Gilded Age Business
1865-1900
Note: The term “Gilded Age” is from
the novel by Mark Twain.
CAPITALISM
• An economic system characterized by non
governmental ownership of capital goods,
• by investments that are determined by private
decision,
• and by prices, production, and the distribution
of goods that are determined mainly in
competition in a free market.
CAPITAL GOODS
Any good used by an organization to
make other goods.
Laissez Faire
• “Let it be” from “laissez nous faire” or let us
be (the merchants)
• Merchants free of mercantilism
• Has come to mean—”let the market rule.”
Investment
• Giving money with the hope of getting more
money back
• Usually through buying “stocks” or “shares” in
a company.
Entrepreneurs/robber barons
CORPORATION
• The problem with a company is liability (who
pays when the Titanic hits the iceberg?)
NO HUMAN!
• A CORPORATION IS A LEGAL PERSON,
THEREFORE IT PAYS TAXES AND SETTLES
LAWSUITS
• NO ONE WORKING FOR THE CORPORATION IS
RESPONSIBLE
HOLDING COMPANIES
Holding companies manufactured no
products and had no customers. They
existed only to own stock in other
corporations.
J. Piermont Morgan
MONOPOLY
To gain control over all businesses
making the same product
PRICE FIXING (POOL)
An agreement to maintain prices by
supposedly competing companies.
THE TRUST
Originally
• A trust was money or land
kept for a child by a board
of trustees.
• The child owned the
property, the trustees
controlled it.
BUSINESS TRUST
A combination of firms or corporations for the
purpose of reducing competition.
A trust was formed when a company was forced to
give control of its operations to a single holding
company (run by a board of trustees).
One powerful company will have control of the
stocks of many smaller companies in the same line of
business, creating a monopoly. The monopoly allows
price-fixing and benefits all companies involved.
HORIZONTAL TRUST
Horizontal integration is an act of joining or
consolidating with ones competitors to create a
monopoly.
John D Rockefeller
Horizontal Trust
Standard Oil
VERTICAL TRUST
All phases of manufacturing from mining to marketing
combined into one organization .
Andrew Carnegie
Vertical trust
U.S. Steel (Bessemer process)
PLUTOCRACY
Government by the wealthy.
Industrialists controlled government
during late 19th Century.
Senate Controlled by Trusts
17th Amendment 1913
direct election of senators
Public turns against trusts
ANTI-MONOPOLY LAWS
• INTERSTATE COMMERCE ACT 1887
• SHERMAN ANTI-TRUST ACT 1890
• CLAYTON ANTI-TRUST ACT 1914
Can monopolies help the economy?