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The Rise of Big Business and Government Support of the Industrial Economy
2 Main Topics
1. “Big business“during the 2nd Industrial Revolution – Causes and Characteristics
2. Role of government in support of the Industrial Economy
6 Factors making for industrial growth
natural resources: farm land, oil, coal, iron, copper, precious metals, other minerals, timber
work force with skills and experience
capital and the means of mobilizing capital
technology
a transportation system
Governmental assistance
Role of the Railroads in Creating 2nd Industrial Rev.
Stimulated the iron and steel industry – Why?
Stimulated settlement of the West – How?
Created the potential for a national market – How?
Became a model for other corporations
Railroads: America’s First Big BusinessHelped to create knowledge and
solutions for:Administrative organizationRaising capitalLabor relationsCompetitionRelation with government
Trust - Defined
A form of business merger in which the major stockholders in several companies turn over their stock to a group of trustees. Used to create a semi-legal monopoly over key industries. Advantage = eliminates competition and enhances profits.
Two Kinds of Trusts
Trusts were organized in two waysVertical integration or consolidation – owner owns all the steps and resources that contribute to productionHorizontal Integration or consolidation – the owner monopolizes one step of the production process
Carnegie and Rockefeller
Vertical Integration = Carnegie. For Homestead Steel, Carnegie owned all the various businesses that helped him make steel – from mines to railroad to steel plant.Horizontal Integration = Rockefeller. At Standard Oil he monopolized over 90% of all oil refineries in the US.
Steel: The Career of Andrew Carnegie
Homestead, PA. | Home | Next
Previous
Rockefeller’s Rise to PowerBegan as a salesman for lamp oil. Advocate of consolidation.By 1877, controlled 95% of all oil refineries in America – horizontal integration and monopoly.Architect of Standard Oil Trust.
John D. Rockefeller and Standard Oil
Topic 2 - Role of GovernmentFederal Government supported rise
of Big Business with:tax policiesthe tariffimmigration policiesdistribution of the national domain
The U.S. in 1850
Railroad Land Grants
Agriculture
Homestead Act, 1862 (160 acres free after 5 years & modest improvements)
Low prices on land for sale: $1.25 or $2.50 per acre
Education
Land Ordinance, 1785: reserved one square mile out of every 36 for support of a public school (applied to same territory as Northwest Ordinance)
Morrill Land-Grant College Act (1862): land given to states (30,000 acres for each senator and representative) to be used to create a public university
Other land distribution
Land given to new, western state governments
Coal, mineral, timber lands sold cheaply
Conclusion: Role of Federal Government in Economic Development
Not a period of laissez faire or hands off capitalism without government intervention Federal government a full partner in economic growth. Result: very rapid expansion of the entire economy.