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The Growth of Big Business
Section
READING FOCUS
KEY TERMS
TARGET READING SKILL
• Why were American industrialists of the
late 1800s called both “robber barons”
and “captains of industry”?
social Darwinism
oligopoly
monopoly
cartel
vertical consolidation
economies of scale
horizontal consolidation
trust
Sherman Antitrust Act
Identify Cause and Effect Copy the web
diagram below. As you read, fill in examples relating to the growth of big business
in the late 1800s.
• How did social Darwinism affect Americans’ views on big business?
• In what ways did big businesses differ
from smaller businesses?
• How did industrialists gain a competitive
edge over their rivals?
Effects
Growth of Big
Business
MAIN IDEA
Big business created wealth for its owners and for the
nation, but it also prompted controversy and concern over
its methods.
Methods
Vertical
consolidation
Government
Relations
Setting the Scene
“
A very important incident in my life occurred when one day in a train,
a nice, farmer-looking gentleman approached me. . . . He pulled from
a small green bag the model of the first sleeping car. This man was
Mr. Woodruff, the inventor. Its value struck me like a flash. . . . [He]
offered me an interest in the venture, which I promptly accepted. . . .
I had not the money, and I did not see any way of getting it. But
I finally decided to visit the local banker and ask him for a loan.
. . . I really made my first considerable sum from this investment in the Woodruff Sleeping Car Company.
The Growth of
Big Business
SECTION OBJECTIVES
Features
Large amounts
of capital
Causes
2
Wall Street in New York City was a
prominent financial center in the
late 1800s.
”
—Andrew Carnegie
1. Read to find out why American
industrialists of the late 1800s were
called both “robber barons” and
“captains of industry.”
2. Discover how social Darwinism
affected Americans’ views on big
business.
3. Analyze the ways in which big
businesses differed from smaller
businesses.
4. Learn how industrialists gained a
competitive edge over their rivals.
BELLRINGER
Warm-Up Activity Have students
describe a “mom and pop” business.
Then have them write a definition of
“big business” and explain how the
two differ.
Activating Prior Knowledge Ask
students to list reasons why this period
in history saw the birth and rapid
growth of many different types of big
businesses.
One of the most successful of all business leaders and industrialists in the late 1800s was Andrew Carnegie. He came from
humble beginnings, but quickly understood and embraced the
concept that “money could make money.” He just needed a way
to find it. Carnegie had an eye for recognizing a good investment. Making wise and sometimes risky investments would soon
make him one of the richest and most successful businessmen in
the world.
The period of invention after the Civil War set the stage for
great industrial growth. Still, more than technology would be
needed to transform the United States. It would take shrewd
businesspeople and many investors willing to gamble on new
products. Without huge amounts of capital, businesses could not
build factories or market their inventions. To succeed, business
leaders often combined funds and resources to create large companies. Thus was born the age of big business.
TARGET READING SKILL
Ask students to complete the graphic
organizer on this page as they read the
section. See the Section Reading
Support Transparencies for a completed version of this graphic organizer.
467
RESOURCE DIRECTORY
Teaching Resources
Guided Reading and Review booklet, p. 55
Technology
Section Reading Support Transparencies
Guided Reading Audiotapes (English/Spanish),
Ch. 13
Student Edition on Audio CD, Ch. 13
Prentice Hall Presentation Pro CD-ROM, Ch. 13
Chapter 13 Section 2 •
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Robber Barons or Captains of Industry?
LESSON PLAN
Focus Explain that organizational
changes in late nineteenth century
businesses brought both great wealth
and great hardship to the country. Ask
students what those changes were
and how they affected Americans.
Instruct Explain that in order to
control the large amounts of money
needed to produce new inventions
and build railroads, bridges, and
factories, American businesses grew
into giant enterprises. Ask students
how industrialists expanded their
businesses. Discuss how the powerful
industrialists of the late 1800s were
both captains of industry and robber
barons. Ask students who they think
would be most likely to advocate the
theory of social Darwinism—industrialists or workers.
Assess/Reteach Ask students to
discuss which aspects of the growth
of big business in the late nineteenth
century were beneficial to society at
large and which aspects were more
hurtful than helpful. In what ways do
the problems and the benefits of big
business still affect us today?
BACKGROUND
Interdisciplinary
The term robber baron dates back to
Medieval England. Then, the term
referred to a nobleman, a baron, who
was known for accosting and robbing
anyone unlucky enough to cross his
lands. The term fell into obscurity until
it was revived in the late 1870s. To
those who used it, the term seemed
appropriate: the original robber barons
became wealthy by exploiting
defenseless travelers. The modern
robber barons became wealthy by
exploiting defenseless workers.
Industrial growth required the contributions of both workers and business owners, as this illustration
suggests.
Historians have used the terms “robber barons” and “captains of industry” to
describe the powerful industrialists who established large businesses in the late
1800s. The two terms suggest strikingly different images.
“Robber barons” implies that the business leaders built their fortunes by
stealing from the public. According to this view, they drained the country
of its natural resources and persuaded public officials to interpret laws
in their favor. At the same time, these industrialists ruthlessly drove
their competitors to ruin. They paid their workers meager wages and
forced them to toil under dangerous and unhealthful conditions.
The term “captains of industry,” on the other hand, suggests that
the business leaders served their nation in a positive way. This view
credits them with increasing the supply of goods by building factories,
raising productivity, and expanding markets. In addition, the giant
industrialists created the jobs that enabled many Americans to buy new
goods and raise their standard of living. They also established outstanding
museums, libraries, and universities, many of which still serve the public today.
Most historians believe that both views of America’s early big business leaders contain elements of truth. The big business railroad giants of the late 1800s,
such as Cornelius Vanderbilt, Edward Harriman, and James J. Hill, all exhibited
qualities of both “robber barons” and “captains of industry.” Consider how the
examples of John D. Rockefeller and Andrew Carnegie, two of the country’s first
great industrialists, reflect this dual nature.
John D. Rockefeller
Florida Development Rockefeller
was not the only person to make a lot of
money from Standard Oil. One of his
business partners, Henry M. Flagler,
also made a fortune from the oil company. Flagler put his money to work in
Florida. On a visit to St. Augustine in
1883, Flagler decided that the state
needed better facilities for travelers. A
few years later, he bought a small
railroad in northern Florida and began
extending it down the Atlantic Coast.
The state government granted Flagler
huge amounts of land along with railroad rights of way. By 1912, his Florida
East Coast Railway reached all the way
to Key West, at the state’s southern tip.
Meanwhile, Flagler built elegant hotels
along the route. These attracted wealthy
visitors to the state, many of whom built
homes on the coast. Flagler’s accomplishments helped Florida develop into a
major tourist destination.
468
John D. Rockefeller was on his way to accumulating a great fortune when he formed the Standard Oil Company
in 1870. Some of the methods Rockefeller used to gain control of a
large share of the oil industry were called into question, as you will
read later in this section.
By the end of his life, however, Rockefeller had given over $500
million to establish or improve charities and institutions that he believed
would benefit humanity. His philanthropy helped found the University
of Chicago and the Rockefeller Foundation, which gave aid to institutions working in the fields of public health, the arts, social research, and
many others.
Carnegie’s “Gospel of Wealth”
Andrew Carnegie’s story is similar
to Rockefeller’s. (See the American Biography on the next page.) While
expanding his steel business, Carnegie became a major public figure. In
his books and speeches, he preached a “gospel of wealth.” The essence of
his message was simple: People should be free to make as much money as
they can. After they make it, however, they should give it away.
More than 80 percent of Carnegie’s fortune went toward some form
of education. By the turn of the century, Carnegie had donated the
money for nearly 3,000 free public libraries worldwide, supported artistic
and research institutes, and set up a fund to study how to abolish war. By
the time he died in 1919, Carnegie had given away some $350 million.
Still, not everyone approved of Carnegie’s methods. As you will
read later in this chapter, workers at his steel plants protested against
his company’s labor practices. Many others questioned the motives
behind his good works. In reply, Carnegie argued that the success of
men like him helped the nation as a whole:
Chapter 13 • The Expansion of American Industry
RESOURCE DIRECTORY
Teaching Resources
Learning with Documents booklet (Primary
Source Activity) Tenement Factories, p. 18
Great Debates booklet (Great Debates) How
Should Business Leaders Affect the
Economy? p. 8
468 • Chapter 13 Section 2
Technology
Sounds of an Era Audio CD “Gospel of Wealth,”
1901 recording (time: 35 seconds)
Primary Source Activity
Carnegie’s Gospel of Wealth, found on
TeacherExpress™, uses an excerpt from the
writing of Andrew Carnegie to explain his philosophy regarding money and philanthropy.
Critical Thinking
Activity Making Comparisons: Business
Consolidations, found on TeacherExpress™,
uses a diagram on consolidating business to
help students apply this skill.
Exploring Primary Sources in U.S. History
CD-ROM Wealth, Andrew Carnegie
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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.
ACTIVITY
”
—Andrew Carnegie
Social Darwinism
Born in Scotland in 1835,
Andrew Carnegie knew
In statements such as these, Carnegie also suggested that the wealthy
something about the harsh
were somehow the most valuable group in society. This idea, popular
side of industrialization.
in the late 1800s, was inferred from Charles Darwin’s theory of evoluHis father was a skilled
weaver, but the invention
tion, first published in 1859. According to Darwin, all animal life had
of the power loom caused
evolved by a process of “natural selection,” a process in which only the
the market for skilled
fittest survived to reproduce.
Andrew Carnegie
craftsworkers to collapse.
1835–1919
After Darwin’s death, Herbert Spencer in England and William
Carnegie’s family faced
Graham Sumner in the United States promoted a philosophy called
hard times. As a result, they immisocial Darwinism that extended Darwin’s concept to human society. Social
grated to the United States in 1848,
Darwinists argued that society should interfere with competition as little as
settling near Pittsburgh, Pennsylvania.
At 12 years old, Carnegie found
possible, and they opposed government intervention to protect workers.
work in a cotton mill at $1.20 a week.
They believed that if the government would stay out of the affairs of busiAt age 18, he attained the post of secness, those who were most “fit” would succeed and become rich. Social Darretary to the superintendent in the
winists believed that society as a whole would benefit from the success of the
Pennsylvania Railroad Company. His
fit and the weeding out of the unfit. Americans were divided on the issue of
boss there encouraged him to invest
government interference in private business. The government, however, nei$500 in the Adams Express Company.
ther taxed businesses’ profits nor regulated their relations with workers.
Although this amount exceeded the
available assets of his whole family,
Carnegie’s parents agreed to mortgage
their house in order to come up with
Many factors combined to create a new kind of business in the United
the money. He was amazed that he
States in the late 1800s. Businesses grew to include much greater sums of
made money from this stock “without
money, more workers, and more products than had previously existed in
any attention.” Carnegie had begun his
American business. Several characteristics help to explain how big business
career as a businessman.
Business on a Larger Scale
differed from earlier forms of business in the United States.
Larger pools of capital The most basic feature of the new giant industries
was the huge amount of money, or capital, needed to run them. In order to pay
for new, expensive technology, and to run large plants across the country,
entrepreneurs had to invest massive amounts of capital themselves or borrow
huge sums from investors. The high start-up costs also limited the ability of
smaller businesses to enter an industry.
Wider geographic span The advent of railroads and the telegraph aided the geographic expansion of businesses. Big businesses often had factories and sales
offices in several different regions throughout the country.
Broader range of operations Prior to big business, most businesses in the United
States were highly specialized. Big businesses often combined multiple operations. They were responsible for all or almost all the stages of production.
Revised role of ownership The increased scope of operations, workers, products,
and money changed the nature of ownership and management. Owners had less
of a connection to all aspects of their businesses because their businesses were
simply too large. In most cases, owners would hire a “professional manager” to
run their business. The manager had no ownership in the business, but was
responsible for overseeing its operations.
New methods of management Innovations, such as more complex systems
of accounting, were also necessary for controlling these large amounts of
READING CHECK
Why did owners hire managers
to manage certain aspects of
their business?
Chapter 13 • Section 2
CUSTOMIZE FOR …
ESL
Have students look up industrialization in a dictionary. Ask a volunteer to explain its meaning.
Then tell students to look at the pictures in this
chapter and discuss how each one relates to
industrialization.
469
TEST PREPARATION
Connecting with
Diversity
In his era, Andrew Carnegie, a proponent of the theory of social Darwinism,
was not alone in his belief that those
who were most “fit” would succeed
and become rich, and should proceed,
unfettered by government regulations,
to do so. How is this perspective generally viewed today? Have students
research the opinions and statements
of a prominent nineteenth-century
social Darwinist such as Herbert
Spencer, Benjamin Kidd, Lewis H.
Morgan, E. B. Taylor, or L. T. Hobhouse.
Then in brief essays, have them summarize the opinion of this thinker and
offer their own response to this individual’s point of view. (Verbal/Linguistic)
BACKGROUND
Recent Scholarship
“Any fool can make soap,” a soap
company spokesman said around 1900.
“It takes a clever man to sell it.” In the
competitive atmosphere of the era,
“clever men” developed advertising
into an art. Instead of merely announcing a product’s availability, now advertisers created a “desire” for it by
touting its many benefits—real or
imagined—and linking it with a recognizable brand name. Quaker Oats, Ivory
soap, Mennen talcum powder, and
Kodak photography equipment were
just a few products that became
household names. As James D. Norris
writes in Advertising and the
Transformation of American Society,
1865–1920, between 1880 and 1900
advertising expenses grew from $100
to $256 million.
READING CHECK
Because businesses were becoming too large and complex for an
owner to oversee all day-to-day
operations personally.
Have students read the quotation from Andrew
Carnegie on this page and then answer the
question below.
Andrew Carnegie describes the nation’s self-made millionaires as bees bringing honey to a hive. Which of the
following would make basically the same analogy?
A
B
C
D
Cattle eating hay in a field.
Squirrels bringing nuts to a nest.
Flies catching spiders in a web.
A bird dropping a seed that germinates into
a plant that eventually feeds many animals.
Chapter 13 Section 2 •
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resources. As a result, big businesses developed new systems of formal, written
rules and created specialized departments.
ACTIVITY
Gaining a Competitive Edge
Connecting with
Economics
Have students reread the “Fast Forward to Today” feature on page 230,
which draws parallels between the
impact of technology on the United
States economy in the late 1800s and
in the late 1900s. Extend the parallel
by asking students whether the growth
of monopolies and trusts in the earlier
period has any parallels today. Have
them conduct research to determine
how the antitrust and anti-monopoly
legislation that grew out of the late
1800s has been applied to Microsoft,
a leading business of the late 1900s.
Students should share what they learn
with the class. (Verbal/Linguistic)
BACKGROUND
A Diverse Nation
Many workers came from China to
California during the Gold Rush of the
mid-1800s. Chinese workers caught the
attention of railroad owners, who
recruited them when they found it difficult to attract other workers to the
hard labor and low wages that were
offered. Of the 12,000 men who worked
to build the Central Pacific Railroad,
10,000 were Chinese. They were paid
about $26 a month—less than the other
workers—out of which they paid Central Pacific for their food and lodging.
All other workers were paid $35 a
month and given free food and lodging.
In their efforts to compete and earn higher profits, industrialists used many
methods, fair or unfair, to gain a competitive edge over their rivals. They
attempted to pay as little as they could for raw materials, labor, and shipping,
hoping to maintain the most efficient businesses in their industry.
New Market Structures The lure of gaining enormous profits from new
booming industries attracted many investors and entrepreneurs. However, the
start-up costs of creating certain types of businesses were high and, as a result,
only a few companies could compete in those industries. A market structure
such as this, which is dominated by only
a few large, profitable firms, is called an
oligopoly. Many industries today are oligopolies, such as those that produce breakfast cereals, cars, and household appliances.
Some companies set out to gain a
monopoly, or complete control of a product
or service. To do this, a business bought out
its competitors or drove them out of business.
Once consumers had no other place to turn
for a given product or service, the sole remaining company would be free to raise its prices.
Toward the end of the 1800s, federal
and state governments passed laws to prevent certain monopolistic practices. Those
laws did not prevent or destroy all monopolies, however. One reason was that political
leaders refused to attack the powerful
business leaders.
Forming monopolies was not the only
The Protectors of Our Industries
way to control an industry. Sometimes
industrialists prospered by taking steps to limit competition with other firms.
INTERPRETING POLITICAL
C A R T O O N S Some Americans
One way was to form a cartel—a loose association of businesses that make the
were offended by the argument
same product. Members of the cartels agreed to limit the supply of their prodthat business leaders protected
uct and thus keep prices high.
jobs. Drawing Conclusions What
Neither the monopolies nor the cartels were foolproof. Monopolies faced
does this cartoon suggest about
the threat of government action, and cartels tended to fall apart during hard
the relationship of workers to busieconomic times. To achieve a more reliable arrangement, industrialists came up
ness leaders?
with new strategies that would help them dominate their markets.
Carnegie Steel
By the time he was 30, in 1865, Andrew Carnegie was
making $50,000 a year, and he wanted to invest his wealth. The development of
the Bessemer process persuaded Carnegie that steel would soon replace iron in
many industries. During the early 1870s, near Pittsburgh, he founded the first
steel plants to use the Bessemer process. These holdings would eventually grow
into the Carnegie Steel Company, which he established in 1889.
Carnegie’s business prospered. The company’s wealth enabled him to make
it even stronger. He soon had enough money to buy the companies that performed all the phases of steel production, from the mines that produced iron
ore to the furnaces and mills that made pig iron and steel. He even bought the
470
CAPTION ANSWERS
Interpreting Political Cartoons It
depicts workers struggling to support
the business leaders who mistakenly
believe that they are protecting workers. In addition, the business leaders
have literally grown fat upon the labor
of the workers.
470 • Chapter 13 Section 2
Chapter 13 • The Expansion of American Industry
RESOURCE DIRECTORY
Technology
Color Transparencies Cause-and-Effect Charts,
D6
Visual Learning Activity
Home of the Trusts, found on
TeacherExpress™, uses an antitrust cartoon by
Thomas Nast to help students analyze political
imagery.
Exploring Primary Sources in U.S. History
CD-ROM Spindle Top Gusher
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Horizontal Consolidation
Vertical Consolidation
purchased
by
Rockefeller
ACTIVITY
Coke fields
purchased by
Carnegie
Connecting with
Citizenship
Carnegie
Steel
Company
Challenge students to identify what
motivated John D. Rockefeller to accumulate such a mind-boggling amount
of wealth. Record responses on the
chalkboard. Then have students consider the reason Ida M. Tarbell gave:
“Why this relentless, cruel, insistent
accumulation of money when you are
already buried in it? There seems to
be only one explanation, that Mr.
Rockefeller is the victim of a moneypassion which blinds him to every
other consideration in life, which is
stronger than his sense of justice, his
humanity, his affections, his joy in life,
which is the one tyrannous, insatiable
force of his being.” (Verbal/Linguistic)
Iron ore deposits
Independent oil refineries
Standard Oil Company
shipping and rail lines necessary to transport his products to
market. Gaining control of the many different businesses that make
up all phases of a product’s development is known as vertical
consolidation. (See diagram at right.)
This method of industrial control allowed Carnegie Steel to
maintain very low production costs. This enabled Carnegie to cut
his prices. He could charge less because of a phenomenon known as
economies of scale. That is, as production increases, the cost of
each item produced is lower. As Carnegie Steel expanded, its cost
per item went down. Smaller companies were then at a disadvantage. Since they did not have the wealth to purchase all the phases
of production, they were unable to cut their prices.
The Standard Oil Trust
purchased by
Carnegie
Steel mills
purchased by
Carnegie
Owns all
phases of
production
Ships
purchased by
Carnegie
Railroads
Oil was another industry that was about
to become huge. In 1859, when Edwin L. Drake discovered oil in
Titusville, Pennsylvania, many new opportunities for oil arose. The
new ease of attaining oil and oil’s growing usefulness excited many
wealthy businessmen, including John D. Rockefeller. He had
become rich from a grain and meat partnership during the Civil War, and he saw
the oil business as a way to become even richer. In 1863, Rockefeller built an oil
refinery near Cleveland, Ohio. The refinery expanded rapidly. In 1870, Rockefeller and several associates formed the Standard Oil Company of Ohio.
The large size of Standard Oil helped Rockefeller cut some of his production costs. For example, Standard Oil did not need to use all of the railroad
services that other companies used, such as insurance and storage. Therefore,
Rockefeller was able to negotiate with railroad companies to obtain refunds on
part of the cost of transporting his oil. As a result of these refunds, he could set
Standard Oil’s prices lower than those of his competitors. As
Rockefeller’s company sold more oil, he was able to undersell his competitors
by charging even less.
Rockefeller knew that he could expand his business further. He figured that
if he could own his competitors’ oil refineries, he would be able to create a giant
oil company that had even lower production costs. This is another method of
industrial control, called horizontal consolidation, which involves the bringing together of many firms in the same business. (See diagram above.)
Rockefeller soon had enough money to buy out his competitors, but the
law stood in his way. State laws prohibited one company from owning the stock
of another. If Rockefeller were to “buy out” his competitors, he would in effect
be owning their stock. State governments feared that this practice would
reduce competition and restrain, or hold back, free trade.
purchased by
Carnegie
Connections to Today
INTERPRETING DIAGRAMS
Some companies grew more powerful through horizontal consolidation,
in which companies simply bought
competitors in their field (above
left). Other companies grew more
powerful through vertical consolidation, in which they controlled all the
phases of production (above right).
Analyzing Information What problems might a business face when
trying to compete with a company
that has a vertical monopoly? With
a company that has a horizontal
monopoly?
Chapter 13 • Section 2
CUSTOMIZE FOR …
Gifted and Talented
To illustrate the delicate balance between
economic development and fair treatment
of workers, ask students to think about how
industrialists like Andrew Carnegie and labor
leaders like Samuel Gompers might have
expressed their ideas through mass media
today. Have students create “infomercials” for
either industrialists or laborers. Suggest that
students brainstorm a list of features that they
would want to highlight in their “infomercials.”
BACKGROUND
The boom of mergers that took place
in the late 1800s was echoed by a massive wave of mergers underway since
the 1980s, when the Reagan administration set out to reverse antitrust laws
that had been in place since the early
1900s. The Reagan administration’s
policies resulted in the takeover of
about 28 percent of the 500 largest
American corporations during the past
twenty years. The merging of Time
Warner and America Online, completed
in 2001, is one example of the many
companies affected.
471
CAPTION ANSWERS
Interpreting Diagrams Vertical: Inability
to compete on consumer price due to
the fact that production costs will be affected by outside suppliers. Horizontal:
The massive share of the market controlled in this way would make it very difficult for a competitor to break in. A large
horizontal trust would always win a price
war with any competitor because a
large trust could better afford to withstand a short-term loss of revenue while
under-selling any potential rival.
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Assessment
The Panic of 1893 In 1893, a
Reading Comprehension
1. Social Darwinism encouraged
government to take a hands-off
approach toward big business
because of the belief that society
should not interfere with people’s
successes.
2. Answers may include: large
amounts of capital, diversification to
encompass the total production of a
product, revised role of ownership,
and new management methods.
3. Through horizontal consolidation,
companies purchased competing
companies. Through vertical consolidation and economies of scale,
companies lowered production
costs so much that other companies
could not compete.
4. Public concerns over large trusts led
Congress to attempt to stop trusts
from limiting industrial competition
and from restraining interstate
commerce.
Critical Thinking and Writing
5. Both had enough wealth to invest in
industries on the brink of expansion.
Both gained industry-wide control
by lowering production costs and
realizing economies of scale.
Rockefeller formed a trust; Carnegie
did not.
6. Answers may include: industrialists
increased the availability of goods,
provided jobs, and endowed cultural
institutions. However, many were
ruthless and corrupt, stopping at
nothing to gain control over the
competition.
period of business expansion suddenly ended, sending a severe shock
to the economy. During the “Panic of
1893,” hundreds of banks closed,
and more than 15,000 businesses
failed, sinking the economy into a
four-year depression. The resulting
unemployment caused widespread
misery, especially among workers and
their families.
How does such a panic happen?
At some point, businesses may begin
churning out more goods than consumers want or can afford. Then
they have to lower prices in order to
sell their products. To cover their
losses, they often cut wages and lay
off workers. In turn, investors begin
to fear that key businesses, heavily
in debt, might not be able to repay
their loans. Investors rush to sell
stock, stock prices fall, and companies
go bankrupt.
Typing the Web Code when prompted
will bring students directly to detailed
instructions for this activity.
2
Assessment
READING
COMPREHENSION
CRITICAL THINKING
AND WRITING
1. How did the theory of social
Darwinism affect the government’s
relationship to big business?
5. Making Comparisons Andrew
Carnegie and John D. Rockefeller
were both giant industrialists. Compare and contrast the ways they
entered into, controlled, and dominated their respective industries.
2. What were some features of the
new big businesses?
3. How did methods such as vertical
and horizontal consolidation, and factors such as economies of scale help
companies dominate their markets?
472
6. Writing to Persuade Create an outline for a persuasive essay in which
you explain why you view the
nation’s early industrialists as
either “robber barons” or “captains
of industry.”
Chapter 13 • The Expansion of American Industry
RESOURCE DIRECTORY
Teaching Resources
Units 5/6 booklet
• Section 2 Quiz, p. 5
Guide to the Essentials
• Section 2 Summary, p. 69
Technology
Color Transparency Political Cartoons, B7
472 • Chapter 13 Section 2
The Government Response
Many Americans were skeptical and
wary of trusts and other large business organizations. Americans who
feared that trusts were limiting industrial competition began to demand
government action to break up these industrial giants.
Despite questions about their practices, the large industrialists
found sympathy and support from many government officials and leaders. The government was hesitant to interfere with the actions of big
business. After all, these firms contributed mightily to the country’s
rising level of wealth. By the turn of the century, such mammoth companies as American Telephone and Telegraph, Swift and Armour, General Electric, Westinghouse, and Dupont were some of America’s
greatest success stories.
Congress did pass a law, however, in 1890, in an attempt to limit the
amount of control a business could have over an industry. The Sherman
Antitrust Act outlawed any combination of companies that restrained
interstate trade or commerce.
The act, however, proved ineffective against trusts for nearly 15 years. Its
vague wording essentially meant that the courts had to determine what the law
said. As a result, the courts, which were largely pro-business in their views,
enforced the law infrequently. The law actually aided giant corporations when it
was applied successfully against labor unions. Federal officials argued that labor
unions restrained trade because workers were combining to gain an advantage.
4. Why did the Sherman Antitrust Act
seek to stop big business from
forming trusts?
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Samuel Dodd, Rockefeller’s lawyer, had an idea to get around this
ban. In 1882, the owners of Standard Oil and the companies allied with it
agreed to combine their operations. They would turn over their assets to a
board of nine trustees. In return, they were promised a share of the profits
of the new organization. The board of trustees, which Rockefeller controlled, managed the companies as a single unit called a trust.
In time, 40 companies joined the trust. Because the companies did
not officially merge, they did not violate any laws. Rockefeller’s trust, a
new kind of monopoly, controlled a high percentage of the nation’s oilrefining capacity.
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An activity on Carnegie and
Rockefeller
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