The Rise of Big Business New Type

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The Rise of Big Business

New Type of Business In response to the changes in industry, a new type of business organization developed corporation A corporation is a large business company that is owned by several members, but acts as one legal entity. Owned by people who buy stock in the company ▪ Limited liability: if company fails, only lose your investment Board of directors makes decisions Corporate officers run day-to-day operations

Corporations and Competitions To gain dominance, competing companies would create a trust (all share holders of similar companies would merge and be ran by a board of trustees). When a trust gained complete control over an industry, it held a monopoly (when there is no competition in the market). No competition and could raise prices or lower quality at will

Horizontal and Vertical Integration: acquiring companies that supplied the larger business Oil Business take over pipelines and railroads Own all the factors of production for that product…control price & quality! Horizontal Integration: taking over other similar companies Oil Business other oil refineries Consolidate companies & monopolize the market

Mc. Donald’s example What ingredients go into making a Big Mac? What if the Mc. Donalds corporation owned all those individuals businesses? What if there was no competition, like Burger King or Wendys? What would happen to the price of Big Macs?

Government? Why is the government allowing this? Governments had never seen such a business, so did nothing to stop it Positive economic growth Laissez faire capitalism- “allow to do”, “leave alone” companies operate without government interference Allows entrepreneurs (risk takers who start new economic ventures) to monopolize the market

Why may this type of business be problematic? Who will benefit? Who will not benefit?

Social Darwinism The new industry created large inequalities between the rich and poor Social Darwinists believed that stronger people, businesses, and nations would prosper. Weaker ones would fail. Gospel of Wealth (1901): written by Carnegie Wealthy should act as ‘trustees’ for their poorer brethren

The Great Industrialists Rockefeller Carnegie Standard Oil Company Carnegie Steel Company By 1875 - owned half of all the oil in the U. S. Sold his company to J. P. Morgan for over $400 billion! Vanderbilt J. P. Morgan Owned Several Railroads Financier and Banker Stretched from New York to Chicago General Electric & U. S. Steel

Robber Barons and Captains of Industry The legacy of the great industrialists of the 1800 s are often debated… Robber Barons: businessmen that used ‘tough’ tactics to control the market and their competitors ▪ Rob from the poor to benefit the rich Captain of Industry: businessmen who used their skills to promote and strengthen the economy and improve the country ▪ Investment and Improvement in the standard of living

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