Chapter 6 Section 2

1
Chapter 6 Section 2

• Rise of Big Business

2
New Capitalist Spirit

• Capitalism private ownership of most industries
• Competition determines price of goods and wages
• By late 1800s businesspeople looked to gain
  wealth by taking advantage of technological
  advances

3
Horatio Alger

• Wrote books describing idea of self reliant
  individiualism
• 1869 Luck and Pluck series based on a rags to
  riches theme

4
Laissez-Faire Capitalism

• No government intervention in economy
• Literal translation hands off
• Businesses would let competition determine prices
  and wages
• Free enterprise system supply and demand, profit
  margin determine what and how much to produce

5
Critics Respond

• Rapid industrialization is harmful and unjust to
  the working class
• Karl Marx German philosopher
• Proposes a system that removes inequities of
  wealth
• Communism proposes that individual ownership of
  property not be allowed
• Property and production are owned by the
  community and it provides for needs of all
• capitalism allowed bourgeoisie to take advantage
  of proletariat

6
Social Darwinism

• Adapted Charles Darwins theory on natural
  selection and Evolution
• Society progresses through natural selection
• The fittest would and should rise to positions
  of wealth and power
• The unfit would fail
• Any attempt to assist poor or less capable would
  slow social progress
• Religious leaders echoed support wealth became a
  sign of Christian virtue

7

• Natures cure for most social and political
  diseases is better than mans
• Nicholas Murray Butler

8
Corporations

• At close of Civil War businesses are owned by
  individuals, families or partnerships
• Not enough capital to manage new industries
• Definition
• Organizers raise money by selling shares of stock
  in company
• Stockholders receive of profits called
  dividends
• Stockholders had little or no part of daily
  operations

9
Advantages of corporations

• Could raise large sums of money
• Stockholders held limited liability not
  responsible for corporations debt
• Stable organization not dependent on owner for
  its existence
• Problems where competition was fierce, prices
  and profits fluctuate

10
Jay Gould

• Worked as grocery clerk
• Invested in railroad stock and earned 77 million

11
Trusts

• Corporations band together to form trusts
• Turn control of business over to board of
  trustees
• Trustees run business as one large company
• Limits overproduction by reducing competition
• Develops monopolies or complete control over
  price and quality of product

12
Andrew Carnegie

• Born in 1835 in Scotland
• Immigrated to United States in 1848 at age of 12
• Worked in cotton miles for 1.20/week in 1848
• At 17 became private Secretary to railroad
  superintendent

13
Carnegie Steel

• Began investing to raise money which he used to
  get into steel industry
• Began empire in 1860s
• Knew nothing about production but hired experts
  to run company

14
Vertical Integration

• Own the companies that provide materials and
  services you depend on
• Iron and coal mines for ore
• Steamships and railroads to transport products
• By 1899 Carnegie organizes Carnegie Steel Company
• Sold it to J.P. Morgan in 1901 for 500 million

15
Gospel of Wealth

• Rich are morally obligated to benefit their
  fellow citizens
• Donated 350 million to charities across the
  country

16
John D. Rockefeller

• Ran Standard Oil Company
• Started in 1863 at beginning of oil boom
• Practiced vertical integration like Carnegie
• Set out to control the oil industry
• Competition was inefficient

17
Horizontal Integration

• Control of other companies producing oil
• Drove others out of business by making deals with
  suppliers/transportation at cheaper rates than
  others
• Became first trust in U.S. in 1899
• By 1880 controlled 90 of all oil production
• Like Carnegie donated vast sums to charity
• 530 million total

18
Cornelius Vanderbilt

• Prior to Railroad operated shipping business
• By 1869 gained control of New York Central and 2
  others that connected New York City
• Soon controlled lines between Chicago, Cleveland,
  New York, and Toledo
• Provided more efficient service by combining
  small railroads
• By 1877 controlled 4,500 miles of track
• Personal fortune of 100 million

19
George Westinghouse

• 1869 at age of 23 established Westinghouse Air
  Brake Company
• After public demonstration of effectiveness of
  air brake his business grew
• By 1874 air brake was on 7,000 passenger cars

20
George Pullman

• Built Railroad cars to make travel more
  comfortable
• Built company town south of Chicago in 1880
• Hoped to encourage educated, healthy, peaceful
  and virtuous workers
• Provided homes, stores, church, library, theatre,
  medical offices and athletic fields strictly
  controlled daily life in company town

21
Mass Marketing

• Persuade consumers to purchase products
• Brand names name recognition
• Standard Oil implies standard for industry
• Packaging to set products apart
• Helped create consumer culture
• Montgomery Ward and Sears, Roebuck and Company
  develop mail order catalogs

22
Department Store

• Variety of products under one store
• Buy in bulk and set cheap prices
• Marshall Field Chicago
• R.H. Macy New York
• John Wanamaker Philadelphia
• Becomes domain of women
• Hired as workers
• Enticed to shop

23
Chain Stores

• Branch stores in many cities
• Woolworths Frank Woolworth in 1879
• By 1900 had 59 stores around country