Download Lecture Big Business in the Gilded Age

Corporations

 A corporation is a business owned by its
stockholders.
 Stockholders elect a board of directors to supervise
the president and other officers.
 Stockholders receive dividends (a share of the
company’s profits).
Corporations

 Corporations often consolidate, which means they
can create large industrial organizations.
 Horizontal integration allowed firms of the same
types to be a single corporation.
 Vertical integration involves taking over all parts of
your business from start to finish.
Traits of a “Titan”

 Traits
Big Business Leaders

 Andrew Carnegie: Steel
 Bought out rivals by controlling the processing of steel
from mine to market (vertical integration) and getting
rebates from the railroads to cut costs and prices.
 Sold to US Steel
 Devoted his life after this to philanthropy.
Big Business Leaders

 John D. Rockefeller: Standard Oil
 40 corporations that controlled every phase of oil
refining (horizontal integration).
 Created a trust to protect his interests, but it was
eventually broken up by the government because of its
monopoly (controlled 90% of the oil industry).
 Also devoted to philanthropy.
Big Business Leaders

 Cornelius Vanderbilt:
 Shipping and Railroads
 JP Morgan
 Banking and Finance
Pools and Trusts

 Pool: competing firms agree to divide the market,
establish prices, place profits in a common fund, and
pro-rate profits.
 Trust: business combination in which stockholders
turn over their securities and authority to the board
of trustees. Stockholders get some money, but the
board has full control of the business.
Laissez-Faire Capitalism

 Adam Smith (1776) argued in The Wealth of Nations
that business should be regulated by supply and
demand, not the government.
 Government stays out of business, business would
be motivated by their own self-interest to offer
improved goods and services at low prices.
 Used as justification for American industrialists,
even though they supported high protective tariffs
and federal subsidies.
Social Darwinism and
Laissez-Faire

 Social Darwinism:
 Used to promote laissez-faire capitalism
 The poor are poor because they are unfit, shouldn’t
interfere with nature by helping them.
 The rich are rich because they are doing the right things
and they are the most fit.
Social Darwinism and
Laissez-Faire

 Competition is the mantra of big business.
 Social Darwinism was used by business leaders of
the day because it supported their activities,
legitimized their success, and confirmed their values.
 At the same time, some promoted “The Gospel of
Wealth”
Gospel of Wealth

 Gospel of Wealth:
 Working hard, which leads to material success, is
proof that God favors a person both in life and
business.
 Carnegie argued in his “Wealth” article that it also
meant the rich should carry out philanthropic works
to benefit society.
The Big Question:

Robber Barons
or Captains of
Industry?