Robber Barons or Captains of Industry?

Question for you….

Do billionaires have a responsibility to help the poor? Do millionaires?

Do businesses have a responsibility to be “fair” in competition with other businesses?

Who are the billionaires (Robber Barons) of today?

Who are the billionaires?

Forbes 2011Rank Name Worth Age Source Country

1 Carlos Slim Helu & family $74 B 71 telecom Mexico

2 Bill Gates $56 B 55 Microsoft USA

3 Warren Buffett $50 B 81 Berkshire Hathaway USA

4 Bernard Arnault $41 B 62 LVMH France

5 Larry Ellison $39.5 B 67 Oracle USA

6 Lakshmi Mittal $31.1 B 61 Steel India

7 Amancio Ortega $31 B 75 Zara Spain

8 Eike Batista $30 B 54 mining, oil Brazil

9 Mukesh Ambani $27 B 54petrochemicals, oil & gas

India

10 Christy Walton & family $26.5 B 56 Walmart USA

3 New Vocabulary words… Monopoly: A company that

completely dominates a particular industry

Trust: a set of companies managed by a small group known as trustees, who can prevent companies in the trust from competing with each other

Corporation: A company recognized by law to exist independently from its owners, with the ability to own property, borrow money, sue or be sued

Andrew Carnegie$75 Billion Andrew Carnegie came from Scotland

with his parents in 1848.

In 1861, at the age of 26, he started up the Freedom Iron Company, and used the new Bessemer process for making steel

He formed all of his companies into the Carnegie Steel Company in 1899, which controlled raw materials, manufacturing, storage, and distribution for steel.

John D. Rockefeller$192 Billion Born in 1839 His working life started as a

bookkeeper He established one of the first oil

refineries 1870—With partners, forms a

business trust: Standard Oil At its peak, controls 90% of all oil

companies

Big Business and the Government: POVLeave Business Alone Laissez-faire Social Darwinism

Limit Business

Sherman Anti-Trust Act 1911--Splits

Rockefeller’s Standard Oil into 34 companies

(A U.S. Court of Appeals found in 2001 that Microsoft violated the Sherman Act antitrust law.)

The Gilded Age…1870s-1900 Where was the most money

made? Was this positive or negative for

America?

1870 1900

Steel Production

77,000 tons

11 million tons

Oil production 5 million barrels

63 million barrels

Railroad track 53,000 miles

200,000 miles

Simulation Business A Business B Step 1 (August):

Business A, set the price for t-shirts

Step 2 (September): Business B opens up a store

across the street, set the price for t-shirts at store B

Consumer: Which store will you shop at?

Simulation Step 3 (October):

Business A, respond to the t-shirt price of Business B

Class: Which store will you shop at? Step 4 (November):

Business B, respond to the t-shirt price of Business A

Class: Which store will you shop at? Step 5 (December)

Repeat process Class: Which store will you shop at?

Business Person A You own a successful t-shirt shop on

Castro Street. You are just one shop but you’ve managed to stay in business because you are the only t-shirt shop on Castro Street. Recently, a t-shirt shop opened up across the street and it’s part of the national chain, Shirt Me Up, that has stores all over the nation. You are worried about losing some of your customers to them but you are willing to cut prices and offer sales if it will keep you in business.

Basics – t-shirts cost $6 to manufacture and you currently sell them for $12.

You need to make at least a $2 profit on each t-shirt in order cover the cost of your rent and pay your employees.

If you lose money for more than a month then you will not be able to pay for your rent.

Task: Respond to the sales ideas from Person B in competitive ways in order to stay open.

Business Person B You are a local manager for the national t-shirt

company, Shirt Me Up, that has stores all over the nation. You are currently managing the new store that just opened up on Castro Street. There is a t-shirt shop already on Castro Street, but you are pretty confident you can drive them out of business since you can draw on money from the national office.

Basics – t-shirts cost $6 to manufacture and your competitor currently sells them for $12. They need to make at least $2 profit on each t-shirt to cover the cost of rent and employees. This is true for you also, but you can lose money for several months in a row because your national office will cover your costs.

Task: Start the competition by telling the shoppers in your group that you are willing to offer t-shirts for $10 and ask if they will shop at your store instead. No matter what your competitor does, respond by offering your t-shirts for less money. It doesn’t matter if you lose money, because eventually they’ll go bankrupt and then you won’t have to compete with them anymore. When they go out of business, raise your prices to $20 a t-shirt.

What would Rockefeller say… Monopolies are good

because we can produce goods at a lower cost to consumers!

Now everyone can have cheap oil and gas.

What would the Populists (poor farmers) say? Monopolies are bad

because they control the whole industry and there is no competition over prices.

We have to pay high prices to ship our wheat on the trains!

And these companies pay low wages to their workers!