Before the Civil War, most American businesses were owned by a single person or a partnership

After the Civil War, industry (mills, factories, railroads, mines) now needed more capital (money) for investment than one person or a few partners could raise.

What’s the solution???

CORPORATIONSPurpose TypeTo raise capital ($$) It is a business in which

many investors own shares called stocks

In exchange for their investment, each stockholder receives a dividend, or part of the corporation’s profits

This limits investor losses If a corporation fails,

each investor only loses his or her investment

TransportationRailroads

Building materialsSteel

EnergyCoal, oil and

electricity

CommunicationsTelegraph and

telephone

MONOPOLYPurpose

Company or small group of companies that has complete control over a particular field of business

A monopoly often allowed a company to raise prices to almost any level it desired

OUTCOMES: Competitors forced out of

businessFederal legislation tried to

control them

What do you see?

What do you think the cartoon is saying about these men?

TRUSTPurpose TypeGroup of similar

corporations agree to combine their management under a single board of trustees

Shareholders in the corporations received dividends from the trust but lost any say in its operation

A way to get around laws regulating monopolies

Standard Oil Trust

Who were the industrial leaders?

Andrew Carnegie – Steel

J.P. Morgan – Finance

John D. Rockefeller – Oil

Cornelius Vanderbilt - Railroads

How did they get so powerful?Maximized profits

Formed corporations and trusts to control an entire industry (monopoly power)

Got rid of competitors (horizontal integration)Set prices as high as possible

Minimized costsKept worker pay very low with long hoursControlled suppliers and transportation costs

(vertical integration)Had no government interference!

LAISSEZ-FAIRE

Government should not interfere with business

FREE-ENTERPRISE SYSTEM – private individuals make the economic decisions – not government

SOCIAL DARWINISMBased on Charles Darwin's theory of

evolutionSocial Darwinists held that life was a

struggle for the “survival of the fittest”Free-enterprise competition would lead

to the strongest businesses surviving.Government regulation would let the

weak survive. Also, any government programs to aid

the poor or workers would violate natural “laws”

Govt Policy towards Business – Was it really “laissez-faire”?

Expanding industries industries and growing foreignforeign trade benefited US

Government policies were designed to aid the growth growth of business

LoansLoans and land land grants to large railroad companies were given

HighHigh tariffs that discouraged foreign competition

Few limits on immigration immigration = more workers= more workers

ROBBER BARONS OR PHILANTHROPISTS?

Those who gained their riches at the expense of the poor and the working class

Lavish lifestyles of the wealthy at this time fed criticism

Many spent freely to show off their wealth

Public criticism and sense of social responsibility led the wealthy to use a part of their wealth to aid society.

Carnegie’s Mansion in NYC

Vanderbilt Mansion, NY

Rockefeller Mansion

SHERMAN ANTITRUST ACT (1890)Why:

Most corporations and trusts had eliminated most competitioncompetition and set up monopoliesmonopolies

Public ProtestWhat it did:

Prohibited monopolies. It prevented any business structure that “restrained trade”

Outcome:Corporations got around the act by

forming holding companies rather than trusts.trusts.

Clayton Anti-Trust Act (1921)Expanded and “fixed” the Sherman Anti-

Trust Act

It outlawed price-fixing

Exempted unions from the Sherman Anti-Trust Act(will make sense next class)