5.3 Big Business

I. The Rise of Big Business

A. Following the Civil War, big businesses began to dominate the economy

1. Made possible by corporations2. Corporations are owned by stockholders who purchase

shares of ownership called stockB. Corporations would achieve economies of scale – cut costs

through mass production

I. The Rise of Big Business…

C. Advantages of big corporations1. Produce more goods cheaply & efficiently2. Could afford to continue to operate in poor economic

times3. Could negotiate rebates with the railroads

D. Small businesses couldn’t compete with large corporations

II. Consolidating Industry

A. To prevent prices from falling (& profits being lost), businesses organized pools, or agreements, to set prices

B. Captains of industry, such as Andrew Carnegie & John D. Rockefeller, used strategies to grow their businesses & cut competition

1. Carnegie became a leader in the steel industry & relied on vertical integration to make his company more efficient

II. Consolidating Industry…

2. Rockefeller owned Standard Oil, the nation’s largest oil refiner, and achieved almost complete horizontal integration of his industry

-almost had a monopoly on the oil industry

II. Consolidating Industry…

C. Many Americans feared monopolies while others believed they would keep prices low

1. Many states make it illegal for one company to own stock in another company

D. Companies looked for ways around the law1. Formed trusts – legal arrangement that allows one

person to manage another person’s property2. Created holding companies, which owns and manages

the stock of other companies, merging them into one large enterprise