Industry and Business Late 19 th Century US History Expansion of Industry Government actions and changes in factors of production fostered industrial growth. These factors included a 1. wealth of natural resources, 2. government support for businesses and a 3. growing population that provided cheap labor and a market for new goods/services. 5 factors of production: Land- natural resources Labor- workers Capital-money, machinery, tools Technology- new inventions Entrepreneurs- risk-takers that start new businesses New Industries 1. Technological innovations. Bessemer and open hearth process (ways to produce steel cheaply) Typewriter-1867 Christopher Sholes Telephone-1876 Alexander Graham Bell Edison o Wizard of Menlo Park o light bulb-1880 o light bulb-1880, phonograph, motion pictures. New Industries 2. The Railroad fueled the growing US economy: First big business in the US. A magnet for financial investment. The key to opening the West= Transcontinental Aided the development of other industries. Brought new settlers Developed a national market Business vocabulary 1. Corporation- form of business organization that is recognized as a legal entity 2. Stock- ownership certificates in a firm 3. Stockholders- person who owns stock in a corporation (investor) 4. Dividend- check representing portion of earnings 5. Monopoly- complete control over its industrys production, wages and prices Create a monopoly in 2 ways: Set up a holding company: corporation does nothing but buy out stocks of another company ex: J.P. Morgan Create trust agreements: participants in a trust turn over their stocks to a group of trustees (people who run separate companies as a one corporation) in return the companies get dividends on profits earned by the trust Vertical and Horizontal Integration Big Business Entrepreneurs used new technologies and new business tactics to create large corporations that controlled their industry. Andrew Carnegie Rise from rags to riches story Carnegie steel company Controlled the steel industry through vertical integration- process of buying out suppliers Controlled the entire steel industry = monopoly Big Business continued John D. Rockefeller Standard Oil Company Used a variety of tactics in his struggle for control of the oil industry Also used horizontal integration- process of companies producing similar products merge Used a trust to gain total control Reaped huge profits: Paid his employees low wages Sold his oil at a lower price until he drove out all his competitors then raised the raised the price Known for horizontal integration Standard Oil Company Robber Barons. .or Philanthropists? Andrew Carnegie donated 90% of his wealth. John D. Rockefeller gave away over 500 million dollars. C. Vanderbilt gave money for Vanderbilt University and to the Church of the Strangers in New York City Sherman Antitrust Act Unfettered competition led to economic uncertainty and eventually led to the public for government regulation of industry. Fear was that expanding corporations would stifle free competition. Government answered the call with the Sherman Antitrust Act Sherman Antitrust Act made it illegal to form a trust that interfered with free trade between states or with other countries. Unfortunately the government did very little to enforce this act and business consolidation continued. Ex: Rockefeller turned Standard oil from a trust to a holding company Bosses of the Senate Justification for cutthroat business practices Principles of Social Darwinism Based off of Charles Darwins theory of Natural Selection Herbert Spencer applied the theory to the evolution of human society-- why one person does better than enough This supported the economic doctrine of laissez faire (French meaning allow to do). The market place should not be regulated. The success and failure of a business were governed by natural law and no one had the right to intervene. Everything was individual responsibility and blame. Justification for cutthroat business practices Gospel of Wealth Riches were a sign of Gods favor The poor were lazy and inferior Inequality is inevitable and good Rags to Riches literature Horatio Alger wrote stories of rags to riches success Supported the myth that anyone could make it if they work hard enough Andrew Carnegie Social Darwinism political cartoon Books by Horatio Alger