Chapter 13 Section2
The Growth of Big Business
Social Darwinism
• Survival of the fittest
• Believed in little
government
interference
• The best will thrive
• The unfit will be
weeded out
• Everyone would benefit
• The theory of evolution
applied to society
How did the theory of social Darwinism
affect the government’s relationship to big
business?
• It encouraged
government to take a
hands-off approach to
big business
• Promoted a belief
that society
should not
interfere with
peoples success
Oligopoly
• Occurs when to cost of
starting a certain type
of business is high
• A market structure
which is dominated by
only a few large,
profitable firms
• Modern examples:
cereals, cars, appliances
Monopoly
• When a business gains
complete control of a
product or service
• To achieve this, a
company must buy
competitors, or drive
them out of business
Cartel
• A loose association of
businesses that make
the same product
• Members of cartels
agree to limit the supply
of their product in order
to keep prices high
Andrew Carnegie
• Founded first plants to
use Bessemer Process
to produce steel
• Founded Carnegie Steel
in 1889
• Became very wealthy
Gospel of Wealth
• A personal philosophy
of Andrew Carnegie
• Became a movement of
the early 20th century
• People should be free
to make as much
money as they want,
but give it away after
they make it
Gospel of Wealth
• Carnegie donated
money to build 3,000
libraries
• Supported art and
research institutes
• Set up a fund to study
how to abolish war
• Had given away $350
million by the time he
died in 1919
Vertical Consolidation
• Business tactic of
Andrew Carnegie
• Gaining control of the
many different
businesses that make
up all phases of a
product’s development
Economies of Scale
• As production
increases, the cost of
each item produced is
lower
• Vertical Consolidation
allowed Carnegie to
maintain low
production costs
– Allowing him to cut his
prices
• put less wealthy
competitors at a
disadvantage
John D. Rockefeller
• Founded Standard Oil in
1870
• Used questionable
business tactics
• Gave $500,000 to
charity
• Helped found the
University of Chicago
Horizontal Consolidation
• Business tactic of
Rockefeller
• Bringing together many
firms in the same
business (taking over
your competitors)
• Allowed Rockefeller to
control an extremely
high percentage of the
oil industry
How did methods such as vertical and horizontal
consolidation, and factors such as economies of scale
help companies dominate their markets?
• Through horizontal
consolidation,
companies purchased
competing companies
• Through vertical
consolidation and
economies of scale,
companies lowered
production costs so
much that other
companies could not
compete
Trust
• Different firms in the
same business (oil for
example) being run as
one company by a
board of trustees
• Rockefeller was able to
combine 40 oil
businesses into his trust
Sherman Antitrust Act
• Outlawed any
combination of
companies that
restrained interstate
trade or commerce
– The law was rarely
enforced by probusiness courts
Why did the Sherman Antitrust Act seek
to stop big business from forming trusts?
• Trusts threatened fair
competition in industry
• Trusts may cause prices
to rise due to lack of
competition
What were some features of the new
big businesses?
• Large amounts of
capital
• Wider geographic span
• Broader range of
operations (they make
more than one thing)
• Revised role of
ownership (business
too big for an owner to
run, so they hired
managers)
• New methods of
management (in order
to keep track of all the
was being produced
and spent)