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Capitalism and Big Business. What is Capitalism?. a type of economy ownership of the means of production, distribution, and exchange of wealth is made by private individuals or corporations opposite of public or state-owned wealth (i.e. socialism). The Principles of Capitalism….

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what is capitalism
What is Capitalism?

a type of economy

ownership of the means of production, distribution, and exchange of wealth is made by private individuals or corporations

opposite of publicor state-owned wealth (i.e. socialism)

1 private property
1. Private Property

Resources and businesses are owned by private citizens or corporations (NOT the government)

2 competition
2. Competition

Different companies can make the same product

Companies compete with each other to make the best product – at the lowest price

3 profit motive
3. Profit Motive

Goods are made and sold in an effort to make a profit

4 freedom of enterprise
4. Freedom of Enterprise

the economy will regulate itself through supply and demand, (a.k.a. market forces)

no need for government intervention or regulation (i.e. laissez-faire)

5 freedom of contract
5. Freedom of Contract

Idea that individuals, or corporations, should be free to bargain the terms of their own contracts

6 consumer sovereignty
6. Consumer Sovereignty

Consumers use their purchasing power to help determine what companies should produce

Also… let companies know when they are unhappy with a product by going elsewhere

benefits of capitalism
Benefits of Capitalism…

Encourages innovation and invention (i.e. entrepreneurship)

Ideally provides the best possible product at the cheapest price

Helped the U.S. become one of the strongest & wealthiest nations in the world

drawbacks of capitalism
Drawbacks of Capitalism…

1. Potential for greed and corruption = development of monopolies and trusts

2. Misuse/abuse of labor force and the environment

3. Large divide between the rich & poor; growth of slums

4. Workers lost pride in their work

development of corporations
Development of Corporations
  • New form of group ownership
  • Perfect for expanding risky businesses
  • Allowed for huge amounts of capital (i.e. money and/or resources)to be pooled together
    • Funded new technology
    • Began new industries
    • Ran larger plants
business competition in the late 1800s led to
Business Competition in the late 1800s led to…

= an attempt to control or eliminate any competition that threatens the growth of your business

monopolies

horizontal integration
horizontal integration

Consolidation of many firms in the same business

slide16

Example:

John D. Rockefeller and Standard Oil Company

holding companies
Holding Companies

Corporation that does nothing but buy out the stock of other companies

Holding Company – buys controlling stock of operating companies

Controls operating companies’ output, prices, etc…

trust
Trust

Stockholders elect of Board of Trustees

Joining with competing companies in a ‘trust’ agreement

Stock is turned over the Board of Trustees

Board runs separate companies as one large corporation

vertical integration
vertical integration

Gain control of the many different businesses that make up all phases of a product’s development

slide20

By 1901, Carnegie owned 80% of all U.S. steel production

Total power over quality and cost of the finished product

the success of big business was dependent upon
The success of big business was dependent upon…
  • Exploiting workers
    • low wages, long hours, harsh work conditions
  • Ruthlessly driving competitors out of business
  • Pro-business governmental policies
you decide
You Decide…

Robber Barons?

Captains of Industry?