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Rise of Big Business

Rise of Big Business. Objective 5.02. Monopolies and Trusts. Late 1800s—Americans become suspicious of large corporations Power of monopolies feared Wanted to prevent horizontal integration. Horizontal Integration. Own all of the industry at the same level.- buy up all the competition.

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Rise of Big Business

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  1. Rise of Big Business Objective 5.02

  2. Monopolies and Trusts • Late 1800s—Americans become suspicious of large corporations • Power of monopolies feared • Wanted to prevent horizontal integration

  3. Horizontal Integration • Own all of the industry at the same level.- buy up all the competition. • Example: Own all the gas stations or telephone companies, discounts stores.

  4. 1882—first trust was formed by the Standard Oil Company • Trust = a coalition of organizations formed to limit competition by controlling the production and distribution of a product or service • Enabled trustees to control a group of companies as if they were one large merged company

  5. New Industries • Railroads • Union Pacific—started in Nebraska; headed west • Built by Civil War Veterans and Irish Immigrants • Central Pacific—started in California; headed east • Built mostly by Chinese Immigrants

  6. Cornelius Vanderbilt (1794-1877) • Began a RR empire by merging popular lines in NY to form the New York Central and Hudson River RR

  7. Improvements for Trains • George Westinghouse developed the new air brake system for trains in 1868 using compressed air after viewing a collision

  8. Steel Industry • Andrew Carnegie (1835-1919) • Began in RR • Met Sir Henry Bessemer who invented a new process of making high quality steel—now called the Bessemer Process • He decided to get into the steel business and opened a company in Pittsburgh in 1875

  9. Success brought by the Carnegie Steel Company cemented Carnegie as a “Captain of Industry” • By the 1890s, his company was the largest and most profitable enterprise in the world

  10. Vertical Integration • Buy up the raw materials, transportation, production/manufacturing, retail/sales. • Control every step of the product.

  11. J.P. Morgan (1837-1913) • 1901—Carnegie decided to sell his steel company to Morgan • He and Elbert Gary then merged Carnegie’s steel with their holdings in the Federal Steel Company to form U.S. Steel • At one time was the largest producer of steel in the world, now produces less than 10%

  12. Oil Industry • Edwin Drake (1819-1880) • 1859—drilled first oil in U.S. near Titusville, PA • Caused major expansion of oil business • By 1900 oil fields from PA to TX had been opened

  13. John D.Rockefeller (1839-1937) • Organized the Standard Oil Company • By 1880s—controlled more than 90% of oil refining in the U.S. • Used horizontal integration to buy out smaller refiners

  14. What is the problem with what Rockefeller was doing?

  15. 1911—Government found his company to be a monopoly and forced it to be divided into 34 companies including • Amoco • Chevron • Sonoco • Exxon • Mobil

  16. Take out a sheet of paper to be put in Goal 5 of portfolio. • Create your own vertical integration- pick a business and show the process. • EX: Pork- own feed mill feed mill, own the farms hogs are raised- own processing plants, distribution, grocery store. • Create your own horizontal integration- pick an industry and show how it work. • EX:- Carolinas Medical Center- buys out the other hospitals.

  17. Ideas of the Gilded Age Objective 5.02

  18. The Gilded Age • Coined by Mark Twain • Era of U.S. 1876-1900 • Period of rapid industrialization • Characterized by ruthless pursuit of profit and government corruption

  19. Individualism • No matter how humble a persons origins, they could rise in society and go as far as their talents and commitment would take them • Horatio Alger —expressed individualism through numerous “rags-to-riches” novels involving the poor going to the big city and becoming successful

  20. Social Darwinism • Reinforced idea of individualism • Proposed by Herbert Spencer, English philosopher • Applied Darwin’s theory of evolution and natural selection to human society • Argued that society progressed and became better because only the fittest were successful

  21. Gospel of Wealth • Those who were wealthy, such as Carnegie, attempted to extend and soften the harsh philosophy of Social Darwinism through philanthropy • Believed that those who profited from society owed it something in return • Used their great fortunes to further social progress

  22. “Capitan’s of Industry” vs. “Robber Barons” • How would you view them? Create a T-Chart to compare the two terms. Use your notes and your knowledge to answer! • Examine the Pros and Cons

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