Define & identify vocabulary words
Review: free enterprise laissez-faire entrepreneur robber baron
New: corporation stockholders captain of industry rebates Andrew Carnegie Henry Bessemer
Carnegie Steel vertical integration
Big Business and the American Dream
At the end of the Civil War in 1865, business dominated the US economy. Offices, distribution centers, warehouses & stores were built near factories. Transportation & communication centers sprouted up, connecting cities. Many of these businesses were owned and operated by one man or one group of businessmen.
As these businesses grew in size, the smaller competition was forced to go out of business. So the federal government abandoned laissez-faire [hands off] and passed regulations on industry where needed.
Big is Better: The Corporation
A corporation is an organization owned by many people and is treated by the law as though it was owned by only 1 person. McDonald’s
Corporation is a corporation owned by many and treated as 1 person.
Corporations own property, pay taxes, & make contracts. Those who own a corporation are called
stockholders, investors who buy certificates of ownership called
stocks. Investors who buy stocks help the company, which invests in technology, equipment, or workers in order to cut costs, be efficient & make better products.
In the late 19 th & early 20 th centuries, big corporations had advantages over small companies. They produced more goods, cheaply and remained in business during tight economic periods.
Some corporations made deals with railroads to get rebates or discounts on shipping costs. They promised the railroad to ship all their goods on that railroad if they were given rebates. This helped the corporations to lower their costs and their prices.
Small businesses could not compete and some were forced out of business. Small businesses said this was unethical because it stopped honest competition.
Captain of Industry: an honest businessman
Many entrepreneurs had great ideas for starting a business. They had money, a great product, and sharp business sense to become a success. They were called captains of industry because they were honest business and helped society. They were not crooks and some of these captains of industry earned great fortunes.
1908: Andrew Carnegie
Andrew Carnegie earned the title of the
“richest man in the world” in 1901 when he sold his steel corporation for $480 million. In today’s dollars that equals $12.3 billion.
Carnegie claimed he was a captain of industry because he started out as a poor, immigrant teen, who worked hard and became a success.
Background: Carnegie, came to the US from Scotland in 1848 because his father lost his job as a weaver. He was 13. Carnegie got work right away in a Pennsylvania textile mill. He was a bobbin
boy, changing spools of thread on machines, earning $1.20/ week.
At age 16, he became a telegraph messenger and worked his way up to be an assistant telegrapher in 1853 at the Pennsylvania
Railroad. It was here that he learned all about the railroad industry. In 1856, at age 21, he became the Pennsylvania Railroad secretary to its president.
That same year Carnegie invested in Pullman Sleeping Cars and made a $5,000 profit. He took the money, invested in oil and bridges. By the time he was 27 he was earning $50,000 a year.
In 1865 he bought the Keystone
Bridge Company and focused on iron and steel manufacturing. In 1872,
Carnegie went to England to meet
Henry Bessemer, a British inventor of a process for making clean steel, cheaply
& efficiently. Carnegie retuned to the
US with Bessemer’s process & started making the best steel in the nation [see drawing at left] , opening his first steel mill in Pittsburg in 1875. By 1889, his Carnegie Steel Corporation was the largest in the world.
Carnegie used clever business practices to ensure his success.
He saved money by owning and controlling the entire production process for making steel from mining raw materials to transporting materials to the manufacture and sale of finished products. This process of owning every aspect of production is called vertical integration, when a company owns all of the different businesses needed to make a product.
Instead of paying companies for raw materials, Carnegie bought coalmines & iron fields.
He bought railroads and ships to transport materials to and from his steel mills. This saved
Carnegie Steel Co. money.
Vertical integration meant that Carnegie controlled every the aspect of the making of
steel from beginning to end. Carnegie undersold all of the competition.
Carnegie’s business plan gave him 100% control of the steel industry. He hired thousands of workers, paid them low wages & worked them 10 to 12 hours/ day in dangerous conditions. But his business practices made Carnegie a $40 million in profit in 1901 alone. He produced ¼ of the world’s steel. For these reasons,
Carnegie earned the title: “steel king.”
Carnegie Steel Corp. 1908 Homestead, Pennsylvania
Questions:
1. Make a timeline of Andrew
Carnegie’s life.
2. Was Carnegie a captain of industry or a robber baron?
Prove with specific evidence.