Unit 7: Second Industrial Revolution: II. The Rise of Big Business



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Unit 7: Second Industrial Revolution:

II. The Rise of Big Business

  1. How did leading 19th century Industrialists such as Andrew Carnegie and John D. Rockefeller dominate their respective industries?

  2. What were the characteristics of Big Business in the late 19th century?

  3. How did the Government contribute to the growth and expansion of Big Business?

  4. What were the results of Big Business Practices in the United States?

A. The Rise of Carnegie and Rockefeller

1. Reasons for Carnegie’s success

a. First to use Bessemer Process



1. Control of many different businesses that make up all phases of a product’s development

2. Carnegie bought other companies that performed phases of steel production

(mines, mills, shipping and railroads)

c. Economies of Scale -

1. As production increases, the cost of each item produced reduces

2. Carnegie drove out smaller companies who were unable to cut prices



2. Reasons for Rockefeller’s success:

a. Negotiated exclusive refunds w/railroad companies for shipping his vast amounts of

oil. (Refunds were not offered to Rockefeller’s competitors)

b. Bought all components needed to manufacture oil barrels to prevent competitors

from getting their oil to the market.

C. Horizontal Consolidation-


      1. bringing together of many firms in the same business

      2. Rockefeller tried buying other oil companies (State gov. prevented buyouts – unfair and reduced competition in the market place)

      3. In1882, Rockefeller formed the Standard Oil Trust

B. Characteristics of Big Business

  1. Larger pools of CapitalBusinesses needed money from investors so businesses started to sell stock in a company in order acquire money to finance their business operations.

  2. Wider Geographic Span – Business sold their product to more areas of the nation. Businesses also had offices located in different parts of the nation.

  3. Broader range of operations – Businesses were responsible for almost all stages of production. Big businesses owned raw materials and the transportation needed to distribute their product.

  4. Revised role of ownership - owners no longer were involved in the management of workers.

C. How the Government Contributed to Big Business:

  1. Passed the Labor Contract Act of 1864 which allowed companies to send agents to foreign nations to recruit workers.

a. Workers agreed to work in the factory in exchange for transport to the U.S.

b. Allowed companies to hire cheap, reliable laborers

2. Promoted consumption and growth of American Production:

a. Tariffs – taxes on foreign made goods or products, forced people to buy American goods.

b. Subsidies – a payment to an industry to encourage development and growth (Examples: farming and railroads)


  1. Did not place regulations on businesses. (No labor or business laws)

a. Many believed in Laissez-Faire – government had a “hands off” approach to the economy and would “allow” certain conditions to “be”.

b. Many also supported Social Darwinism - belief that wealth and power were signs of fitness and that mankind benefited from intense competition and removal of the weak and unfit. (Derived from the theories of Herbert Spencer and Charles Darwin)



D. Results of Big Business

1. New Market Structures within Industries

      1. MonopolyWhen one company completely controls a product or service with an industry

      2. Oligopoly - When a few companies compete and control the distribution of a product or service in an industry. Typically three companies are in competition.

      3. Cartel - A Loose association of businesses that make the same product and set a standard price for the product or service.

  1. Production in the United States grew –1894 #1 manufacturer in the world

3. Uneven distribution of Wealth: 9% of the population controlled 75% of the nation’s wealth.

4. Negative Attitudes toward Big Business:

Before we finish…

  1. How did leading 19th century Industrialists such as Andrew Carnegie and John D. Rockefeller dominate their respective industries?

  2. What were the characteristics of Big Business in the late 19th century?

  3. How did the Government contribute to the growth and expansion of Big Business?

  4. What were the results of Big Business Practices in the United States?



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