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Section 2
Page 578
2 The Rise of Big Business
Prepare to Read
SECTION OBJECTIVES
1. Identify factors that were responsible for the growth of huge steel
empires after the Civil War.
2. List the benefits corporations and
bankers provided to the growing
economy.
3. Explain how John D. Rockefeller
amassed his huge oil holdings.
4. Summarize the arguments for and
against trusts.
LESSON PLAN
Objectives
Key Terms
In this section, you will
• Identify reasons for the
growth of huge steel empires.
• List the benefits corporations
and bankers provided to the
growing economy.
• Explain how John D.
Rockefeller amassed his huge
oil holdings.
• Summarize the arguments for
and against trusts.
Bessemer process
vertical integration
corporation
stock
dividend
trust
monopoly
free enterprise system
Sherman Antitrust Act
Target Reading Skill
Clarifying Meaning Copy the concept web below. Include three or
four blank ovals. As you read, fill in
each blank oval with a major development associated with the rise of
big business during the late 1800s.
Corporations
develop
Carnegie builds
huge empire
STEEL
INDUSTRY
THRIVES
Main Idea As industry boomed, American businesses grew and
developed new ways of organizing and limiting competition.
1. Engage
Warm-Up Activity Have students
consider this question: “How would
having a single company produce all
video and computer games affect the
variety and quality of games available?”
Activating Prior Knowledge Ask
students to suppose that they have
designed a new video or computer game
that is unlike all existing games. Have
them discuss this question: “Would it be
easier to sell your game if there were
only one company or several companies
that produced such games?”
Setting the Scene
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granted permission to display this
image in electronic format. Please
see the teacher's edition of your
textbook for this image.
“
A cloud of smoke hangs over it by day. The glow of
scores of furnaces lights the riverbanks by night. It
stands at the junction of two great rivers, the Monongahela which flows down today in a [slow] yellow stream,
and the Allegheny which is blackish.
”
—Charles Philips Trevelyan, Letters From North America
and the Pacific, April 15, 1898
Trevelyan met some of Pittsburgh’s wealthiest people. He thought
they were “a good breed and shrewd and friendly.”
Pittsburgh was one of many cities that drew its energy from business and industry in the late 1800s. Its wealthiest citizens were a
new breed of American business leaders. They were bold, imaginative, sometimes generous, and sometimes ruthless. By the end of the
1800s, they had made their businesses big beyond imagining.
2. Explore
Steel-mill pollution
Ask students to read the section. For
homework, have them list the industries
described and say whether each one is
still important today.
3. Teach
Divide the class into groups. Have each
group choose one of the following factors and explain its role in the rise of corporations: (a) railroad growth, (b) need
for investment capital, (c) plentiful
natural resources, (d) sale of stocks,
(e) vertical integration, or (f) creation
of monopolies and trusts. Make a master chart on the board in which each
group can add the development that
it researched and the development’s
impact on the rise of big business.
In the spring of 1898, an Englishman named
Charles Trevelyan visited Pittsburgh. Trevelyan found Pittsburgh to
be a rough town dominated by the steel business.
Growth of the Steel Industry
The growth of railroads after the Civil War spurred the growth of the
steel industry. Early trains ran on iron rails that wore out quickly.
Railroad owners knew that steel rails were much stronger and not as
likely to rust as iron. Steel, however, was costly and difficult to make.
Making Steel a New Way In the 1850s, William Kelly in the
United States and Henry Bessemer in England each discovered a
new way to make steel. The Bessemer process, as it came to be
called, enabled steel makers to produce strong steel at a lower cost.
As a result, railroads began to lay steel rails.
578
★
Chapter 20
Industrial Growth
RESOURCE DIRECTORY
Teaching Resources
Cooperative Learning in the Middle Grades, p. 97
Unit 6/Ch. 20
• Map Mystery: From Competition to
Combination, p. 24
• Guided Reading and Review, p. 59
Guide to the Essentials (English/Spanish), p. 111
Other Print Resources
Voices of Freedom The Talent for Wealth,
pp. 146–147
Technology
Section Reading Support Transparencies
578 ★ Chapter 20
Color Transparencies
• Corporations, p. B-5
Guided Reading Audiotapes (English/Spanish),
Ch. 20
Student Book on Audio CD
Prentice Hall United States History Video
Collection™ Vol. 11, Ch. 13, “The Modern
Corporation,” 4:15 min.
Prentice Hall Presentation Pro CD-ROM, Ch. 20
TeacherExpressTM CD-ROM
Exploring Primary Sources in U.S. History
CD-ROM
• Wealth, Andrew Carnegie
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Page 579
Other industries also took advantage of the cheaper steel.
Manufacturers made steel nails, screws, needles, and other items.
Steel girders supported the great weight of the new “skyscrapers”—
the new tall buildings going up in the cities.
4. Assess/Reteach
To close the lesson, have students
write a sentence for each subsection
that states the most important main
idea. As an alternative, have students
complete the Section Assessment.
If a student’s Assess activity does not
reflect adequate understanding of the
lesson, you might assign the Guided
Reading and Review worksheet or
Guide to the Essentials for this section.
Thriving Steel Mills Steel mills sprang up in cities throughout the
midwest. Pittsburgh became the steel-making capital of the nation.
Nearby coal mines and good transportation helped Pittsburgh’s steel
mills to thrive.
The boom in steel making brought jobs and prosperity to Pittsburgh and other steel towns. It also caused problems. The yellowcolored river that Charles Trevelyan saw on his visit to Pittsburgh in
1898 was the result of years of pouring industrial waste into waterways. Steel mills belched thick black smoke that turned the air gray.
Soot blanketed houses, trees, and streets.
BACKGROUND
Andrew Carnegie’s Steel Empire
Connecting With
Many Americans made fortunes in the steel industry. Richest of all
was a Scottish immigrant, Andrew Carnegie. Carnegie’s ideas about
how to make money—and how to spend it—had a wide influence.
Controlling the Steel Industry During a visit to Britain, Carnegie
had seen the Bessemer process in action. Returning to the United
States, he borrowed money and began his own steel mill. Within a
short time, Carnegie was earning huge profits. He used the money to
buy out rivals. He also bought iron mines, railroad and steamship
lines, and warehouses.
Soon, Carnegie controlled all phases of the steel industry—
from mining iron ore to shipping finished steel. Gaining control of
all the steps used to change raw materials into finished products is
called vertical integration. Vertical integration gave Carnegie a
great advantage over other steel producers. By 1900, Carnegie’s
steel mills were turning out more steel than was produced in all of
Great Britain.
The “Gospel of Wealth” Like other business owners, Carnegie
drove his workers hard. Still, he believed that the rich had a duty to
help the poor and to improve society. He called this idea the “gospel
of wealth.” Carnegie gave millions of dollars to charities. After selling
his steel empire in 1901, he spent his time and money helping people.
The Corporation and the Bankers
Before the railroad boom, nearly every American town had its own
small factories. They produced goods for people in the area. By the
late 1800s, however, big factories were producing goods more cheaply
than small factories could. Railroads distributed these goods to
nationwide markets. As demand for local goods fell, many small factories closed. Big factories then increased their output.
Expanding factories needed capital, or money, for investment.
Factory owners used the capital to buy raw materials, pay workers,
and cover shipping and advertising costs. To raise capital, Americans
adopted new ways of organizing their businesses.
Culture
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granted permission to display this
image in electronic format. Please
see the teacher's edition of your
textbook for this image.
Andrew Carnegie
1835–1919
When Andrew Carnegie was 12, his
family left Scotland to immigrate to
the United States. He first worked
in a cotton factory for $1.20 a week.
Then, he worked as a telegram
messenger. Carnegie worked long
hours during the day and studied
Morse code at night.
Luck favored Carnegie when
Thomas Scott, superintendent of
the Pennsylvania Railroad, hired
the young man as his telegrapher.
Scott introduced Carnegie to other
industrial leaders and helped him
invest his savings. Although Carnegie earned only a modest salary,
shrewd investment made him a millionaire. By the 1890s, he was one
of the world’s richest men.
How did Carnegie take
advantage of his good luck?
Chapter 20
CUSTOMIZE FOR . . .
ESL
Building Vocabulary To review the vocabulary for this section,
organize ESL students into pairs, or pair an ESL student with a more
proficient English speaker. Give each pair a note card containing one
of the key terms for this section. Have student pairs find their word in
context in the section and write its definition on the other side of the
card. After student pairs have defined their term, have them write a
sentence using it correctly. Then, put groups with these terms
together: (1) vertical integration, corporation; (2) stock, dividend;
(3) trust, monopoly. Have these groups write two or three sentences
telling how their terms are related and a sentence that correctly
uses both terms.
Section 2
★
Free Libraries After Andrew
Carnegie became very wealthy, he
donated 2,509 libraries to towns and
cities throughout the English-speaking
world at a cost of more than $56 million.
His intention was that his libraries would
be “free to the people forever,” words
that often were inscribed on the buildings. Many of these libraries are still in
use today.
ACTIVITY
Group Work
Planning for a Business To reinforce the concept of vertical integration,
tell students that they own a company.
Have them form small groups, and
assign each one a business or industry,
such as car manufacturing or electronics. Say: “List the companies you would
need in order to control the supply of
raw materials and parts, transportation
of new products, and sales outlets.” To
begin, students can list the steps from
raw materials to finished products. Have
the groups share their lists with the
class. (Logical/Mathematical)
579
ANSWER Carnegie used his position
as telegrapher for Thomas Scott to
make contacts with wealthy people
and then make shrewd investments.
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The Rise of the Corporation Many expanding businesses
became corporations. A corporation is a business that is owned by
investors. A corporation sells stock, or shares in the business, to
investors, who are known as stockholders. The corporation can use
the money invested by stockholders to build a new factory or buy
new machines.
In return for their investment, stockholders hope to receive
dividends, or shares of a corporation’s profit. To protect their investment, stockholders elect a board of directors to run the corporation.
Stockholders face fewer risks than owners of private businesses
do. If a private business goes bankrupt, the owner must pay all the
debts of the business. By law, stockholders cannot be held responsible for a corporation’s debts.
BACKGROUND
Connecting With
Government and Citizenship
Saving the Gold Standard John
Pierpont Morgan provided loans to the
United States government to help save
the gold standard. The gold standard
fixes the basic unit of currency—the
dollar—equal to a set amount of gold.
His influence extended to other areas
of American life as well, including the
arts. He was one of the early supporters of the Metropolitan Museum of Art
in New York City.
BACKGROUND
Summarize
Read the paragraphs
under the heading “Banks and
Industry.” Write a brief summary
explaining how banks were linked
with the development of big business. Add this information to your
concept web.
Turning Points
A Slick Operator Like Carnegie,
Rockefeller valued vertical integration.
He bought railroad tanker cars to carry
his oil and forced a 10 percent rebate
from the railroads. He also got kickbacks on his competitors’ oil shipments.
When pipelines began to carry oil,
Rockefeller set up a pipeline network.
By 1890, he was worth $800 million, an
incredible fortune at the time.
Banks and Industry In the years after the Civil War, corporations
attracted large amounts of capital from American investors.
Corporations also borrowed millions of dollars from banks. These
loans helped American industry grow at a rapid pace. At the same
time, bankers made huge profits.
The most powerful banker of the late 1800s was J. Pierpont
Morgan. Morgan’s influence was not limited to banking. He used his
banking profits to gain control of major corporations.
During economic hard times in the 1890s, Morgan and other
bankers invested in the stock of troubled corporations. As large
stockholders, they easily won seats on the boards of directors. They
then adopted policies that reduced competition and ensured big
profits. “I like a little competition, but I like combination more,”
Morgan used to say.
Between 1894 and 1898, Morgan gained control of most of the
nation’s major rail lines. He then began to buy up steel companies,
including Carnegie Steel, and to merge them into a single large corporation. By 1901, Morgan had become head of the United States
Steel Company. It was the first American business worth more than
$1 billion.
Rockefeller’s Oil Empire
Industry could not have expanded so quickly in the United States
without the nation’s rich supply of natural resources. Iron ore was
plentiful, especially in the Mesabi Range of Minnesota. Pennsylvania, West Virginia, and the Rocky Mountains had large deposits of
coal. The Rockies also contained minerals, such as gold, silver, and
copper. Vast forests provided lumber for building.
In 1859, Americans discovered a valuable new resource: oil. Drillers
near Titusville, Pennsylvania, made the nation’s first oil strike. An oil
boom quickly followed. Hundreds of prospectors rushed to western
Pennsylvania ready to drill wells in search of oil.
Rockefeller and Standard Oil Among those who came to the
Pennsylvania oil fields was young John D. Rockefeller. Rockefeller,
however, did not rush to drill for oil. He knew that oil had little value
until it was refined, or purified, to make kerosene. Kerosene was used
as a fuel in stoves and lamps. So Rockefeller built an oil refinery.
580
Summarize
Banks loaned corporations
money that allowed the businesses to grow. Bankers also gained
control of companies by buying up
stock and combining the acquired
businesses into huge corporations.
580 ★ Chapter 20
★
Chapter 20
Industrial Growth
RESOURCE DIRECTORY
Other Print Resources
Voices of Freedom Founding Standard Oil,
pp. 148–149
Technology
Color Transparencies
• Business Cycle, p. B-7
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Rockefeller believed that competition
was wasteful. He used the profits from his
refinery to buy up other refineries. He then
combined the companies into the Standard
Oil Company of Ohio.
Rockefeller was a shrewd businessman.
He was always trying to improve the quality
of his oil. He also did whatever he could to
get rid of competition. Standard Oil slashed
its prices to drive rivals out of business. It
pressured its customers not to deal with
other oil companies. It forced railroad companies eager for his business to grant
rebates to Standard Oil. Lower shipping
costs gave Rockefeller an important advantage over his competitors.
The Standard Oil Trust To tighten his
Cause and Effect
BACKGROUND
Causes
Connecting With
Economics
• Railroad boom spurs business
• Businesses become corporations
• Nation has rich supply of natural resources
• New inventions make business more efficient
THE RISE OF INDUSTRY
Effects
• Steel and oil become giant industries
• Monopolies and trusts dominate important industries
Noble Barons? Some historians
once labeled all giants of industry
“robber barons.” Railroad owner Jay
Gould was called “one of the most sinister figures that [has] ever flitted batlike across the vision of the American
people.” Some recent historians see
these industrialists as a diverse group:
some were vicious and cutthroat, but
others showed creativity and vision.
• Factory workers face harsh conditions
hold over the oil industry, Rockefeller
• Membership in labor unions grows
formed the Standard Oil trust in 1882. A
trust is a group of corporations run by a single board of directors.
Effects Today
Stockholders in dozens of smaller oil
•
United
States
is
world’s leading economic power
companies turned over their stock to
•
American
corporations
do business around the world
Standard Oil. In return, they got stock in the
• Government laws regulate monopolies
newly created trust. The trust paid the
stockholders high dividends. However, the
board of Standard Oil, headed by
GRAPHIC ORGANIZER
Rockefeller, managed all the companies that
Skills
had previously been rivals.
American
industry
boomed
The Standard Oil trust created a monopoly of the oil industry. A
after the Civil War. The
monopoly controls all or nearly all the business of an industry. The
effects of industrial growth
Standard Oil trust controlled 95 percent of all oil refining in the
are still being felt today.
United States.
1. Comprehension List two
Other businesses followed Rockefeller’s lead. They set up trusts
causes for the rise of
and tried to build monopolies. By the 1890s, monopolies and trusts
industry.
controlled some of the nation’s most important industries.
The Case For and Against Trusts
Some Americans charged that the leaders of giant corporations were
abusing the free enterprise system. In a free enterprise system,
businesses are owned by private citizens. Owners decide what products to make, how much to produce, where to sell products, and what
prices to charge. Companies compete to win customers by making
the best product at the lowest price.
2. Critical Thinking
Drawing Conclusions
Why do you think the
government now tries to
regulate monopolies?
Economics
The Case Against Trusts Critics argued that trusts and monopolies reduced competition. Without competition, there was no reason
for companies to keep prices low or to improve their products. It was
also hard for new companies to compete with powerful trusts.
Critics were also upset about the political influence of trusts.
Some people worried that millionaires were using their wealth to
Chapter 20
TEST PREPARATION
Use the graphic organizer on this page and your knowledge of
social studies to answer the following question.
How did geography play a role in the rise of industry in the
United States?
A The United States is a large, geographically diverse country.
B The United States was home to many immigrants who succeeded
in business.
C The United States has a bountiful quantity of natural resources.
D The United States has a vast network of railroads to transport
finished products.
Section 2
★
ACTIVITY
Linking Past
and Present
Comparing Industrial Giants
Billionaire Bill Gates is chairman of
Microsoft, the nation’s top computer
software firm. Gates has been compared with the industrial giants of the
late 1800s. Have students research
and write a report on Gates’s life and
achievements and compare him with
one of the industrial giants of the late
1800s. (Verbal/Linguistic)
ACTIVITY
Connecting With
Economics
Writing an Essay Ask students to
use the information in the graphic
organizer on this page as the basis
for a short essay on the causes and
effects of the growth of industry in
the late 1800s. Point out that the chart
shows both short-term and long-term
effects. (Verbal/Linguistic)
581
GRAPHIC ORGANIZER
Skills
ANSWERS
1. Possible answers: Railroad boom
spurs business; new inventions
make business more efficient.
2. Possible answers: to control prices,
to ensure safety for workers, to
maintain health standards for
consumers
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buy favors from elected officials. John Reagan, a member of
Congress from Texas, said:
Section 2 Assessment
1. (a) Scottish immigrant who was the
richest steel magnate in America
(b) process that enabled steel makers to produce strong steel at a
lower cost (c) built and bought out
oil refineries that he then formed
into a trust to create a monopoly of
the oil industry (d) act of Congress
that banned the formation of trusts
and monopolies
2. (a) p. 579 (b) p. 580 (c) p. 580 (d) p. 580
(e) p. 581 (f) p. 581 (g) p. 581
3. Steel rails, girders for buildings, and
screws were used to build railroads
and factories.
4. Corporations provided the capital
that expanding companies needed.
Banks provided the capital for
corporations. These loans helped
American industry grow at a
rapid pace.
5. He drove his competition out of
business. He slashed prices, pressured customers not to deal with
other companies, and persuaded
railroad companies to grant rebates
to Standard Oil.
6. Supporters: Giant corporations
brought lower production costs,
lower prices, higher wages, and a
better quality of life for millions of
Americans. Opponents: Trusts
reduced competition, raising prices
to the consumer and lowering quality. Trusts used their riches to buy
favors from elected officials.
7. Possible answers: formation of
corporations, growth of investment
banking, rebates, pools, monopolies,
trusts
8. Possible answer: Carnegie carried
out this philosophy by giving away
much of his fortune to various
charities.
“
There were no beggars till Vanderbilts . . .
shaped the actions of Congress and molded
the purposes of government. Then the few became
fabulously wealthy, the many wretchedly poor.
”
—John Reagan, Austin Weekly Democratic Statesman, 1877
Under pressure from the public, the government slowly moved
toward controlling giant corporations. Congress approved the
Sherman Antitrust Act in 1890, which banned the formation of
trusts and monopolies. However, it was too weak to be effective.
Some state governments passed laws to regulate business, but the
corporations usually sidestepped them.
The Case for Trusts Naturally, some business leaders defended
trusts. Andrew Carnegie published articles arguing that too much
competition ruined businesses and put people out of work. In an
article titled “Wealth and Its Uses,” he wrote:
“
It will be a great mistake for the community to shoot
the millionaires, for they are the bees that make the
most honey, and contribute most to the hive even after
they have gorged themselves full.
”
—Andrew Carnegie, “Wealth and Its Uses”
Defenders of big business argued that the growth of giant corporations brought lower production costs, lower prices, higher wages,
and a better quality of life for millions of Americans. They pointed
out that by 1900, Americans enjoyed the highest standard of living
in the world.
Section 1
2 Assessment
Recall
5. How did John D. Rockefeller
1. Identify Explain the significance of (a) Andrew Carnegie,
(b) Bessemer process, (c) John
D. Rockefeller, (d) Sherman
Antitrust Act.
2. Define (a) vertical integration,
(b) corporation, (c) stock,
(d) dividend, (e) trust,
(f) monopoly, (g) free
enterprise system.
Comprehension
3. Why did the steel industry grow
so quickly after the Civil War?
4. How did corporations and
banking help the United States
economy to expand?
monopolize the oil industry?
6. What arguments did supporters and opponents of trusts
each use?
Critical Thinking and Writing
7. Exploring the Main Idea
Review the Main Idea statement at the beginning of the
section. Then, list the ways that
the need for capital led to new
ways of running businesses.
8. Applying Information
Andrew Carnegie once said of
people who held onto their fortunes, “The man who dies thus
rich, dies disgraced.” How did
Carnegie follow this philosophy?
ACTIVITY Guided Instruction
Have students first go over the reasons for the growth of corporations.
Then, have the class discuss what
advantages corporations held for individual investors. These include sharing
in the corporation’s profits without
incurring responsibility for the corporation’s debts if it went bankrupt.
Encourage students to express their
ideas with catchy slogans.
582 ★ Chapter 20
582
★
Chapter 20
Industrial Growth
RESOURCE DIRECTORY
Teaching Resources
Unit 6/Ch. 20
• Section 2 Quiz, p. 28
Connecting With . . . New Industries and New
Inventions, pp. 122–126
ACTIVITY
Creating an
Advertisement It is
1875, and you have been
given the job of designing
a one-page advertisement
for the financial pages of a
newspaper. The assignment: Explain the advantages of a corporation to a
public that is not familiar
with it. The goal: to get
people to invest in
corporations.