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18-2 / Big Business

The Big Idea

The growth of big business in the late 1800s led to the creation of monopolies.

Main Ideas

  • The rise of corporations and powerful business leaders led to the dominance of big business in the United States.
  • People and the government began to question the methods of big business.

8.12.4

8.12.6

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Vocabulary

corporations - businesses that sell portions of ownership called stockshares.

Andrew Carnegie - wealthy and powerful business owner in the steel industry

vertical integration - owning all business involved in each step of a manufacturing process

John D. Rockefeller - wealthy and powerful business owner in the oil industry 

horizontal integration - owning all businesses in a certain field 

trust - legal arrangement grouping together a number of companies under a single board of directors

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Vocabulary (Cont.)

Leland Stanford - wealthy and powerful business owner in

the railroad industry

social Darwinism - a view of society based on Darwin’s

theory of natural selection in which the “fittest” rise to

the top

monopoly - total ownership of a product or service 

Sherman Antitrust Act - a law that made it illegal to create

monopolies or trusts that restrained competition

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The rise of corporations and powerful business leaders led to the dominance of big business in the United States.

  • Many entrepreneurs formed their businesses in the late 1800s as corporations: businesses that sell portions of ownership called stock shares.
  • Corporate leaders were some of the most widely respected members of American society.
  • Successful corporations rewarded not only the people who founded them, but also investors who held stock
  • Corporations encouraged more investment in businesses because stockholders could sell stock whenever they wanted.

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Rise � of Corporations

  • In the late 1800s, many entrepreneurs formed their businesses as corporations
  • Successful corporations reward their investors, or shareholders, as well as their owners
  • Shareholders share ownership of the corporation, but elect a board of directors to manage the operation of the business
  • Corporations offer advantages over earlier business forms:
    • If corporations fail, stockholders only lose the amount they invested
    • Stockholders are free to sell their stock at any time
  • By 1900, more than 100 million shares were being traded per year on the New York Stock Exchange

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Business leaders became wealthy, powerful and famous

  • Came to the U.S. as a poor immigrant
  • Took a job with the railroad and worked his way up
  • By 1873, he was focused on steelmaking
  • Bought out competitors
  • Used vertical integration, owning businesses involved in each step of manufacturing, to lower costs
  • Carnegie acquired iron ore mines, coalfields, and railroads to supply and support his steel mills

Andrew Carnegie: one of the most admired businessmen of the time

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Carnegie’s Philosophy

As I grow older, I pay less attention to what men say. I just watch what they do. ��Do not look for approval except for the consciousness of doing your best. ��I would as soon leave my son a curse as the almighty dollar. ��No man will make a great leader who wants to do it all himself or get all the credit for doing it. ��People who are unable to motivate themselves must be content with mediocrity, no matter how impressive their other talents. ��Surplus wealth is a sacred trust which its possessor is bound to administer in his lifetime for the good of the community. �

Carnegie sold Carnegie Steel Company in 1901 for $250 billion, making him the richest man in the world.

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Huge corporations resulted from the successful consolidation of smaller busineses

  • At 21, John D. Rockefeller started an oil refining business
  • In ten years, Standard Oil Company had become the country’s largest refinery
  • Developed horizontal integration, owning all businesses in a field; controlled 90% of U.S. oil business
  • Formed a trust, grouping many companies under a single board

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Rockefeller’s Philosophy

  • Don’t be afraid to give up the good to go for the great.
  • Every right implies a responsibility; Every opportunity, an obligation, Every possession, a duty.
  • Good leadership consists of showing average people how to do the work of superior people.
  • The only question with wealth is, what do you do with it?
  • I always tried to turn every disaster into an opportunity.
  • I believe in the supreme worth of the individual and in his right to life, liberty, and the pursuit of happiness.
  • I have no use for men who fail. The cause of their failure is no business of mine, but I want successful men as my associates.

Rockefeller’s philanthropies gave out $500 million in his lifetime.

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Railroads remained big business

  • Leland Stanford made fortune selling equipment to miners
  • Governor of California, one of founders of Central Pacific Railroad, and founder of Stanford University
  • Later in life, argued that industry should be owned by workers

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Stanford’s Philosophy

  • The right of each individual in any relation to secure to himself the full benefits of his intelligence, his capacity, his industry and skill are among the inalienable inheritances of humanity. ��The rights of one sex, political and otherwise, are the same as those of the other sex, and this equality of rights ought to be fully recognized. �
  • I have always been fully persuaded that, through co-operation, labor could become its own employer. �
  • Legislation has been and is still directed towards the protection of wealth, rather than towards the far more important interests of labor on which everything of value to mankind depends. �

Stanford founded Stanford University in Palo Alto, CA in 1884

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Social Darwinism

  • People and the government began to view big business as a problem in the late 1800s.
    • Concerned about child labor, low wages, and poor working conditions
  • Many business leaders believed in social Darwinism.
    • Darwin’s “survival of fittest” applied to which human beings would succeed in business and in life in general
    • Used this theory to justify divisions between rich and poor

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Anti-Trust Movement

  • Critics said many businesses earned their fortunes through unfair business practices.
    • Used size and strength to drive smaller competitors out of business
    • Powerful trusts sold goods and services below market value until smaller competitors went out of business, then raised prices.
  • Some people were concerned when a trust gained a monopoly, or total ownership of a product or service.

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Sherman Antitrust Act

  • Americans worried about the political power of wealthy trusts.
  • The Sherman Antitrust Act was passed in 1890 to make it illegal to create monopolies or trusts that restrained trade.
    • The act did not clearly define a trust in legal terms, so it was hard to enforce.
    • Corporations and trusts continued to grow in size

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Enduring Philanthropy

    • After amassing huge fortunes, Carnegie, Rockefeller, Stanford, and other business leaders gave away large sums of money.
  • They came to believe that the rich should help the poor.
  • Their charitable organizations continue to fund public programs today.

Stanford University

Rockefeller Center

Carnegie Hall