Chapter 19: Section 2

Chapter 19: Section 2

Big Business

Main Ideas:

• The rise of corporations and powerful business leaders led to the dominance of big business in the United States.

• People and the government began to question the methods of big business.

• The growth of big business in the late 1800s led to the creation of monopolies.

Dominance of Big Business

• In the late 1800s many entrepreneurs formed their business as corporations, or businesses that sell portions of ownership called stock share.

Corporations Generate Wealth

• Stockholders in corporation typically get a % of profits based on the amount of stock they own.

• Stockholders do not run the day to day business, they elect a board of directors that choose the corporation's main leaders.

Advantages of Corporations

• Stockholders in a corporation are not responsible for business debts.

• If businesses fail stockholders lose only the money that they invested.

• Stockholders are usually free to sell their stock to whomever they want.

• By 1900 more than 100 million shares per year were being traded on the New York Stock Exchange.

Business Leaders

• Andrew Carnegie - one of the most admired business-people of all time.

• Scottish immigrant who stated in the railroad and worked his way up.

• 1873: focused on the steel industry.

• Expanded his business by buying out competitors when steel prices were low.

• Vertical integration- ownership of business involved in each step of the manufacturing process.

Business Leaders

• John D. Rockefeller - focused on the oil refinery industry.

• Rockefeller's Standard Oil Company was the country's largest oil refiner.

• Used vertical and horizontal integration.

• Horizontal integration- owning all businesses in a certain filed.

• Trust - legal arrangement grouping together a number of companies under a single board of directors.

Business Leaders

• Leland Stanford: made his fortune selling equipment to miners.

• One of the founders of the Central Pacific Railroad and founded Stanford University.

• Stanford argued that industries should be owned and managed cooperatively by workers.

Questioning the Methods of Big Business

• By the late 1800s, people and the government were becoming uncomfortable with child labor, low wages, and poor working conditions.

• People began to view big business as a problem.

Social Darwinism

• A view of society based on scientist Charles Darwin's theory of natural selection.

• "Survival of the Fittest" decided which human beings would succeeded in business and in life in general.

• Others believe rich had the duty to aid the poor and give money through charity.

An Antitrust Movement

• 1880s : People began to criticize the practices of big business.

• Large corporations drove smaller competitors out of business.

• Owners of small businesses wanted the government to help control monopolies (total ownership of a product or service).

Sherman Antitrust Act

• July 1890 Congress passed a law that made it illegal to create monopolies or trusts that restrain trade.

• The act did not clearly define a trust in legal terms.

• Antitrust laws were difficult to enforce and corporations and trusts kept growing in size and power.