The Growth of Big Business in the Gilded Age Ch. 6, Sec 2
The Industrialists • Called “Robber Barons”. • Rose to wealth to by exploiting labor and bending laws. • Called “Captains of Industry”. • Rose to wealth by increasing supply of goods, expanding markets, and creating jobs. • Created libraries, universities, were philanthropists. • Both views are partially right.
John D. Rockefeller and Standard Oil • John D. Rockefeller founded Standard Oil Co. in 1870. • Made a fortune in grain, meat in Civil War. • Became so large, was able to make deals with RR’s and sell oil at lower prices. • Led to horizontal consoldiation– bringing together many firms of same business. • Created a Trust – many companies turn over assets to a board of directors and share in profits. • 40 companies joined Standard Oil Trust.
Andrew Carnegie and Carnegie Steel • Andrew Carnegie started in railroads and later began Carnegie Steel. • First to use Bessemer Process. • Used vertical consolidation. • Controlled businesses that made up all phases of a product’s development. • Mines, steel mills, shipping, railroads. • Charged less than competition because of economy of scale. • As production increases cost per item decreases.
Business Practices • Rockefeller, Carnegie, others used certain practices. • Horizontal & vertical consolidation, trusts, economy of scale. • Were Oligopolies – a few large business produce products profitably. • Ex – carmakers today. • Some became Monopolies – had complete control of a product or service. • Some formed Cartels – loose group of businesses that agree to limit supply and keep prices high.
Government Response • Gov’t was mostly pro-business, but worried about monopolies and trusts. • Passed Sherman Anti-Trust Act in 1890. • Outlawed any combination of companies that restrained interstate trade or commerce. • Ineffective until T. Roosevelt became president.