industrial era pioneers of industry
DESCRIPTION
TRANSCRIPT
This, then, is held to be the duty of the man of wealth: First, to set an example of modest, unostentatious living, shunning display or extravagance; … and, after doing so, to consider all surplus revenues which come to him simply as trust funds, which he is called upon to administer… to produce the most beneficial results for the community—the man of wealth thus becoming the mere trustee and agent for his poorer brethren, bringing to their service his superior wisdom, experience and ability to administer, doing for them better than they would or could do for themselves.— From "Wealth," by Andrew Carnegie, North American Review (1889)
Law? Who cares about the law. Ain't I got the power?— Comment alleged to have been made by Cornelius Vanderbilt, when warned that he might be violating the law
Pioneers of Industry
OR
Robber Barons?
Were these men Captains of Industry, without whom this country could not have taken its place as a great industrial
power, or were they Robber Barons, limiting healthy competition and robbing from the poor to
benefit the rich?
Where do we draw the line between unfair business
practices and competition that leads to innovation, investment, and improvement in the standard
of living for everyone?
Would the industrial economy have succeeded
without entrepreneurs willing to take competition to its
extremes?
Andrew Carnegie
• Rags to riches story• Head of steel industry• Always looked for
better product at lower cost1.Hired people to
improve steel quality2.Undersold competitors3.Bought out rival
plants• “Integrated operation”• Carnegie Steel part of
U.S. Steel Corporation• Sold in 1901 for $250
mil
Vertical Integration
Within an industry
Raw materials
Production
Distribution
Horizontal Integration
Across an industry
mergers
•Buying part of a company•Receive dividends (interest)• Risky vs. Safe
Expensive to purchaseMove money quickUnstable- Make money quick- Lose money quick
Ex: Technology .coms
Cheaper to purchaseLong term investmentsStable-Slow to make money
Ex: Electric Companies Toliet Paper
•Didn’t make steel but instead…•Sold stock in itself (and their good reputations)
•Used that money to buy control of companies that were making steel
•Two companies combine to form one
•Retains power but reduces competition–Why is competition important?
Other companies followed suit
Cornelius Vanderbilt
JP Morgan
JD Rockefeller
Pros of Big Business
• Raises productivity• More efficient (no middle man)
• Better product• Increase in product• Creates more jobs• Funds public institutions
Cons of Big Business
• Reduces competition• Increases prices• Drains resources• Lives “above” law• Poor working conditions• Pays low wages
Railroad Workers - first ever strike 1877
And Grange Movement involvement
And the government intervened
• Sherman Anti-trust Act–All mergers that restrain competition are illegal
– MONOPOLY - objective of the game?
• Standard Oil Company– Broke apart into comp. (Exxon, Mobile, Chevron…)
• U.S. Steel Corporation– broke apart by region (Scranton, Bethlehem, Pgh)
• Movie production companies– Produce or distribute (RKO, Paramount, MGM, Universal, 20th Cent. Fox, Columbia, Warner Bros.)
• Bell Telephones– By region and service: long distance, local, mobile, research, development (Bell Atlantic, Bell Pacific…)
• Charles Darwin’s theory– Natural Selection & Survival of the Fittest
• Used to explain success - Carnegie & Rockefeller
• Stated rich were rich because they were fit to live and poor were poor because they weren’t
• Herbert Spencer–Gov’t to leave business alone; fittest will survive
• Horatio Alger– if worked hard, could be successful…