The Second

Industrial
Revolution
Part 2
John D. Rockefeller
- Oil Refining - Standard Oil
Company
- Controlled 95% of all refineries in
the US by 1877.
- Believed in economies of scale.
- Absolutely ruthless in business.
- Used rebates, drawbacks,
spies, and secret info from RR
to learn about competitors
and force them out of
Cont.
- Treated his workers well.
- First to offer pensions and tried to retain workers during downturns.

- Rockefeller was notorious for his hatred of waste.

- He believed that only the strong survive

- Social Darwinism

- Retired at 40 and spent the rest of his life giving away his
money.
- Gave over $520 million to charity.
Andrew Carnegie
- Founded US Steel Corporation

- Hired the best experts and

made use of new process to
produce steel so cheaply it
forced his competitors into
bankruptcy - where he then
bought them.
Cont.
- Did not treat his workers well
- Drove hours up and wages down.
- Carnegie was a poor Scottish immigrant who believed
that hard work and smart investment could make
anyone rich.
- Believed in the Gospel of Wealth
- The wealthy are blessed with greater talent and
Social Darwinism
- Philosophy that applies Darwins biological theory of survival of the fittest to
human society.

- Wealth will no longer be viewed as a negative trait, rather a sign of Gods

approval.
- millionaires are the product of natural selection
Rugged Individualism
- Equates to contempt for the poor
- Many of the nouveau riche believed they
had pulled themselves up by their
bootstraps.
- The poor are only poor because of their laziness
and lack of initiative.

- It is a Christian duty to accumulate wealth

- Reverend Russell Conwell.

Anti-Competitive Measures
- Horizontal Integration - Vertical Integration

- Several firms in the same kind of business

consolidate. - Businesses in different
- Ex - Rockefeller and Standard Oil
but related activities
joined together.
- Combines all phases of
the production process
to get rid of middlemen.
- Ex - Carnegie
The Birth of Corporations
- A corporation is a company formed by a group of investors who get a share of
ownership in proportion to the amount of money they invest.

- Corporation enjoy LIMITED LIABILITY - risk only extends to the amount of

their investment and investors cannot be held personally liable for debts of
the corporation

- A Trust is a group of several corporations, of similar nature, controlled by a

single board of directors.
The Advantages of Big Business
- Can produce more and better goods at a lower cost.

- Created jobs

- Can afford to pay high salaries to get the best experts.

- Increased efficiency by establishing separate departments in business.

The Disadvantages of Big
Business
- Methods to get big
- Demanded and received volume discounts from shippers.

- Underselling to reduce competition

- Then raising prices when there are no substitutes.

- Bribing of public officials

- Destruction of the Environment

Leads to Idea of Robber Barons
Regulating the Trusts
- 1877 - Munn v. IL - Farmers (The Grange) win victory when the Court rules
states CAN regulate RR rates

- Reversed by Wabash v. IL

- 1890 - Sherman Antitrust Act

- Forbids combinations in restraint of trade

- No real means of enforcement

- First lawsuits benefit monopolies - go against the Unions - because they

restrained trade.

- 1895 - US v. E.C. Knight Co. - Federal Government cannot regulate factories