The Great Industrialists and their

Tactics

Scottish immigrant-”rags to riches” story

became a giant in the steel industry

1873- built massive steel plant in Pittsburgh, PA to produce railroad tracks

used Bessemer converter to make steel efficiently and cheaply

#1 steel producer in the world- owned 80% of the steel market

donated $400 million to worthy causes; gave away 90% of his wealth

John D. Rockefeller

Started Standard oil company-today called Chevron

used ruthless tactics to beat his competition

controlled 90% of the oil industry

paid extremely low wages to his employees

gave away millions of $, but kept most for himself

Cornelius Vanderbilt

American entrepreneur who built his wealth in shipping and railroads

By age 16 he was operating his own ferrying business between Staten Island and Manhattan

Ruthless in business, very few friends; perceived as vulgar, mean-spirited, made life miserable for those around him, including his family

Died at 82 with a fortune of more than $100 million

Nicknamed the “The Commodore”

Vanderbilt University, Breakers mansion in Newport, RI

Trusts and Monopolies

entrepreneurs controlled competition by forming a monopoly; bought out competitors or drove them out of business

trusts were another type of monopoly

Rockefeller created the Standard Oil trust to almost completely control the oil industry.

To fight the “robber barons”, Congress passed the 1890 Sherman Antitrust Act, making it illegal to form monopolies and trusts.

Business Tactics

Vertical Integration- buying up all phases of production such as raw materials and distribution.

Horizontal Integration- buying up all similar industries

Social Darwinism- only the best run businesses will survive. Encouraged competition, hard work, and responsibility

Laissez-faire- US government should not interfere with the economy. “Hands off!”

In Vertical Integration the Company Owns the Whole Production Process

Andrew Carnegie owned the coalfields that supplied coal to his steel mills

Carnegie owned the iron mines that supplied the iron ore for his Bessemer converters

Carnegie owned the railroad tracks and railroad trains that brought raw materials in and finished steel out

Carnegie controlled “top to bottom”, or vertically, all the parts of the process needed to make steel

Can you think of an example of Vertical Integration in today’s economy?

What is Horizontal Integration?

If Coca Cola buys Pepsi

If McDonalds buys Burger King

If Starbucks buys Dunkin Donuts

If ATT buys Verizon

If Toyota buys Honda

What happened to the competition?

Robber Baron A business leader who used unfair practices and had little

sensitivity for the common worker

provided unsafe and unsanitary working conditions

low wages and long hours

used violence against workers

selfishly kept their wealth

controlled and bought out competition

What can be done to slow down the Robber Barons? The Unions!