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Chapter 20

Section 3

An Age of Big Business

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The Growth of Big Business

  • People in Pennsylvania long noticed oil in the ground
  • Researchers figured out in burned for heat and light
  • Lubricate machinery
  • 1859 - Edwin Drake drilled a well in Titusville-struck oil
    • Started multi-billion dollar petroleum industry

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The Factors of Production

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  • Shift continued from farming economy to industry
  • U.S. had resources for growing economy
  • Factors of production
    • Land, labor, capital
  • Land - resources
  • Labor - population doubled
  • Capital - money, infrastructure

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Finding Capital for Expansion

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  • Entrepreneurs had to raise monetary capital
    • Materials, equipment, payroll
  • Corporations sell stock to raise money - shareholders
  • Dividend - payment from corporation’s profits
  • Rise of corporations fueled industry in late 1800s
  • Railroads were first to form corporations

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The Growth of Oil and Steel

  • After 1859 oil strike, prospectors hurried to Pennsylvania
  • Oil rush towns
    • Ohio, West Virginia
  • John D. Rockefeller
    • Built an oil refinery at 26
    • 1870 - organized Standard Oil Company of Ohio
    • Would dominate the oil industry

John D. Rockefeller

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Rockefeller and the

Standard Oil Trust

  • Horizontal integration
    • Combining competing companies
  • Lowered price to kill competition
  • Pressured customers
  • Cut deals with railroads
  • Formed a trust - group of companies with same board
  • Created a monopoly

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Carnegie and the

Steel Industry

  • Steel became big business
    • Railroads, bridges
  • Bessemer process changed the industry
  • Large steel mills emerged
    • Pennsylvania, Ohio
  • Pittsburgh became steel capital
    • Cleveland, Chicago, Detroit

Bessemer Process

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Carnegie and the

Steel Industry (Cont.)

  • Andrew Carnegie
    • Son of Scottish immigrants
    • Messenger, telegraph Op.
  • Manager of Pennsylvania RR
  • Built a steel plant in Pittsburgh
  • By 1890 dominated steel industry by vertical integration
  • Ships, warehouses, mines, railroads
  • Reduced production costs and prices - ⅓ of steel in U.S.

Andrew Carnegie

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Millionaires and Philanthropists

  • Many industrial millionaires were philanthropists
  • Founded schools, universities, libraries
  • Carnegie donated $350 million
    • Carnegie Hall
    • 2,000 libraries
    • University of Chicago
    • Institute for medical research

Carnegie Hall

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Corporations Grow Larger

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  • Holding companies
    • Buy stock instead of the company
  • Mergers - Combining companies
  • Lack of competition bad for consumers
  • 1890 - Sherman Antitrust Act