Big Business

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A Brassy, Flamboyant Age

The Gilded Age, the period between the end of Radical Reconstruction (1877) and the beginning of the Progressive Era (1901), was a brassy, flamboyant age dominated by big business values, political corruption, and extremes of wealth and poverty.

During the Gilded Age, the United States changed from a predominantly rural agrarian nation to an urban industrial one.

From Agriculture to Industry

The Way We Were in  The Gilded Age: 1877-1901

Who We Were How We Lived

1880 1890 1900 1880 1890 1900

Population (millions)

50.2 63.0  76.0Gallon of milk

$0.16 $0.17 $0.30

Pop. per sq. mile

16.9 21.2 25.6Loaf of bread

$0.02 $0.02 $0.03

Percent rural 71.8% 64.9% 60.4%New auto

N/A N/A $500

Percent urban 28.2% 35.1% 39.6%Gallon of gas

N/A N/A $0.05

Percent native born

94.4% 87.1% 84.4%New house

$4,500 $5,800 $4,000

Percent immigrant

5.6% 12.9% 15.6%Average income

$480 $660 $637

 

The Role of Corporations

Corporation: an organization owned by many people but

treated by law as though it were a single person.

Stockholders: people who own the corporation because they

own shares of ownership called stock. This raises large amounts of money for big

projects while spreading out financial risk.

The Role of Corporations

By the 1830s, states began passing general incorporation laws, allowing companies to become corporations and issue stocks.

With money raised from selling stock, corporations would invest in new technologies, hire a large workforce, and purchase many machines. This greatly hurt small businesses with high

operating costs—forcing many out of business. Corporations were criticized for cutting prices and

negotiating rebates.

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Andrew Carnegie

Scottish immigrant who started small and became the owner of a steel company in Pittsburg.

Began vertical integration- owns all of the different businesses on which it depends for its operation. Ex) Instead of buying coal

from a company, Carnegie bought the actual coal mine.

Vertical Integration

The Consolidation of Industry

Business leaders also pushed for horizontal integration- combining many firms engaged in the same type of business into one, large corporation.

This happened often and when a company began to lose market share, it would sell to its competitors and create a large organization.

Horizontal Integration

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John D. Rockefeller

U.S. industrialist who made a fortune in the oil business.

By 1880, Standard Oil controlled almost 90% of the oil refining industry in the U.S. When a single

company achieves control of an entire market, this is called a monopoly.

The Consolidation of Industry

By the late 1800s, Americans grew suspicious of large corporations and monopolies.

To preserve competition, many states made it illegal for one company to own stock in another without permission from state legislature.

Trusts

In 1882 Standard Oil formed the first trust—a new way of merging businesses without violating the law of owning other companies.

Trust: a legal concept that allows one person to manage another person’s property (called a trustee). Ex) Standard Oil trustees were able to control

a group of companies as if they were one large merged company.

Alexander Graham Bell

Scottish inventor.

He invented the harmonic telegraph, an instrument that makes it possible to send multiple telegraphs on one line.

Thomas Edison

American inventor.

He is credited for holding 1,093 patents.

Best known for perfecting the incandescent light bulb.

Cornelius Vanderbilt

American Railroad baron.

Baron: An important or powerful  person in a specified business or industry

Wealthiest man in the United States during the nineteenth century.

Self-made man.

Name sake of Vanderbilt University in Nashville, TN.

Robber Barons Don’t write all of this.

The great wealth many railroad entrepreneurs acquired in the late 1800s led to accusations that they built their fortunes by swindling investors and taxpayers, bribing government officials, and cheating on their contracts and debts.

Corruption in the railroad industry became public and created the impression that all railroad entrepreneurs were “robber barons.”

Robber Barons: people who loot an industry and give nothing back.

By 1900, big business dominated the economy, operating vast complexes of factories, warehouses, offices, and distribution facilities.

J.P. Morgan

American business leader, financier and banker.

He was criticized for creating monopolies by making it difficult for any business to compete against his. 

Morgan dominated two industries in particular He helped consolidate

railroad industry in the East.

Formed the United States Steel Corporation in 1901.