The Rise of Big Business and Government Support of the Industrial Economy

2 Main Topics

1. “Big business“during the 2nd Industrial Revolution – Causes and Characteristics

2. Role of government in support of the Industrial Economy

6 Factors making for industrial growth

natural resources: farm land, oil, coal, iron, copper, precious metals, other minerals, timber

work force with skills and experience

capital and the means of mobilizing capital

technology

a transportation system

Governmental assistance

Role of the Railroads in Creating 2nd Industrial Rev.

Stimulated the iron and steel industry – Why?

Stimulated settlement of the West – How?

Created the potential for a national market – How?

Became a model for other corporations

Railroads: America’s First Big BusinessHelped to create knowledge and

solutions for:Administrative organizationRaising capitalLabor relationsCompetitionRelation with government

Trust - Defined

A form of business merger in which the major stockholders in several companies turn over their stock to a group of trustees. Used to create a semi-legal monopoly over key industries. Advantage = eliminates competition and enhances profits.

Two Kinds of Trusts

Trusts were organized in two waysVertical integration or consolidation – owner owns all the steps and resources that contribute to productionHorizontal Integration or consolidation – the owner monopolizes one step of the production process

Carnegie and Rockefeller

Vertical Integration = Carnegie. For Homestead Steel, Carnegie owned all the various businesses that helped him make steel – from mines to railroad to steel plant.Horizontal Integration = Rockefeller. At Standard Oil he monopolized over 90% of all oil refineries in the US.

Steel: The Career of Andrew Carnegie

Homestead, PA. | Home | Next

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Rockefeller’s Rise to PowerBegan as a salesman for lamp oil. Advocate of consolidation.By 1877, controlled 95% of all oil refineries in America – horizontal integration and monopoly.Architect of Standard Oil Trust.

John D. Rockefeller and Standard Oil

Topic 2 - Role of GovernmentFederal Government supported rise

of Big Business with:tax policiesthe tariffimmigration policiesdistribution of the national domain

The U.S. in 1850

Railroad Land Grants

Agriculture

Homestead Act, 1862 (160 acres free after 5 years & modest improvements)

Low prices on land for sale: $1.25 or $2.50 per acre

Education

Land Ordinance, 1785: reserved one square mile out of every 36 for support of a public school (applied to same territory as Northwest Ordinance)

Morrill Land-Grant College Act (1862): land given to states (30,000 acres for each senator and representative) to be used to create a public university

Other land distribution

Land given to new, western state governments

Coal, mineral, timber lands sold cheaply

Conclusion: Role of Federal Government in Economic Development

Not a period of laissez faire or hands off capitalism without government intervention Federal government a full partner in economic growth. Result: very rapid expansion of the entire economy.