New Methods of Business

Do Now:How did the Industrial Revolution affect the lives of children?

Pre-Industrialization

• Cottage industry: Products made in small shops or in peoples’ homes– Also known as the Domestic system

Pre-Industrial Businesses• Sole Proprietorships – businesses owned by individuals

• Partnerships– Some businesses were owned by 2 or 3 people

• This changed because few individuals could afford machinery required for factories

Corporations• individuals buy shares of stock/ receive dividends• this makes mass production affordable• this limits the liability and responsibility for what

happens• stock holders elect directors to decide corporate

policies• directors hire managers to run the

business

Innovations• Division of Labor: a different

person performs each step in making a product

• Assembly Line: product moves from one work station to the next; workers do not move

• Interchangeable Parts: identical parts allowed unskilled workers to make goods

Capitalism

• Economic system in which the means of production and distribution are privately or corporately owned

• Based on the belief that individuals, rather than government should own factors of production

• Capitalism also allowed corporations to buy out small companies

• Corps. created monopoly - control the production & price of a product to avoid competition.

Monopolies

• Two kinds:– Horizontal monopolies

• Someone owns all of one kind of business • Example: someone owns all the railroads and canals so you

have to do business with them if you want to transport goods

– Vertical monopolies• When one person/company owns everything needed to

produce a finished product• Example: A car company that expands into tire manufacturing

would be an example of a vertical monopoly.

Laissez-Faire Economics

• Means “hands-off”• Allowing businesses to run with little or no

government interference

Economic Thinkers

• Adam Smith– Created the Theory of Free Enterprise - Every

person should have freedom to start a business– Private competition should be free from

government regulation

• Thomas Malthus– Believed people would multiply faster than the

food supply, so poverty was inevitable– Eventually proven wrong, but not before many

accepted his ideas.

Captains of Industry Robber Baron

Tremendous Sacrifice