Overview
This lecture covers the rise of industrial growth in the United States after the Civil War, focusing on major business leaders ("robber barons"), their business practices, and the development of monopolies in key industries.
Robber Barons and Big Business
- "Robber baron" refers to very wealthy and powerful business leaders seen as exploiting workers and controlling industries.
- The Gilded Age featured some of the richest individuals in world history.
- Railroads were the first major industry to become a "big business" and affected all other sectors of the economy.
- Railroad expansion was funded by a mix of private investment and large government loans/subsidies.
Key Figures in Industrialization
- Jay Gould was a railroad tycoon known for price gouging, especially exploiting farmers during harvest seasons.
- Cornelius Vanderbilt was also a major railroad baron, perceived as somewhat less ruthless than Gould.
- Andrew Carnegie built his empire in steel, at one point producing 80% of U.S. steel.
- Carnegie was an immigrant who believed in "philanthropy" (charity) and wrote "The Gospel of Wealth," advocating that the rich should give back to society.
- John D. Rockefeller founded Standard Oil, controlling 95% of U.S. oil refining, and built a monopoly.
- J.P. Morgan was an investment banker who expanded his wealth by purchasing and consolidating companies, notably buying Carnegie Steel and forming U.S. Steel, the first billion-dollar company.
Business Practices and Monopolies
- A monopoly is when a single person or company controls an entire industry, allowing them to set any price.
- Rockefeller used "horizontal integration" (controlling all the refining processes) and "vertical integration" (controlling the entire supply chain, from drilling to sales).
- Rockefeller developed the "trust," a legal structure to control multiple businesses, and later the "holding company" to evade legal limits.
- The Sherman Antitrust Act (1890) was an early federal law aimed at breaking up monopolies, but it was initially ineffective.
Social Ideologies and Public Perception
- Robber barons often justified their success using "Social Darwinism," the idea that the richest and most powerful are the "fittest" in society.
- The concept of "rags to riches," popularized by author Horatio Alger, promoted the belief that anyone could attain great wealth through hard work.
Key Terms & Definitions
- Robber Baron — a powerful business leader accused of using exploitative practices to amass wealth.
- Monopoly — exclusive control over an entire industry by one company or person.
- Philanthropy — charitable giving, especially by the wealthy.
- Social Darwinism — applying Darwin's theory of evolution to society, justifying economic and social inequality.
- Horizontal Integration — controlling all businesses in a particular step of production.
- Vertical Integration — controlling the entire supply chain of a product, from raw materials to sale.
- Trust — a legal arrangement where one entity controls several companies, often to reduce competition.
- Holding Company — a company created to own shares in other companies, usually to control them.
- Sherman Antitrust Act — 1890 federal law aimed at preventing monopolies.
Action Items / Next Steps
- Review the careers of Carnegie, Rockefeller, Gould, Vanderbilt, and Morgan.
- Read about the Sherman Antitrust Act and its early effects.
- Prepare examples of horizontal and vertical integration for discussion.