Big Business
Development of Basic American
Industries- Corporations
Oil (drilling, refining, etc.)
• Refining- John D. Rockefeller,
Standard Oil Company
– used HORIZONTAL
INTEGRATION= companies
“merge” or consolidate
– led to the creation of TRUSTS=
business combination of
companies in the same field for
the purpose of reducing
competition or creating a
monopoly
Steel
Andrew Carnegie - used
VERTICAL INTEGRATION = buy
out all suppliers, gaining total
power over quality and cost of
product
– corporation owns all parts of the
production process
Banking
JP Morgan- US Steel (1901)
largest business organization
in US
– INTERLOCKING DIRECTORATE=
one individual serves on the
boards of competing firms.
– HOLDING COMPANY=
corporation that does nothing
but buy stock in other
companies, able to dictate
common policy
Advantages
Disadvantages
• 1. Greater efficiency
• 2. Economies of scale: as
production incr., cost of
product decreases
• 3. High productivity
• 1. Unfair business practices
• 2. Led to corruption and
bribery
• 3. Power sought to destroy
labor movements- which
protected workers
Public SentimentRobber Baron or Capt. Of Industry??
Criticized because made extreme profits using ruthless tactics
– not passing on $ to employees
– predatory pricing: selling cheaper to drive out competition
Philanthropy??- donated $ to charity
– Carnegie- “Gospel of Wealth”: responsibility of the wealthy to help the less
fortunate
Social Darwinism: survival of the fittest also applies to business, justifies
wealth
Call for regulation -> Gov’t action:
– Sherman Anti-Trust Act: trusts deemed illegal b/c interferes w/ free trade - not
specific, difficult to enforce
Creation of the “American Dream”- rags to riches, Horatio Alger novels