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Rise of Big Business

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  1. Rise of Big Business Objective 5.02

  2. Monopolies and Trusts • Late 1800s—Americans become suspicious of large corporations • Power of monopolies feared • Wanted to prevent horizontal integration

  3. Horizontal Integration • Own all of the industry at the same level.- buy up all the competition. • Example: Own all the gas stations or telephone companies, discounts stores.

  4. 1882—first trust was formed by the Standard Oil Company • Trust = a coalition of organizations formed to limit competition by controlling the production and distribution of a product or service • Enabled trustees to control a group of companies as if they were one large merged company

  5. New Industries • Railroads • Union Pacific—started in Nebraska; headed west • Built by Civil War Veterans and Irish Immigrants • Central Pacific—started in California; headed east • Built mostly by Chinese Immigrants

  6. Cornelius Vanderbilt (1794-1877) • Began a RR empire by merging popular lines in NY to form the New York Central and Hudson River RR

  7. Improvements for Trains • George Westinghouse developed the new air brake system for trains in 1868 using compressed air after viewing a collision

  8. Steel Industry • Andrew Carnegie (1835-1919) • Began in RR • Met Sir Henry Bessemer who invented a new process of making high quality steel—now called the Bessemer Process • He decided to get into the steel business and opened a company in Pittsburgh in 1875

  9. Success brought by the Carnegie Steel Company cemented Carnegie as a “Captain of Industry” • By the 1890s, his company was the largest and most profitable enterprise in the world

  10. Vertical Integration • Buy up the raw materials, transportation, production/manufacturing, retail/sales. • Control every step of the product.

  11. J.P. Morgan (1837-1913) • 1901—Carnegie decided to sell his steel company to Morgan • He and Elbert Gary then merged Carnegie’s steel with their holdings in the Federal Steel Company to form U.S. Steel • At one time was the largest producer of steel in the world, now produces less than 10%

  12. Oil Industry • Edwin Drake (1819-1880) • 1859—drilled first oil in U.S. near Titusville, PA • Caused major expansion of oil business • By 1900 oil fields from PA to TX had been opened

  13. John D.Rockefeller (1839-1937) • Organized the Standard Oil Company • By 1880s—controlled more than 90% of oil refining in the U.S. • Used horizontal integration to buy out smaller refiners

  14. What is the problem with what Rockefeller was doing?

  15. 1911—Government found his company to be a monopoly and forced it to be divided into 34 companies including • Amoco • Chevron • Sonoco • Exxon • Mobil

  16. Take out a sheet of paper to be put in Goal 5 of portfolio. • Create your own vertical integration- pick a business and show the process. • EX: Pork- own feed mill feed mill, own the farms hogs are raised- own processing plants, distribution, grocery store. • Create your own horizontal integration- pick an industry and show how it work. • EX:- Carolinas Medical Center- buys out the other hospitals.

  17. Ideas of the Gilded Age Objective 5.02

  18. The Gilded Age • Coined by Mark Twain • Era of U.S. 1876-1900 • Period of rapid industrialization • Characterized by ruthless pursuit of profit and government corruption

  19. Individualism • No matter how humble a persons origins, they could rise in society and go as far as their talents and commitment would take them • Horatio Alger —expressed individualism through numerous “rags-to-riches” novels involving the poor going to the big city and becoming successful

  20. Social Darwinism • Reinforced idea of individualism • Proposed by Herbert Spencer, English philosopher • Applied Darwin’s theory of evolution and natural selection to human society • Argued that society progressed and became better because only the fittest were successful

  21. Gospel of Wealth • Those who were wealthy, such as Carnegie, attempted to extend and soften the harsh philosophy of Social Darwinism through philanthropy • Believed that those who profited from society owed it something in return • Used their great fortunes to further social progress

  22. “Capitan’s of Industry” vs. “Robber Barons” • How would you view them? Create a T-Chart to compare the two terms. Use your notes and your knowledge to answer! • Examine the Pros and Cons