US Economy Capitalism- Laissez-Faire- Types of Big Businesses Corporation = 3 or more people Monopoly = 1 person controls an ENTIRE industry Ms. V s pen Mr. K s pen Ms. V. Trust = 2 companies join together GinoDomino s Pizza Gino s Pizza Domino s Pizza Turn and Talk 1. What is unfair about a monopoly? 2. Why would some Americans think big businesses threatened capitalism (competition)? Big Businessmen Robber Barons vs. Captains of Industry
Andrew Carnegie Andrew Carnegie was a captain of industry or, to others, a robber baron. He came to America as a poor Scottish immigrant in pursuit of the American Dream. He built his business by buying everything he needed to make steel. Carnegie owned: Iron mines for iron ore Steel mills to make the iron into steel Railroads and ships to carry iron and steel Oil fields for oil to run mills, ships and railroads Carnegie created the Carnegie Steel - a monopoly- meaning that Carnegie owned the ENTIRE steel industry, had no competition, and as a result became one of the richest men in America. Steel was used to make machines, railroads, and factories- anytime a company or person wanted to buy steel, they could only buy it from him! Thanks to Andrew Carnegie and the demand for steel, he employed millions of workers, which in turn meant that those millions of workers were all making steady incomes and spending their money. This spending stimulated the economy. Although Andrew Carnegie was a big businessman and one of the richest men in America, he remembered that he came from a poor, immigrant background. He believed that it was the duty of the rich to help the poor. He called this the Gospel of Wealth and became one of the largest philanthropists- people who donate to charity. Carnegie started many charities, such as providing New York with $5.2 million for the construction of sixty-five libraries. Carnegie said, I started my life as a poor man and I wish to end it that way. At the time of his death in 1919, Carnegie had given away over $350 million. Although Carnegie believed in the Gospel of Wealth and donated much to charity, he was not always the best captain of industry. He lowered the wages of his workers to increase profit and when his workers went on strike, violence ensued. Carnegie fired the workers who went on strike and quickly and easily replaced them with the lines of unskilled immigrants waiting for jobs.
John Rockefeller John D. Rockefeller has often been called both a captain of industry and a robber baron. Rockefeller s oil company controlled 95% of the oil business in the US. Rockefeller saw he could get rich if Rockefeller Standard Oil was the only oil company in the US. He quickly bought the other oil companies and formed a trust. Rockefeller turned his trust into a monopoly and controlled all of the oil in the US. He created the Standard Oil monopoly by: Set his oil prices low. People then bought from Standard Oil. Other oil companies went out of business. Took over the oil businesses of those companies Raised prices on oil. Almost everyone had to by from him, so he could make people pay high prices. Made secret deals with railroads. They had to carry his oil at a lower rate than other companies oil. John Rockefeller used many unfair business tactics to drive competitors out of business. Using his wealth and money he bought off politicians and congressmen in government to make deals and laws that favored his company. For example, when workers started to demand higher wages, Rockefeller paid off congressmen who thought of making a minimum wage law. As a result, no law was made and Rockefeller was able to keep paying his workers pennies a day. Rockefeller believed his good fortune and wealth was a sign from God. He believed if God didn t want him to continue to use unfair business tactics then he wouldn t have blessed him with so much fame and fortune. By the time he was 33, Rockefeller controlled the entire industry, drove all competitors out of business, was paying and treating his workers poorly, and was making secret deals with railroad companies and politicians. He did, however, stimulate the economy, with all of the workers he paid and all of the oil he sold. Although Rockefeller did not treat his workers fairly, he did believe in philanthropy- giving money to charity. He donated over $100 billion dollars to charities before he died at age 97. Below is a popular cartoon from the time period titled, What a funny little government!
Cornelius Vanderbilt Cornelius Vanderbilt was born in Staten Island, New York and grew up to become one of the richest men in history, a captain of industry or to those who dislike him, a robber baron. In the 1860s, Vanderbilt focused on railroads which were beginning to become a huge industry as more people moved West. He gained control of a number of railway lines operating between Chicago and New York and established a new railroad system. Vanderbilt s railroad system was a major transformation of the railroad network, which previously had been a bunch of short railroads, each with its own procedures and time schedules. Vanderbilt created one, unified network of railroads all with the same procedures and time schedules. The creation of a one system spanning several states lowered costs, increased efficiency, and sped up travel and shipment times. Vanderbilt was the driving force behind the construction of Manhattan s Grand Central Station, which opened in 1871. By this time Vanderbilt had established himself as a railroad baron (businessman) and controlled over 90% of the nation s railroads. He often made secret deals with other rich friends, such as John Rockefeller. He charged Rockefeller lower rates to ship Rockefeller s oil on the railroads. As a result, these two men were able to drive out competition and be the only men to control the railroad and oil industry, respectively. Vanderbilt did not give away much of his vast wealth to charitable causes. He left the bulk of his fortune, estimated at more than $100 million, to his son William. Vanderbilt was a cunning tycoon who did whatever it took, including treating workers and other competitors unfairly, to get to the top. His most famous quotes are below: What do I care about the law. Ain t I got the power? Cornelius Vanderbilt I have been insane on the subject of moneymaking all my life. Cornelius Vanderbilt You have undertaken to cheat me. I won't sue you, for the law is too slow. I'll ruin you. Cornelius Vanderbilt
JP Morgan John Pierpont (JP) Morgan became one of the biggest banking tycoons in history. He was born into a family of great wealth and his father had already established a bank. With his family s money and his father s bank, he took to investing and foreign markets. By 1873, he became the king of American finance and a captain of industry to those who liked him. To those who didn t like him, he was a robber baron. He opened a bank and lent huge amounts of money to corporations. These loans helped American industry grow faster than ever before. Hundreds of people were able to open up new businesses thanks to the loans they received from the banks. In turn, JP Morgan was able to make huge profits by charging high interest rates on the loans. In 1873, when the economy collapsed, JP Morgan had so much gold he allowed the federal government to buy his gold to stop the value of the dollar from decreasing. He was that rich! In 1901, he bought fellow mogul, Andrew Carnegie s steel company to create his own company, US Steel for $500 million dollars. Within ten years, US Steel was worth over $1 billion dollars and was the only company that sold steel- a monopoly. JP Morgan controlled the banks and steel industry and established himself as one of the richest men in America. He used his money to buy real estate and invest in companies all over the country. Due to his massive spending, and due to all of the companies and properties he owned, he became the inspiration for the popular game, Monopoly. In fact, the monopoly man is JP Morgan. JP Morgan, although rich, was not always a nice man. He often combined small companies into big corporations and drove mom and pop small shops and companies out of business. He paid his workers pennies a day and forced them to work long hours, sometimes 14-20 hours per day. But, Morgan did consider himself a philanthropist-a person who donates to charity. He collected fine art. He donated many valuable works to the Metropolitan Museum of Art.
Social Darwinism According to a popular theory of the late 1800s, Social Darwinism, only the strongest survived. According to scientist, Charles Darwin, all animal life had evolved by a process called natural selection. According to the natural selection theory, only the strongest and fittest animals survived to evolve- survival of the fittest. Applying the theory of natural selection to the business world, the theory of Social Darwinism said that society should do as little as possible to interfere with the process of people trying to succeed or fail. According to the Social Darwinism theory, the government would stay out of business that way only the strongest and best businesses would survive. By having the strongest and best businesses survive, the idea was that the economy was be the best and strongest as well. Businesses that drove out their competitors were perfectly justified because they were the best. Many Americans thought that our nation s prosperity (wealth) depended on a laissezfaire or hands off approach to the economy by the government. As a result, the government didn t regulate big businesses and allowed businesses to mistreat their workers. There was no minimum wage, no maximum number of work hours, or health regulations. Women and children worked in small sweatshops- small factories with large machines, often with no windows for ventilation, and often inundated with rats. People worked in dangerous factories for pennies a day and the government remained laissezfaire or hands-off under the belief that the strongest people and businesses would survive and make the country better.