Big Business Notes

1. Big Business Notes

2. Factors encouraging growth of Big Business • Inventions • electricity (extends work day) • railroad (cuts production and distribution costs) • Bessemer process (stronger steel allows high rise construction) • telegraph and telephone (aids in company efficiency)

3. What is a monopoly? • not talking about this • although it is the object of the game! • A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity; characterized by lack of any competition

4. Factors encouraging growth of Big Business • Immigration • provides cheap labor source • Governmental Policies • Laissez Faire “hands off” approach – allows business to do whatever they want • Direct/Indirect aid – land grants to railroads allow huge profits for investors

5. Trusts (Monopolies) form through unregulated business practices • Vertical Integration: when a company buys up all the steps used to create a product: i.e., U.S. Steel (Carnegie) owned the mine, the smelting companies, the railroads to ship the steel, and the distributors of the steel • Horizontal Integration: when a company buys up all the raw materials for a finished product: i.e., Standard Oil (Rockefeller) controlled 90% of the wells in the country

6. Trusts (Monopolies) form through unregulated business practices • Pools: when several companies work together to maintain high prices and reduce competition: i.e., many railroad companies agreed to fix high prices so consumers were forced to pay regardless of who they shipped with • Interlocking Directorates: when the Board of Directors of one company also sit on the Board of Directors for a competing company (they only make decisions which are favorable to the parent company

7. Effects of Trusts • decreased competition – large companies controlled the market • higher prices – because there was no competition, companies could charge whatever they wanted • wealth – monopolists became incredibly wealthy (first group of millionaires in country), increased gap between rich and poor

8. Effects of Trusts • government controlled by business – wealth allowed companies to lobby for favorable governmental decisions • growth of unions – as poor working conditions increase, workers begin banding together in greater numbers to fight for better hours, pay, etc. • use technique called collective bargaining – essentially, if we negotiate together, we are stronger than if we do it by ourselves

9. Robber Baron or Capt. of Industry • Robber Baron- businesspeople who allegedly engage in unethical business tactics and questionable stock market transactions to build large personal fortunes

10. Captians of Industry • Captain of Industry-a business leader whose means of amassing a personal fortune contributes positively to the country in some way

11. Andrew Carnegie • Scottish immigrant • At 14 he was working 12 hours a day for $1.20 a week as a bobbin boy.  • He studied hard and will then become a telegraph clerk at age 16 for $4.00 a week.  • At 17 he will become the private secretary to the president of the Pennsylvania Railroad •   In 1850 he bought an oil well and made money in the new oil industry, but turned his attention to the steel industry where he will make his fortune

12. JP Morgan • American financier who dominated corporate finance and industrial consolidation • Formed US Steel Co with Andrew Carnegie • accused by critics of controlling the nation's high finance • his dedication to efficiency and modernization helped transform American business

13. John Rockefeller • Was America’s first billionaire • Owned the Standard Oil Company • Paid employees very low wages to keep his product price low enough to drive out competition • Gave away over $500 million to charities and universities