The Gilded Age1865-1900
“covered in gold” - beneath the gold is a decaying structure
An era of growth and political scandal
US transitioning to a world power
Times of boom and bust…
Manufacturing for war/Let down after the war
Expansion westward Need for new inventions Depression (deflation) Crop/Cattle prices fall dramatically
Communism vs. Capitalism
Communism – mid 1800’s
Karl Marx – German philosopher
Community provides for all regardless of social rank
Capitalism Entrepreneurs –
motivated by wealth and wanting to better their lives
Self-reliant individualism – harder I work the more I will get
Horatio Alger Jr. – writer, “rags to riches” stories
Social Darwinism
Herbert Spencer – adapted Darwin’s biological theory to societal issues
“survival of the fittest” “fittest” people would rise to positions
of wealth and power “unfit” would fail
Way to organize business ownership
Has existed since colonial times
Sells shares of stock to raise money
Profits paid out in the form of dividends
Includes a board of trustees
Group of corporations run as a single enterprise
Reduces competition in the industry by eliminating inefficient business practices
Exclusive control of an industry
Little to no competition
Control over price and quality of product
“let people do as they choose”
No government intervention
Also known as free enterprise
Private ownership based on free market competition (sets price)
Big Business in America
Who are the rising stars in America’s second industrial revolution?
Robber Barons
Businessman that dominated a particular industry
Gained enormous wealth Practiced anti-competitive business
practices/strategies Gain market share Eliminate competition Set prices and standards as you wish
A. Carnegie, J.D. Rockefeller, C. Vanderbilt, H. Ford
Andrew Carnegie
Steel Carnegie Steel Company
Entrepreneur (risk-taking business people)
Little knowledge of steel industry but outstanding at running a company
How did he gain an edge over his competition? Lower production costs
Economies of scale Vertical integration
Owning all steps used in turning raw materials into finished goods
Iron mines, railroads, steamship lines, warehouses
Andrew Carnegie
Retired the richest man alive (at the time)
Philanthropy Gospel of Wealth
It is the obligation/duty of the richto advance society
Henry Bessemer/ Bessemer Process
Age of Iron Cheap to make Technology available and reliable Rust Weak
Age of Steel William Kelly (US) and Henry Bessemer (UK)
Steel Produce it cheaper Stronger material
Allowed for the advancement of railroads and skyscrapers (both significant in the growth of cities)
Bessemer Process (1855); low cost method of converting iron to steel Process had existed for more than 100 years before
Bessemer; however, never on a commercial scale until the mid 1800’s
Products Nails Screws Needles Girders Rail ties
Steel mills sprang up throughout the country Pittsburgh; steel-making capital
Good transportation (rivers) Coal mines Polluted waters Grey skies
Henry Bessemer/ Bessemer Process
John D. Rockefeller
Oil Refining Standard Oil Company Strategy to eliminate competition Vertical Integration Horizontal Integration
Wealthiest man in American history 1/65 of US GDP
Cornelius Vanderbilt Railroads
As water travel slowed investment in railroads began across the country
Controlled lines within some of the largest US cities New York, Chicago, Cleveland
Began connecting smaller lines to urban areas Efficiency (lower costs)
1877 – controlled 4,500 miles of rail Personal wealth estimated at $100 million
Railroad standardization & consolidation
Civil War railroads Track width Length – Where does it take you? Location
US expansion Demand for movement of goods and people
increased Standardization and consolidation lowered costs
Standardization – tracks universal width Consolidation – merger of smaller companies into
one larger, more efficient company Did not have to change trains/tracks/companies
George Westinghouse
Railroad Westinghouse Air Brake Company
Compressed air brake As the railroad industry grew…
The industry was looking for improvements
Long time before Westinghouse’s air brake was accepted/embraced
George Pullman
Railroad Designed and manufactured comfort passenger rail car Sleeping, dining, luxurious cars
Company towns Inspired by poor urban conditions Promote education, healthy living and peace among workers
Pullman controlled every aspect of daily life, bred dissatisfaction
J.P. Morgan
Banker and financier Lender of money to corporations Stockholder – bought his way onto many
Board of Director’s seats Making decisions for the company (benefiting
him) Eliminating competition Increasing profits
General Electric United States Steel Company
First business worth more than $1 billion
J.P. Morgan vs. Uncle SamWho dominates?
Sherman Antitrust Act - 1890
Angered by anti-competitive business strategies (monopolies, trusts, consolidation) the American public (small businesses) sought reform in free capitalism system
Intentionally creating a monopoly or suppressing trade or controlling supply was made illegal
Proved to be weak and ineffective legislation Those in power often benefited from large
corporations, trusts and monopolies (turn the other cheek)