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AN AGE OF BIG BUSINESS Growing Pains: Robber Barons and the Growth of U.S. Industry, 1870-1900

AN AGE OF BIG BUSINESS Growing Pains: Robber Barons and the Growth of U.S. Industry, 1870-1900. Mrs. Gainey U.S. History. FOUNDATIONS FOR GROWTH I. Factors of Production. New technology & business methods  allow U.S. to tap supply of natural resources increase production

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AN AGE OF BIG BUSINESS Growing Pains: Robber Barons and the Growth of U.S. Industry, 1870-1900

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  1. AN AGE OF BIG BUSINESSGrowing Pains: Robber Barons and the Growth of U.S. Industry, 1870-1900 Mrs. Gainey U.S. History

  2. FOUNDATIONS FOR GROWTHI. Factors of Production • New technology& business methods  allow U.S. to • tap supply of natural resources • increase production • raise $ needed for growth • Growth possible because U.S. benefited from “factors of production” • LAND (land & natural resources) • LABOR (availability of workers) • CAPITAL(money for investment….buildings, machinery, & tools)

  3. FOUNDATIONS FOR GROWTHII. Raising Capital • Banks • businesses borrowed $ to expand • Becoming a“Corporation” • Company that sells shares, or “stock” , of its business • “shareholders” – people who invest in a company by buying shares • GOOD TIMES  shareholders do well when stock rises in value • BAD TIMES  shareholders lose investment when stock lowers in value • Stocks bought & sold in “stockmarkets” • Railroads first businesses to incorporate

  4. THE OIL BUSINESSI. The Impact of Oil • 1850s oil found in Pennsylvania hills • Oil valuable • lubricate machinery • burn to produce energy • 1859- first oil well created in Titusville, PA by Edwin Drake • Oil industry grows rapidly in late 1800s

  5. THE OIL BUSINESSII. John D. Rockefeller • Made a fortune in oil industry • Set up Standard Oil Company of Ohio, 1870 (oil refinery in Cleveland) • Built empire through “horizontal integration” • Combining competing companies into one corporation • He bought competing oil refineries • SOC became a “monopoly” - total control by a single producer • Lowered prices to drive out competitors • Pressured customers to not use other oil companies • Created Standard oil “trust” • Group of companies controlled by one Board of Directors

  6. THE STEEL BUSINESSI. The Impact of Steel • Steel becomes big business in late 1800s • Strong & long-lasting form of iron • Great for railroad tracks, bridges, buildings, etc. • 1860s: new methods of making steel (Bessemer process)  could produce larger amounts, more cheaply • 1870s: Pittsburg, PA  steel capital of US • Close to sources of iron ore (PA & OH) • Large steel mills built

  7. THE STEEL BUSINESSII. Andrew Carnegie • Son of Scottish immigrant • By 1890, rules steel industry • Built one of first steel mills in Pittsburg • Brought Bessemer process to U.S. • Created empire through “vertical integration” • buying companies that provide equipment and services for a business • By 1900, Carnegie’s company produces 1/3 of all U.S. steel! • 1901 Carnegie sells his company to banker J. Pierpont Morgan for $450 million • JPR forms U.S. Steel Corporation  first billion $ corporation

  8. CONCENTRATION OF ECONOMIC POWER • “Mergers” – combining of companies – concentrated economic power in a few corporations • By 1900  1/3U.S. manufacturing controlled by 1% of U.S. corporations! • Problemsof giant corporations • Drove competition away • Hurt consumers • Corporations did not need to keep prices low • Corporations did not need to improvegoods/services

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