chapter 6 section 2 rise of big business. new capitalist spirit capitalism– private ownership of...
TRANSCRIPT
Chapter 6 Section 2
Rise of Big Business
New Capitalist Spirit
Capitalism– private ownership of most industries
Competition determines price of goods and wages
By late 1800’s businesspeople looked to gain wealth by taking advantage of technological advances
Horatio Alger
Wrote books describing idea of self reliant individiualism
1869 Luck and Pluck series– based on a rags to riches theme
Laissez-Faire Capitalism
No government intervention in economyLiteral 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
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”
Social Darwinism
Adapted Charles Darwin’s 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
“Natures cure for most social and political diseases is better than man’s”
Nicholas Murray Butler
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
Advantages of corporations
Could raise large sums of moneyStockholders held limited liability–
not responsible for corporations debtStable organization– not dependent
on owner for its existenceProblems– where competition was
fierce, prices and profits fluctuate
Jay Gould
Worked as grocery clerk
Invested in railroad stock and earned $77 million
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
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
Carnegie Steel
Began investing to raise money which he used to get into steel industry
Began empire in 1860’sKnew nothing about production but
hired experts to run company
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
Gospel of Wealth
“Rich are morally obligated to benefit their fellow citizens”
Donated $350 million to charities across the country
John D. Rockefeller
Ran Standard Oil CompanyStarted in 1863 at beginning of oil
boomPracticed vertical integration like
CarnegieSet out to control the oil industry
“Competition was inefficient”
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
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
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
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
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
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
Chain Stores
Branch stores in many citiesWoolworths– Frank Woolworth in
1879By 1900 had 59 stores around
country