Railroads and Rise of Big Business Age Term coined by Refers to last quarter of the 19th century Looked glitzy, but not pure Transcontinental Railroad Central Pacific and Union Pacific Railroads met at in 1869 Increased westward expansion & migration Railroads united nation Led to boom in other industries New towns and markets for goods 1
Railroad Corruption Often set unfair prices Government bribes and kickbacks scandal Railroad company formed a construction company and billed the U.S. government 2-3 times what it actually cost to build railroad and kept profits Cornelius Vanderbilt made millions building railroads The Grange Movement Railroads often charged unfair (higher) prices RRs knew farmers had to use RRs to get food to market Farms ban together to fight RRs First organized in the 1870s in the Midwest, the south, and Texas. Succeeded in lobbying for Granger Laws. Laws to ensure by railroads Grange movement fell apart when farmers stopped cooperating with one another. Supreme Court Decisions National government had to figure out who could regulate RRs (1877): States could regulate businesses (railroads) within their borders : States could not regulate commerce--it was a federal government responsibility 2
Act (1887) Required railroads to publish their openly. Forbade discrimination against shippers Panic of 1893 1880s and 90s: Some of railroad owners spent too much money building railroads Some did not make enough to pay off debt Some could not pay Railroad failures contributed to Panic of 1893 Worst economic at that time Led to: Closing of banks Failure of businesses Loss of jobs for people Railroads would continue to be main mode of transporting goods for decades Rise of Big Business Big businesses dominating the U.S. economy Big businesses had: Large amounts of Could afford and big factories Could take risks Hire hundreds of workers Rise of big business meant more jobs, more goods and lower prices Some big businesses made more money than some 3
Big Business No could afford the costs of many of the businesses Required many investors and help from government Corporation: A business owned by who buy part of the company through shares of New Financial Businessman The Investor: J. Pierpont Morgan Made millions making Monopoly: Andrew Carnegie 4
John D. Rockefeller First Made money in Standard Oil controlled % of the oil industry Trust: A popular way of creating a Standard Oil was a trust Two ways to make a monopoly Integration John D. Rockefeller Buy out competition Integration: o Andrew Carnegie U. S. Steel o Bring all means of production under his control o Costs less to create the product o You may lower and still make a profit o Your competition cannot compete and will go out of business The Robber Barons Many lost their companies Paid very to maximize profits often did very little to stop robber barons Rockefeller and Carnegie became philanthropists later in life Philanthropist: Tried to improve their images Both gave away over 5
Social Many of the rich believed applied to economics was a result of competition The best companies will beat the inferior company Poverty a result of being No obligation to help the poor Rich worked hard and were superior Supported laissez-faire government Laissez-faire: Government set very few rules or to make sure competition was fair. Very Laissez Faire Federal Govt. Federal Govt. did very little inside the country during Gilded Age Main duties of the federal govt.: Deliver the mail. Maintain a national military. Collect taxes & tariffs. Conduct a foreign policy. Results of Federal Laissez- Faire The Good The Bad 6
Federal Government and Big Business Big Business dominated the economy: of country s industrial goods by 1900 % of companies made % of products Government gave big business leaders a lot of freedom to do what they wanted Big business leaders would often government officials Lots of Fight Against of Laissez-Faire U.S. economy grows and becomes a dominant force world wide Growing gap between Workers often paid poor wages while corporate increasing Number of increase Lack of competition bad for could charge what they wanted Would often raise prices on goods Call for reform and push for government to do something to regulate big business! Act (1890) National government made and illegal Major victory for businesses, and Problem: Federal government did not this law fully until 1914 Will influence the reform movement of the early 20th century. 7