l6: the gilded age: the birth of the corporation 1870s-1900 an economic history of the united states...
TRANSCRIPT
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L6: The Gilded Age: The Birth of the Corporation 1870s-1900
An Economic History of the United States
AgendaObjective:To understand1. How the Industrial
Revolution gave way to the Gilded Age
2. The structure of corporations.
3. The central role of corporations and corporate owners in the Gilded Age.
Schedule: 1. Discussions & Lecture
Homework:Readings on
laissez-faire and individualism Due L7
Green = Thurs 3/5Purple = Fri 3/6
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The Industrial Revolution Goes Full Steam Ahead
• By 1870, the American economy was growing considerably into a national market providing mass produced products made in factories.
• The growth and development of the national economy that Federalists/Republicans had long dreamed of was made possible by the invention of the railroad
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Railroads Grow With Government Support
Government provided land and cash grants to companies to develop two railroad systems.
Central Pacific Railroad◦ Begin in Sacramento, CA◦ Broke ground January 1863
Union Pacific Railroad◦ Begin in Omaha, NE◦ Broke ground in late 1863 but no tracks laid until
1865Transcontinental Railroad: Connecting of
these two railroads Meeting place: Promontory Summit, UT
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Transcontinental Railroad
• Central Pacific Railroad (Chinese immigrants) and Union Pacific Railroad (Irish immigrants)
• Meet at Promontory Point, Utah in 1869• Casualties – 2,000 dead; 20,000 injured• Pay – Approx. $50.00/month (Irish);
Approx. $ 35.00/month (Chinese)• Railroad lines now connect the Atlantic
and Pacific
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The Industrial Revolution Morphs Into A Gilded Age
• By 1870, the American economy was growing considerably into a national market providing mass produced products made in factories.
• But, most the ownership of these factories were still held as sole proprietorships.• What is a sole proprietorship?
• Why is it difficult for a sole proprietorship to own run of these factories?– Consider: Costs?, What
happens if there is a loss?, Raising capital? What happens if the owner retires or dies?
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How does the Industrial Revolution Morph into the Gilded Age?
• The problems associated with running a factory (or factories) under a sole proprietorship, give way to need to create a new business structure better matched to govern the needs of large, national, industrial enterprises.
• That business model: The Corporation
• It is the introduction of the corporation and its associated tensions that define the Gilded Age; that move us from the Industrial Revolution to the Gilded Age.
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CorporationOwnership & Direction: Share-Holders; in proportion to the number
of shares owned
Profits Accrue To: Share-Holders; in proportion to the number of shares owned
Losses Incurred To: Share-Holders; losses cannot exceed the amount they paid for their share (limited liability)
Revenue is Raised By: Selling Stock
Life of the Company: Perpetuity
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Corporations
• Why is the creation of a corporation necessary in an industrializing, nationalizing economy?
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Structure of Corporations During The Gilded Age
• Corporations tended to be structure in one of three unique ways during the Gilded Age
• We will talk about three structures:– Horizontal Integration– Vertical Integration–Monopoly
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Vertical Integration
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Horizontal Integration
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Vertical and Horizontal Integration in the The Steel Industry: The Case of
U.S. Steel
Companies incorporated by U.S. Steel (vertical
integration), as well as related industries absorbed by the company (horizontal
integration).
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Monopoly
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Andrew Carnegie• Worked his way up in the
factory system.• Started Carnegie Steel• Used vertical integration
and low to keep costs and down and his profits up
• Believed in the “social gospel”
• Net worth $298.3 billion in todays dollars
• Gave away 90% of his fortune
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J.P. Morgan• He began a series of
consolidations in the railroad and other industries, leading the formation of colossal corporations including US Steel and General Electric.
• Controlled 70% of steel industry, 20% of all corporations trading on wall street, the 3 largest insurance companies in the country, and several banks.
• His philosophy was that only ruthless competition would lead economic stability.
• Net worth of $310 billion• Organized the Metropolitan
Museum of Art and the Museum of Natural History
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John D. Rockefeller • Rockefeller built a massive fortune
in the oil industry using practices including swallowing up competitors and negotiating exclusive deals with railroad companies.
• In 1911, Standard Oil's monopoly was dissolved in a Supreme Court decision based on the 1890 Sherman Anti-Trust Act.
• Rockefeller was often maligned in the press and some perceive him as one of the most hated figures of his day.
• Rockefeller’s net wroth was $318.3 billion, making him the richest person in all of world history
• By the time of his death, Rockefeller, a devout Baptist, had given away over $500 million in philanthropic pursuits.
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Cornelius Vanderbilt• Born poor in 1794• Started working on ferries
and rose his way up until he owned more than 100 ferries
• Expanded into ocean liners• Expanded into railroads• Worth $185 billion dollars
Gave very little away to charity– $50,000 church– $1 million to great
Vanderbilt University• Disinherited all of his sons
but 1, who inherited 95% of his estate
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So What is The Gilded Age?• The ascendency of
corporations helps usher in a new age in American history…Gilded Age!
• Refers to the decades between the end of reconstruction and the turn of the century (about 1870 to 1900).
• Defining feature is the creation of the corporation and its consequences
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The Gilded Age: What is it?
What makes it gilded?
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Entities in American Society Post-Gilded Age