golden_age_of_industry_part_ii2
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http://www.houstonchristian.org/data/files/gallery/ClassFileGallery/Golden_Age_of_Industry_Part_II2.pptTRANSCRIPT
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Golden Age of Industry Part II
The Rise of Big BusinessThe Birth of Corporate America
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Theories of Business
• Laissez-faire capitalism– Calls for no government regulation of
business.– Business leaders believed if businesses were
freed from government regulation, the economy would prosper.
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Theories of Business
• Social Darwinism – the idea advanced by English social philosopher Herbert Spencer.
• Based on Charles Darwin’s theories of natural selection.
• Argues that society progresses through competition
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Social Darwinism
• Advances the idea that the “fittest” people, businesses, or nations will rise to positions of wealth and power.
• The “unfit” people, businesses, or nations will fail.
• Social Darwinists also believed that to help the poor or less capable only slows social progress.
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Social Darwinism
• The theory was even supported by many religious leaders.
• Baptist minister Russell H. Conwell declared, “you ought to get rich, and it is your duty to get rich…To make money honestly is to preach the gospel.”
• What message does this send?
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The Birth of Big Business
• Big business was a new business model.• Prior to the Civil War most businesses
were sole proprietorships – meaning a single owner – or partnerships – businesses owned by two people.
• These business models proved to be inadequate to finance the new industries that were developing such as railroads or steel mills.
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Corporations
• The idea of the corporation has been around since colonial times.
• The corporation is owned by many individuals who buy stock, or a share, of the company.
• Stockholders receive a percentage of the profits in the form of dividends.
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Advantages of the Corporation
• Can raise enormous sums of money.• There is limited liability – the stockholders
are not responsible for the corporation’s debt.
• Corporations are stable organizations. They are not dependent on owners to exist.
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Rise of the Trust
• The trust became one of the most hated symbols of Big Business in American History.
• The business trust came about as a way to provide stability during the fiercely competitive economic climate of the late 1800’s.
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The Trusts
• Trusts function by having a groups of companies turn over control of their stock to a board of directors.
• The board of directors then run the various companies as a single enterprise.
• If the trust could gain exclusive control of a single industry, it would have a monopoly.
• What modern day corporation has been accused of being a trust?
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Andrew Carnegie
• Immigrated from Scotland in 1848.
• Watched his father struggle to adapt to a new culture and way of life as America was in the process of becoming an industrial nation.
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Andrew Carnegie• The Carnegie family
lived in abject poverty after immigrating.
• Carnegie’s father tried to earn a living as a weaver.
• Carnegie’s mother told him and his brother Tom that “they must become honorable and respectable men, yet not remain impoverished.”
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Carnegie
• Worked two jobs as a child to help support his family.
• His next job was as a delivery boy for O’Reilly Telegraph Company. He carefully studied this business and all of its customers as he worked.
• He taught himself to be a telegraph operator.
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Carnegie
• He was self-educated.• He went to night school to learn double-
entry bookkeeping.• He set about to educate himself by
reading “great books and literature” such as Shakespeare.
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Carnegie and the Pennsy
• His major break came between 1853 and 1865 when he worked for the great eastern railroad, The Pennsylvania Railroad.
• He worked as the assistant to the western division’s supervisor, Thomas Scott, one of the best business minds of the era.
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Carnegie and the Pennsy
• Carnegie learned during his years on the Pennsy how changes in one part of a business would effect another.
• He learned the necessity of knowing how all the parts of an industry worked individually and in relationship to one another.
• Learned how to invest from Thomas Scott.
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Henry Bessemer and Carnegie
• In 1872 Carnegie traveled to England to witness firsthand how the Bessemer Process worked.
• He formed Carnegie, McCandless, and Company, the forerunner of Carnegie Steel.
• Carnegie hired excellent business managers and drove them mercilessly.
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A Bessemer Converter
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Carnegie’s Contributions to Industry
• Economies of Scale – by purchasing supplies in bulk and producing goods in large quantities, costs can be lowered and profits increased.
• Vertical integration – the practice of acquiring companies that provided materials and services that his enterprises depended on, for example iron ore and coal mines.
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Carnegie Steel Company
• Formed in 1889 when Carnegie merged all of his interests, steel mills, mines, steamship lines, and railroads into one corporation.
• He sold it to J.P. Morgan in 1901 for $500 million dollars and retired, the world’s richest man.
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Carnegie’s Wealth
• He made excellent steel at a low price.• He amassed unbelievable wealth for that
era.• He did it in part because of the low wages
and living conditions he provided his workers.
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Skibo Castle
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The Carnegie Residence In New York
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Carnegie The Philanthropist
• Gave away all but 10% of his fortune which he set aside for his family.
• 2,811 public libraries, 1,946 of which were in the United States.
• Gave away 8,000 organs to churches.• Established the Carnegie Foundation with
an endowment of $125 million dollars.
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John D. Rockefeller – The Oil Tycoon
• Established the practice of horizontal integration- one company’s owning of other companies involved in the same industry.
• What Rockefeller could not buy, he drove out of business by making deals with suppliers to receive lower prices on supplies and freight rates.
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John D. Rockefeller
• A 1901 Puck cartoon satirizing Rockefeller and his empire. He stands on the base of his empire, Standard Oil. His crown is decorated with his other holdings.
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Famous Quotes From John D. Rockefeller
• “God gave me my money. I believe the power to make money is a gift from God…to be developed and used to the best of our ability for the good of mankind. Having been endowed with the gift I possess, I believe it is my duty to make money and still more money to use the money I make for the good of my fellow man according to the dictates of my conscience.
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Rockefeller and Anti-trust
• In 1911 Standard Oil was dissolved following a Supreme Court decision.
• Rockefeller retired that year.• He was worth $1 billion.
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Rockefeller
• By 1899 he controlled 90% of American oil refining capacity.
• Annual profits had reached $45 million.• In his later years he spent much of his
fortune as a philanthropist. One newspaper even commented he was in competition with Andrew Carnegie to see who could give the most money away.
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A Man of Contradictions
• Rockefeller was an utterly ruthless business man who was quoted as saying “competition was a sin.”
• He would do whatever was necessary to drive a competitor out of business.
• He practiced: monopolization, rate wars, rebates from railroads, and intimidation.
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A Man of Contradictions
• Rockefeller was deeply religious.• He was a devout Baptist.• He gave large amounts of money to
religious organizations.• He gave the matching challenge grant to
establish the University of Chicago, which was founded to be a Baptist college.
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Famous Quotes From John D. Rockefeller
• “I do not think there is any other quality so essential to success of any kind as the quality of perseverance. It overcomes almost everything, even nature.”
• I believe that every right implies a responsibility; every opportunity, an obligation; every possession, a duty.”
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Famous Quotes From John D. Rockefeller
• “I always try to turn every disaster into an opportunity.”
• “Don’t be afraid to give up the good to go for the great.”
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Government and Big Business
• The Industrialists frowned on intervention by Government.
• Welcomed government promotion of the new industrial order. Protective steel tariffs are one such example.
• Public pressure brings about the Sherman Anti-trust Act which outlaws the formation of trusts.
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Mass Marketing & Mail Order
• The Industrialists use advertising to increase demand for their products.
• John Wanamker, Marshall Field, and R.H. Macy open Department Stores.
• Mail order is now possible thanks to the RPO and REA service provided by railroads.
• Wards and Sears.