Ch. 6, sect 3
Big Business Emerges
Industrial Leaders – industrial giants consolidated smaller
companies and reshaped U.S. business into massive corporations
• John D. Rockefeller = Oil tycoon
–
Formed Standard Oil Company (Chevron) which will control
90% of the oil market in the U.S.
– Monopolized the oil industry – argued that
monopolies and trusts ensure
economic stability and consistently high
quality of goods.
• Andrew Carnegie = Steel tycoon
–
Top of the steel industry
due to his management
practices
–
Rags to riches story: Scottish immigrant to industrial giant.
Carnegie’s New Business Strategy
Carnegie searches for ways to make better products more
cheaply:
•
Management practice: hires talented staff; offers company
stock; promotes competition among assistance
• Vertical integration — buys
out suppliers to control
materials
• Horizontal integration merges
with competing companies
•
Carnegie controls almost entire steel industry
A Carnegie steel furnace in 1905
Social Darwinism and Business
•
Principles of
–
Charles Darwin’s theory of biological evolution: the best-adapted survive, natural
selection
–
economists used theory to justify doctrine of
laissez faire
William Sumner, Yale professor, promoted the theory that
success and failure in business were governed
by natural law
–
•
Social Darwinism
A New Definition of Success
1.
2.
3.
Idea of survival, success of the most capable appeals to wealthy
Notion of individual responsibility in line with Protestant work ethic
See riches as sign of God’s favor; poor must be lazy, inferior
Literature, Horatio Alger, promoted the possibility of ragsto-riches success for anyone who was virtuous and hardworking
Consolidation leads to Monopolies
Monopoly – having
complete control over
an industry’s
production, wages, and
prices = no competition
1.
Businesses try to control industry with
mergers — buy out competitors
2.
Holding companies buy all
the stock of other
companies
Rockefeller and the “Robber Barons”
Trust – people who run separate
companies as one large
corporation. Participants turn their stock
•
over to a group to trustees.
Rockefeller profits by paying low wages, underselling
others
– when controls market, raises prices
“Robber Barons” - critics call
industrialists robber barons (after
feudal lords who had owned estates in Europe during the
Middle Ages) because of their
ruthless tactics.
Political cartoon depicting robber barons
1889
Government thinks expanding corporations stifle free competition
• Sherman Antitrust Act: any attempt to
interfere with free trade by forming a
trust was illegal.
–
Prosecuting companies difficult because trust was weakly defined;
Supreme Court refused to support the act; government stops
enforcing act
Industrialists also become philanthropists
• Business giants argued they had taken the
greatest risk in investing their resources so they are
entitled to profits.
–
Philanthropists – donate their fortunes for the good of the
communities and donate directly to causes they believe in.
Carnegie donated directly to causes (libraries, scientific research,
art museums, universities)
LEFT-SIDE
“Carnegie/Rockefeller”
• pages 241-244 [257-260], compare the lives and
beliefs of Andrew Carnegie and John D.
Rockefeller using a Venn diagram.
(3-4 points)
•
•
•
2-3 points
•
•
•
(3-4 points)