Industrial Giants: The Kings of the “Gilded Age”.

A closer look at the wealth of the leading 19th Century Industrialists of the United States.

GNP Gross National Product Measure of goods and services a country

produces in a given year

U.S. GNP - expands 8x between 1865-1910

Why???

1 European Union 15,970,000,000,000

2 United States 15,940,000,000,000

3 China 12,610,000,000,000

4 India 4,761,000,000,000

5 Japan 4,704,000,000,000

6 Germany 3,250,000,000,000

2013 GNP

Big Business Define a corporation. An organization owned by many people but treated by law as

though it were a person.

  What are the people called who own a corporation AND what

is it that they must buy to essentially become owners of a corporation?

Shareholders; stock.

Business Costs

Define the two costs that all companies have: Fixed costs – must be paid whether or not a

company is operating, i.e. loans, taxes. 

Operating costs – occur when a company is open, i.e. wages, shipping, material costs (stuff).

  Sole Proprietorship Partnership Corporation

 Who owns the

business?

 One person or family 

 Two or more people

 shareholders

 Advantages

 Easy to start Low fixed costs 

 Share responsibility for running the business; low fixed costs

 Limited liabilityLow operating costs

 Disadvantages

 Hard to raise $Limited growthUnlimited liability for owner 

 May have disagreementsUnlimited liabilityHigh operating costs

 High fixed costs

Business in competition Define vertical integration. When a company owns all of the different businesses on which it depends for its

operation.

  Define horizontal integration AND who was the most famous industrialists who

achieved almost complete horizontal integration in his industry?

Combining firms in the same business into one large corporation. J.D. Rockefeller – oil!

Define trust. A legal arrangement that allows one person to manage another person’s property

(trustee) Shareholders Stocks Trust ; Trust Shares Shareholders

Big Business

Captain of Industry or Robber Barron

Richest people of all time 8. Warren Buffett — $28 billion

The “Oracle of Omaha”, Chairman of the Board and Chief Executive Officer of Berkshire Hathaway Inc.

7. King Fahd Bin Abdul Aziz Alsaud — $30 billionThe 77-year-old Saudi Arabian King

6. Lawrence J. Ellison — $55 billionOracle’s Chief Executive Officer

5. William Gates III — $60 billionMicrosoft co-founder, Chairman and Chief Software Architect

4. John Jacob Astor (1763-1848) — $85 billionThe “Self-Made Money-Making Machine” became synonymous with the American Fur Trade.

3. Cornelius Vanderbilt (1794-1877) — $100 billion2. Andrew Carnegie (1835-1919) — $110 billion1. John D. Rockefeller (1839-1937) — $200 billion

Cornelius Vanderbilt

Vanderbilt made his fortune in the shipping and railroad business of the mid to late 1800s. Controlled around 75% or U.S. Railroads

His net worth of US$105 million in 1877 was equal to 1.15% of the U.S. annual GDP in his day

Vanderbilt Was one of the most successful railroad

consolidators. By 1869, he merged 3 smaller lines into one

larger one-known as New York Central. Was the first to offer non-stop service from

New York to Buffalo In 1871, he began building New York’s

Grand Central Station

Legislating the Rails Interstate Commerce Act of 1887 – put in place for

Government to supervise railroad activities Shipping rates had to be "reasonable and just" Rates had to be published Secret rebates were outlawed Price discrimination against small markets was made

illegal.

Vanderbilt had several mansion, three alone on 5th Ave. in New York City

However, he also had homes in Rhode Island, as well as North Carolina.

John D. Rockefeller Rockefeller amassed

over a billion dollars in his lifetime.

Using Horizontal Integration, he owned over 90% of the oil refineries in the US.

1.53% of the total U.S. annual GDP in his day

Standard Oil By 1880 Rockefeller formed the Standard Oil

Trust A trust merged companies together legally Is a legal agreement that allows one person to

manage another person’s property Instead of buying companies Rockefeller had

them give their stocks in the company to Standard Oil Trustees, stockholders held shares in the trust.

Andrew Carnegie

Andrew Carnegie saying farewell to Pittburgh. Mr Carnegie and Louise Carnegie, his wife, leaving East Liberty Station in 1914 on last visit to this city.

Andrew Carnegie at age 19

Andrew Carnegie Andrew Carnegie was born in Dunfermline, Scotland Founder of the Carnegie Steel Company, which was the most extensive

integrated iron and steel operations in the United States Carnegie merged his company into U.S. Steel and sold his share for

US$492 million in 1901. Capitalized at US$1.4 billion at the time, U.S. Steel was the first billion dollar company in the world

Carnegie's hundreds of millions accounted for about 0.60% of the U.S. annual GDP

By the time of his death in 1919 he had donated most of his wealth to charities and other philanthropic endeavors and had only US$30 million left to his personal fortune.

Henry Clay Frick Business partner of

Andrew Carnegie His home, Clayton,

still stands today as a historical site.

Daughter was an avid art collector and Henry collected automobiles.

J.P. Morgan Helped put new holding companies together Holding companies manage several smaller

companies effectively merging them into a large enterprise.

1901 he bought out Andrew Carnegie merging his steel company with other large steel companies calling it U.S. Steel

J.P. Morgan Teaming with Thomas Edison, Morgan backed projects leading to the

electrification of New York City using direct current (DC) and by 1892 had most parts of Edison's business interests and numerous other companies consolidated in one large company; General Electric

J. P. Morgan's General Electric to rapidly grow. Morgan then continued to branch out into other interests eying steel and the Carnegie empire. Morgan's portfolio included railroads, steel, and mines but the best integrated company was Carnegie Steel

AC and DC

Labor Concerns of the Gilded Age Three major concerns of workers: Low Pay/Wages Long Hours Dangerous or Unhealthy Working Conditions

Early Unions Types of early unions: craft and common laborers or skilled and unskilled

(immigrants made up a large percentage of this group)

Craft workers formed trade unions (shoemakers, blacksmiths, etc.)

First trade union in U.S. is National Trades Union (NTU). Doesn’t last very long.

Employers viewed unions as conspiring against property rights Industrial unions-united all in a particular industry (steel, glass, etc.)

A common tactic was a strike. Many strikes were denied by courts (injunctions) and scabs or replacement workers were sometimes brought in.

Unions Types of early unions: craft and common laborers or skilled

and unskilled (immigrants made up a large percentage of this group)

Craft workers formed trade unions (shoemakers, blacksmiths, etc.)

First trade union in U.S. is National Trades Union (NTU). Doesn’t last very long.

Employers viewed unions as conspiring against property rights Industrial unions-united all in a particular industry (steel, glass,

etc.) A common tactic was a strike. Many strikes were denied by

courts (injunctions) and scabs or replacement workers were sometimes brought in.

Management vs. Labor

Management vs. Labor

““Tools” of Tools” of ManagementManagement

““Tools” of Tools” of LaborLabor

““scabs”scabs”

PinkertonsPinkertons

lockoutlockout

blacklistingblacklisting

yellow-dog contractsyellow-dog contracts

Collective Collective BargainingBargaining

picketingpicketing

strikesstrikes

Great Railroad Strike Panic of 1873 was a severe recession Companies cut wages 1877 The Baltimore & Ohio Railroads cut employee wages for the 3rd

time They walked off the job and blocked the tracks Railroad workers across the country also walked off the job Violence erupted and federal troops were sent to stop the violence By the end of the strike, 100 people were dead and $10 million dollars in

railroad property had been destroyed

Great Railroad Strike in Pittsburgh

Homestead Strike In 1892 a steel mill owned by Andrew Carnegie and managed

by Henry Clay Frick went on strike over cut wages

Frick locked workers out of the plant and hired Pinkertons to bring in replacement workers.

Pinkertons brought replacement workers by barge to the plant but workers refused to let them in.

Gunfire erupted, after 14 hours several were dead and many were injured.

PA governor sent in militia and strike eventually collapsed.

Pullman Strike George Pullman built the Pullman Palace Car Co and built a “company” town

He required workers to live and buy their goods in the town.

In 1893 Pullman cut wages and laid off many

Wage cuts made it difficult to buy goods at the high priced company store. Strike began after Pullman wouldn’t listen to grievances.

They attached U.S. Mail cars to their trains. If employees refused to handle these cars they would be violating federal law.

President Grover Cleveland sent in troops to break strike and federal court issued an injunction direction strike to halt.

Strike collapsed

Haymarket Riot 1866 McCormick Harvesting Machine Co.McCormick Harvesting Machine Co.

Wanted an 8 hour workday, called for a national Wanted an 8 hour workday, called for a national strike.strike.

Four strikers were killed and anarchist called a Four strikers were killed and anarchist called a meeting in Haymarket Square. Over 3,000 meeting in Haymarket Square. Over 3,000

people showed up along with the police. A bomb people showed up along with the police. A bomb was thrown killing one officer and wounding six was thrown killing one officer and wounding six

more. Police opened fire on the crowd. Eight more. Police opened fire on the crowd. Eight German immigrants were arrested and found German immigrants were arrested and found

guilty.guilty.

Unionsù Support arbitration-3Support arbitration-3rdrd party negotiation party negotiation

ù Eight-hour workday.Eight-hour workday.

ù Workers’ cooperatives.Workers’ cooperatives.

ù Worker-owned factories.Worker-owned factories.

ù Abolition of child and prison labor.Abolition of child and prison labor.

ù Increased circulation of greenbacks.Increased circulation of greenbacks.

ù Equal pay for men and women.Equal pay for men and women.

ù Safety codes in the workplace.Safety codes in the workplace.

ù Prohibition of contract foreign labor.Prohibition of contract foreign labor.

ù Abolition of the National Bank.Abolition of the National Bank.

Eugen V. Debs

Socialist Ran for President 5 times, once from

jail. He never won President of KOL (Knights of labor) Promoted 8 hour work day Pushed for rights for all workers

skilled and unskilled Promoted rights for minorities and

women Was not opposed to violent

resistance and protest to large corporations

Samuel Gompers

(AFL) American Federation of Labor

Focused on skilled laborer only 3 goals Force companies to recognize

unions Push for closed shops:

Companies could only hire union workers

8 hour work day