The Rise Of Big Business


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rise of big business at the end of the 1800's

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The Rise Of Big Business

  1. 1. How will you get rich? <ul><li>What would be a smart business to get into now if you wanted to make $$$ in the future? </li></ul><ul><li>What’s something that everybody uses or will use in the future? </li></ul>
  2. 2. How did people get rich? <ul><li>Think for a moment about the economy and environment of the late 1800’s… we’re going to be learning about several people who got super rich… how do you think they made their money? What industries would have been good ways to earn a living back then and why? </li></ul>
  3. 3. The Rise of Big Business
  4. 4. Name three ways people & products moved around in the late 1800’s <ul><li>Which of these could move the most people & goods the fastest? </li></ul><ul><li>How do railroads make money? </li></ul>
  5. 5. Big Business # 1: Railroads <ul><li>By 1886 there was a network of RR all over the U.S. using the same gauge </li></ul><ul><li>New inventions such as Westinghouse’s airbrake & Pullman’s sleeping car made train travel easier & safer </li></ul>
  6. 6. How do railroads make money again? <ul><li>Therefore, the more tracks (lines) you own… </li></ul>Vanderbilt
  7. 7. Eliminating the Competition <ul><li>There are 2 ways to get rid of your competition </li></ul><ul><ul><li>1) Buy them: consolidate & combine </li></ul></ul><ul><ul><li>2) Drive them out of business: lower prices for big customers ( rebate ) so that your competition loses all their customers </li></ul></ul>
  8. 8. Who does competition help? How? <ul><li>The CONSUMER </li></ul><ul><ul><li>More competition = lower prices </li></ul></ul>Who does competition hurt? How? <ul><li>Other Businesses </li></ul><ul><ul><li>More competition = lower prices = less profit </li></ul></ul>
  9. 9. RR’s began to help each other instead of competing <ul><li>Pool: RR companies agreed not to compete with each other and set the same high price (rates) everywhere. </li></ul>Let’s not compete anymore Let’s Pool!
  10. 10. When businesses cooperate who wins? <ul><li>The businesses </li></ul>When businesses compete who wins? <ul><li>The consumer </li></ul>
  11. 11. The biggest losers when RR’s cooperated (pooled) were the farmers WHY?
  12. 12. Why was it so tough for Farmers? <ul><li>New machines helped farmers produce more  so the price of their produce went down </li></ul><ul><li>Farmers produced even more to make more money  the prices for their produce went down even more </li></ul><ul><li>Farmers owed lots of $ to banks </li></ul><ul><li>They became less able to pay back their debts </li></ul><ul><li>Because of interest on loans, they owed even more $ to the banks </li></ul>
  13. 13. The Vanderbilt family controlled most of the RR lines in the U.S.
  14. 14. Railroad Monopoly <ul><li>Because the Vanderbilts owned most of the RR’s, they could charge whatever they wanted. </li></ul><ul><li>They charged “Whatever the market will bear.” </li></ul>
  15. 15. Big Business #2: Steel <ul><li>The growth of RR’s led to the growth of the steel industry </li></ul><ul><li>Steel was much lighter, stronger, & just better than iron </li></ul><ul><li>Steel was used to make many things including: railroad lines, nails, screws, & skyscrapers </li></ul>
  16. 16. Some uses for steel
  17. 17. Bessemer Process <ul><li>The Bessemer Process allowed iron to be turned into steel much faster & cheaper. </li></ul>
  18. 18. Andrew Carnegie, King of Steel <ul><li>Helped bring Bessemer process to U.S. </li></ul><ul><li>Carnegie was a poor, Scottish immigrant, he worked hard, got lucky and eventually became one of the richest men in the world; owning U.S. Steel </li></ul>
  19. 19. Steel Mills <ul><li>Many steel mills (factories where steel is produced) sprang up. Especially in Pittsburgh, PA </li></ul><ul><li>These mills offered jobs to many “new” immigrants </li></ul>
  20. 20. Life for workers <ul><li>Work in the mills, mines, and factories was difficult, dangerous, & dirty. </li></ul><ul><li>Workers were paid very little </li></ul><ul><li>Workers had no pension or healthcare </li></ul><ul><li>Workers could be fired for any reason </li></ul><ul><li>Unions were not allowed </li></ul>
  21. 21. Vertical Integration <ul><li>Carnegie owned every aspect of the steelmaking process. </li></ul><ul><li>From the mines where ore was dug to the railroads that shipped the ore, to the factories where the ore was turned to steel. </li></ul>
  22. 23. Time to make up some examples of Vertical Integration <ul><li>How would Burger King vertically integrate? </li></ul>
  23. 24. Big Business # 3: Oil <ul><li>Oil was first discovered in Pennsylvania </li></ul>
  24. 25. OIL <ul><li>Oil was only valuable after it had been refined into kerosene and other products </li></ul>
  25. 26. Rockefeller <ul><li>Originally from Richford, NY </li></ul><ul><li>Moved to Cleveland </li></ul><ul><li>Started the Standard Oil Trust </li></ul><ul><ul><li>(Trust = a group of companies run by the same board of directors) </li></ul></ul>
  26. 27. Example: The Hamburger Trust
  27. 29. Time to make up some examples of Horizontal Integration <ul><li>How would AT&T horizontally integrate? </li></ul>
  28. 30. The Standard Oil Monopoly <ul><li>Monopoly: When one business controls all or nearly all of the business of an industry. </li></ul><ul><li>Through various legal and illegal methods Rockefeller created a monopoly that controlled 95% of all oil refining in the United States </li></ul>
  29. 31. What were some uses for oil? <ul><li>Who needed oil? </li></ul>
  30. 33. Big Business #4: Banking & Finance <ul><li>Corporations became very popular ways to organize businesses </li></ul><ul><li>A corporation is a type of business organization owned by investors </li></ul><ul><li>Each investor who buys stock owns part of the corporation and they receive dividends or a percentage of the corporation’s yearly profit. </li></ul>
  31. 35. Corporations <ul><li>A corporation is a form of business organization recognized by law as a separate legal entity having all the rights of an individual </li></ul>
  32. 36. Banking <ul><li>Following the Civil War, Corporations borrowed lots of $ from large banks. </li></ul><ul><li>When the corporations started making $, they paid the banks back with interest & kept their $ in the banks </li></ul><ul><li>This meant that bankers like J.P. Morgan had plenty of $ </li></ul>
  33. 37. J.P. Morgan <ul><li>Morgan was an incredibly wealthy banker. </li></ul><ul><li>He used his money to buy steel mills & RR lines </li></ul><ul><li>He eventually bought U.S. Steel (Carnegie’s corporation) </li></ul>
  34. 38. J.P. Morgan…continued <ul><li>Morgan, “I like a little competition, but I like combination more.” </li></ul><ul><li>Morgan organized efforts to reduce competition between companies </li></ul><ul><li>How rich was he? </li></ul><ul><li>When the U.S. government needed a loan of $129 million in gold, Morgan gave it to them! </li></ul>
  35. 39. Trusts (noun) <ul><li>The monopolies created by men such as Rockefeller (oil), Carnegie (steel), Vanderbilt (RR’s), & Morgan (banking/steel) were called trusts </li></ul>
  36. 40. Controlling the Trusts? <ul><li>1890: Sherman Antitrust Act is passed to restore competition to America’s capitalist (free enterprise) economy </li></ul><ul><li>The Act was far too weak to control the trusts and was ignored </li></ul><ul><li>The Sherman Antitrust Act would later be used to break up labor unions instead of trusts. </li></ul>
  37. 41. The pros & cons of powerful trusts <ul><li>Pros </li></ul><ul><li>Cons </li></ul>
  38. 42. Homework <ul><li>Using the “T” chart you’ve just created in your notes, write an essay about the trusts of the late 1800’s. </li></ul><ul><li>Questions: Were they a good or bad thing? Why do you believe that? </li></ul><ul><li>How long should it be? This is a 10 point homework assignment… take a position & support that position using what you’ve learned about trusts. </li></ul>