benefits of big business large companies could manufacture enough products to meet national demand....

Benefits of Big Business• Large companies could

manufacture enough products to meet national demand.

• Produced better products for lower cost.

• Paid high salaries to get experts.• Increased efficiency

Big Business Tactics

• Demand volume discounts.

• Sell at a loss until their competition shuts down.

• IF/when it becomes a monopoly, it controls prices.

Mixed Feelings Toward Big Business

•Worried about corrupting influence of power and wealth, but liked the low prices, efficiency, and national markets.

•Same as feelings toward outsourcing today.

Role of Corporations

• Corporation is an organization owned by many but treated by law as an individual. Can own property, sue/be sued, enter into contracts.

• Owners are called stockholders; own shares of partnership called stock.

• Issuing stock allows the corporation to raise money, or financial capital, while diluting the risk.

Limited Liability

• Stockholder risks no more than the sum originally invested.

• If the corporation cannot pay its debts and goes bankrupt, stockholders (owners) are not personally responsible for paying its debts.

Economies of Scale

• With large capital, corporations could invest in new technologies, hire large workforce, purchase more machines.

• Corporations can make goods more cheaply because they produce so much so quickly using large manufacturing facilities.

• Small companies could not compete and went bankrupt.

America’s Industrialists: Captains

of Industry Or

Robber Barons?

America’s Industrialists: Captains

of Industry Or

Robber Barons?

The ‘Robber Barons’ of the Past

The ‘Robber Barons’ of the Past

Robber Barons: term implies that leaders

built their businesses by stealing from the public & using unfair business practices

Captains of Industry: credits these

Industrialists with creating the industrial power of the US

New Business CultureNew Business Culture1. Laissez Faire the economic theory of the

Industrial Age.1. Laissez Faire the economic theory of the

Industrial Age.

Individuals should compete freely in the marketplace.

No room for government in the market!

Individuals should compete freely in the marketplace.

No room for government in the market!

2. Social Darwinism2. Social Darwinism British economist. Advocate of

laissez-faire. Adapted Darwin’s

ideas from the “Origin of Species” to humans.

“Survival of the Fittest” applied to business

British economist. Advocate of

laissez-faire. Adapted Darwin’s

ideas from the “Origin of Species” to humans.

“Survival of the Fittest” applied to businessHerbert SpencerHerbert Spencer

Social Darwinism in America

Social Darwinism in America$ Individuals must have absolute

freedom to struggle, succeed or fail.

$ Wealth is a reward for “smarts” and hard work.

$ The strongest companies will survive, the weak ones will perish.

$ Gov’t should not interfere with the “natural selection” of successful businesses.

$ Individuals must have absolute freedom to struggle, succeed or fail.

$ Wealth is a reward for “smarts” and hard work.

$ The strongest companies will survive, the weak ones will perish.

$ Gov’t should not interfere with the “natural selection” of successful businesses.

Cornelius [“Commodore”]

Vanderbilt

Cornelius [“Commodore”]

Vanderbilt

Can’t I do what I want with my money?Can’t I do what I want with my money?

William VanderbiltWilliam Vanderbilt

$ The public be damned!

$ What do I care about the law? H’aint I got the power?

$ The public be damned!

$ What do I care about the law? H’aint I got the power?

Andrew CarnegieScottish immigrant“Rags to Riches”

1st major steel company in US (now US Steel)

Vertical Integration

Gospel of Wealth

Philanthropist

Vertical Integration

• Owns all of the businesses that its needs in order to operate

• Saves company money even while company becomes bigger

• Carnegie Steel bought coal mines, limestone quarries, iron ore fields.

The Gospel of Wealth:

The Gospel of Wealth:$ Wealth is not looked upon as bad.

but is$ Viewed as a sign of God’s approval.

$ Christian duty to accumulate wealth. (Protestant work ethic)

$ Wealthy people have responsibility to use their wealth for the benefit of society. Thus many endowed colleges, libraries, scholarships, etc.

$ Wealth is not looked upon as bad. but is$ Viewed as a sign of God’s approval.

$ Christian duty to accumulate wealth. (Protestant work ethic)

$ Wealthy people have responsibility to use their wealth for the benefit of society. Thus many endowed colleges, libraries, scholarships, etc.

John D. Rockefeller

Founder of Standard Oil controlled 90% of US oil refining

Widely criticized for his business practices –√ horizontal consolidation√ forced rebates√ trusts

Legacy as philanthropist

Horizontal Integration

• Buys out same type of business.

• Big oil company (Standard Oil) buys out little oil companies.

• When owns all of same type of companies, has a monopoly. With no competition, can set prices where it wants.

Standard Oil Co.Standard Oil Co.

TRUSTS

• A trust is formed when several companies give control of their corporations to a single board of trustees.

• Did not violate state laws forbidding one company to own stock in another company without first getting permission from state

• Enabled trustees to control a group of companies as if they were one large merged company

BILL GATES

Chairman and chief architect of Microsoft

Richest man in world Bill and Melinda Gates Foundation