Chapter 14 Sect. 3

Objectives:

1.Identify Management and business strategies that contributed to the success of business tycoons such as Andrew Carnegie.

2.Explain Social Darwinism and its effects on society.

3.Cite methods used by ruthless businessmen to eliminate free competition.

4.Describe the reasons for the slow industrialization of the south.

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Map: Industrial Production, 1919

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Tycoons

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1. Profiteering from the Civil War gives rise to millionaire class

2. Millionaires capitalize on Transcontinental railroad, mechanization, industrialization, & expansion of markets

3. Surplus of raw materials, cheap labor, foreign investment ENCOURAGE CAPITALISM

4. Inventions Industrialization More Inventions More

Industrialization

ALL OF THIS GIVES RISE TO TYCOONS

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The Manufacture of Iron The Manufacture of Iron

Manufacturing iron was a hot and strenuous process, requiring workers to spend longs hours stoking hot blast furnaces. (Library of Congress)

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http://www.tiscali.co.uk/reference/encyclopaedia/hutchinson/images/c05312.jpg

Bessemer Process = process to convert iron to steel

Andrew Carnegie = Steel Kingpin

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Steel is King : US pouring out 1/3 of world’s steel by 1890’s

“bootstrap” story: poor immigrant to tycoon

Carnegie uses vertical integration to make more profit Controls all means of production,

eliminates middle man

Also uses horizontal consolidation to eliminate competition.

Sells to JP Morgan for 400 million

Becomes a philanthropist

How do horizontal consolidation and vertical integration help business??

J P Morgan – Banker’s Banker

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Builds financial empire through railroads, banks, and holding companies

Buys out Carnegie and enters steel business

Uses trusts and holding companies to consolidate wealth and power What are trusts and holding

companies?

Forms US Steel Corporation – 1st ever corporation worth more than $1 billion!

Rockefeller – Standard Oil Corp.

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Kerosene and then Automobiles drive up US oil consumption

Rockefeller ruthlessly uses horizontal consolidation to create largest monopoly

1877 controls 95% of US’s oil refineries

Robber Baron’s Baron

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Standard Oil Monopoly

Standard Oil MonopolyBelieving that Rockefeller's Standard Oil monopoly was exercising dangerous power, this political cartoonist depicts the trust as a greedy octopus whose sprawling tentacles already ensnare Congress, state legislatures, and the taxpayer, and are reaching for the White House. (Library of Congress)

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HOW MUCH WOULD THEY BE WORTH TODAY??

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J.P. Morgan - $139 BILLION

Andrew Carnegie - $189.6 BILLION

John D. Rockefeller - $262 BILLION

COMPARE:

Bill Gates - $76 BILLION

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Monopoly = a firm that completely controls an industry

Vertical integration = combining all phases of manufacturing in to one organization (Carnegie)

Horizontal consolidation = allying with competitors to monopolize a market (Rockefeller)

Trust = a board of directors/stockholders that coordinates companies within an industry to avoid competition

Holding company = a corporation composed of various competing enterprises within one industry (JP Morgan’s US Steel)

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Compare the lives and beliefs of Carnegie and Rockefeller

using a Venn Diagram

Justifications for Big Business

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Old Rich displaced by rule of the “new rich”

Gospel of Wealth – discourages helping the poor by state

Laissez faire = “let it be”

Justified by Social Darwinism – survival of the fittest

Poor are poor due to lack of initiative

Taking on the Trusts

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Trusts and robber barons defended by 14th amendment’s due process clause

Constitution’s “interstate commerce” clause inhibits states from controlling trusts

Sherman Anti-Trust Act of 1890 Largely ineffective

Industry and the South

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1900: less manufacturing than before Civil War

South acts primarily as source of raw materials

Northerners control stock in Southern industry, discourage industrialization

Shift in cotton mills from NE to S in 1880’s

Cheap labor (virtually sharecropping) brings rural white southerners to mill towns, and then traps them there

TERMS

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Andrew Carnegie Vertical integration Horizontal consolidation Social Darwinism Monopoly Holding company John D. Rockefeller Trust Sherman Antitrust Act

Objectives: 1. Identify Management

and business strategies that contributed to the success of business tycoons such as Andrew Carnegie.

2. Explain Social Darwinism and its effects on society.

3. Cite methods used by ruthless businessmen to eliminate free competition.

4. Describe the reasons for the slow industrialization of the south.