The Great Industrialists and their Tactics

1. The Great Industrialists and their Tactics

2. Andrew Carnegie • Scottish immigrant-”rags to riches” story • became a giant in the steel industry • 1873- built massive steel plant in Pittsburgh, PA to produce railroad tracks • used Bessemer converter to make steel efficiently and cheaply • #1 steel producer in the world- owned 80% of the steel market • donated $400 million to worthy causes; gave away 90% of his wealth

3. John D. Rockefeller • Started Standard oil company-today called Chevron • used ruthless tactics to beat his competition • controlled 90% of the oil industry • paid extremely low wages to his employees • gave away millions of $, but kept most for himself

4. Cornelius Vanderbilt • American entrepreneur who built his wealth in shipping and railroads • By age 16 he was operating his own ferrying business between Staten Island and Manhattan • Ruthless in business, very few friends; perceived as vulgar, mean-spirited, made life miserable for those around him, including his family • Died at 82 with a fortune of more than $100 million • Nicknamed the “The Commodore” • Vanderbilt University, Breakers mansion in Newport, RI

5. Trusts and Monopolies • entrepreneurs controlled competition by forming a monopoly; bought out competitors or drove them out of business • trusts were another type of monopoly • Rockefeller created the Standard Oil trust to almost completely control the oil industry. • To fight the “robber barons”, Congress passed the 1890 Sherman Antitrust Act, making it illegal to form monopolies and trusts.

6. Business Tactics • Vertical Integration- buying up all phases of production such as raw materials and distribution. • Horizontal Integration- buying up all similar industries • Social Darwinism- only the best run businesses will survive. Encouraged competition, hard work, and responsibility • Laissez-faire- US government should not interfere with the economy. “Hands off!”

7. In Vertical Integration the Company Owns the Whole Production Process • Andrew Carnegie owned the coalfields that supplied coal to his steel mills • Carnegie owned the iron mines that supplied the iron ore for his Bessemer converters • Carnegie owned the railroad tracks and railroad trains that brought raw materials in and finished steel out • Carnegie controlled “top to bottom”, or vertically, all the parts of the process needed to make steel • Can you think of an example of Vertical Integration in today’s economy?

8. What is Horizontal Integration? • If Coca Cola buys Pepsi • If McDonalds buys Burger King • If Starbucks buys Dunkin Donuts • If ATT buys Verizon • If Toyota buys Honda • What happened to the competition?

9. Robber Baron • A business leader who used unfair practices and had little sensitivity for the common worker • provided unsafe and unsanitary working conditions • low wages and long hours • used violence against workers • selfishly kept their wealth • controlled and bought out competition • What can be done to slow down the Robber Barons? The Unions!