Economies of scale = the more you produce the less each next one costs – M&Ms
Limited Liability – stockholders only lose what they put in
Stability – death in corporation doesn’t affect the stockholders
Lives the ultimate American Dream – immigrant to extremely rich
1872 – visits Great Britain and steals the Bessemer Process, quits his job in the railroad and starts U.S. Steel
Carnegie uses vertical integration to eliminate competition
Carnegie secures all phases of production to make sure he can produce the cheapest goods possible.
So he buys up coal mines, iron mines, railroad and shipping lines, and all the steel mills he can afford.
This way he can avoid the middle man and produce and sell the cheapest, highest quality steel in the world.
Success in Steel
By 1900 he earned $40 million in a year
He also produced more steel in his mills than all of Great Britain combined.
John D. Rockefeller
Founder of Standard Oil
Rockefeller used vertical integration – buys up oil fields, barrel making companies, pipelines, railroads, petroleum plants, refineries, and gas stations.
He also uses horizontal integration to destroy his competition
Bribed railroad officials not to ship any other company’s oil.
Would set up gas stations across the street from existing ones – and because of vertical integration (he has cheaper gas) – he can undercut the other station’s prices and either buy them out or drive them out of business.
Morgan is the first real monopoly player.
Morgan is a banker whose genius lies in merging companies together.
Convinces Carnegie to sell US Steel for $500 million (Carnegie becomes the richest man in the world). Then buys out the next 5 biggest companies also.
Morgan becomes a billionaire overnight.
What Morgan did was technically illegal.
The government did force the break-up of US Steel after +10 years.
Monopoly is when there is no competition – Morgan bought the competition out.
Democracy is competition – this ensures a cheaper, safer product. Ex > airplanes
Kellogg, Post and the Cereal Wars
Both invent and intend to sell cornflakes.
Kellogg invents promotions (advertising) and takes the early lead.
This advertising evolves into commercials etc…
Making both extremely successful and rich.
Singer Sewing Machines – not the first sewing machine – but the first with only and up and down needle.
This led to patent wars – everybody started to steal his invention – but the courts didn’t back him so he has to make money some other way.
This is Singer’s way to make money.
Installment Plan = payoff over time
Singer also made stores, mechanics, and salespeople available for help – kind of the first people friendly warranty.
Singer becomes quite rich.
The Governments Response
Will be covered in more detail later.
Quickly though, the government saw that the American public was getting the short end of the stick in the business world and decides to take action.
This brings about the idea on the next page.
The Gilded Age
Gilded Age – coined by Mark Twain – means “Gold covered” but what it covers is rotten
Example – an apple with a worm
The U.S. looks good on the outside but the real story is rotten.
This is an extremely important idea that guides the U.S. for the next 30 years.
Labor – racism, sexism etc…
- lots of people are coming to the city to live and work
o small depression in late 1870’s-80’s
- lots of extra workers, unemployed, for factories = owners could cut corners
-Women went to work for ½ pay
- Children also went to work
Workday is usually 14 hours and at least 6 days a week
Jacob Riis, Upton Sinclair
Upton Sinclair “The Jungle” – meatpacking terrors
Jacob Riis “How the Other Half Lives” – photos of inner city terrors
Workplace has NONE OF THE FOLLOWING; Office of Housing and Urban Development, building codes, social services, child labor laws, 40 hr work week, unions, minimum wage, benefits, OSHA etc…
Especially with mining.
Company owns the town – monopoly over the workers
Workers paid in scrip (paper money good only at the company store)
No place for workers to go (no money, argue=fired etc…)
Knights of Labor
Started in 1869 – Uriah Stephens
1st Union, originally for only white males, however when they included all skilled workers (men, women, blacks, etc…) membership and power flourished
Great Upheaval - 1886
The Knights have successful strikes in ’77 ’84 and look to make their mark in ’86