The Growth of Big Business. Why? Better capital products- machines, inventions and technologies...

The Growth of Big Business

Why?

Better capital products- machines, inventions and technologies which help workers produce more.

Better management and entrepreneurs- the captains of industry although considered by many to be ruthless they organized production more cost effective.

Better Labor- workers to use the new machines and work in the new factories.

During the late 1800’s the nations experienced a boom in industrial output and profits

Robber Barons

implies business leaders built fortunes by stealing from the public

-depleted country of natural resources and persuaded legislatures to make laws in their favor

-employees were paid less and treated more unfairly

Captains of Industry

suggest that business leaders served their nation in a positive way.

building factories, increasing supply of goods, raising productivity, expanding markets

created jobs, allowed many Americans to raise standard of living

created museums, libraries, universities, etc

John D. Rockefeller

Standard Oil Company Philanthropist: University of Chicago,

Rockefeller Foundation by end of his life had given away more than

$500 million to charity

Andrew Carnegie

“Gospel of Wealth”: People should be free to make lots of money, then give back as much as they can afford

by his death had given more than $350 Million to charity

Social Darwinism

People/Government should do little to interfere with people’s pursuit of happiness/money

most people, including government officials, believed in this principle so the government did not tax business profits or regulate their relationships with workers.

Business on a Larger Scale

Bigger, stronger, more money, more workers, more products than ever before.

Differences from Early American Business

Larger pools of capital -more money was needed to run

these gigantic businesses so money was either invested from personal money or borrowed from investors*never before was this done on a large scale

Wider Geographic Span

-Railroads, communication, etc made widespread business operations more feasible

Broader Range of Operations

combined multiple operations; no longer as limited and specialized in one or two areas

Revised Role of Ownership

owners often hired managers to run businesses

New Methods of Management

-accounting, financing, etc. could now be done within the company

New Market Structures Oligopoly Monopoly Cartel Vertical Consolidation Economics of Scale Horizontal Consolidation Trust

New Market Structures Oligopoly -market controlled by only a few large,

profitable firms -most people wanted

to get into some sort of

business or another,

but not everyone had

the means to do so

New Market Structures Monopoly- company that has complete

control over the market accomplished by driving others out of

business

New Market Structures Cartel -agreement by firms in the same

field to keep prices high companies were always looking for new

ways to “stay ahead of the game” and control the market because monopolies and cartels were not fool-proof

New Market Structures Vertical Consolidation -

when a company owes all the

phases of a products development

Ex-Andrew Carnegie’s steel

operations of production

New Market Structures

Economics of Scale --allowed him (Andrew Carnegie) to lower prices and drive people out of business because he sold a cheaper product that others could not compete with

New Market Structures Horizontal Consolidation-combined multiple

operations;

no longer as limited and specialized in one or two areas

New Market Structures

Trust -board of trusties from various companies manages them as one

Sherman Antitrust Act nation’s first attempt to limit the control that

an industry has over the market passed because of fears about big

business not regularly enforced because of pro-big

business judges