Business in the

Gilded Age

Chapter 17

• Why was Twain’s reference to this period being the “Gilded Age” appropriate?

• Why was this the “perfect storm” of industrialism?

• How did entrepreneurs seize the potential of the time period?

• What are the factors of production, which enable the production of goods?

• How do we label these entrepreneurs – robber barons or philanthropists?

From Fourth to First!Technological advances transformed the U.S. - innovations made in the first industrial revolution are built on and improve:TransportationCommunicationConsumer Products

•Business creates new strategies – Govt provides freedom•Rural agricultural economy to urban industrialism•Industry transformed by innovation

The “Gilded Age”• "Gilded Age” -coined by Mark Twain• Refers to end of Reconstruction thru

turn of the century (about 1870 to 1900).

• Unprecedented industrial growth

• Wave of immigration. • Govt & Politics – corruption

Congress for sale?Health of democracy is questioned

PERFECT STORM!

"What is the chief end of man?--to get rich. In what way?--dishonestly if we can; honestly if we must."

-- Mark Twain, 1871

Pioneers of new business strategies:•Jay Gould•Andrew Carnegie•John D. Rockefeller•J.P. Morgan

Jay Gould• Railroad entrepreneur • Example of greedy &

unscrupulous "robber baron”• Bought failing RR – turned

around for a profit• Stock speculator (bribery &

inside stock manipulation)• Considered himself most hated

man • Brutal strikebreaker• Major achievement -helping

Western Union dominate in the telegraph industry.

J.P. Morgan• JP Morgan - influential

and powerful figure in the financial world.

• Goal: to replace cutthroat competition with economic stability

• Consolidated railroad and other industries, forming colossal corporations - US Steel and General Electric.

Morgan preferred not to be photographed!

Ingenuity that changes an industry

America's emergence as an industrial power •oil •Iron

J.D. Rockefeller • Oil refinery business

annihilate competitors negotiating exclusive deals

with railroad companies (Rebates)

• Used vertical and horizontal

• TRUST: legal entity that can hold title to property for the benefit of one or more other persons or entities

• Over $500 million in philanthropic donations.

New Type of Business Entities

Standard Oil

“Monopoly” - few trusts and individuals thrived and amassed fortunes while many Americans lived in poverty -lost personal autonomy to the corporate machine.

Andrew Carnegie• Manufacturing “I wished to make

something tangible” • “Cut prices, scoop the market, run

the mills full; watch the costs & profits will take care of themselves.”

• sold steel company to JP Morgan (who integrated it into US Steel)

• He famously wrote, "the man who dies rich, dies disgraced.”

The Steel Industry Carnegie's steel mills set new standards

strategies to increase efficiency cut costs vertically integrateinvest in new technology.

Steel was produced at reduced prices (Bessemer Process)Enabled engineering innovation - bridges

and tall buildings more affordable. Cutting costs translated to low wages and

dangerous working conditions for laborers.

Gospel of Wealth

• After reading Gospel of Wealth handout – what is the MAIN theme Carnegie conveys?

• What are 2 “responsibilities” for a man of wealth?

• What should a man of wealth leave as a legacy?

Maple Leaf Rag by Scott Joplin (at turn of the century):http://www.youtube.com/watch?v=pMAtL7n_-rc

Andrew Carnegie ~ The Gospel of Wealth

Rationalized by the belief that they were doing good for society. Carnegie, one of the most generous philanthropists of his day, wrote in defense of the successful man who acquires a vast fortune:

“Thus is the problem of Rich and Poor to be solved. The laws of accumulation will be left free; the laws of distribution free. Individualism will continue, but the millionaire will be but a trustee for the poor; … administering [wealth] for the community far better than it could or would have done for itself. … the man who dies leaving behind him millions of available wealth, which was his to administer during life, will pass away ‘unwept, unhonored, and unsung… Of such as these the public verdict will then be: "The man who dies thus rich dies disgraced.’ ”

http://historymatters.gmu.edu/d/5766

Social Darwinism

Justification for racismExploited idea of survival of the fittest

Natural, normal, and proper for the strong to thrive at the expense of the weak.

Justification for numerous policy decisions of questionable moral value (colonialism & imperialism)

Herbert Spencer

Why was Rockefeller “the symbol of the heartless monopoly” & Carnegie loved?

• Carnegie: – Capitalizes on innovation of steel– Controls via vertical integration (mining ore to

transport to production)– fostered competition among managers (Trump?)

• Rockeller:– Rebates to control transportation– Trusts to Holding Companies – Ida M. Tarbell, “History of the Standard Oil

Company”

"Robber Barons" or "Captains of Industry"?

Where do we draw the line between unfair business practices and competition that leads to innovation, investment, and improvement in the standard of living for everyone? Would the industrial economy have succeeded without entrepreneurs willing to take competition to its extremes?

Compare & Contrast

Part II: Were these men captains of industry, without whom this country could not have taken its place as a great industrial power, or were they robber barons, limiting healthy competition and robbing from the poor to benefit the rich?

PART I -JANUS PROJECT: Determine qualities shared and those that were exclusive to only Carnegie & Rockefeller

If Time…

Evolution of health & Wealth -Globalization of Countries (Hans Rosling): http://www.youtube.com/watch?v=jbkSRLYSojo