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The Rise of Big Business
Chapter 14
Section 2The Second Industrial Revolution
Riddlebarger
Capitalism
An economic system in which private businesses run most industries.
Competition determines prices and wages.
Laissez-faire: no government interference in business activities.
Age of Big Business
• The period of invention after the Civil War sets the stage for great industrial growth
• Huge amounts of capital ($$)needed, along with human labor and natural resources
Robber Barons/ Captain of Industry
Powerful Industrialists of late 1800’sRobber Baron
• キperception of stealing from public
• キruin competition, bribe public officials, pay low wages, unhealthy workplace
Captain of Industry• キPerception of
serving nation in positive way
• キCreating jobs, donating money, increase public supply of goods and jobs
Robber Baron or Captain of Industry???
Carnegie Morgan
Vanderbilt Rockefeller
Social Darwinism
– A. idea popular in late 1800’s– B. Government shouldn’t interfere with people’s
success; if so, the most “fit” would succeed and become rich
» Society would benefit from success of fit & weeding out of unfit
– C. Most Americans agree at the time that government should not interfere with private business
Who is most likely to advocate Social Darwinism?
•Industrialists or Workers?
What Is a Monopoly?
–A. Many industrialists use whatever means necessary to gain competitive edge
Monopoly & Cartels
–B. monopoly- controlling entire industry or product
»Buy them or drive them out, then you can charge any price you like
–C. cartel- loose association of businesses that make the same product
»Members agree to limit production and keep prices high
Trusts
• A group of companies
placed under the control of a single managing board
Vertical
Consolidation
–∙ Gaining
control of
many
businesses
that make up
all phases of
product’s
production
Growth of Big Business
(2 strategies)
Iron OreDeposits
SteelMills
Ships
Coke Fields
Railroads
Carnegie Steel Company
Owns all phases of production
What
problems
might a
business face
that must
compete
against a
company with
a vertical
monopoly?
Growth of Big Business
(2 strategies)
Iron OreDeposits
SteelMills
Ships
Coke Fields
Railroads
Carnegie Steel Company
Owns all phases of production
Horizontal
Consolidation
● Joining competing
firms in the same
business
•Example:
Standard Oil
Growth of Big
Business
(2 strategies)
Independent Oil
Refineries
Purchased by
Rockefeller
Standard OilCompany
Why were
companies at a
disadvantage
when facing a
company with
horizontal
consolidation?
Growth of Big
Business
(2 strategies)
Independent Oil
Refineries
Purchased by
Rockefeller
Standard OilCompany
Growth of Big Business
• Economies of Scale- As production increases,
the cost of each additional item produced is
lower•D.Effects of big business on American
Society
•Few like trusts or other large
businesses
•Politicians don’t crack
down-continue to allow
industrialists to operate at will
•Disparity in wealth (gap between
rich & poor grows)
•Boom & bust-good times followed
by bad
•Business Cycle
Standard Oil Company•John D. Rockefeller
–Built oil refinery in Cleveland (1863)
–Forms Standard Oil (1870)
–Persuades railroads to give refunds on shipping-
Allows him to lower prices
–Over $2 billion fortune
•
•B. The Trust
–Law prevents buying out
competition
–Allows them to get around the law
–Control of most of nations oil
refining
Andrew Carnegie
• Made millions in steel industry by bringing Bessemer Process to America.
• Scottish immigrant• Sold his company for
$492 million to JP Morgan in 1900.
• Paid low wages to workers
• Donated millions to charity.
Mass Marketing
Retailers also look for new ways to maximize profits
• May new approaches used to win customers– Department Stores in urban areas
• One-stop shopping; lower prices– Mail-order catalogs in rural areas
• Now any American has access to wide range of goods
Looking Ahead
What effects did the growth of big business have on workers?