Post on 29-Dec-2015
Age of Big BusinessSec. 19-3 Pages 567 - 571
• Define: Factors of production – land – labor – capital – corporation – stock - shareholders –dividends – horizontal integration –trust - vertical integration – philanthropy – merger – monopoly
• Identify: John D. Rockefeller – Andrew Carnegie – J. Pierpont Morgan – Sherman Antitrust Act
Foundations for Growth• 1859 - Titusville, Pa. – Oil found by Edwin Drake –
produce heat, lubricate machinery• US will change from agricultural economy to
industrial economy• Factors of production • Land – land and natural resources• Labor – workers to turn raw materials into goods –
population doubled 1860-1900• Capital – equipment, buildings, machinery, tools
used in production Also means money for investing – sell stocks by
corporations – corporate savings is investing a portion of earnings in better equipment
Raising Capital• Railroads and other businesses needed capital
to buy raw materials, equipment, pay workers, cover shipping and advertising costs.
• They formed a corporation – a company that sells stocks (shares of business) to the public.
• Shareholders – people who invest in a corporation by buying stock
• Earn dividends – cash payment from the corporation’s profits on the stock they own.
Summarize• What are the 3 factors of production?• Vocab term that means a company that sells
stocks (shares of business) to the public.• Vocab term that means people who invest in
a corporation by buying stock• Vocab term that means cash payment from
the corporation’s profits on the stock they own.
OIL BUSINESS John D. Rockefeller –1870 – Standard Oil Co. – built
empire using horizontal integration – combining competing (same industry)firms into one corporation.
• Standard Oil Corporation produced and used its own tank cars, pipelines, wooden barrels.
• Rockefeller lowered prices to drive out competitors – formed trust – group of companies managed by the same board of directors.
Horizontal integration
• Company A + B = Company C• Oil Oil Oil
Standard Oil Corp.• Standard Oil’s board traded for enough of other
companies’ stock, they then owned and managed those companies.
• Other tactics used:1. Lower his prices to force competitors out of business2. Pressure customers to avoid using other oil companies3. Persuaded RR to give him rebates in return for his
business.
Created monopoly – almost total control of an industry by a single producer
SUMMARIZE• Define horizontal integration.• Who industrialist used horizontal
integration?• What type of business was he in?• What was the company?• Vocab term that means group of companies
managed by the same board of directors. • Vocab term that means almost total control
of an industry by a single producer.
STEEL BUSINESS• Pittsburgh, Pa – steel capital of
US in late 1870s.• Started in RR business – invested
in sleeping cars , then steel mills• Andrew Carnegie – used vertical
integration – acquire companies that provide the raw materials, production and transportation needed.
• Formed Carnegie Steel Corp. in 1901–producing 1/3 of nation’s steel.
Vertical Integration• Raw Materials (oil fields, farms)
• Production (refineries, mills factories)
• Distribution ( RR, ships, trucks)
J.Pierpont Morgan• 1861-banking business – later invested in Edison’s company-
• Invested in Railroads- shipping• By 1890 one of the most
powerful men in US• 1901- Bought Carnegie’s
company for $480 million –• Became US Steel (Billion $ Corp)• 1912- Didn’t sail on Titanic
(subsidiary of his shipping line)• Helped consolidate (AT&T,
General Electric, Int’l Harvester)
Philanthropists• Carnegie interested in philanthropy – use of
money to benefit the community – started schools, universities, built more than 2000 libraries . Spent $350 million to build Carnegie Hall in NYC. Carnegie Mellon Univ. (Pitts.) Carnegie Institution of Washington (research)
• J.D. Rockefeller – started University of Chicago – Rockefeller Institute for Medical Research.
• J. P. Morgan- gave art collections to NY museums (Metropolitan Museum Of Art)
Corporations grow larger• Merger – combining of companies – put
economic power in few giant corporations• By 1900 1/3 of all US manufacturing was
controlled by 1% of US corporations.• Without competition, prices went up – no
need to improve goods/ service.• 1890- Sherman Antitrust Act – law that
prohibits trusts and monopolies – gov’t used this law to stop strikes by railroad workers threatening delivery of nation’s mail.
Summarize• Define Vertical integration• What industrialist used vertical integration.• What was his business? Name?• Vocab term that means use of money to
benefit the community?
Ticket out the door• Define: Philanthropy• Name one of the famous men who was a
philanthropist – what did he do?• What was the law that did not allow
companies to form a trust or have a monopoly?