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Big Business. During the Industrial Revolution. Andrew Carnegie. Scotsman, immigrated to United States as child Became one of the first industrial moguls to make his own fortune – “American Dream” Donated nearly all of his lifetime profits, philanthropist Carnegie steel company:
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Big Business During the Industrial Revolution
Andrew Carnegie • Scotsman, immigrated to United States as child • Became one of the first industrial moguls to make his own fortune – “American Dream” • Donated nearly all of his lifetime profits, philanthropist • Carnegie steel company: - business boomed in the late 19th century - success was in large part to Carnegie’s management practices - Carnegie attempted to CONTROL as much of the steel industry as he could
How did Carnegie control so much of the steel industry? • Vertical integration - buyout suppliers to control means of production Example: Carnegie bought coal fields, iron mines, ore freighters and railroad lines. He controlled every step in the production of STEEL
How did Carnegie control so much of the steel industry? • Horizontal integration: - integration of companies that produce similar products merge Example: Carnegie purchased, or bought out, the business of his competition (monopolized market)
How did Carnegie control so much of the steel industry? • Summary: - bought all the means of production (vertical) - bought the competition (horizontal) • Result: - Carnegie owned almost the entire steel industry in the late 19th century How is this bad for consumers?
Social Darwinism • What is Social Darwinism? - It grew out of Darwin’s “Theory of Evolution.” - Became used to explain evolution of society, “best adapted individuals survive” - Popular belief that signs of riches was God’s favor - Reflected the Protestant work ethic, personal responsibility - Used to justify “laissez faire” capitalism, in which big business grew without government control - Made sense to 4,000 millionaires in United States in late 19th century
Growth and Consolidation of Business • Why did businesses grow and consolidate so much during this period? - Horizontal integration: mergers increased and monopolies formed Ex: U.S. Steel, owned by JP Morgan, bought out Carnegie Steel in 1901 for $492 million - Another example of horizontal integration: Ex: Standard Oil merged with other companies through a trust agreement (illegal mergers) to gain control of Oil industry
John D. Rockefeller • Established Standard Oil company • Used horizontal integration to gain control of the entire oil industry • By 1880, Standard Oil controlled 90% of oil refining • As an employer, he made millions yet paid workers low wages • He controlled the market, thus was able to hike prices • Labeled a Robber Baron, why?
Sherman Anti-trust Act (1890) • Made it illegal to form a trust that interfered with free trade between states or other countries • However! Difficult to enforce, not easy to define trusts • Trusts continued until the “Trust Buster” Teddy Roosevelt passed more anti-trust legislation in 1906