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THE GILDED AGE OF BIG BUSINESS

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I owe the public nothing J. P. Morgan – PowerPoint PPT presentation

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Title: THE GILDED AGE OF BIG BUSINESS


1
I owe the public nothing J. P. Morgan
2
THE GILDED AGE
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Setting the stage
  • 19th Century Long term trends
  • rural, agrarian to an urban, industrial market
    economy
  • Market Revolution selling goods commercially
    instead of subsistence livingexpansion of free
    enterprise
  • Industrial Revolution
  • specialization of jobs (craft trades decline)
  • massive scale
  • population shifted from country to city
  • massive immigration to supply labor

Italian immigrants
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Setting the stage
  • Short term factors
  • new ways of doing business
  • new businessmen--Captains of Industry
  • few government regulations of big business

John D. Rockefeller
7
U.S. MODERN ECONOMY A PRODUCT OF THREE FACTORS
Mass transportation in the form of the
Railroads. Mass communication in the form of the
Telegraph. Cheap Energy in the form of Coal
By and large a laissez faire system. Extremely
rapid growth, giant scale, massive financing, and
little or no rules for the game.
8
Various causes of rapid industrialization
  • 1. Steam Revolution of the 1830s-1850s.
  • 2. The Railroad fueled the growing US economy
  • First big business in the US.
  • A magnet for financial investment.
  • The key to opening the West.
  • Aided the development of other industries.
  • 3. Technological innovations.
  • Bessemer and open hearth process
  • Refrigerated cars
  • Edison
  • Wizard of Menlo Park
  • light bulb, phonograph, motion pictures.

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Various causes of rapid industrialization
5. Unskilled semi-skilled labor in
abundance. 6. Abundant capital. 7. New,
talented group of businessmen entrepreneurs and
advisors. 8. Market growing as US population
increased. 9. Government willing to help at all
levels to stimulate economic growth. (mostly by
staying out of it) 10. Abundant natural
resources.
10
Patents granted
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Impact of Railroads
After Civil War, Railroad industry was
boomingUSAs first big business May 10, 1869-
Golden Spike unites Central Pacific with Union
Pacific (East and West) Result 1st
transcontinental railroad By 1883- 4
transcontinental routes Significance Faster
movement of ideas, goods, people growth of
markets
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1892 Map showing R.R. lines, drainages, cities,
towns, borders, time zones.
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Railroad Corruption and Farmers
Midwestern farmers -extremely high rates charged
by railroad companies Result National Grange, to
unite farmers and demand for better rates 1870s,
Grange had over 800,000 members 1887- Interstate
Commerce Commission gave the Fed. Govt power to
regulate railroad prices (ICC) Significance
Govt intervention in private industry (Populist
Party)
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Where do we get steel?
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New ways of doing business
  • Can government match the growth of big business
    in America?

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New Businessmen
  • Captain of Industry
  • American folk heroes
  • Economic leadership as a patriotic service
  • The Horatio Alger, or rags to riches
    myth-Andrew Carnegie
  • America you can leave your past behind and
    begin fresh

Dig on my ride? Henry Ford.
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New Businessmen
  • Three perspectives on the new leaders in business
  • Captains of Industry
  • Robber Barons
  • Philanthropists

Which one is true?
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New ways of doing business 1870-1900
Goal monopoly
  • Vertical integration
  • if you own a railroad, then buy out your
    suppliers or other relevant factors in your
    business
  • coal and iron mines
  • ore freighters
  • railroads
  • benefit more efficient, less expensive
  • Horizontal consolidation
  • if you own a railroad, then buy out your
    competitors, in other words, all of the other
    railroad businesses
  • benefit wipe out competition, establish a
    monopoly

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New Ways of Doing Business The Corporation
Key features --a sizable group of people
shareholders --charter from state legislature
--form a corporation --limited risk(several
shareholder investors) --massive growth and
size --immortal(investors come and go) --Supreme
Court 1818, 1819limited risk and charters are
legally acceptable
Standard Oil Mother of Trusts Rockefellercombin
es with other corporation --exchanged stock for
trust certificates --firms participated to
benefit each other --Sherman Anti-trust Act of
1890 outlaws this --corporations respond with
holding companies --difficult to combat
corporate attempts at monoploy
What is a trust? --a mega corporation --a
combination of smaller corporations --wipe out
competition
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By 1900, two-thirds of all manufactured goods
were being produced by giant corporations. Swift
and Armour dominated meat packing, the Duke
family controlled tobacco, and Andrew Carnegie
took over every aspect of steel production.
Corporations become a permanent fixture
In 1886, the Supreme Court set a precedent that
has been interpreted to mean that corporations
have the same rights as living persons under the
Fourteenth Amendment to the Constitution.
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New Businessmen
  • Robber Barons
  • immoral, greedy, corrupt
  • illegal business activities, ie stock watering
  • disregard for benefits of a free market
  • Gould-a master of trick and deceit
  • J. P. Morgan I owe the public nothing

Jay Gould, Railroad Tycoon
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New Ways of Working
  • Frederick Taylor and Scientific Management
  • Belief workers will try to get away with the
    minimumlack of productivity Goal industrial
    efficiency
  • Apply scientific methods to labor and management
  • Eliminate time waste, unnecessary tasks
    self-training
  • Workers are now trained in the one best way
  • Pay schedule, standard methods

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Justifying the New Ways
Andrew Carnegie
  • Philanthropists
  • philanthropy love of human beings
  • gospel of wealth-the rich have a duty to give
    back to humanity
  • Rockefeller-established the Rockefeller
    foundation
  • Carnegie-founded 2, 500 public libraries, helped
    to build whats now the World Court
  • he who dies rich, dies disgraced

Leland Stanford
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Consequences
  • Concentration of power into a few, large
    corporations
  • Appearance of holding companies and trusts -both
    are ways to evade governmental control
  • Increase in corruption and bribery in the
    government
  • Exploitation of child labor
  • Increase in philanthropic activity
  • Social awareness

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The Example of Railroads
  • Speed
  • Distance
  • Year round
  • Requires large, complex business--ie,
    corporation--Vanderbilt, Carnegie
  • Standardization--time effects on business
  • From iron to steel (British import-American steel)

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