Bell Ringer
Write these down and respond on a
separate sheet of paper:
1. Why is competition between business so
important to the American economy?
2. What did men like Carnegie, Rockefeller
and JP Morgan do to stifle competition?
Money for nothing (and your
chicks for free…)
Big Business and Industry in
the late 1800s
Chapter 6, Section 2
September 7, 2010
Horatio Alger
 Alger was an incredibly successful author
in the late 1800s who wrote books that
appealed to both workers and their
bosses.
 All of Alger’s plots were pretty much the
same. A poor kid catches a break and
uses hard work to become successful.
 Is this really possible? Is this the
“American Dream?”
What is a corporation?
 A CORPORATION is a business owned
by many people, but acts as though it was
owned by a single person.
Advantages to a corporation
 Can sell STOCK, or shares of the
corporation, to raise money.
 Stockholders are not responsible for the
debts of the business, only the money that
they put into it.
 Corporations had higher FIXED COSTS –
loans, taxes, etc. but lower OPERATING
COSTS – the costs that it takes to run a
company.
 Goods could be made quickly in large
factories.
 Because of this, corporations made goods
CHEAPLY (thus bigger profits).
BESSEMER PROCESS
 In 1875, Henry Bessemer created an
easier and less expensive way to make
steel.
 Steel was used for railroads. Buildings,
and bridges.
 Andrew Carnegie uses this process to
build a steel company in Pittsburgh.
ANDREW CARNEGIE
 Born in Scotland and comes to the U.S. in
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1848. Example of the “American Dream.”
Starts work in a factory at $1.20 per week.
Works hard, gets promoted, and gets a
break – given $600 for his first investment.
Buys shares of stock in iron mills and
factories.
Begins to concentrate on making STEEL
in 1875.
Social Gospel
 Andrew Carnegie claimed that it was the
moral duty of those with wealth to use their
wealth to help society.
 He was specific about the fact that this is
voluntary action and not required by law.
VERTICAL INTEGRATION
 Carnegie’s steel companies used
VERTICAL INTEGRATION.
 Here, a company owns all of the different
businesses it needs for production.
 EXAMPLE: Carnegie owned iron ore
mines, coal fields, railroads, and steel
mills.
 If he owned all this, he kept production
costs LOW.
Social Darwinism
 Carnegie described his success in a
philosophy we know today as Social
Darwinism.
 This idea basically says that the strong will
survive in a laissez faire economy and that
that economy should not be regulated and
that the weak will not make it or will have
to find another profession or do their job
better in order to make a living.

JOHN D. ROCKEFELLER
 1870 – Forms the STANDARD OIL
COMPANY. The nation’s largest oil
company.
 Rockefeller uses vertical integration, but
he also uses HORIZONTAL
INTEGRATION.
HORIZONTAL INTEGRATION
 With Horizontal integration, you own all of
the companies in a particular field.
 Example: By 1880, Rockefeller controls
80% of the oil industry in the U.S.
 This can lead to a MONOPOLY – where
one company owns all of a product.
 Monopolies are bad, because there is NO
COMPETITION. A company can
set whatever prices it wants.
TRUSTS
 In many states, monopolies become
illegal.
 To get around this, companies form
TRUSTS – a way to own businesses
without violating the law.
Sherman Anti Trust Act
 By the 1890s, the government was
becoming concerned that expanding
corporations would stifle competition.
 Since the was no clear definition of what a
trust was, the government had difficulty
enforcing the act, and the Supreme Court
threw out most of the cases the
government brought against corporations.
 Government eventually gave up and
consolidation of businesses continued.
Railroad Robber Barons
 Some RR entrepreneurs get their fortune
by illegal means.
 Often BRIBERY was used with members
of Congress to get land grants for RRs.
 JAY GOULD is one of the worst examples
of these ROBBER BARONS.
Credit Mobilier Scandal
 1872 – A construction group known as the
Credit Mobilier company bribes Congress
to give RR contracts to the Union Pacific.
Cred Mob makes $$ off of this.
 An example of corruption with RRs during
this time.