Rise of Big Business:
Theories of Capitalism
Rise of Capitalism
Capitalism Defined
 Private
businesses run most industries.
 Profits drive business.
 Law


High price, increased production.
Low price, reduced production.
 Law


of Supply (Business Owners).
of Demand (Buyers).
High price, decreased demand.
Low price, increased demand.
Conservative Economic Theories
Laissez Faire Economic Theory
 Adam
Smith, The
Wealth of Nations,
1776.
 Government
does not
have to be involved.
 “Hands
off” policy of
the government.
Adam Smith
http://www.biografiasyvidas.com/biografia/s/fotos/smith_adam.jpg
Conservative Economic Theories
Laissez Faire Economic Theory

Allow businesses to do
what needs to be done
with little government
intervention.

Government regulation
will reduce prosperity and
self-reliance.
The Wealth of Nations
http://www.ibiblio.org/ml/covers/WealthNations.jpg
Conservative Economic Theories
Social Darwinism
 Natural
selection and
survival of the fittest
should be applied to the
economy.
 Concentration
Darwinian Theory
http://www.flyfishingdevon.co.uk/salmon/year3/psy339evaluationevolutionary-psychology/darwin-ape.jpg
of wealth
in the hands of the “fit”
was a benefit to the
human race as a whole.
Conservative Economic Theories
Social Darwinism

Professor William G.
Sumner of Yale.

Help for the poor was
misguided because it
interfered with the
laws of nature.

Would only weaken
the evolution of the
species by preserving
the unfit.
Social Darwinism
http://cache.eb.com/eb/image?id=24413&rendTypeId=4
Conservative Economic Theories
The Gospel of Wealth: God Gave Me My Riches
 The
use of religion to
justify the wealth of
successful industrialists.
 John
D. Rockefeller:
“God gave me my riches.”
John D. Rockefeller
http://www.chelationtherapyonline.com/anatomy/images/JDRd.jpg
Conservative Economic Theories
The Gospel of Wealth: God Gave Me My Riches
...To Use for the Common Good
 Andrew
Carnegie,
Wealth.
 Argued
that the
wealthy had a Godgiven responsibility to
carry out projects of
civic philanthropy for
the benefit of society.
Andrew Carnegie,
King of Steel
http://cache.eb.com/eb/image?id=70619&rendTypeId=4
Rise of Capitalism
New Ways of Doing Business
Mergers
 Horizontal Merger



Combining two or more companies
competing in the same industry.
Example: If Coke & Pepsi would
merge.
Vertical Merger


Combining companies that are
involved in different stages of
production of a certain product.
Example: Steel.

Carnegie bought iron and limestone
mines in Minnesota, coal fields in
Pennsylvania and West Virginia,
railroad lines from Cleveland and Erie
to Pittsburgh, and barge companies on
the Three Rivers and Great Lakes. .
Merger Cartoon
http://www.cartoonstock.com/newscartoons/cartoonists/dbr/lowres/
dbrn449l.jpg
Rise of Capitalism
New Ways of Doing Business
Monopolies
 A company gains near
exclusive control of an
industry.
 Little or no competition.
 Controlled the price and
quality of a product.
Mr. Monopoly
http://blogs.usatoday.com/photos/uncategorized/blogmonopoly.jpg
Rise of Capitalism
New Ways of Doing Business
Advertising
 Targeted what people wanted or needed through
catchy slogans, bright posters, and catalogs.
Early Coca-Cola Ad
http://www.antiquetrader.com/mark/content/binary/CocaCola1.jpg
Rise of Capitalism
New Ways of Doing Business

Department Stores &
Catalog Shopping
Catalog shopping allowed people
from across the country to order
goods and services from other
parts of the country.


Department stores.



Sears catalog was the most popular.
One-stop shopping and services are
offered for dry goods.
Wanamaker’s, Macy’s, JC Penney,
Sears, Kauffmann’s, etc.
Woolworth’s Five and Dime
Stores.


The original Wal-Mart or K-Mart.
Offered cheaper goods to the public.
Bloomingdale’s First Store
http://www.kipnotes.com/bloomies1ststore.jpg
Rise of Big Business:
The Robber Barons
John D. Rockefeller
Oil Refining


Formed the Standard Oil
Trust.
Destroyed competition
through “horizontal
integration” and price
slashes.



Rockefeller’s Oil Trust
http://aftermathnews.files.wordpress.com/2007/07/rockefeller_octopus.jpg

H. I.—Mergers within the
same industry to gain control.
Lower prices leads to more
control of the market.
By 1880, controlled 90% of
the nation’s oil refining
capacity.
Supported the arts,
medicine, and education.
Andrew Carnegie
Steel, Coal, Iron




Started poor, but invested
wisely.
Built up enough capital to invest
in steel.
Used the Bessemer process to
produce strong steel more
cheaply.
Used “vertical integration” to
gain control.


Purchase companies involved in the
production of materials for certain
projects.
The Gospel of Wealth.

The rich were morally obligated to
use wealth for fellow citizens.
Andrew Carnegie
http://www.libraryhistorybuff.org/images/pic-carnegie-cartoon-72.jpg
John Pierpont Morgan
Banking, Railroads, Steel


Son of a rich banker.
Bailed the U.S. out of
financial problems.
 Used his profits from
banking to buy into other
industries.

John Pierpont Morgan
Bailing out the US Gov’t.
http://blogs.usatoday.com/photos/uncategorized/blogmonopoly.jpg

Bought Carnegie Steel in
1903 for $500 million.
Used companies to drive
out competition.
 Very, very ruthless.
Cornelius Vanderbilt
Railroads

Started as a shipping
company.
 Bought small railroads
during the Civil War.
 Provided more efficient
service by purchasing
smaller lines and combining
them.
Cornelius Vanderbilt
http://i.a.cnn.net/money/galleries/2007/fortune/0702/gallery.richestameric
ans.fortune/images/vanderbilt.jpg
George Westinghouse
Railroad Brakes, Electricity

Produced air brakes for rail
cars.
 Made it safer for trains to
haul more cars and travel
more quickly.
 Dominated the air brake
market with his patents.
George Westinghouse
http://www.westinghousenuclear.com/images/timeline_images/1868_you
ng_george.jpg
George Pullman
Railroad Cars

Built sleeping and dining
cars.
 Created his own town for
his workers, wanting to
provide them with their
basic needs and encourage
an educated, healthy, and
peaceful working
population.
George Pullman
http://www25.uua.org/uuhs/duub/images/georgepullman1.jpg
Merit Point
Question #5

In his “Gospel of Wealth,” Andrew Carnegie
articulated the view that
A. the wealthy were entitled to their riches and had no
responsibility to share it with others.
B. only those born into wealth were the real economic
leaders of the nation.
C. religious leaders had a responsibility to convince their
parishioners that success was attainable to those who
worked hard.
D. capitalism and Christianity were intimately related in
the progress of individuals and nations.
E. the wealthy were morally obligated to use some of their
wealth for the improvement of society.