CHAPTER 19:The Industrial Age Section 2: Big Business
THE U.S. ECONOMY Based on capitalism –Economic system in which privatebusinesses run industries • Provides for free markets and competition • Keeps prices low and quality high
Capitalism and the Free Market
HOW BUSINESSES GREW – Formed corporationsbusiness that sells portions ofownership called stock shares
How Corporations Work
HOW BUSINESSES GREW Stockholders:• Get a % of the profit• Elect board of directors to runcompany
HOW BUSINESSES GREW Using horizontal integration –Acquiring ownership of otherbusinesses in the same field
HOW BUSINESSES GREW Using vertical integration –Acquiring ownership ofbusinesses involved in each stepof a manufacturing process
HOW BUSINESSES GREW Making a trust – Legalarrangement grouping together anumber of companies under asingle board of directors
HOW BUSINESSES GREW to run• Set prices very lowcompetitors out of business, thenraised prices very high
HOW BUSINESSES GREW monopoly – Goal was to form aTotal ownership of a product orservice
HOW BUSINESSES GREW• No competition left• Raise prices to whatever theywanted• Quality of products decreased
TWO LEADERS IN BUSINESS Some men used integration andtrusts to become extraordinarilywealthy
TWO LEADERS IN BUSINESS Andrew Carnegie – Controlledmost of the steel production in theU.S.
TWO LEADERS IN BUSINESS John D. Rockefeller –Controlled most of the oilproduction in the U.S.
WHY DID THESE MEN BECOME SO RICH? Some said they were cheatingthe system Others justified their actionsthrough a theory called SocialDarwinism • “Survival of the fittest” determined which human beings would succeed in business and in life in general