Download Chapter 14 Section 2 The Rise of Big Business Section 2. The Rise

Chapter 14
Section 2 The Rise of Big Business
Section 2. The Rise of Big Business
Section 3. Workers Organize
Note: There is no reading check quiz on this material, but it is on the Unit
on this material, but it is on the Unit Test (Nov. 20)
An Era of An
Era of “laissez
laissez‐faire faire
capitalism”
p
Defining key terms:
Capitalism
Laissez faire
Laissez‐faire
Capitalism‐‐An economic system b d
based on a free market, open f
k
competition, and profit motive. In a p
,
p
capitalist economic system most productive assets are held by private
productive assets are held by private owners, and most decisions about production and distribution are made by the market rather than
made by the market rather than government command.
Laissez‐faire‐‐An economic theory that is strongly opposed
theory that is strongly opposed to any government intervention in business affairs beyond the minimum necessary for a free
minimum necessary for a free‐
enterprise system to operate.
p
y
p
Put it in your own words
Put it in your own words
• Explain
Explain how a laissez
how a laissez‐faire
faire capitalist system capitalist system
would work.
Alternatives
What are some other economic systems?
What
are some other economic systems?
• Regulated capitalism: this is still capitalism, but with more government regulations (e g
but with more government regulations (e.g. Child labor laws, minimum wage, environmental protection etc )
environmental protection etc.)
Alternatives
• Socialism:
Socialism: In a socialist economy, some or all In a socialist economy some or all
of the means of production are owned and operated by the government and run for the
operated by the government and run for the benefit of the people. Alternatives
• Communism:
Communism: In a communist economy, the In a communist economy the
government owns and controls all the means of production Government officials make
of production. Government officials make economic decisions for the people. All communist nations have been dictatorships
communist nations have been dictatorships.
Back to laissez‐faire
Back to laissez
faire capitalism…
capitalism…
• This
This was the system that the US had in the was the system that the US had in the
1800s.
• What are some advantages and disadvantages What are some advantages and disadvantages
of this system?
Businesses Try to Take Advantage of the System
h
• What
What actions would businesses take to actions would businesses take to
maximize their own profits? Remember, the government will generally not step in to
government will generally not step in to interfere.
In the late 1800s, Businesses…
In the late 1800s, Businesses…
• Formed corporations to pool their money and p
p
y
limit their risk
• Paid workers as little as possible with no benefits and little regard to workplace safety
and little regard to workplace safety
• Used child labor
• Paid little to no attention to pollution
Paid little to no attention to pollution
• Formed monopolies & trusts to drive competitors out of business
• Offered a huge array of affordable and useful products to consumers Child Labor
Child Labor
Social Darwinism
Social Darwinism
• Americans understood that there were inequalities under e ca s u de s ood a e e e e equa es u de
capitalism. But many thinkers believed that inequalities were part of a natural order. To explain why some people prospered while others did not, economists and business d hil
h did
i
db i
leaders embraced the philosophy of social Darwinism. Social Darwinists believed that natural Social Darwinists believed that natural
selection also applied to society. Stronger people, businesses, and nations would prosper. Weaker ones would fail. Social Darwinists believed that what they called “survival of the fittest” strengthened society as a whole They opposed any interference with the process
whole. They opposed any interference with the process.
The Rise of Big Business
The Rise of Big Business
• In
In the late 1800s, businesses did many things the late 1800s businesses did many things
to try to earn more profits and to get ahead of their competition
their competition.
How did businesses get bigger?
How did businesses get bigger?
1. The Rise of Corporations
1. The Rise of Corporations
• Proprietorships
Proprietorships and partnerships
and partnerships At the end At the end
of the Civil War, most businesses were small. Some were run by individual owners—an
Some were run by individual owners
an arrangement called a proprietorship. Other companies were owned by two or more
companies were owned by two or more people in a partnership. In both proprietorships and partnerships the owners
proprietorships and partnerships, the owners of the company were personally responsible for all debts and obligations of the business
for all debts and obligations of the business.
• Corporations The massive industries of the The massive industries of the
late 1800s needed more expert management. These industries began organizing as
These industries began organizing as corporations. A corporation is a business with the legal status of an individual It is owned by
the legal status of an individual. It is owned by stockholders—people who buy shares of the company or stock The major business
company, or stock. The major business decisions of a corporation are made by a board of directors The board in turn hires
board of directors. The board in turn hires corporate officers to run the day‐to‐day operations.
operations
2. Trusts
2. Trusts
• To
To gain dominance, some competing gain dominance some competing
companies formed trusts. The companies agreed to merge and turn over their separate
agreed to merge and turn over their separate stocks to a board of trustees. The trustees then ran the group of companies as if it were a
then ran the group of companies as if it were a single corporation, and all the participants split the profits
split the profits.
3. Monopolies
3. Monopolies
• When
When a trust or corporation gained complete a trust or corporation gained complete
control over an industry, it held a monopoly.
That meant it had no competition from other
That meant it had no competition from other firms. It could raise prices on its products or lower quality much more freely than it
lower quality much more freely than it otherwise might.
4. Horizontal & Vertical Integration
Example: Rockefeller’ss Standard Oil
Example: Rockefeller
Standard Oil
• John D. Rockefeller entered the oil business in 1863 and proved himself to be a superb business leader. His d hi
lf t b
bb i
l d Hi
company, Standard Oil, started as a refinery. To increase p
profits, though, Rockefeller engaged in vertical ,
g ,
g g
integration—acquiring companies that supplied his business. Rockefeller bought barrel factories, oil fields, oil‐storage facilities, pipelines, and railroad cars. This il t
f iliti
i li
d il d
Thi
allowed him to keep his costs low and profits high.
To expand his business, Rockefeller also practiced
To expand his business, Rockefeller also practiced horizontal integration. This meant taking over other companies producing the same product. Rockefeller b
bought as many refineries as he could. By 1879 Standard h
fi i
h
ld
8 9S d d
Oil refined 90 percent of all U.S. oil.
5. Mass Marketing
5. Mass Marketing
•
•
•
•
Advertising
Brand names and logos
Department Stores
S
Mail Order Catalogues
Tycoons
• Some Americans came to view the business tycoons of the late 1800s as “robber
of the late 1800s as robber barons.
barons ” Critics have Critics have
argued that these entrepreneurs profited unfairly by squeezing out competitors and using other tough q
g
p
g
g
tactics. Their huge mansions and luxurious lifestyles seemed like ill‐gotten rewards.
•
Other people, though, saw these men as “captains of industry.” Admirers credited these tycoons with using their business skills to make the American i th i b i
kill t
k th A
i
economy more productive. That in turn made the American economy stronger Tycoons also won praise
American economy stronger. Tycoons also won praise for their generous contributions to charity.
Andrew Carnegie
Andrew Carnegie
• Andrew Carnegie
g lived a true rags‐to‐riches story. Born in g
y
Scotland to parents that hit hard economic times when he was about 9, Carnegie immigrated to the United States when he was 12 He advanced quickly in his early jobs and began
he was 12. He advanced quickly in his early jobs and began investing in the iron, oil, railroad, and telegraph industries. He soon founded his own company and rose to the top of the steel business. Carnegie held down costs by using vertical integration, buying supplies in bulk, and producing items in g q
y
y
g
large quantities. By the end of the century the Carnegie Steel Company dominated the U.S. steel industry. In 1901 Carnegie sold the company to banker J. P. Morgan for $480 million. After retiring Carnegie began to devote his time to
After retiring, Carnegie began to devote his time to philanthropy, or charity. Carnegie gave away some $350 million over his lifetime, mostly to support education. Some Call for Change
Some Call for Change
• Some
Some Americans felt that big business had too Americans felt that big business had too
much power and that it hurt workers and small businesses Who or what could these
small businesses. Who or what could these people turn to for help?
2 main sources of help
2 main sources of help
• Government
• Labor Unions
Both of these sources had the potential to help workers and small businesses, but big business had a lot of power and they would not give it up easily. The Government
The Government
• In the late 1800s the government maintained a hands‐off e a e 800s e go e
e
a a ed a a ds o
attitude toward business. Most politicians, like business leaders, insisted that regulating business would harm the economy. Nonetheless, as corporations expanded, the N
h l
i
d d h
government grew uneasy about the power of these giants. In 1890 Congress passed the Sherman Antitrust
giants. In 1890 Congress passed the Sherman Antitrust Act. This act made it illegal to form trusts that interfered with free trade. It also prohibited monopolies and activities that hindered competition in the marketplace. At first the government did not prosecute many companies under this act
many companies under this act. The Rise of Labor Unions
The Rise of Labor Unions
Labor Unions
Labor Unions
• A
A labor union is an organized group of workers labor union is an organized group of workers
that use collective bargaining to try to improve their situation That is they
improve their situation. That is, they negotiate as a group with the employers rather than as an individual Unions use the
rather than as an individual. Unions use the treat of a strike to enhance their power. Barriers to Union Success
Barriers to Union Success
• 1
1. Workers were easy to replace (
Workers were easy to replace (“scabs”
scabs were hired to replace striking workers).
• 2. Employers fired union organizers
2 Employers fired union organizers
• 3. The government sided with business owners
• 4. The public often didn’t trust unions
• 5. Unions were difficult to organize. What did unions want?
How did they try to get it?
How did they try to get it?
Why did business owners oppose Wh
did b i
them?
What advantages did the opponents of What
advantages did the opponents of
unions have?