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Business Vocabulary
CAPITALISM
An economic system characterized
by private or corporate ownership of
capital goods, by investments that are
determined by private decision, and by
prices, production, and the distribution of
goods that are determined mainly in
competition in a free market.
ENTREPRENEUR
A person who organizes and manages
an enterprise or business
ROBBER BARON
A term used to describe powerful business leaders during the post
Civil war period
PLUTOCRACY
Government by the wealthy. Industrialists controlled
government during late 19th Century.
PHILANTHROPIST
A person who gives large amounts of money to charities. Both John D.
Rockefeller and Andrew Carnegie were philanthropists.
POOL A pool is an informal agreement between a group of people or leaders
of a company to keep their prices high and to keep competition low.
The Interstate Commerce Act in 1887 made railroads publicly publish
their prices and it outlawed the pool.
REBATE
A rebate is a deduction from an amount to be paid, or money
back. Rockefeller, oil king, employed spies to find the rebates of
railroads and forced the railroads to pay him the rebates on the bills
of his competitors.
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A combination of firms or corporations for the purpose of
reducing competition.
A trust is a legal way to share ownership—
TRUST
the owner still gets profits, but the trustee runs everything.
(Children with property must have trustees to run the property for
them.) A trust was formed when a company was forced to give control
of its operations to a single holding company (run by a board of
trustees).
The trust was pioneered by men such as Andrew Carnegie of the steel
industry and John Rockefeller of the oil industry. The purpose of a
trust is to eliminate competition in business. One powerful company
will have control of the stocks of many smaller companies in the same
line of business, creating a monopoly. The monopoly allows price-fixing
and benefits all companies involved. Trusts were outlawed in the early
1900's.
VERTICAL INTEGRATION (ALSO VERTICAL TRUST, VERTICAL MERGER)
It was pioneered by tycoon Andrew Carnegie. It is when you
combine into one organization all phases of manufacturing from mining
to marketing. This makes supplies more reliable and improved
efficiency. It controlled the quality of the product at all stages of
production.
HORIZONTAL INTEGRATION (ALSO HORIZONTAL TRUST,
HORIZONTAL MERGER) A technique used by John D. Rockefeller.
Horizontal integration is an act of joining or consolidating with ones
competitors to create a monopoly. Rockefeller was excellent with
using this technique to monopolize certain markets. It is responsible
for the majority of his wealth.
INTERLOCKING DIRECTORATE
A plan devised by J. Morgan to
eliminate competition in the banking business during the 1890's. The
same people sit on several boards of directors and control and
influence all the businesses.
MONOPOLY
To dominate by excluding others—to gain control over all
businesses making the same product, ending competition
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ANTI-TRUST LAWS
A series of laws passed by the U.S. government
that tries to maintain competition and prevents business form getting a
monopoly, such as the Sherman Anti-Trust Act (1890) and the Clayton Anti-
Trust Act.
PRICE FIXING
An unlawful agreement between manufactures to maintain specified
prices on usually competing companies.
HOLDING COMPANY
Holding companies manufactured no products and had no customers.
They existed only to own stock in other corporations.
VANDERBILT, CORNELIUS
He was a big man with little education but he
established a shipping-land transit across Nicaragua after the gold
rush. He built a railway that connected New York to Chicago in 1873.
He offered superior service at low rates and was extremely
successful.
EDISON, THOMAS
A deaf Edison invented the phonograph and by
1900 it was used in over 150,000 homes. His invention made going to
the symphony obsolete. He not only invented the light bulb, he
invented a way to keep light on in factories around the clock.
CARNEGIE, ANDREW
Steel king; integrated every phase of his steelmaking operation including ships, railroads, iron and coal mines. This
"Vertical Integration" improved efficiency by making supplies more
reliable controlling the quality of the product at all stages of
production and eliminating the middle man
ROCKEFELLER, JOHN D. Standard Oil tycoon, by 1877 he controlled 95%
of all of the refineries in the United States. It achieved important
economies both home and abroad by its large-scale methods of
production and distribution. He also organized the trust and started
the Horizontal Merger.
MORGAN, J. PIERPONT He was a banker who financed the reorganization
of railroads, insurance companies, and banks. He bought out Carnegie
and in 1901 he started the United States Steel Corporation.
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CORPORATION a business authorized by law to act as if it was a single
person. A corporation pays taxes and can be sued. Liability (blame
for any problems) goes to the corporation and not to the president or
the stockholders. A corporation must be incorporated, that is it must
file legal papers to be created.
C.E.O. stands for CHIEF EXECUTIVE OFFICER, the President of the
Corporation. He does not own it, but is an employee, appointed by the
Board of Directors.
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