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Age of Big Business Age of Monopolies. Background: Capitalism – economic system. Private ownership of the means of production Free enterprise – to meet the demands Profit motive – goal to make $ Market price – buyers & sellers Competition. New Business Culture.

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Age of big business age of monopolies
Age of Big Business Age of Monopolies

Background capitalism economic system
Background:Capitalism – economic system

  • Private ownership of the means of production

  • Free enterprise – to meet the demands

  • Profit motive – goal to make $

  • Market price – buyers & sellers

  • Competition

New business culture
New Business Culture

1. Laissez Fairethe ideology of the Industrial Age.

  • Individual as a moral and economic ideal.

  • Individuals should compete freely in the marketplace.

  • The market was not man-made or invented.

  • No room for government in the market!

2 social darwinism
2.Social Darwinism

  • British economist.

  • Advocate of laissez-faire.

  • Adapted Darwin’s ideas from the “Origin of Species” to humans.

  • Notion of “Survival of the Fittest.”

Herbert Spencer

2 social darwinism in america
2.Social Darwinism in America

  • Individuals must have absolute freedom to struggle, succeed or fail.

  • Therefore, state intervention to reward society and the economy is futile!

William Graham SumnerFolkways (1906)

New business culture the american dream
New Business Culture:“The American Dream?”

3. Protestant (Puritan) “Work Ethic”

  • Horatio Alger [100+ novels]

Is the idea of the “self-made man” a MYTH??

Causes of rapid industrialization
Causes of Rapid Industrialization

  • Steam Revolution of the 1830s-1850s.

  • The Railroad fueled the growing US economy:

    • First big business in the US.

    • A magnet for financial investment.

    • The key to opening the West.

    • Aided the development of other industries.

Causes of rapid industrialization1
Causes of Rapid Industrialization

  • Technological innovations.

    • Bessemer and open hearth process

    • Refrigerated cars

    • Edison

      • “Wizard of Menlo Park”

      • light bulb, phonograph, motion pictures.

Thomas alva edison
Thomas Alva Edison

“Wizard of Menlo Park”

Alexander graham bell
Alexander Graham Bell

Telephone (1876)

Alternate current
Alternate Current

George Westinghouse

The airplane
The Airplane

Wilbur Wright Orville Wright

Kitty Hawk, NC – December 7, 1903

Model t automobile
Model T Automobile

Henry FordI want to pay my workers so that they can afford my product!

U s patents granted
U. S. Patents Granted

1790s  276 patents issued.

1990s  1,119,220 patents issued.

Essential question
Essential Question

Industrialization increased the standard of living and the opportunities of most Americans, but at what cost?

3 new vocabulary words
3 New Vocabulary words…

  • Monopoly: A company that completely dominates a particular industry

  • Trust: a set of companies managed by a small group known as trustees, who can prevent companies in the trust from competing with each other

  • Corporation: A company recognized by law to exist independently from its owners, with the ability to own property, borrow money, sue or be sued

Corporate monopolies
Corporate Monopolies



Vertical Integration

Age of big business age of monopolies1
Age of Big Business – Age of Monopolies

  • To gain control of a product or business

  • Types of monopolies

    • Pools (pooling agreements) RR’s – divide routes & agree not to compete

    • *Trusts – competing companies run by the same Board of Trustees

    • Holding companies

    • Interlocking directorates

    • Mergers/Consolidations

      * See slide # 23

New type of business entities1
New Type of Business Entities

  • Trust:

    • Horizontal Integration John D. Rockefeller

  • Vertical Integration:

    • Gustavus Swift  Meat-packing

    • Andrew Carnegie  U. S. Steel

Andrew carnegie 75 billion
Andrew Carnegie$75 Billion

  • Andrew Carnegie came from Scotland with his parents in 1848.

  • In 1861, at the age of 26, he started up the Freedom Iron Company, and used the new Bessemer process for making steel

  • He formed all of his companies into the Carnegie Steel Company in 1899, which controlled raw materials, manufacturing, storage, and distribution for steel.

    • Merged steps of production to cut costs of production

    • Vertical Integration

  • Wrote “Gospel of Wealth”

  • Established free lending libraries

On wealth
“On Wealth”

  • The Anglo-Saxon race is superior.

  • “Gospel of Wealth” (1901).

  • Inequality is inevitable and good.

  • Wealthy should act as “trustees” for their “poorer brethren.”

Andrew Carnegie

John d rockefeller 192 billion
John D. Rockefeller$192 Billion

  • Born in 1839 -started as a bookkeeper

  • He established one of the first oil refineries

  • 1870—With partners, forms a business trust: Standard Oil

  • At its peak, controlled 90% of all oil companies

    • Noted for very ruthless tactics – price wars, intimidation

    • Merged companies that produced same product

      • Horizontal integration

  • Later established foundations, scholarships,

John d rockefeller oil
John D. Rockefeller – Oil

  • Horizontal integration – merged companies that produced same product

  • At one point controlled 90% of the oil refineries in the US

  • Noted for very ruthless tactics – price wars, intimidation

  • Later established foundations, scholarships,

Cornelius vanderbilt railroads
Cornelius Vanderbilt – Railroads

  • New York Central Railroad

  • Merged railroad lines between NY and Chicago

Cornelius commodore vanderbilt
Cornelius [“Commodore”] Vanderbilt

Can’t I do what I want with my money?

William vanderbilt
William Vanderbilt

  • The public be damned!

  • What do I care about the law? H’aint I got the power?

Jp morgan banking finance
JP Morgan – banking & finance

  • Loaned money to businesses

  • Took over bankrupt railroads and merged into profitable lines

  • Bought Carnegie Steel and merged with others to form US Steel

The reorganization of work
The Reorganization of Work

Frederick W. Taylor

The Principles of Scientific Management (1911)

Model t prices sales
“Model T” Prices & Sales

  • Revolutionized auto making by using the assembly line to produce more affordable cars

Of billionaires in 1900
% of Billionaires in 1900

% of Billionaires in 1918

Robber barons or captains of industry

Robber Barons or Captains of Industry?

Do millionaires/ billionaires have a responsibility to help the poor?

Captains of industry or robber barons

Captain of Industry

Entrepreneurs, risk takers

Used the system & available resources to make a fortune

Role model


Robber Baron

Ruthless businessmen

Exploited workers & consumers in order to make a profit

“Captains of Industry” or “Robber Barons”

The robber barons of the past
The ‘Robber Barons’ of the Past

Abuses by railroads
Abuses by Railroads

  • Pooling Agreements

    • Divide the sales territory and fix prices

  • Long haul, short haul discrimination

    • Charge more for short distances where there is no competition

  • Rebates and kickbacks to special customers

  • Unannounced rate increases

  • Free passes to government officials

Granger laws to help out farmers
Granger laws to help out farmers

  • Farmers complained about poor service and high rates charged by railroads

  • States passed “granger laws” to regulate railroads within the state

  • Granger laws were challenged in the Supreme Court (Court cases to follow)

Interstate commerce act 1887
Interstate Commerce Act – 1887

  • Created the Interstate Commerce Commission to end abuse by railroads

    • No pools, rebates, special deals

    • Public posting of rates, must be fair and reasonable

    • Set precedent for federal regulation of interstate commerce

Sherman anti trust act 1890
Sherman Anti-Trust Act – 1890

  • Declared combinations in the form of a trust in restraint of trade to be illegal (if it lessens competition)

    • Weak, vague language but set the principle that the government should break up monopolies

Munn v illinois 1877


State of Illinois had passed Granger Laws to set rates of railroads and grain elevators


Did Illinois law deprive railroads of property (profits) without due process?


State law was constitutionalbecause the law was related to the public interest


Railroad rates continued to be limited by the state government

Munn v. Illinois (1877)

Wabash st louis pacific railway co v illinois 1886


Long-haul, short-haul discrimination by the railroads within the state of Illinois (penalties were applied)


Could the state regulate railroads on the intrastate portion of an interstate trip?


State law was unconstitutional

The power to regulate interstate commerce belongs to Congress


Put pressure on Congress to act if the states can’t regulate the railroads

One year after the decision Congress passed the Interstate Commerce Act

Wabash, St.Louis, & Pacific Railway Co. v. Illinois (1886)

United states v e c knight co 1895


American Sugar Refining Co. bought stock in smaller companies & controlled 90% of sugar processed in U.S.


Can Congress regulate manufacturing?

Can Congress outlaw “manufacturing monopolies”?


Federal Gov’t cannot regulate refineries because they were manufacturing operations, not directly related to interstate commerce

State gov’t. can regulate local activities under the terms of 10th Amendment


Few attempts made to prosecute corporations in restraint of trade (most against unions as “unreasonable restraint of trade”!)

United States v. E.C. Knight Co. (1895)