Industrialization in the United States
1860s – 1900s
“Captains of Industry”
Railroads
Steel
Oil
Banking
Technology
Unions
Cornelius
Vanderbilt
Andrew
Carnegie
John D.
Rockefeller
J.P.
Morgan
Thomas
Edison
Samuel
Gompers
Cornelius
Vanderbilt
Andrew
Carnegie
John D.
Rockefeller
J. P.
Morgan
Thomas
Edison
Samuel
Gompers
U.S. Businesses, 1870-1900
 Businessmen such as
Carnegie, Rockefeller,
Ford and Morgan
developed new methods
to expand business!
140,000
120,000
100,000
80,000
U.S.
Businesses,
1870-1900
 New business methods, 60,000
help from the gov’t and
“Captains of Industry”
begin to take control of
the U.S. economy...
40,000
20,000
0
1870 1880 1890 1900
 Department Stores…
 1862, A.T. Stewart, NYC
 Shopping becomes a
pastime!
 Urban consumers.
 Mail-Order Catalogs…
 Montgomery Ward, Chicago
 Sears & Roebuck, 1890s
 Rural consumers.
 Rise of corporations fueled the rise of “big business…”
 Small businesses could not compete! Shut down in “hard times”
Proprietorship
Who owns it?
How is money
raised?
Advantages
Disadvantages
Partnership
Corporation
1 person
2 or more
Investors, stockholders
* Savings, loans from banks
* Partners invest own
money, loans from bank
* Stock is sold, loans from
bank
* Easy!
* Low fixed cost…
* Small facilities!
* Partners share resp…
* Low fixed cost…
* Limited liability for
investors…
* Low operating cost…
* Difficult to raise money…
* Limited opportunities for
growth…
* Owner has unlimited liability…
* High operating costs…
* Disagreeing partners…
* Owners have unlimited
liability…
* High operating costs…
* High fixed costs…
* Large facilities and
equipment…
 Corporation: organization owned by many people but
treated by law as though it were a person.
 Stockholders buy stock…
 Raise money, spread the risk! (vs. partnership, proprietorship)
 Created Economies of Scale…
 Could produce goods more efficiently, which allowed to the
rise of “big business”
 Produce more goods @ cheaper price, continue to operate in
harsh economic times, drive out small competition!
 Santa Clara County v.
Southern Pacific Railroad
Company
 SCOTUS, 14th
Amendment and
Corporations…
 Received protection just
as individuals would!
 Competition created problems; low prices for consumers!!!
 Railroad pools:
 associations of competing railroads “for the purpose of a
proper division of the traffic at competitive points and the
maintenance of equitable rates that may be agreed upon.”
 Interstate Commerce Act, 1887
 By 1870s, competing businesses were merging together,
creating “big business”
Mergers, Consolidation of Industry
2. Creation of Trusts
3. Holding Companies
1.
 Example of consolidation:
 1870, Rockefeller’s Standard Oil Company owned 2% of the
country’s crude oil…
 By 1880 – it controlled 90% of U.S. crude oil!
How did it do
so???
 Monopolies:
 Single company achieves
control of an entire market!
 Trusts:
 Legal maneuver allowing
 Many states begin outlawing…
trustee to control several
companies & run them as
one.
 Holding Companies:
 Produce no actual
product.
 Controls several
companies, merging into
one large enterprise!
1. Monopolies
“Carnegie Steel”
Steel
Refineries
Railroad
Lines
Raw
Materials
Limestone
Quarries
Iron Ore
Fields
Coal
Mines
“Standard Oil Company”
Refinery
Refinery
Refinery
2. Trusts
 … by creating Trusts!
 Stocks would be traded in for trust certificates.
 “Super-Corporation” created from many small
corporations!
 Standard Oil, 1882 – first TRUST!
 J.P. Morgan
 Buy large blocks of stock
from companies looking to
sell… (discounted)
 Re-sell the stock for profit!
 These investment bankers
became interested in holding
companies and trusts…
 United States Steel, 1901