Professional Documents
Culture Documents
The Rise of Big Business
The Rise of Big Business
Laissez-faire
means ‘allow to be’ or the
government stays out of a person’s business in
French.
New Business Culture
1. Laissez Faire --> the ideology of the
Industrial Age.
Þ Individuals should compete freely in
the marketplace.
Þ Own their own business and use their
skills to better our culture and
make profit for themselves.
Þ The market was not man-made or
invented and no room for government
in the market.
Þ Government should allow for natural
competition for the betterment
of our society.
Economic system characterized
by private property ownership
Individuals and companies compete for their
own economic gain (Profit)
Capitalists determine the prices of goods and
services.
Production and distribution are privately or
corporately owned.
Reinvestment of profits
Economic system based on
cooperation rather than
competition
Some Americans opposed capitalism and believed a
socialistic economy would better suit the US because
some capitalists were corrupt.
Believes in government ownership of business and
capital (money, natural resources)
Government controls production, sets wages, prices
and distributes the goods. No profit or competition.
Opposite of laissez faire and capitalism
• Corporation: form of business consisting of a group of
people authorized by law to act as a single person and with
the ability to sell shares of stock to raise “capital”
• Shareholders or stockholders: investors who invest
their money into a corporation who each receive a share of
ownership in proportion to the amount they invested
• if the corporation makes a profit---than investor
gets a “dividend” or a share of the profit.
• Limited liability: Important aspect of a corporation is
limited liability. Shareholders have the right to participate
in the profits, through dividends and/or the appreciation of
stock, but are not held liable for the company's debts.
• “Risk is spread over the shareholders so if the
company goes bankrupt, the loss is not so
devastating”
Key Terms to Note about Businesses-Owning
FORMATION Individual or person decides to
operate a business
OWNERSHIP Individual
“Rags to Riches”
•What does this mean?
In NC
RJ Reynolds in the New South
• Son of wealthy plantation owner (tobacco
farmer)
• Traveled to Winston to start business due to
railroad location
• Invented the packaged cigarette (wrapped by
hand before)
• Became wealthiest man in NC during his
lifetime
• Owned 121 buildings in Winston-Salem
• His contributions led to many creations in W-
S (Reynolda House, Reynolds Building, WSSU,
Wake Forrest being moved, etc, etc.)
• Put W-S on the map!!!
NC Tobacco Mills in NC
In NC: The Duke Family
George Washington Duke started the business
• Started his business in Durham, NC (American Tobacco
Co.)
• Marketed pre-rolled cigarettes
• Moved Trinity College to Durham (name changed to
Duke)
• Business later controlled by son: J.B. Duke
• J.B. helped grow the business further
• Duke starts diversifying into electric… a company later
known as Duke Energy
Carnegie: Before
http://www.washingtonpost.com/blogs/wonkblog/wp/2014/09/25/the
-pay-gap-between-ceos-and-workers-is-much-worse-than-you-realize/
http://qz.com/156522/how-
many-months-it-takes-an-
average-worker-to-earn-
what-the-ceo-makes-in-an-
hour/
How did they “make it”?
Why were their corporations
so successful?
•“Horizontal Integration”
•Buying out rival businesses to gain more
control of an industry
•“Vertical Integration”
•Gaining control of the many different
businesses that make up all phases of a
product’s production
Vertical and Horizontal Integration
Steel mills
purchased
by
Carnegie
Ships
purchased
by
Carnegie
Railroads
Horizontal Integration purchased
Buy out your competition until by
Carnegie
you have control of a single area
of industry
Rockefeller used vertical integration to
build his empire, Standard Oil
•Forests
•Barrel-Making Shops
•Tank Cars/Railroads
•Oil Wells/Pipelines
•Retail Outlets
Modern Day Example of
Vertical Integration
Ford Motor company
– What goes in an automobile?
– Why is it an advantage for a company to
own/control all production?
Vertical Integration
You control all phases of
production from the raw
material to the finished
product
Advantages Vertical Integration
You are always in control of supply of the
products you need
In control of labor cost, land/resources
Always in control of the cost
Schedule your production of autos
because you are in control of all factors
Can you give another example of this?
Other Vertical Integrations
Boeing
Anheiser-Busch: all grown by own
producers
McDonald’s: own cattle ranches
Oil companies
AOL Time Warner
Horizontal Integration
Examples
– Standard Oil
– Carnegie Steel
– Swift & Company: meat producers
– United Fruit Company: bananas
– Dole Pineapple
Horizontal Integration
Buy out your competition
until you have control of a
single area of industry
Modern Day Examples of
Horizontal Integration
Microsoft
PG & E
Comcast
Starbucks
De Beers
How did they “make it”?
Were they…
Robber Barons
or
Captains of Industry?
What is a “Robber Baron”?
• Robber
• One who steals
• Baron
• A man of great power or influence in some
field of activity
Small businesses
complained “monopolies”
eliminated fair competition
What is a “Captain of Industry”?
• Captain
• One who leads or supervises
• A person of importance or influence
Captains of Industry
•Big businesses provided jobs, strengthened
the economy, improved technology, and
donated money to universities, charities, etc.
•***Andrew Carnegie’s “Gospel of Wealth”
• Philanthropy
“Robber Barons” “Captains of
Business leaders built their Industry”
fortunes by stealing from the The business leaders served
public. their nation in a positive way.
They drained the country of They increased the supply of
its natural resources. goods by building factories.
They persuaded public They raised productivity and
officials to interpret laws in expanded markets.
their favor.
They created jobs that enabled
They ruthlessly drove their many Americans to buy new
competitors to ruin. goods and raise their standard
They paid their workers of living.
meager wages and forced They also created museums,
them to toil under dangerous libraries, and universities,
and unhealthful conditions. many of which still serve the
Which of these two terms (or both)
do you think better fits the
“wealthy” during this time period?
Why?
• "The growth of large business is merely a
survival of the fittest…the American Beauty
rose can be produced in splendor and fragrance
which brings cheer to its beholder only by
sacrificing the early buds which grow up around
it. This is not an evil tendency in business. It is
merely the working out of the law of nature
and the law of God."
-John Rockefeller
“Social Darwinism”
Herbert Spencer
Social Darwinism
• Social Darwinists believed that
companies struggled for survival in
the economic world and the
government should not tamper with
this natural process.
• The fittest business leaders would
survive and would improve society.
• Belief that hard work and wealth
showed God’s approval and those
that were poor were lazy and
naturally a lower class.
1. All living things 1. Every human
have always activity individuals
competed for compete for
survival. Survival of success.
the fittest. 2. The unfit or
2. All living things incompetent lose
have evolved over and the strong or
millions of years as a competent win.
result of genetic 3. These winners
changes. make up a natural
3. Some plants and upper class.
animals developed 4. Hard worked
traits that helped paid off, and lazy
them survive. were inferior.
Social Darwinism in America
Individuals must have
absolute freedom to
struggle, succeed or
fail.
Therefore, state
intervention to reward
society and the
economy is futile!
William Graham Sumner
Folkways (1906)
• “The right of the working-men to combine and to form trades-
unions is no less sacred than the right of the manufacturer to
enter into associations and conferences with his fellows…”
Russell H. Conwell
“On Wealth”
$ The Anglo-Saxon race
is superior.
$ “Gospel of Wealth”
(1901).
$ Inequality is inevitable
and good.
$ Wealthy should act as
“trustees” for their
“poorer brethren.”
Andrew Carnegie
Gospel of Wealth
• Capitalists used Social Darwinism to justify their success
– Social Darwinism also coincided with the ideas of Adam
Smith, especially concerning the laws of supply & demand
and free markets
• Carnegie wrote The Gospel of Wealth (1901) which
claimed wealthy people have power but also an
obligation to society
• Baptist preacher Russell H. Conwell preached about
“Acres of Diamonds” – everyone who wanted to be rich
had the opportunity
• Horatio Alger’s “Luck and Pluck” manual pushed the
idea of rags-to-riches at the time to encourage everyone
(think Jackson)
BIG BUSINESS
PRIMARY SOURCE
ANALYSIS
“The Protectors of Our Industries” What stands out to you abou
this cartoon?
What is going on?
What message is the
cartoonist trying to convey?
What stands out
to you?
What message is
the cartoonist
trying to convey?