The Rise of American
Big Business
Industriali
zation
New Tools of Industrialization
 Before the Civil War, most American
businesses were owned by a single person or a
partnership
 After the Civil War, industry (mills, factories,
railroads, mines) now needed more capital
(money) for investment than one person or a
few partners could raise.
 What’s the solution???
CORPORATIONS
Purpose
 To raise capital (money $$)
 It is a business in which many
investors own shares called stocks
 In exchange for their investment,
each stockholder receives a
dividend, or part of the
corporation’s profits
 This limits investor losses
 If a corporation fails,
each investor only loses
his or her investment
Wall Street $$
MONOPOLY
Purpose
 Company or small group of
companies that has complete
control over a particular industry
 A monopoly often allowed a
company to raise prices to almost
any level it desired
 OUTCOMES:
 Competitors forced out of business
 Government tried to control them
 What do you
see?
 What do you
think the
cartoon is saying
about these
men?
TRUSTS
Purpose
 To get around government
regulation of monopolies,
companies combined their
management into trusts
 Shareholders in the
corporations received
dividends from the trust but
lost any say in its operation
 A way to get around laws
regulating monopolies
 Standard Oil Trust
Who were the industrial leaders?
 Andrew Carnegie –
Steel
 J.P. Morgan – Finance
(Investment Banker)
Who were the industrial leaders?
 John D. Rockefeller –
Oil
 Cornelius Vanderbilt
- Railroads
How did they get so powerful?
 Maximized profits
 Controlled entire industries
 Got rid of competitors
 Controlled prices
 Minimized costs
 Kept worker pay very low with long hours
 Controlled suppliers and transportation costs (they
owned all parts of their industry)
 Had no government interference!
LAISSEZ-FAIRE
 Government should not
interfere with business
 FREE-ENTERPRISE
SYSTEM – private
individuals make the
economic decisions
 Government is hands-off
SOCIAL DARWINISM
 Based on Charles Darwin's theory of evolution
 Social Darwinists thought life was a struggle for
the “survival of the fittest”
 Free-enterprise competition (laissez-faire) would
lead to the strongest businesses surviving – that’s
good.
 Government regulation would let the weak
survive, so it was bad.
 Government programs to aid the poor or workers
would let the weak survive, so they were bad.
How laissez-faire was it really?
 Govt Policy towards business – Was it
really “laissez-faire”?
 Land grants to railroads
 No limits on immigration (at first)
 Supported business owners during
strikes
ROBBER BARONS?
 Those who got rich at the expense of the poor and
the working class
 Fancy lifestyles of the rich – mansions, show off
their wealth
Carnegie’s Mansion in NYC
Vanderbilt Mansion, NY
Rockefeller
Mansion
or Philanthropists?
 But the Robber Barons also used their money to
help society (philanthropy):
 Can you think of places/things with the names
Rockefeller, Carnegie, Vanderbilt?
Gov’t Regulates Monopolies
1st try: Sherman Anti-Trust Act (1890)
 Tried to prohibit monopolies and trusts. It
prevented any business structure that “restrained
trade”
 Problem: It was too vague. Corporations got
around the act by forming other types of
companies.
2nd try: Clayton Anti-Trust Act (1914)
 “Fixed” the Sherman Anti-Trust Act
 This one worked.