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Context• The Age of Monopolies, Trusts,

and Big Labor

• America accomplished heavy industrialization in the post-Civil War era. Spurred by the transcontinental rail network, business grew and consolidated into giant corporate trusts, especially in the oil and steel industries.

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Map: Industrial Production, 1919

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Experience

• When was the last time you felt that the “game was rigged”?

• Have you experienced the power of a monopoly?

• Do you trust “big business”?

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Overview

• Efficient use of expensive machinery called for “bigness” and consolidation proved more profitable than ruinous price wars

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• Monopoly = a firm that completely controls an industry

• Vertical integration = combining all phases of manufacturing in to one organization (Carnegie)

• Horizontal consolidation = allying with competitors to monopolize a market (Rockefeller)

• Trust = a board of directors/stockholders that coordinates companies within an industry to avoid competition

• Holding company = a corporation composed of various competing enterprises within one industry (JP Morgan’s US Steel)

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Tycoons1. Profiteering from the Civil War gives rise to

millionaire class2. Millionaires capitalize on Transcontinental

railroad, mechanization, industrialization, & expansion of markets

3. Surplus of raw materials, cheap labor, foreign investment ENCOURAGE CAPITALISM

4. Inventions Industrialization More Inventions More

Industrialization

ALL OF THIS GIVES RISE TO TYCOONS

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Key Inventors and Inventions

• Alexander Graham Bell = telephone• Thomas A. Edison = electric lights,

phonograph• Bessemer Process/William Kelley = process

to convert iron to steel• Kerosene lamp• Typewriter• automobile

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The Manufacture of Iron

Manufacturing iron was a hot and strenuous process, requiring workers to spend longs hours stoking hot blast furnaces. (Library of Congress)

The Manufacture of Iron

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Bessemer Process = process to convert iron to steel

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Andrew Carnegie = Steel Kingpin

• Steel is King : US pouring out 1/3 of world’s steel by 1890’s

• “bootstrap” story: poor immigrant to tycoon

• Carnegie uses vertical integration with “Pittsburgh millionaires”

• Controls all means of production, eliminates middle man

• Sells to JP Morgan for 400 million

• Becomes a philanthropist

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J P Morgan – Banker’s Banker

• Builds financial empire through railroads, banks, and holding companies

• Buys out Carnegie and enters steel business

• Uses trusts and holding companies to consolidate wealth and power

• Forms US Steel Corporation – 1st ever corporation worth more than one billion $

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Rockefeller – Standard Oil Corp.

• Kerosene and then Automobiles drive up US oil consumption

• Rockefeller ruthlessly uses horizontal consolidation to create largest monopoly

• See “The Octopus,” 1904 - Cartoon

• 1877 controls 95% of US’s oil refineries

• Robber Baron’s Baron

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Standard Oil MonopolyBelieving that Rockefeller's Standard Oil monopoly was exercising dangerous power, this political cartoonist depicts the trust as a greedy octopus whose sprawling tentacles already ensnare Congress, state legislatures, and the taxpayer, and are reaching for the White House. (Library of Congress)

Standard Oil Monopoly

Copyright © Houghton Mifflin Company. All rights reserved.

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Compare the lives and beliefs of Carnegie and Rockefeller

using a Venn Diagram

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Justifications for Big Business

• Old Rich displaced by rule of the “new rich”

• Gospel of Wealth – discourages helping the poor by state

• Laissez faire = “let it be”• Justified by Social Darwinism –

survival of the fittest• Poor are poor due to lack of initiative

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Taking on the Trusts

• Trusts and robber barons defended by 14th amendment’s due process clause

• Constitution’s “interstate commerce” clause inhibits states from controlling trusts

• Sherman Anti-Trust Act of 1890– Largely ineffective

IRONY: Used effectively against unions

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Industry and the South• 1900: less manufacturing than before Civil

War

• South acts primarily as source of raw materials

• Northerners control stock in Southern industry, discourage industrialization

• Shift in cotton mills from NE to S in 1880’s

• Cheap labor (virtually sharecropping) brings rural white southerners to mill towns, and then traps them there

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Context• The Age of Monopolies, Trusts,

and Big Labor

• Industrialization radically transformed the condition of American working people, but workers failed to develop effective labor organizations to match the corporate forms of business.