Business Tycoons of the Gilded Age

Andrew Carnegie (1835-1919)

Born in Scotland to poor parents He entered the steel industry and started his own company Carnegie used good management practices and used the latest machinery to make better products for less He offered his employees stock in the company and encouraged competition between his assistants

Andrew Carnegie

Essay titled The Gospel of Wealth in 1889:

the accumulation of wealth was beneficial to society government should not interfere.

Carnegie believed the rich were trustees of their money, holding it until proper public uses could be discovered.
Spent his last years giving away his vast fortune. Carnegie wrote, The man who dies rich dies disgraced.

John D. Rockefeller (1839-1937)

Rockefeller started his first business at age 7he raised turkeys. By 1880, the Standard Oil Co. controlled 90% of the refining business. He paid his employees very low wages and sold his oil at lower prices to drive out the competition.
Then when he controlled the market, he raised prices.

Rockefellers Philanthropies

Rockefeller founded the University of Chicago in 1890, the Rockefeller Institute for Medical Research (now Rockefeller University), the General Education Board, the Rockefeller Foundation, and other charities.

Robber Barons

Critics began to call industrialists robber barons

men who would stop at nothing to achieve great wealth Accused of exploiting workers and treating them unfairly in poor working conditions.

Vertical Integration
A company takes over its suppliers and distributors and transportation systems to gain total control over the quality and cost of its product. Carnegie bought out the coal fields, iron mines.

Horizontal Integration
The merging of companies that make similar products. Carnegie bought competing steel companies With control over the suppliers and the competition, Carnegie controlled almost the entire steel industry.

Social Darwinism

New theory used by philosophers to explain Carnegies success. Grew out of Charles Darwin and his book On the Origin of Species (1859). Some people succeed and pass along their traits, while others lack them. Natural selection weeds out the losers and the best-adapted survive.

Adam Smith and Laissez-faire economics

Scottish economist Adam Smith wrote the Wealth of Nations in 1776. Along with Social Darwinism, many 19th century businessmen agreed with Laissez-faire economics (let it be) The main argument: People are naturally selfish. They are in business to gain wealth and/or power. This should not be interfered with because their activity is good for all of society. More goods they make or trade=more goods people will have. Increased competition=even more goods and probably lower prices. Creates jobs and spreads wealth.

Terms
Merger: one corporation buys out the stock of another Holding company: one corporation that does nothing except buy out the stock of other companies

(US Steel headed by banker J.P. Morganlater bought Carnegie Steel and was the worlds largest business).

Terms, cont

Mergers and holding companies lead to monopolies

Monopoly: a firm with complete control over its industrys production, wages, and prices.

Trust: hold the stock, run by trustees. Companies make money on dividends.
Used to take control of industries (like Rockefeller)