The Rise of Big Business

Ch 6, Section 2

A New Capitalist Spirit

• Capitalism is when private business run most industry

• Competition determines how much things cost and worker pay

• Laissez-faire capitalism means to let the people do as they chose (no Govt. intervention)

• Free enterprise frees the big business from government regulations

Marxism/Communism

• Marxism developed by Karl Marx a German philosopher

• Proposed to remove the inequalities of wealth

• {proposed by Marx Communism is the theory that individual ownership of property should not be allowed}

• The community provides for the needs of the people

• Good in theory• Why does it not work?• Too much power in

Govt. hands• People in power

become corrupt• No drive to put out a

better product

Social Darwinism

• Originally {proposed by Herbert Spencer

• Based on Charles Darwin Survival of the Fittest}

• The “Fittest” businesses would rise to great wealth

• Unfit businesses would fail

{Corporation

• organizers raise money by selling shares of stock}

• Stockholders, who own shares of the company receive a percentage of the profit

• {Trust is when a group of companies turn control of stock over to a board of trustees

• The trustees then run all the companies as a single enterprise}

{Monopoly

• If a trust gains exclusive control of an industry}

• This gives a company complete control of the product price and quality

• Is this good or bad?

• {Carnegie believed the rich were morally obligated to manage their wealth in a way that benefited their fellow citizen.}

• Is this common?• What do you think?

Carnegie and steel

• Carnegie was a master at using all of these business strategies

• He started out investing in steel he then entered steel production

• He used {Vertical Integration which is acquiring companies that provided the materials and services his enterprises depended on to reduce cost.}

Continued

• Others had to pay for raw material or shipping their product.

• He purchased Iron and coal mines that provided the raw materials

• He bought steam ships and railroad lines to move the material.

• He never had to pay someone else during the whole production process of his steel

Rockefeller and Oil

• John D Rockefeller founded Standard Oil

• He started in wholesale food• Also used vertical integration• What kind of companies do

you need to buy for vertical integration of oil?

answer

• You need…

• Barrel factories

• Oil fields

• Oil storage facilities

• Pipelines and railroad tanker cars

Horizontal Intergration• Rockefeller then used horizontal integration• That is when one company starts buying other

companies producing the same product.• He would make deals with suppliers to get

cheaper supplies and freight• He intentionally drove his competition out of

business.• By 1880 Standard oil Trust owned 90% of

petroleum refinery• He did however donate $550 million to various

causes over his life

The Railroad Giants

• Vanderbilt

{Vanderbilt

• He extended his railroad system by buying smaller lines }

• he controlled the lines between Cleveland, Chicago, New York, and Toledo

Westinghouse

The Department store

• New store that sold a variety of goods under one roof

• Became the domain of ladies as a place to shop and to work

• This made a pleasant homelike atmosphere

• Bought goods in bulk to pass savings to customers

Questions• Social Darwinism is based on what?

• Karl Marx came up with what form of Govt?

• What is it when organizers raise money by selling shares of stock?

• What is it called when a trust gains exclusive control of an industry?

• He extended his railroad system by buying smaller lines