How did Robber Barons gain so much wealth during the gilded age?
A long time ago in the United States of America…
Businessmen saw an opportunity to make lots of money and concentrate their power and influence over the nations economy.
New inventions and new production techniques made it possible to reduce manufacturing costs and transportation costs.
The country was changing, changing fast. Unfortunately the laws regulating business practices weren’t changing at the same pace…
The “Gilded Age” as it came to be known is named for the extreme wealth that some men built for themselves on the backs of the workers and using ruthlessly competitive practices.
Step 1 = create a product
Step 2 = reduce manufacturing costs
Step 3 = crush the competition
Step 4 = become a monopoly
1. Horizontal Integration
2. Vertical Integration
3. Conglomeration
Horizontal Integration
Combining Several Competing
Companies in the Same Industry
Oil Company A Oil Company B Oil Company C
Vertical Integration
MARKET
WIRE FACTORY
When one business controls various elements of the production & distribution process
STEEL MILL
IRON FURNACE
IRON MINE COAL MINE
Rockefeller’s Problem: NJ Law Prohibited
Corporations from Owning Other
Corporations
A smaller corporation allows a larger corporation to control (but not own) its stock “ in trust.
”
Co. A
STANDARD OIL
Co. B
HELD IN TRUST
Co. C Co. D Co. E
Interlocking Directorates
When the same people serve on the Board of
Directors of Corporations in the same industry
Board of Directors
Co. A Co. B Co. C Co. D Co. E
Also called “Holding Companies”
In 1888 NJ law changed to allow corporations to actually own (not just control) stock in other corporations.
Holding Company: When a one corporation owns a controlling percentage of another corporation stock
STANDARD OIL
’ s
Co. A Co. B
OWNERSHIP
Co. C Co. D Co. E
Example from Today
Philip Morris
(Tobacco Company)
OWNERSHIP
Kraft
Foods
Nabisco
Miller
Brewing
Altria
Capital
Various
Wineries