before the civil war, most american businesses were owned by a single person or a partnership after...
TRANSCRIPT
Before the Civil War, most American businesses were owned by a single person or a partnership
After the Civil War, industry (mills, factories, railroads, mines) now needed more capital (money) for investment than one person or a few partners could raise.
What’s the solution???
CORPORATIONSPurpose TypeTo raise capital ($$) It is a business in which
many investors own shares called stocks
In exchange for their investment, each stockholder receives a dividend, or part of the corporation’s profits
This limits investor losses If a corporation fails,
each investor only loses his or her investment
TransportationRailroads
Building materialsSteel
EnergyCoal, oil and
electricity
CommunicationsTelegraph and
telephone
MONOPOLYPurpose
Company or small group of companies that has complete control over a particular field of business
A monopoly often allowed a company to raise prices to almost any level it desired
OUTCOMES: Competitors forced out of
businessFederal legislation tried to
control them
What do you see?
What do you think the cartoon is saying about these men?
TRUSTPurpose TypeGroup of similar
corporations agree to combine their management under a single board of trustees
Shareholders in the corporations received dividends from the trust but lost any say in its operation
A way to get around laws regulating monopolies
Standard Oil Trust
Who were the industrial leaders?
Andrew Carnegie – Steel
J.P. Morgan – Finance
John D. Rockefeller – Oil
Cornelius Vanderbilt - Railroads
How did they get so powerful?Maximized profits
Formed corporations and trusts to control an entire industry (monopoly power)
Got rid of competitors (horizontal integration)Set prices as high as possible
Minimized costsKept worker pay very low with long hoursControlled suppliers and transportation costs
(vertical integration)Had no government interference!
LAISSEZ-FAIRE
Government should not interfere with business
FREE-ENTERPRISE SYSTEM – private individuals make the economic decisions – not government
SOCIAL DARWINISMBased on Charles Darwin's theory of
evolutionSocial Darwinists held that life was a
struggle for the “survival of the fittest”Free-enterprise competition would lead
to the strongest businesses surviving.Government regulation would let the
weak survive. Also, any government programs to aid
the poor or workers would violate natural “laws”
Govt Policy towards Business – Was it really “laissez-faire”?
Expanding industries industries and growing foreignforeign trade benefited US
Government policies were designed to aid the growth growth of business
LoansLoans and land land grants to large railroad companies were given
HighHigh tariffs that discouraged foreign competition
Few limits on immigration immigration = more workers= more workers
ROBBER BARONS OR PHILANTHROPISTS?
Those who gained their riches at the expense of the poor and the working class
Lavish lifestyles of the wealthy at this time fed criticism
Many spent freely to show off their wealth
Public criticism and sense of social responsibility led the wealthy to use a part of their wealth to aid society.
Carnegie’s Mansion in NYC
Vanderbilt Mansion, NY
Rockefeller Mansion
SHERMAN ANTITRUST ACT (1890)Why:
Most corporations and trusts had eliminated most competitioncompetition and set up monopoliesmonopolies
Public ProtestWhat it did:
Prohibited monopolies. It prevented any business structure that “restrained trade”
Outcome:Corporations got around the act by
forming holding companies rather than trusts.trusts.
Clayton Anti-Trust Act (1921)Expanded and “fixed” the Sherman Anti-
Trust Act
It outlawed price-fixing
Exempted unions from the Sherman Anti-Trust Act(will make sense next class)