The Incorporation of America

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The Incorporation of America

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Benefits of Big Business

• Large companies could manufacture enough products
  to meet national demand.
• Produced better products for lower cost.
• Paid high salaries to get experts.
• Increased efficiency

3
Big Business Tactics

• Demand volume discounts.
• Sell at a loss until their competition shuts
  down.
• IF/when it becomes a monopoly, it controls prices.

4
Mixed Feelings Toward Big Business

• Worried about corrupting influence of power and
  wealth, but liked the low prices, efficiency, and
  national markets.
• Same as feelings toward outsourcing today.

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Role of Corporations

• Corporation is an organization owned by many but
  treated by law as an individual. Can own
  property, sue/be sued, enter into contracts.
• Owners are called stockholders own shares of
  partnership called stock.
• Issuing stock allows the corporation to raise
  money, or financial capital, while diluting the
  risk.

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Limited Liability

• Stockholder risks no more than the sum originally
  invested.
• If the corporation cannot pay its debts and goes
  bankrupt, stockholders (owners) are not
  personally responsible for paying its debts.

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Economies of Scale

• With large capital, corporations could invest in
  new technologies, hire large workforce, purchase
  more machines.
• Corporations can make goods more cheaply because
  they produce so much so quickly using large
  manufacturing facilities.
• Small companies could not compete and went
  bankrupt.

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• Americas Industrialists Captains of Industry
• Or
• Robber Barons?

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The Robber Barons of the Past
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Robber Barons term implies that leaders built
their businesses by stealing from the public
using unfair business practices Captains of
Industry credits these Industrialists with
creating the industrial power of the US
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New Business Culture

1. Laissez Faire ? the economic theory of the
   Industrial Age.

• Individuals should compete freely in the
  marketplace.
• No room for government in the market!

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2. Social Darwinism

• British economist.
• Advocate of laissez-faire.
• Adapted Darwins ideas from the Origin of
  Species to humans.
• Survival of the Fittest applied to business

Herbert Spencer
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Social Darwinism in America

• Individuals must have absolute freedom to
  struggle, succeed or fail.
• Wealth is a reward for smarts and hard work.
• The strongest companies will survive, the weak
  ones will perish.
• Govt should not interfere with the natural
  selection of successful businesses.

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Cornelius Commodore Vanderbilt
Cant I do what I want with my money?
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William Vanderbilt

• The public be damned!
• What do I care about the law? Haint I got the
  power?

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Andrew Carnegie
Scottish immigrant Rags to Riches 1st major
steel company in US (now US Steel) Vertical
Integration Gospel of Wealth Philanthropist
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Vertical Integration

• Owns all of the businesses that its needs in
  order to operate
• Saves company money even while company becomes
  bigger
• Carnegie Steel bought coal mines, limestone
  quarries, iron ore fields.

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The Gospel of Wealth

• Wealth is not looked upon as bad.
• but is
• Viewed as a sign of Gods approval.
• Christian duty to accumulate wealth. (Protestant
  work ethic)
• Wealthy people have responsibility to use their
  wealth for the benefit of society. Thus many
  endowed colleges, libraries, scholarships, etc.

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John D. Rockefeller

• Founder of Standard Oil
• controlled 90 of US
• oil refining
• Widely criticized for his
• business practices
• horizontal consolidation
• forced rebates
• trusts
• Legacy as philanthropist

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Horizontal Integration

• Buys out same type of business.
• Big oil company (Standard Oil) buys out little
  oil companies.
• When owns all of same type of companies, has a
  monopoly. With no competition, can set prices
  where it wants.

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Standard Oil Co.
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TRUSTS

• A trust is formed when several companies give
  control of their corporations to a single board
  of trustees.
• Did not violate state laws forbidding one company
  to own stock in another company without first
  getting permission from state
• Enabled trustees to control a group of companies
  as if they were one large merged company

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BILL GATES
Chairman and chief architect of
Microsoft Richest man in world Bill and
Melinda Gates Foundation