The Gilded Age and Progressive Era Pt. 1

​The Gilded Age and Progressive Eras (Industry, Immigration, and Reform) 1880's - 1914

By Andrew Pokorny

• ​How do factories and large corporations affect a society?

• How does industrialization influence national and personal wealth, poverty, and the world?

Industry and Economics

• To what extent should governments regulate businesses?

Government and Regulation

​Big Concepts and Questions

Open Ended

Are there companies today that you think are very influential on U.S. society or government? If so, which companies?

Poll

Regarding government's role in business, which position do you most agree with?

• Government should have no or very little role in controlling private businesses.

• Government should only regulate businesses when absolutely necessary to protect consumers, national security, and the environment.

• Government should very closely monitor and regulate businesses in a role that is like both overseer and partner.

• Government should own (nationalize) all businesses.

​Between 1865 and 1900 manufacturing replaced agriculture as main source of economy.

Cause of Rapid Industrialization:

• Abundant Natural Resources

  • Westward Expansion brings resources: Timber, Coal, Iron, Copper, Oil/Petroleum, etc.

• Large, cheap workforce

  • Immigrants: Europe and China

  • Large American families

​U.S. Industrialization Overview

Industrialization Overview: Gov.

Cause of Rapid Industrialization:

• Laissez-faire economics

  • French phrase “let the people do as they choose." The Govt. keeps hands off business - very few regulations

• Entrepreneurs and Free Enterprise

  • People who bear financial risk in starting businesses in company

  • Business/Entrepreneurs ‘free’ to succeed or fail

Categorize

Options (13)

Businesses are free and quick to respond to market changes.

Promotes competition among businesses

Increases consumer choice

Drives economic growth

Encourages efficient resource allocation

Fosters creativity and new ideas

Enhances customer service through competition

May result in monopolies or oligopolies

Can create market failures

Can harm small businesses unable to compete

May lead to exploitation of workers

Can result in environmental degradation

May prioritize profit over social responsibility

Sort the advantages and disadvantages of the Laissez-faire system

Advantages

Disadvantages

Industrialization Overview: Gov.

Cause of Rapid Industrialization:

• Tariffs: Govt. tax on foreign made products

  • Government Protection of U.S. Business by Encouraging Americans to buy American made products

• U.S. not very dependent on foreign markets or raw materials

Industrialization Overview: Infrastructure

Cause of Rapid Industrialization:

• Growing Infrastructure: organizational structures and facilities (e.g. buildings, roads, power supplies) needed for the operation of a society and/or business

  • Transportation

    • Railroads - Nationwide rail system by the late 1800's

    • Ever expanding roadways

  • Communication

    • Growing Telegraph and Telephone Networks

Industrialization Overview: Age of Inventions

Cause of Rapid Industrialization:

• The late 1800's and Early 1900's see and explosion of major technological inventions.Some of these inventions will create whole new businesses and industries.

  • Examples

    • Electric Power and Lighting - Edison/Tesla

    • Phonograph - Edison

    • Motion Picture Camera - Edison

    • Telephone - Bell

    • Airplane - Wright Brothers

    • Radio - Marconi/Tesla

    • Affordable Automobile - Ford

Open Ended

Of the examples of major inventions given on the previous slide, which do you think was the most important to society and why?

The "New" Natural Resource: Oil, Black Gold, Texas Tea

Various businesses in The Gilded Age were making use of the abundance of natural resources in the U.S., both directly and indirectly. - Many coming from the expanding U.S. West

One resource was fairly new in the way it was now gathered and used - Crude Oil

Since the first major strike with an oil drill in Titusville PA in 1859, oil refining was becoming big business by the late 19th century (1800's).

While crude oil had long been a natural resource, it was now being drilled and refined in new ways that made it practical and profitable

​Business Gets BIG - Industrialists and Monopolies

Industrialist - A powerful business owner/manager/entrepreneur managing a particular. Positively called Captains of Industry and Negatively called Robber Barons.

Monopoly - A company that is the only seller of a product or service.

​Only here can mean nearly only (i.e. other businesses exist but are few in number and small in size

Multiple Choice

What would be a disadvantage for consumers buying from a monopoly?

• Convenience of sourcing or point of sale (you always know where to get the product)

• Consistent product quality (the monopoly's product or service is generally going to be the same - single source of production)

• Pricing of goods/service (lack of competition means a monopoly can maximize the cost - no other company to offer the product or service for less money)

Multiple Choice

In the game of Monopoly, what is the primary type of monopoly players try to establish?

• Steel Production

• Oil Refining

• Grocery and Dry Goods

• Real Estate (land)

Getting Ahead in Business: The Gilded Age Way

• ​Increase production efficiency

  • Invest in the latest technology

  • Invest heavily the stock market

  • Buy any machines that aid in production

• Expand operations - Get bigger by creating jobs

  • Take advantage of the large labor force

    • Expand hours of operation

    • Large labor pool means labor is cheap - people will work for low wages.

• Reduce production overhead whenever possible maximize profits

• Make it harder for smaller business to compete: buy your competition - put them out of business

overhead: the expenses related to business operation prior to selling a product or providing a service

Sale $- overhead/production = profit $

The Stock Market: Key Terms and Concepts.

​Private Company - No publicly traded stock - Owned by a small group or even a single person
Public Company - Ownership is divided into shares/stock and is sold to the general public on a stock market/stock exchange
"Going Public" - When a private company becomes a public company - Original shareholders generally retain most of the stock and reap large rewards/dividends when the stock opens for general sale

The Stock Market: Key Terms and Concepts.

Investment in the stock market generated substantial wealth during The Gilded Age and remains a major part of wealth generation today as well. While U.S. and European stock markets had existed for generations before, this was the period of major growth.

Share/Stock - A unit of ownership in a business.

Stock Exchange - The place where particular stocks are bought and sold.

Stock Market - A nation's collection of stock exchanges.

​The New York Stock Exchange (NYSE) was historically the U.S.'s biggest stock market. The NASDAQ (est. 1971) is another major market.

Hotspot

Point to the street where the NYSE is located and whose name is sometimes synonymous with the stock market

The Stock Market: Key Terms and Concepts.

​Bull Market - When lots of money is being invested in the stock market (i.e. people are buying stocks -- Price/Value of stock rises.
Bear Market - When shareholders are selling their stock (i.e. cashing out) - Price/Value of stock falls
Controlling Interest/Majority Shareholder- The person or group with the largest number of shares gets most say in company operations.
Takeover - When a person or group gains a controlling interest and changes the way a company operates
Board of Directors - A group elected by shareholders that partly runs a company.

Multiple Choice

The NYSE held a secondary site from 1882-2019 in a Midwestern City. This city named its sports teams after the two types of market. What is the city?

• Detroit
• Cleveland
• Milwaukee
• Chicago

Gilded Age Companies - Avoiding the Law

Because of clear disadvantages and potential for abuse, forming a monopoly was technically illegal under the Sherman Antitrust Act (1890).

However, the act was weakly enforced until Presidents like T. Roosevelt and Taft (Progressive Era Presidents) started to target big monopolies (Trustbusting) in their administrations.

Throughout The Gilded Age and Progressive Era many companies often structured themselves in ways to avoid the law by exploiting the vague definitions of monopoly/trust in the act.

Gilded Age Companies - Corporate Structure: Trust

• Stockholders (usually the heads of smaller or competing companies hand over their stock to a Trustee

• The shareholders still own their stock, but their Trustee makes all the big business decisions.

• Becomes a monopoly when several smaller competing businesses all turn a controlling interest of their stock to the same Trustee.

• The Trustee runs all the businesses like one company, but doesn't technically own them.

• Now Illegal
  
  

Oil Company A

Oil Company B

Oil Company C

I'm just holding these shares for my friends.

Gilded Age Companies - Corp. Structure: Pool

• Several competing companies agree to

  • Divide territories (establish regional monopolies) - Company A won't compete in Company B's territory and vice versa

  • Price Fixing (companies agree not to undersell each other)

  • Set production quotas (control supply to manipulate price)

• Now Illegal
  
  
  

Gilded Age Company - Corp. Struct: Holding Company

• A holding company owns a controlling interest in various smaller companies.

• The holding company doesn't produce anything, it just manages its subsidiaries (the companies it owns or owns a controlling interest in)

• Not illegal today if it doesn't own too many competing companies

  • Legal Ex: A holding company could own a fast-food chain, TV station, and music company

  • Illegal Ex: A holding company owns all the TV stations.
    
    
    
    

Open Ended

Are the companies here monopolies, approaching monopolies, or not monopolies? Is there still enough competition in the market? Explain.

A wealthy industrialist whose business contributes to the good of the nation through increased productivity, job creation, economic growth, and charity.

Captains of Industry

A wealthy industrialist who gains wealth through ruthless and or underhanded business practices

Robber Baron

Industrialists: Robber Barons or Captains of Industry

• Rises to wealth working for steamship companies

• Begins buying and consolidating small railroad companies under his massive growing company

  • New York and Harlem Railroad

  • New York, Chicago, and St. Louis Railroad

  • Lakeshore and Michigan Southern Railway

  • And others...

• Undercuts competition with big shipping deals with other large businesses. Makes it so they can't compete, and then buys them

• Founded Vanderbilt University.

Cornelius Vanderbilt - Railroad Monopoly

John Rockefeller - Standard Oil Company

• Grew up in poverty - Father abandoned the family. Began working at early age to help his mother and siblings. Worked as a bookkeeper. Invested in oil refineries.

• Founder and owner of Standard Oil Company - Owns 90% of oil refineries.

• Uses anticompetitive strategies (e.g. cut deals with railroads to ship his oil for less) to bankrupt competition and buy them out.

• Becomes nation's first billionaire.

• Gave largely to charities, medical research, and building projects.

Rockefeller Center

• First big product is kerosene (used for lamp oil)

• Electric lights cut into profits - transitions to gasoline - will also revolutionize the automotive industry

• Eventually business is targeted by government for trustbusting (breaking up a monopoly)

• Journalist Ida Tarbell is key in exposing the monopoly.

• Standard Oil is broken up into many companies (most still exist)

• Rockefeller remains the primary shareholder - actually becomes wealthier.

John Rockefeller - Standard Oil Company

f

Roosevelt

Ida Tarbell

Standard Oil Company - Then and Now

Over the years the companies Standard Oil was broken into have merged or gone out of business.

Standard Oil Company - Media Analysis

Multiple Choice

Which best explains why Standard Oil was so frequently represented as an octopus?

• Standard Oil was frequently represented as an octopus to illustrate its extensive control and influence in the oil industry.
• To represent the competition among oil companies.
• To show the octopus as a symbol of innovation in the oil industry because octopuses secret a black oily ink when threatened

• To depict the environmental impact of oil drilling as octopuses are threatened by oil spills

Andrew Carnegie - Carnegie/U.S. Steel

• ​Came to the U.S. as a child of impoverished Scottish immigrants

• Began working as child (12 y/o) as an office worker for a railway company

• Founded a steel company called Carnegie Steel - produces better steel faster and in larger quantities than ever before -- uses Bessemer Process (new production method)

• Eventually owns all stages of the production process - quarries, iron & coal mines, railroads foundries and mills.

• Was 2nd richest man at the height of his wealth

• ​Carnegie steel supplies railway, military, and skyscraper construction

• Carnegie donated the vast bulk of his fortune to charity/public buildings late in his life.

Horizontal and Vertical Monopolies

Horizontal Monopoly/Integration - A business structure formed from owning all (or nearly all) the outlets for producing a product or service.

Vertical Monopoly/Integration - A business structure where a single company owns all (or most) portions of a production chain from harvesting raw materials to shipping to processing and production.

Labelling

Place the Gilded Age Industrialist next to the type of integration/monopoly they operated

Drag labels to their correct position on the image

Andrew Carnegie

J.D. Rockefeller

• Born to a wealthy and influential family of business owners and bankers.

• Through personal investment, stock purchasing, banking/financing came to own or largely own many major companies

• Known for both business innovation and relentless pursuit of wealth/ownership, accused of using underhanded tactics

• Often invested in new technology - His house was the 1st to have electricity (Thomas Edison)

• Eventually took the #1 spot for richest man

J.P. Morgan - Banking Monopoly and Others