The Rise of Big Business Robber Barons or Captains of Industry.

The Rise of Big Business

Robber Barons or Captains of Industry

How to Eliminate Competition

• During the rise of Big Business, several men were able to eliminate their competition and form extremely powerful “Big Businesses”

• Ways to eliminate competition?– Trust– Monopoly

Trust

• A group of separate companies placed under the control of a single managing group– The managers oversee and control the actions

of all the companies• Set prices• Set wages• Control distribution• Competition is eliminated

Monopoly

• Monopoly– One company has exclusive control over their

entire industry– They are able to wipe out all of their

competition– Two Methods of forming a monopoly:

• Vertical Integration• Horizontal Integration

Robber Baron

• Negative term that describes a business leader that has built his wealth by lying, cheating and stealing– Robs from the consumers– Abuses employees and workers – Drives competitors out of business (And

enjoys it!)– Drains the country of natural resources– Persuades (bribes) government officials to

pass favorable business legislation

Captain of Industry

• Positive term that describes a business leader that has positively contributed to the country as he built his wealth– Created jobs– Increased availability of goods– Expanded markets– Helped the economy– Was a philanthropists – donates money or

goods to a charity• Creates museums, libraries, universities

Robbers or Captains

• Two men define the era of “Big Business’ during America’s Industrial Revolution

• Andrew Carnegie and U.S. Steel• John D. Rockefeller and Standard Oil Company

• Both men controlled their industries by forming monopolies and eliminating the competition

Andrew Carnegie and U.S. Steel

• Used Vertical Integration

• Carnegie built a steel empire

• Purchased iron ore mines, steel mills, ships, and railroads

• Offered steel at low prices – eliminated the competition

Vertical Integration

• The process of gaining control of the many different businesses that are needed for a product’s development and distribution– One company controls all means of production

and distribution from beginning to end– Middleman is eliminated– Costs less for company to create a product

• Lower prices• Competition eliminated• Consumers go with cheaper prices

Vertical Integration

Assembly and Manufacturing

End Product

Distribution

Raw Materials

One Company Owns all

Phases of Production

From TopTo Bottom

Captain or Robber?

• Considered the richest man in the world - $1 billion dollar empire in 1901

• U.S. Steel produced as much as Great Britain

• Issues with workers/Homestead Strike

• U.S. Steel: a monopoly• “Gospel of Wealth” –

becomes world’s largest Philanthropists

John D. Rockefeller and Standard Oil

• Used Horizontal Integration

• Bought out his competition to form the largest and most profitable company in the World

• Used trusts to control his empire

• 1910, Controls 91% of all oil in US

Horizontal Integration

• Process of one company buying out the many businesses in the same industry to form one large company– Buy out the competition– If companies refuse to sell, lower prices to

undercut the competition– Consumers flock to lower prices– Competition goes bankrupt or is forced to sell

Horizontal Integration

Small Business

Small Business

Small Business

Small Business

Small Business

Small Business

Small Business

Small Business

Small Business

Small Business

Small Business

Small Business

To Form a Giant

Company

Purchased by one Company

Robber or Captain?

• Rockefeller replaces Carnegie as the richest man in the world

• By 1910, he was worth $310 billion

• Controversial business career – formed monopolies and bitterly attacked by journalists

• Considered the most notorious Robber Baron

• Gave away over half his wealth