SECTION 1

•Corporations Gain Power

•Economic Growth Brings Wealth and Poverty

November 2011

KEY QUESTIONS:

•What is a corporation?

•How did corporations affect business competition?

•What is a monopoly?

•What is a trust?

Rise of Corporations:Rise of Corporations:

• Corporation – business owned by investors through shares of stock. (shareholders or stockholders)

•allows pooling of money (capital) for larger factories or expansion of factories

Rise of Corporations:Rise of Corporations:

• corporations can put smaller competitors out of business, or buy them out (can out-produce them)

•Dividends = payments to shareholders out of profits after expenses are paid

The Oil Industry:The Oil Industry:• Natural resource discovered in Pennsylvania in 1859

• John D. Rockefeller and Standard Oil Co. control the industry

• Eliminate competition

The Oil Industry:The Oil Industry:•Developed Standard Oil Trust 1882

•Controlled 95% of oil industry

•Becomes a “Robber Baron”

Trust:Trust:

• a group of corporations run by a single board of directors.

•Creates a monopoly (control of all or nearly all of the business of an industry (think Microsoft!)

Reasons for Opposition to Trusts:Reasons for Opposition to Trusts:

1.  Reduces competition

2.  Prices are higher

3.  Companies have no reason to improve products or advance technology

Reasons for Opposition to Trusts:Reasons for Opposition to Trusts:

4.  Difficult for new companies to start up

5.  Workers felt larger corporations did not care about them, treated them badly

Reasons for Opposition to Trusts:Reasons for Opposition to Trusts:

6. Leaders of big business could buy favors from politicians (government corruption, bribery)  

“Bosses of the Senate” – 1889 from Puck Magazine

The Steel Industry:The Steel Industry:• Andrew Carnegie controls steel industry by making best, cheapest steel

•Uses “vertical integration” to do this. Control every step in the process of making steel

Banks & Industry:Banks & Industry:• large banks loaned money to corporations for expansion

• J. P. Morgan – most powerful banker of late 1800s-early 1900s

• bankers helped business during economic hard times with investments

1800s = Unregulated Economy in US.

•Industries had “ups and downs” of good/bad times. Called the business cycle (“boom and bust”).

•Depression = long period of very bad times (1873, 1893) characterized by:

•Spending & investing decrease

•Workers laid off

•Reduce production

•Some businesses close

The Gilded Age:The Gilded Age: The wealth of a few masked society’s problems:

•Corrupt politics & politicians

•Poverty

•South’s economy & industries grew very slowly