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Capitalism and Big Business

Capitalism and Big Business. What is Capitalism?. a type of economy ownership of the means of production, distribution, and exchange of wealth is made by private individuals or corporations opposite of public or state-owned wealth (i.e. socialism). The Principles of Capitalism….

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Capitalism and Big Business

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  1. Capitalism and Big Business

  2. What is Capitalism? a type of economy ownership of the means of production, distribution, and exchange of wealth is made by private individuals or corporations opposite of publicor state-owned wealth (i.e. socialism)

  3. The Principles of Capitalism…

  4. 1. Private Property Resources and businesses are owned by private citizens or corporations (NOT the government)

  5. 2. Competition Different companies can make the same product Companies compete with each other to make the best product – at the lowest price

  6. 3. Profit Motive Goods are made and sold in an effort to make a profit

  7. 4. Freedom of Enterprise the economy will regulate itself through supply and demand, (a.k.a. market forces) no need for government intervention or regulation (i.e. laissez-faire)

  8. 5. Freedom of Contract Idea that individuals, or corporations, should be free to bargain the terms of their own contracts

  9. 6. Consumer Sovereignty Consumers use their purchasing power to help determine what companies should produce Also… let companies know when they are unhappy with a product by going elsewhere

  10. Benefits of Capitalism… Encourages innovation and invention (i.e. entrepreneurship) Ideally provides the best possible product at the cheapest price Helped the U.S. become one of the strongest & wealthiest nations in the world

  11. Drawbacks of Capitalism… 1. Potential for greed and corruption = development of monopolies and trusts 2. Misuse/abuse of labor force and the environment 3. Large divide between the rich & poor; growth of slums 4. Workers lost pride in their work

  12. Big Business in the late 1800s

  13. Development of Corporations • New form of group ownership • Perfect for expanding risky businesses • Allowed for huge amounts of capital (i.e. money and/or resources)to be pooled together • Funded new technology • Began new industries • Ran larger plants

  14. Business Competition in the late 1800s led to… = an attempt to control or eliminate any competition that threatens the growth of your business monopolies

  15. horizontal integration Consolidation of many firms in the same business

  16. Example: John D. Rockefeller and Standard Oil Company

  17. Holding Companies Corporation that does nothing but buy out the stock of other companies Holding Company – buys controlling stock of operating companies Controls operating companies’ output, prices, etc…

  18. Trust Stockholders elect of Board of Trustees Joining with competing companies in a ‘trust’ agreement Stock is turned over the Board of Trustees Board runs separate companies as one large corporation

  19. vertical integration Gain control of the many different businesses that make up all phases of a product’s development

  20. By 1901, Carnegie owned 80% of all U.S. steel production Total power over quality and cost of the finished product

  21. The success of big business was dependent upon… • Exploiting workers • low wages, long hours, harsh work conditions • Ruthlessly driving competitors out of business • Pro-business governmental policies

  22. You Decide… Robber Barons? Captains of Industry?

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