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1865-1920. Rise of American Business, Industry, and Labor. The Big Idea The United States developed a prosperous new economy based on the mass production of goods . economic development expanded in the North and weakened in the South entrepreneurs became wealthy and powerful
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1865-1920 Rise of American Business, Industry, and Labor
The Big IdeaThe United States developed a prosperous new economy based on the mass production of goods. • economic development expanded in the North and weakened in the South • entrepreneurs became wealthy and powerful • government began to regulate business • labor unions formed to improve working conditions
In the post–Civil War United States, corporations grew significantly in number, size, and influence. Analyze the impact of big business on the economy and politics and the responses of Americans to these changes. OBJECTIVE
After the war, growing northern factories looked to overseas markets for their goods. In addition , the completion of the transcontinental railroad opened new markets in the West and brought products of western farms and mines east.
PAUSE AND REFLECT • What is the transcontinental railroad? • How did it contribute to economic growth?
As the nation’s economy boomed and industries grew larger during the late 1800s, other forms of business organizations developed. Often the aim of such businesses was to eliminate competition and dominate a particular area of business.
Innovations enabled businesses tomarket their products more effectively
Entrepreneurs What is an entrepreneur? An entrepreneur is an individual who takes responsibility for the organization and operation of a new business venture or enterprise. Entrepreneurs often risk large sums of venture capital in the hope of making enormous profits.
New forms of business organization and innovative ideas from inventors helped American industry grow in the late 1800s and early 1900s. Daring business decisions made by turn of the century entrepreneurs had a great impact on the lives of most Americans.
Vertical IntegrationIntegration of all aspects of production in a single industry
Horizontal IntegrationCombination of competing companies in the same industry
Industrialization and the changes associated with it caused attitudes toward business to change. The tremendous wealth some entrepreneurs gained during the late 1800s, as well as the cut-throat business methods they used, led some Americans to rethink their traditional attitudes toward business. Both traditional and new philosophies were used to explain and justify the accumulation of wealth and the practices used to achieve it. Attitudes toward Business
PAUSE AND REFLECT How was Social Darwinism applied to business competition?
Robber Barons or Philanthropists? Robber Barons Philanthropists
The growing (widening) gap between the rich and poor led some Americans to criticize the government’s laissez-faire policies and those who profited from them. Robber Barons Philanthropists Public criticism and a sense of social responsibility led entrepreneurs to use part of their wealth to benefit society In 1889, Andrew Carnegie authored an essay, The Gospel of Wealth, in which he wrote “he who dies rich, dies disgraced.” People like Carnegie and Rockefeller became philanthropists, donating vast sums of money to charities and institutions such as schools, museums, libraries, and orchestras • Critics condemned the wealthy entrepreneurs as robber barons, those who gained their wealth by ruthless methods in their dealings with competitors at the expense of the poor and the working class • The lavish lifestyles of the wealthy at this time fed such criticism • Mark Twain criticized the period as the Gilded Age because of the way in which the rich spent freely to show off their wealth, a practice known as conspicuous consumption
OBJECTIVE What factors led the government toward regulating businesses in the late 1800s?
The Federal Government generally held a laissez-faire attitude toward business for much of this period. • Expanding industries and growing foreign trade seemed to justify such an attitude • Many business leaders made contributions, both legal and illegal, to the politicians who set federal policies • A number of government policies were designed to aid the growth of business including loans and land grants to railroad companies, high protective tariffs, tight limits on the amount of money in circulation, few and restrictions (limits) on immigration
Steps toward Government Regulation“The Bosses of the Senate”
Steps toward Government Regulation“One sees his finish unless good government retakes the ship”
Steps toward Government RegulationSeveral factors led the government to take the first steps in the late 1800s toward regulating business:
Although Government intervention during the late 1800s had limited impact, it did set the course for more federal regulation in years to come. Supreme Court Decisions • During the late 1800s, railroads developed a number of policies like pools and rebates that discriminated against farmers and small shippers • These groups, such as the Grange, pressured some states to pass laws regulating railroad practices • The railroads sued to have such laws overturned
Supreme Court Decisions Munn v. Illinois (1877) • the Supreme Court upheld an Illinois law controlling grain elevator rates • the Court ruled that the Constitution recognized a state’s right to a “police power” that permitted a state to regulate businesses “affected with a “public interest.” Wabash, St. Louis & Pacific Railway Co. v. Illinois (1886) • in the 1886 case Wabash, St. Louis & Pacific Railway Co. v. Illinois, however, the Court ruled that states could not regulate railroad rates on portions of interstate routes that lay within their borders. • the Court based its decision on the Commerce Clause of the United States Constitution. • Under the Constitution, only the federal government can regulate interstate trade. • the decision meant that states could do little to regulate the railroads.
Steps toward Government Regulation Interstate Commerce Act (1887) • public pressure for reform of railroad policies led Congress to the Interstate CommerceAct • the act set up the InterstateCommerce Commission, a federal regulatory agency, the first of its kind • the agency was charged with regulating railroads in order to ensure fair rates and end railroad abuses such as pools and rebates • although several court decisions limited the effectiveness of the agency early on, the law represents an important first step toward government regulation of business
Steps toward Government Regulation Sherman Antitrust Act (1890) • by the late 1800s, some large corporations and trusts had eliminated competition in their respective industries • Public concern over the growing power of the trusts and monopolists led to the passage of the Sherman Antitrust Act in 1890 • the act sought to restore competition by declaring illegal any business combination or trust “in restraint of trade.” • vague and poorly written, the law was difficult to enforce • In addition, the Supreme Court, in United States v. E.C. Knight Company in 1895, ruled that the Sherman Antitrust Act could not suppress a monopoly “in the manufacture of a good.” • although the government secured few convictions under the Sherman Antitrust Act, the law, as in the case of the Interstate Commerce Act, represents an early step toward government regulation of business
Preparing for the Regents 1. The Interstate Commerce Act and the Sherman Antitrust Act were attempts to limit 1 business competition 2 labor unions 3 monopolies 4 tariffs • The theory of Social Darwinism was often used to justify 1 creation of the Ku Klux Klan 2 formation of business monopolies 3 use of strikes by labor unions 4 passage of antitrust laws
Preparing for the Regents 3. In the late 1800s, the creation of the Standard Oil Trust by John D. Rockefeller was intended to 1 protect small independent oil firms 2 control prices and practices in the oil refining business 3 increase competition among oil refining companies 4 distribute donations to charitable causes 4. The Supreme Court cases of Wabash, St. Louis, & Pacific R.R. v. Illinois (1886) and United States v. E.C. Knight Co. (1895) were based on laws that were intended to 1 limit the power of big business 2 support farmers’ efforts to increase the money supply 3 maintain a laissez-faire approach to the economy 4 improve working conditions for immigrants
TODAYWhat is the ideal balance between governmentregulation and laissez-faire?
