Chapter 14 Section 3 – Big Business

1. Chapter 14 Section 3 – Big Business

2. The Rise of Big Business • Corporations • Owned by many people called stock holders • Much more common starting in the 1830’s • Economies of Scale • Could produce many products quickly and cheaply because of large manufacturing facilities • Small Businesses = Low Fixed Costs – High Operating Costs • Big Businesses = High Fixes Costs – Low Operating Costs

3. II. The Consolidation of Industry i. Formed pools to fix prices (Vanderbilt and Scott) ii. No legal protection and often didn’t last long a. Carnegie and Steel i. Started by investing in companies that served the railroad industry ii. Moved to steel after learning the Bessemer process (could produce steel much more efficiently) iii. Opened his first steel company in Pittsburgh in 1875 b. Vertical and Horizontal Integration i. Vertical Integration – Combining all the businesses on which a company depends on for operation (lime, coal, iron) ii. Horizontal Integration – Combining many companies involved in the same business.

4. iii. In the 1880’s Rockefeller’s Standard Oil controlled over 90% of the oil refining capabilities in the U.S. iv. When one company can control the entire market it becomes a monopoly c. Trusts i. People became suspicious about the power of monopolies ii. Companies like Standard Oil formed trusts to get around law put in place to control monopolies a. One person could manage another’s property b. Standard Oil had stockholders give their stocks to trustees in exchange for a portion of the profits of the trust d. Holding Companies i. Companies that produce nothing themselves but hold the stock of many businesses that do.

5. III. Selling the Product a. Illustrations replace small type line advertisements b. 10 fold increase in advertising from 1865-1900 c. Department stores cropped up by the late 1870’s d. Chain stores offered lower prices than department stores (Woolworth’s) e. Mail Order Catalogs (Sears)

6. Chapter 14 Section 4 – Unions

7. Working in the United States • Standard of living increased dramatically, but working conditions were often monotonous, dangerous and unhealthy • Real wages increased 50% from 1860-1890 • In 1900 the average worked made 22 cents an hour and worked 59 hours a week • Falling wages due to inflation caused workers to believe they needed to organize to unions so they could negotiate working conditions and pay collectively. • Early Unions • Workers began to form trade unions (around a specific job/field)

8. Industry Opposes Unions • Thought industrial unions were illegitimate • Companies hired detectives • Made workers sign contracts saying they wouldn’t join a union • Companies used lockouts to break the • Unions if formed

9. b. Political and Social Opposition i. No laws protecting unions ii. Courts often ruled in favor of the company iii. Marxism became influential in Europe a. Class struggle between workers and owners b. Elimination of private property iv. Anarchists thought there should be no government v. These immigrants began coming to the U.S. which increased suspicion and nativism

10. III. The Struggle to Organize a. Great Railroad Strike of 1877 i. In response to the recession of 1873 ii. Involved 80,000 railroad workers in 11 states iii. President Hayes sent troops to restore order b. The Knights of Labor i. Eight hour workday, elimination of child labor, equal pay and arbitration ii. Convinced Jay Gould to reverse wage cuts iii. Membership then exploded from 100k to 700k

11. IV. American Federation of Labor i. Twenty trade unions organized the AFL in 1886 ii. Samuel Gompers was the first leader iii. Rejected communist and socialist ideas iv. Three goals a. Eight hour workday b. Closed Shops (had to hire union members) c. Recognition and collective bargaining v. Largest union in the nation by 1900 a. Over 50,000 members