The Rise of Big Business …and robber –barons, unions, and more. Background Info • When? - 2nd Industrial Revolution/Gilded Age - late 1800’s • Marked by - rise of big business and corporations - disparity of wealth - ultra wealthy industrialists - monopoly • Gilded Age: Gold plated but cheap on the inside Background Info • Capitalism - economic system in which private businesses run most industries - competition determines price and wage Background Info • Corporation: Business organization that raises money by selling stock to the public • Trust: merging of companies turning over control to a board of trustees Big Business Vocabulary • Corporations – companies sell shares of ownership called stocks to raise money • Entrepreneurs – people who take risks & organize new businesses • Capitalism – private businesses dominate the economy & promote competition • Laissez Fairre – govt. does not interfere in economic affairs (hands off big business) • Patent – exclusive right to manufacture or sell an invention III. Monopolies and Trusts • • Monopolies - characterized by a lack of competition to produce a good or service - Goal is to control the market for a product by destroying the competition - Achieved by controlling production and distribution of a good or service Trust – consolidate corporations under a Board of Trustees to control the market What is a monopoly? A Trust with complete control over an industry How do you create a monopoly? Vertical Integration acquiring companies that supply your business Horizontal Integration: buying out the competition How did Industrial Tycoons create monopolies? • Vertical Integration: acquiring companies that supply your business • Horizontal Integration: buying out the competition Robber Barons powerful industrialists who amassed huge personal fortunes, typically as a direct result of unfair business practices Carnegie Ford Morgan Rockefeller Vanderbilt Andrew Carnegie • Steel industry • Horizontal integration: bought out his competitors • Vertical Integration: bought coal mines, iron ranges, shipping, and railroads • Controlled from mine to market John D. Rockefeller • Oil Industry: Standard Oil • Horizontal Integration: bought out competitors • Vertical Integration: built barrel factories, warehouses, pipelines. Owned freight cars and developed own marketing • Controlled 90% of oil in US What do you think the cartoonist was trying to communicate with this image? How about this image? What was the cartoonist trying to communicate here? Owned interests in all parts of the industry, including drilling, refining, and storage of oil Received special rates from railroad companies, lowering his transport costs His fortune rests on Standard Oil What a Funny Little Government How did men like Carnegie and Rockefeller (robber barons) justify ownership of monopolies and the lavish lifestyle their wealth provided for them? Let’s talk about this as a class! “And while the law of competition may be sometimes hard for the individual, it is best for the race, because it ensures the survival of the fittest in every department.” Andrew Carnegie Social Darwinism (SD) • SD - idea that “survival of the fittest” determines success of people in society & marketplace – Strong survive & the weak fail – “Survival of the fittest” strengthens society as a whole – Justification for industrialists • Social Darwinists and capitalists agree that competition promotes progress Review 1. Describe laissez-faire economic policies. 2. A monopoly can best be characterized as ________ 3. Horizontal integration is _______________________ 4. Vertical integration is _________________________ 5. Describe three aspects of a monopoly. 6. What is a trust? 7. Describe “Robber Barons.” 8. Social Darwinists believed in the idea that _________ Were the Robber Barons good guys or bad guys? • Carnegie believed the wealthy should give back to the community • By the time he died, Carnegie had given away $350,695,653 (approximately $4.3 billion, adjusted to 2005 figures). At his death, the last $30,000,000 was likewise given away to foundations, charities, and to pensioners. • Rockefeller gave away over ½ of his $900 million including over $80 million to the University of Chicago Funded the building of over 300 libraries Labor Unions • Advantages of unions – Greater bargaining power (pay, hours & conditions) – Strength in numbers • Main purpose of a union is collective bargaining – Negotiations between management and a union about pay and work conditions on behalf of all the workers in the union • 2011: NFL & NBA Knights of Labor • Welcomed unskilled laborers including blacks, immigrants & women – 1869 first major national labor organization – Opened to all who “toiled” – Accepted all workers – Encouraged collective bargaining American Federation of Labor • Represented skilled labor only; most effective & enduring union – Main purpose was collective bargaining – Negotiated for better pay, fewer hours & safer conditions • 1886-present: most powerful leader was Samuel Gompers & strike was a ready tool Strikes • Haymarket Square Riot (Chicago, IL 1886) strikers clashed w/ police: several killed, 100's hurt – May 1, 1886 – Strikes & demonstrations were held nationwide, to demand an eight-hour workday for industrial workers – May 3, 1886 -- McCormick Reaper Works factory went on strike; unarmed strikers, police clash; several strikers were killed – Evening of May 4, 1886 -- A meeting of workingmen is held near Haymarket Square, Chicago. Police arrived to disperse the peaceful assembly; a bomb is thrown into the ranks of the police; the police open fire; workingmen evidently return fire; police and an unknown number of workingmen killed; the bomb thrower is not identified • Significance: Americans linked unions w/ radicals Homestead Strike • Wages were cut & workers went on strike in 1892 • Amalgamated union workers went on strike • 300 Pinkertons called in - 3 guards & 10 strikers killed • Significance: state govt. supported corporation (big business) State militia entered Homestead, PA to put down the strike of July 1892 Pullman Strike (1894) • Pullman Palace Car Co. (Chicago) cut wages but did not reduce workers rent • Largest strike in US history had interrupted US mail service – Eugene V. Debs (future Socialist Party of America) got involved • Significance: President Cleveland sent in the national guard & sided w/ corporation Govt. favored business in most disputes w/ labor in late 19th century Industry • Advantages of US in world market Raw materials, expanding markets & favorable govt. policies (LF) • Growth of manufacturing - Natural resources, investment capital and cheap labor • People left farms and moved to cities for jobs in industry Frederick Olmsted • Landscape architect - designed Central Park (Manhattan) and Prospect Park (Brooklyn) – also Boston, Chicago, Capital grounds in DC and Stanford Univ. Mass transit • Cities created forms of mass transit such as the subway and cable car Inventions • Nikolaus Otto invented the horseless carriage by using an internal combustion engine • Orville & Wilbur Wright were bicycle makers who invented the airplane after a 12 second flight Inventions • Alexander Graham Bell invented the telephone which transmitted voices using electricity • Thomas Edison-invented the light bulb and brought electricity to NYC Gold Standard • - money was backed by gold in the treasury (1882-1933) • Free Silver - some people wanted $ to be backed by silver as well to get more $ flowing in the economy Review 9. The main purpose of a labor union is ________________. 10. Unions negotiate about _______ and ________________. 11. The American Federation of Labor (AFL) represented ______________ and was the most _________________. 12. What type of workers did the Knights of Labor accept? 13. What was the significance of the Homestead strike? 14. The Pullman Strike ended when President Grover Cleveland ____________________. 15. What was the significance of the Haymarket bombing? 16. The govt. would usually support (business / labor) during strikes in the Industrial Revolution. Questions?