Industrialization
Trusts, Monopolies, and Labor Unions
Today’s Objective
• After this lesson, students will be able to…
• Identify and explain the strategies and tools used by both industrialists
and labor forces to further their position economically
• Essential Skills
• Students will assess information and draw conclusions
• Generate many diverse solutions to presented and found problems
5 Features of the Birth of American
Industrialization
• Coal Deposits used as cheap source of energy (“Fuel of
Industry”)
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Spread of Technological Innovation and the Factory System
Competition of firms to cut costs and prices
Overall Drop in Price Levels
Failure of Money Supply to keep pace with Productivity
Outcomes of Industrialization
• Major Industries Develop
• Railroads
• Steel
• Oil
• Machinery
• Meatpacking
• More Cheap Consumer Goods Produced
Positives and Negatives
Positives
• Creates jobs for everyone
• Cheaper goods (more consumerism)
• Development of middle class
• Opportunity for financial success
• US becomes rich world power
Negatives
• Poor pay
• Long hours
• Unskilled labor (goodbye artisans)
• Terrible labor conditions
• Need for works = women and children
Strategies of Competition
• Undercut Prices
• Buyouts
• Trusts and Monopolies
• Vertical and Horizontal Integration
New Vocabulary
• 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
• Horizontal
and Vertical
Integration
Vertical Integration
• Controlling all aspects of manufacturing from
start to finish – raw materials to finished product
• Example: A car company that ins expanding into
tire manufacturing
Horizontal Integration
• The merger of two or more companies which are in the
same line of business
• Example: If Acme and Giant merged together
What would Rockefeller say…
• Monopolies are good because we can produce goods at a lower cost to
consumers!
• Now everyone can have cheap oil and gas
What would the Populist (poor farmer) say…
• Monopolies are bad because they control the whole industry and
there is no competition over prices!
• We have to pay high prices to ship our wheat on trains!
• And these companies pay low wages to their workers!
Big Business and the Government
• Leave Business Alone
• Laissez-faire
• Social Darwinism
• Limit Business
• Sherman Anti-Trust Act (1890)
• Ineffective early
• 1911 - Splits Rockefeller’s Standard
Oil into 34 Companies
• 2001 – U.S. Court of Appeals found
that Microsoft violated the Sherman
Act antitrust laws
Baseball Manufacturers
• The company manufactures baseball bats for the MLB
• Contract has expired an you must negotiate a new one
• Its playoff time and you need bats
• Managers – you cannot allow production to halt (playoffs, World Series)
• Laborers – if you refuse to work, laborers in other places are happy to be
employed
• Must negotiate a contract – remember to save your best offer