vanderbilt made his profits investing in railroads.

• He purchased many small lines and then combined them to make direct routes.

• He provided a more efficient service.• At the time of his death, he controlled

4,500 miles of railroad track.

George Westinghouse

• He established the

Westinghouse Air Brake

Company to capitalize on his invention – the compressed air brake.• This invention allowed trains to haul more

cars and move at greater speeds.

George Pullman

• He designed and manufactured railroad cars that made long-distance rail travel more comfortable.

• His passenger cars

were luxurious for

wealthy passengers.

Pullman, Illinois

• Pullman built a planned community next to his factory for his employees.

• Pullman provided for the employees (good), but strictly controlled daily life (not good).



Mass Marketing (aka…buy our stuff!)

• Marketing – it’s what’s on the outside that counts!• Brand names and packaging played

important roles in promoting goods.

“Standard Oil sets the Standard!”

Advertising• Magazines, newspapers, and roadside

billboards were used.

…for all of your butter churning needs.

YOU should BUY Bob’s Butter Churns…

Consumers

• Many new products became available through newspapers, mail-order publications, and special catalogs.• Montgomery Ward• Sears, Roebuck, and Co.

The Department Store

• Lots of different types of things all in one place?!? It’s too good to be true!

• Department stores bought items in bulk, and were then able to offer lower prices to consumers.• They had a wide variety of items all under one roof

for convenient one-stop shopping.

Chain Stores

• Chain stores had branches in several cities.• The most famous was Frank W.

Woolworth, who owned 59 stores by 1900.• He could offer low prices by buying goods

in large quantities.

Hmmmmmm...

• How did mass marketing contribute to business growth?

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Chapter 15: The Second Industrial Revolution Section 2: The Rise of Big Business