Cornelius Vanderbilt Chapter 6 Section 3
Objectives: Identify business and
management strategies that led to big business.
• Explain Social Darwinism
• Identify methods that led to monopoly
Big Business Emerges
Carnegie controlled more steel production than all of Great Britain.
Management Techniques◦ How to make better products at cheaper prices
1. Accounting led to cost controls 2. New production techniques led to faster steel
production 3. Gave managers stock ownership in companies These steps reduced costs and increased production.
Andrew Carnegie’s Business Innovations
Attempted to control entire steel industry◦ Vertical Integration
bought suppliers, controlling every stage of production
◦ Horizontal consolidation bought out competitors, companies producing similar
products merge Carnegie controlled 80% of the nation’s
steel production. He was the second richest man in the world.
Carnegie Business Strategy
Vertical Integration Model
Horizontal Integration
Natural Selection- Charles Darwin’s idea of evolution.
◦ weeded out the weak, enabled the strong to survive
Idea helped explain income inequalities. Led to idea that government should not
interfere with business Appealed to the Protestant work ethic
Work hard, save money, show that you are saved.
Social Darwinism
Social Darwinism: ◦ Riches are a
sign of God’s favor
◦ Poor and lazy people get what they deserve.
It justified the income gap between the incredibly rich and the incredibly poor.
Social Darwinism explains• Laissez-Faire Economics: government
non-interference of business• The failures of the poor • The extreme income and wealth gap• Winners and losers
Monopolies and oligopolies form◦ Monopoly-one person or firm controls the market◦ Oligopoly-a few control the market.◦ Holding companies- buy stock in other
companies to control them. ◦ John D. Rockefeller
Established Standard Oil, monopolized the oil industry
Trusts-companies that put their stock ownership into a trust run by one Trustee. They reap the profits in return.
◦ The Trusts start to control everything.
Growth and Consolidation
Rockefeller’s Standard Oil has tentacles reaching everywhere
Trusts even control Congress
The term “Robber Baron” comes from the feudal lords of the Middle Ages. They control all aspects of life.
Sold products at below cost to drive competition out of business ◦ Paid employees low wages, reinvested profits to
buy out the competition. ◦ This is the business model of the late 1800’s.
The ultimate game of Monopoly.
Robber Barons
John D. Rockefeller –controls the government
Once they gained control of an industry, ◦ they raised prices dramatically for huge profits◦ Railroads were pressured to reduce prices by
farmers. (Populist Movement) Barons donated large parts of their fortunes
to charities. (Gospel of Wealth)◦ Rockefeller: University of Chicago, medical
research◦ Carnegie: Libraries across America, Carnegie Hall,
Carnegie Foundation
Robber Barons
Fairfield, Iowa received $40,000 to build the first Carnegie Library west of the Alleghany's.
Carnegie eventually gives over $41million to build libraries across America.
First Carnegie Library in Iowa
Attempt to bust up the Trusts. Monopoly forming is illegal.◦ Enforcement was difficult because “trust” could
not be defined well enough for the courts. ◦ Business dissolved trusts and formed new ones
that didn’t fit the definition. Enforcement slowly ends due to frustration. Business consolidation increases.
Sherman Antitrust Act
Teddy Roosevelt-Trust Buster Roosevelt
became know as the “Trust Buster” trying to break up monopolies.
South still recovering from the Civil War◦ Lacked money for investment Had few cities with sufficient population
for large industry. Few Southerners had money to invest in
business, banks still in the North. Railroads were controlled by Northerners Overbuilding of railroads caused many
railroads to go bankrupt. Vanderbilt bought them up and consolidated the industry.
Boom bypasses the South
Lack of skilled workers due to lack of schools in the South.
Both Northern and Southern laborers were exploited by Robber Barons.◦ Exploitation drew them together in a nationwide
labor movement to demand rights.
Social Causes
Beginning of Labor Movement
Labor fights big business by using their own technique of horizontal integration. ◦ There is strength in
numbers. ◦ Unionization is illegal at
first. Seen as building monopoly.