MONOPOLYIt’s not just a game……..It’s BIG BUSINESS

What is a Monopoly? A Cartel?

• Complete control of a product or service

•In order to have a monopoly, a corporation either buys out its competitors or drives them out of business

•Once consumers have no other choices for a given product or service, the sole remaining company is free to set its own prices

•In a cartel, businesses making the same product agree to limit their production in order to keep prices high

Horizontal & Vertical Integration

•Horizontal Integration:

•Rockefeller bought up rival businesses to gain more control of the oil-refining industry

•Vertical Integration:

•Rockefeller sought to turn Standard Oil into an empire.

•He invested in industries related to oil production, including: pipelines, tank cars, oil barrels, railroads and marketing companies.

•By taking control of the entire supply chain, Rockefeller was able to have almost complete control over competitors

Trusts

•Rockefeller was one of the first to use horizontal integration; however, laws in Ohio prevented one company owning stock (a portion of ) another company.

•His lawyer had an idea to get around this law•In a trust, companies assign their stock to a board of trustees, who combine them into a new organization

•The trustees run the organization, paying themselves dividends (a portion) of the profits

Captains of Industry or “Robber Barons”?•John D. Rockefeller made special deals with railroads in order to increase the profits of his oil business

•Andrew Carnegie, who was a tycoon in the steel industry, increased his power by gaining control of the many different businesses that make up all of the phases of a products development

•Most small businesses were bought up or squeezed out of competition because of these larger corporations

Captains of Industry or “Robber Barons”? (Continued)•Many people thought that these big business tycoons (Rockefeller, Carnegie, Vanderbilt, etc.) served the nation positively, giving them the nickname “Captains of Industry”

•Others thought that these monopolies and cartels swindled the poor by setting unfairly high prices on their products to gain massive profits.

•These people thought of these businessmen as “Robber Barons”

Social Darwinism: Survival of the fittest• In 1895 biologist Charles Darwin published “On the Origin of Species”, arguing that animals evolved by a process of “natural selection” and that only the fittest survived to reproduce (survival of the fittest)

•This theory was eventually applied to the “rough and tumble” world of American capitalism, calling it “Social Darwinism”

•Those who worked hard and ran the “fittest” business, were the ones who deserved to survive in the business world

•They felt that government should stay out of business dealings as not to disrupt the “natural selection” of big businesses that will rise to the top

The ICC and the Sherman Anti-Trust Act•The railroad business was quickly becoming corrupt and hurting the American economy by fixing unfair rates and entering into secret agreements

•In 1887, the US Senate created the Interstate Commerce Commission (ICC) to oversee the railroad operations

•Similarly, the federal government slowly became involved in regulating businesses

•The Sherman Anti-Trust Act regulated business practices

•This began a trend toward federal limitations on corporations’ power

Political Cartoon Analysis

•What company does the octopus represent?

•What objects is the octopus grabbing and controlling? 

•According to the artist, is the octopus a monopoly? Why or why not? 

•Do you think the artist likes monopolies? Why or why not?

•BONUS: What other industries were dominated by monopolies a the beginning of the 1900’s?

Vocabulary• Monopoly

• Andrew Carnegie

• Cartel

• Vertical Integration

• Sherman Antitrust Act

• Social Darwinism

• Trust

• Interstate Commerce Commission

• John D. Rockefeller

• Horizontal Integration