Industrial Giants: Robber Barons Or Captains of Industry

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Industrial GiantsRobber Barons Or Captains of
Industry?
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Robber Barons

• Business leaders who treated workers with little
  regard
• They drove out competition with unscrupulous
  practices (though not illegal at the time)
• Laissez Faire led to doctrine of Social
  Darwinism, which evolved from Darwins Origin of
  Species.
• Free competition in economy, like natural
  selection, would ensure survival of the fittest.
• Bribed political officials

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Captain of Industry

• Business leaders who served nation in a positive
  way
• This includes creating jobs, building up nations
  wealth/power, and financing parks, hospitals,
  schools etc.

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CORNELIUS VANDERBILT 1794 - 1877

• Came from a poor family
• Nicknamed the Commodore

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Made millions in shipping business transports
people to California Gold Rush
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Business Continues

• Invested in railroads--owned NY Central RR (1st
  connection NY to Chicago)
• During Panic of 1873 provided thousands of jobs
  to build Grand Central Terminal

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Philanthropic Activity

• Generally didnt give money away
• Gave away 1 million to Central University in
  Nashville,TN Later renamed Vanderbilt University
• 50,000 for Church of the Strangers

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Rest of Fortune

• the public be daed, I am working for my
  stockholders

• Bulk of inheritance (95 million) went to eldest
  son William
• Like father, like son in response to reporters
  question Don't you run it (the train) for the
  public benefit?

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3rd Richest American of all-time 105
million calculated based on percentage of
nations GNPTodays Value 95.9 Billion 5 Bill
Gates 61.7 billion
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JOHN D. ROCKEFELLER1839 - 1937

• Came from a modest family father was a farmer
  and traveling salesman
• Nicknamed The Deacon

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Early Years

• As a kid bought candy wholesale and sold for
  profit
• 10 years old gave a 50.00 loan at 7 interest to
  neighbor!!
• Worked as an accountant

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Oil Business Grows

• Oil discovered 1859 in Titusville, PA by Edwin
  Drake
• Rockefeller and partners see possibilities for
  oil
• Standard Oil Formed 1870

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Business Becomes Powerful

• Used Horizontal Consolidation
• Attempt to corner the market in oil refinery
  business
• 10 oil in USA in 1870
• 90 oil in USA in 1880

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Horizontal Consolidation
  Borculo Oil Refinery
  Zeeland Oil Refinery
  Drenthe Oil Refinery
Standard oil (a refinery company) purchases
smaller oil refinery companies. This eliminates
competition and gives Rockefeller a larger share
of the market
STANDARD Oil
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Business Under His Control

• Fixed shipping rates through rebates money
  repaid to Rockefeller by railroad companies
• Railroad companies cut Standards costs in half
• Railroad companies raised competitions costs 2x
• States attempt to break his monopoly organizes
  Trusts to avoid law eventually broken apart
• New companies eventually include Exxon, Texaco
  (Chevron), Phillips, BP, and Mobil

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TRUSTS
STANDARD Oil
Profits
Profits
Profits
Stock/Control
  Small Oil Company
Stock/Control
  Small Oil Company
Stock/Control
  Small Oil Company

• STANDARD OIL Takes control of small oil
  companies by forcing them to sell more than ½ of
  their stock. This gives Standard control over
  the boards of directors ultimately giving them
  control of the companies. In return Standard will
  not run the small companies out of business and
  they will share in some of Standards profits.
  This eliminates competition and Standard Oil can
  now charge whatever price it wants.
• Avoids anti-monopoly rules aimed at Rockefeller

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POOLS/CARTELS      Could Produce
10,000 Could Produce 8,000
Could Produce 12,000 Barrels Per Day
Barrels Per Day
Barrels Per Day                 All these
companies agree to produce only 6000 barrels per
day and this makes oil scarce, so the price
increases.
  OIL Company 1
  OIL Company 2
  OIL Company 3
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Who is the man in the cartoon?
What is the cartoonist saying about the man?
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What animal is used to represent big business?
What is the animal controlling?
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Save Money At All Costs

• Counted welds on barrelsonly 39 needed
• Painted storage tanks 1 color
• Counted number of bungs (corks) used on
  barrels wanted to know where months supply went

Last month you reported, on hand, 1,119 bungs.
10,000 were sent you beginning this month. You
have used 9,572 this month. You report 1,092 on
hand. What has become of the other 500?
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Philanthropic Activity

• Gave away millions of dollars to
• Churchesmany denominations
• University of Chicago and others
• Founded Rockefeller Institute for Medical Research

• Golf Courses
• Handed out dimes to children daily
• Colonial Williamsburg preservation
• Donated land for United Nations building

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The Richest American of all-time !! 900
million calculated based on percentage of
nations GNPTodays value 189.6 billion 5
Bill Gates 61.7 billion
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ANDREW CARNEGIE1835 - 1919

• Came from a poor Scottish immigrant family
• Father was a weaver
• Very close to his family

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Early Years

• Worked as bobbin boy in sweatshop for 1.20
  per week
• Was hard working and paid attention to detail
• Got job operating telegraph for wealthy railroad
  executive
• Invested some money in stock market

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Wave of Future

• Carnegie is convinced steel is wave of future
• Invests in steel plants
• Implements new technology for making steel
  (Bessemer Process)
• Expensive to install
• Cheaper and faster to produce steel

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Goal To Be The Best

• Founded Homestead Steel (Pittsburgh, PA)
• Henry Frick becomes partner and daily manager
  very frugal
• 1892 Strike at Homestead Steel plant over wage
  cuts
• Pinkertons end strike with force and replacement
  workers hired

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Business Practices

• Used Vertical Consolidation (a.k.a. Integration)
• Obtained mines, trains, ships, foundries etc. to
  control all aspects of steel production
• Workers had to meet production goals or risk
  losing some wagescompeted for Flag

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Time For A Change

• Sold out to J.P. Morgan in 1901
• Believed in Gospel of Wealth The man who dies
  thus rich dies disgraced.
• Gave away 400,000,000 for libraries, schools,
  hospitals
• Carnegie foundation worth over 1.4 billion today
  annually gives away 60 million

Carnegies Scottish Castle
Carnegies 60 bedroom NY mansion
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2nd Richest American of all-time 250 million
calculated based on percentage of nations
GNPTodays value 100.5 billion 5 Bill Gates
61.7 billion
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JOHN PIERPONT MORGAN1837 - 1913

• Came from wealthy family
• Father was a banker
• Graduated from Harvard
• Worked for fathers investment firm

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Gift of Combinations

• Took smaller and weaker companies and combined
  into major industries
• Known as Morganization
• ATT
• General Electric
• Western Union
• International Harvester
• First National Bank

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Prized Company

• Holding Company A corporation that did nothing
  but buy out the stock of other companies.
• U.S. Steel is example of this.
• Purchased Carnegie Steel for 493,000,000 turns
  into U.S.
• U.S. Steel Becomes 1st Billion Dollar Corporation
  in USA

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Power To Help

• Helped bail out government in 1895 bought
  substantial amount of government bonds with gold
• Nation was short on gold and needed to back
  currency
• 1907 Raised 25 million dollars in
• 15 minutes to stock Wall Street Crash

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Power to Destroy

• Public hurt by some of Morgans dealings
• Presidents Teddy Roosevelt and William Howard
  Taft set out to be trust busters
• Government breaks apart many Morgan Trusts

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Near Disaster

• Owned IMM shipping company which owned White Star
  Lines
• White Star Line owned Titanic
• Morgan had reserved the fanciest suite on board
  he was unable to travel that day

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Philanthropic Activity

• Donated Rare Book Collection to J.P. Morgan
  Library
• Kept his rare coin collection until he died
  however

• Gave private art collection to New York Citys
  Metropolitan Museum
• Gave millions to East Coast Universities,
  hospitals, YMCA etc

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23rd Richest American of all-time 119 million
calculated based on percentage of nations
GNPTodays value 25 billion 5 Bill Gates
61.7 billion
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In response Sherman Anti-Trust Act 1890 (this
isnt in your guided noteswrite it down)

• Made it a crime to conspire to destroy
  competition
• Now illegal to combine businesses into monopolies
  and hurt free interstate trade
• Aimed at curbing abuses of big business
• Not as effective early on because few courts or
  government officials would enforce it

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Industrial Age A Final Look

• Viewed as captains of industry by some, robber
  barons by others
• 32 of 40 wealthiest Americans ever lived in this
  period (near turn of century)only 3 alive today!
• Claimed chosen to be wealthy

• Monopolies were generally legal then
• Monopolies are generally illegal today
• Real rags to riches stories inspired poor
• Were philanthropists
• Lived long lives diets, types of work, access to
  health care