Big Business Emerges!! ! Laissez Faire Economics HANDS OFF The idea that the government should leave business alone. The Strong will survive the weak.

Big Big Business Business Emerges!!Emerges!!!!

Laissez FaireLaissez Faire Economics Economics

• HANDS OFF

• The idea that the government should leave business alone. The Strong will survive the weak will perish.

• This is how “NATURE” works.

A series of new management A series of new management techniques were developed.techniques were developed.

• Vertical integration

• Horizontal integration

• These techniques lead to…

Monopolies/Types of Monopolies/Types of BusinessesBusinesses

Monopolies/Types of Monopolies/Types of BusinessesBusinesses

Monopolies/Types of Monopolies/Types of BusinessesBusinesses

Monopolies/Types of Monopolies/Types of BusinessesBusinesses

VERTICAL VERTICAL INTEGRATIONINTEGRATION

• When a company buys each stage of the production process.

• This– Lowers production costs– Gives a company control over the process– Improves quality– Improves availability– But… limits competition.

Ore company

Shipping company

Rail Lines

Rail cars

Steel mills

$5

$5

$5

$5

$5

Y Ore company

Y Rail cars

Y Rail Company

Y Shipping Company

Y Steel Mills

$2

$2

$2

$2

$2

Total Additional

Cost$25

Cost ReducedTo $10

Who Did it?Who Did it?• Andrew Carnegie• Carnegie Steel

Horizontal Horizontal IntegrationIntegration

• When companies making similar products merge in order to have more control over the market.

• Results- – Lowers costs by eliminating competition. – Keeps control of prices in the hands of a few men.– Price fixing

– (Laws of Supply and Demand)

CompanyA

CompanyB

CompanyC

Competition keeps prices low

Removing competition allows companies to increase profits

by raising prices.

Trust/Holding Company

Who did it?Who did it?• John D. Rockefeller

• 1870- Standard Oil was– 23% of US Oil processing.– 1890- 90%

• Created TRUSTS.

3 Really Important Ideas3 Really Important Ideas

• The Law of Supply and Demand

• Social Darwinism

• Laissez Faire Economics

The Law of Supply and The Law of Supply and DemandDemand

• If demand is low the price is…

• Low.

• If demand is high the price is…

• High.

• If supply is low the price is…

• High

• If supply is high the price is…

• Low.

The “Gospel of WealthThe “Gospel of Wealth• "The Gospel of Wealth" was an

essay written by industrialist Andrew Carnegie in 1889. Carnegie professed the virtues of a Laissez-faire system in which the government did not interfere with a corporation's right to do as it pleased. Carnegie made it clear that the wealthy were responsible for the recirculation of their money back into society where it could be used to support the greater good. Carnegie himself practiced this procedure, and in his later years gave money to establish public libraries, schools and swimming pools.

Social Social DarwinismDarwinism

• A perversion of Charles Darwin’s “On the Origin

• of Species”• His ideas were applied to

business. (It wasn’t what • he had in mind.)• 2 key ideas

– Survival of the fittest– Natural Selection

Darwin onDarwin onBreeding Breeding Animals.Animals.

• Thus the weak members of civilized societies propagate their kind. No one who has attended to the breeding of domestic animals will doubt that this must be highly injurious to the race of man. It is surprising how soon a want of care, or care wrongly directed, leads to the degeneration of a domestic race; but excepting in the case of man himself, hardly any one is so ignorant as to allow his worst animals to breed.

Social Darwinism extends Darwin into a realm Darwin never intended = a competitive struggle where only

those with the strongest moral character should survive, or else the society would weaken. It was Spencer, not

Darwin, who coined the phrase "survival of the fittest.“

Social Darwinism thereby offered a perfect moral justification for America’s Gilded Age –

Robber Barons 1.controlled much of American industry2. the gap between rich and poor widened even

greater 3. urban slums festered, and politicians were

bought off by the wealthy. AND - It allowed men like John D. Rockefeller to claim

that the fortune he accumulated through the giant Standard Oil Trust was "merely a survival of the

fittest, ... the working out of a law of nature and a law of God."

In its most extreme forms, Social Darwinism was used to justify eugenics programs – the weeding out of "undesirable" genes from the population; which inspired

sterilization laws directed against "unfit" individuals. Between1910-1930, 24 states passed sterilization laws and Congress passed a law restricting immigration from certain areas deemed to be unfit. Social Darwinism i, though in different form, was also applied by the Nazi party in Germany to justify

their “eugenics” programs.

Social Darwinism - justified 1.the more exploitative forms of capitalism in which workers were paid sometimes pennies a day for long

hours of backbreaking labor. 2. big business' refusal to acknowledge labor unions

and similar organizations, and 3. implied that the rich need not donate money to the poor or less fortunate, since such people were less fit

anyway.

ResultsResults

Social Darwinism as it Social Darwinism as it applies to… applies to…

• Workers and Owners

• Rich and Poor

• The U.S. and other countries.

• History: The Native Americans

Social Darwinism as it applies to “Factory

Towns”

Horatio Alger – a partial listHoratio Alger – a partial list

• Abraham Lincoln: the Backwoods Boy; or, How A Young Rail-Splitter Became President (1883) • Adrift in New York; or, Tom and Florence Braving the World (1904) • Adrift in the City; or, Oliver Conrad's Plucky Fight (1902) • Andy Gordon; or, The Fortunes of a Young Janitor (1909) • Andy Grant's Pluck (1902) • Ben Bruce. Scenes in the Life of a Bowery Newsboy (1901) • Ben Logan's Triumph; or, The Boys of Boxwood Academy (1908) • Ben's Nugget; or, A Boy's Search for Fortune (1882) • Ben The Luggage Boy; or, Among the Wharves (1870) • Bernard Brooks' Adventures. The Story of a Brave Boy's Trials (1903) • Bertha's Christmas Vision. An Autumn Sheaf (1856) • Bob Burton; or, The Young Ranchman of the Missouri (1888) • Bound to Rise; or, Up the Ladder (1873) • A Boy's Fortune; or, The Strange Adventures of Ben Baker (1898) • Brave and Bold; or, The Fortunes of Robert Rushton (1874) • The Cash Boy (1887

One day a handsome carriage drove up to the door. FromOne day a handsome carriage drove up to the door. From it descended our hero, elegantly attired. He knocked at the door. it descended our hero, elegantly attired. He knocked at the door.

Mrs. Chase, who was impressed by wealth, came to the door in a flutter of respect, induced Mrs. Chase, who was impressed by wealth, came to the door in a flutter of respect, induced by the handsome carriage. ``What do you wish, sir?'' she asked, not recognizing Frank. by the handsome carriage. ``What do you wish, sir?'' she asked, not recognizing Frank.

``Miss Grace Fowler!'' repeated Mrs. Chase, almost paralyzed at Grace being called for by ``Miss Grace Fowler!'' repeated Mrs. Chase, almost paralyzed at Grace being called for by such stylish acquaintances ``Yes, my sister Grace.'' ``What! are you Frank Fowler?'' ``Yes. I such stylish acquaintances ``Yes, my sister Grace.'' ``What! are you Frank Fowler?'' ``Yes. I have come to take Grace away.'' ``I don't know as I have the right to let her go,'' said Mrs. have come to take Grace away.'' ``I don't know as I have the right to let her go,'' said Mrs.

Chase, cautiously, regretting that Grace was likely to escape her clutches. ``Here is an order Chase, cautiously, regretting that Grace was likely to escape her clutches. ``Here is an order from Deacon Pinkerton, chairman of the overseers of the poor.'' ``That is sufficient. She can from Deacon Pinkerton, chairman of the overseers of the poor.'' ``That is sufficient. She can

go. You look as if you had prospered in the city,'' she added, with curiosity. ``Yes. I have go. You look as if you had prospered in the city,'' she added, with curiosity. ``Yes. I have found my grandfather, who is very wealthy.'' ``You don't say!'' exclaimed Mrs. Chase. ``I'll found my grandfather, who is very wealthy.'' ``You don't say!'' exclaimed Mrs. Chase. ``I'll

tell Grace at once.'' tell Grace at once.''

• Grace at work in the kitchen had not heard of the arrival. What was her surprise when Mrs. Chase, entering the room, said, graciously: ``Go up at once, Grace, and change your clothes. Your brother has come for you. He is going to take you away.'' Grace almost gasped for breath. ``Is it true?'' ``It is indeed. Your brother looks remarkably well. He is rich. He has found a rich grandfather, and has come for you in a carriage.'' In amazed bewilderment Grace went upstairs and put on her best dress, poor enough in comparison with her brother's clothes, and was soon happy in his embrace. ``I am glad to see you, my dear child,'' said Mr. Wharton, who had accompanied Frank. ``Will you come to the city and live with me and your brother?'' ``Oh, sir, I shall be glad to be wherever Frank is.'' ``Good-bye, my dear child,'' sand Mrs. Chase, whose feelings were very much changed, now that Grace was a rich young lady. ``Come and see me some time.'' ``Thank you, Mrs. Chase. Good-bye!'' The carriage rolled on.

• A few words only remain. Our hero was placed at a classical school, and in due time entered college, where he acquitted himself with distinction. He is now making a tour of Europe. Grace was also placed at an excellent school, and has developed into a handsome and accomplished young lady.