Big Business Emerges Panic of 1893

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Big Business Emerges

Panic of 1893 • Brief, severe depression caused by over - investing in and failure of railroads & banks. • Enabled purchase of assets by investors who bought up the pieces and controlled industries.

Gilded Age Investors Vanderbilt bought up dead railroads. Carnegie bought & built steel mills. JP Morgan bought dead banks and railroads.

Good Conditions Seven factors helped mass industrialization in the US: 1) 2) 3) 4) 5) Abundant natural resources & better power – coal & now oil. Sufficient common and skilled labor force - Immigration Sufficient Capital for investment (domestic and foreign) Technology available to convert materials into useable goods Market System was able to distribute goods and promote consumption 6) Favorable Government Policies @ state and Federal levels 7) Better Management techniques & leaders to run big operations

Better Management Techniques Scientific Management • David Mc. Callum separates management from workers • Improves communication through middle managers. Business Structure – Methods of Integration • Horizontal – Buy out competitors, expand market share • Vertical – Buy “feeder” businesses – means of production

Business Models • Monopolies – Ultimate control of an industry’s production, sales, quality, prices and wages • Holding Companies – Massive company that owns other companies – a way to gain a monopoly. • Trusts – Organizations that ran groups of competing companies as though they were one. Owners of the companies got stock and dividends from all profits combined – more than they would get from just one company. • Managers would become known as “Robber Barons”.

Problems with Monopolies

Business Justifies Size Social Darwinism A social & business philosophy based on Darwin’s theory of Natural Selection…“Survival of the Fittest”. If it was acceptable in nature…why not in business? Herbert Spencer and William Sumner promote that…success and failure in business were governed by the same natural law and that no one (government too) had the right to intervene.

"The American Beauty rose can be produced in all its splendor only by sacrificing the early buds that grow up around it. “ John D. Rockefeller, Jr.

“Robber Barons” or Philanthropists Gospel of Wealth • Rockefeller Foundation • University of Chicago Despite the hundreds of millions he made, Rockefeller donated over $500 Million to charities. • Carnegie Hall -Mellon University Carnegie gave away about 90% of everything he made.

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