Read pages 447 – 450 (this is the first half of the chapter section, "Big Business & Labor - 14-3") and then answer the questions below about government’s attempts to regulate big business.
1. What is it?
B. How did it help businesses such as the Carnegie Company and tycoons like Andrew Carnegie?
1. Vertical integration
A.
Vertical integration is when the raw resources, transportation of supplies and manufacturing are all own by one company. One obtains the raw materials and transportation system by buying the suppliers.
B.
Vertical integration helped Andrew Carnegie and Carnegie Company control the steel industry by completely controlling the steel from iron ore to train track. This control of the suppliers would lead to total control of the industry, which was what was desired in order to have the largest profit.
2. Horizontal integration
A.
Horizontal integration is when one tries to buy out the other producers of the product.
B.
Horizontal integration allowed Carnegie to control the prices of steel. By buying the competitors, the price of the steel was completely up to Carnegie, which was another example of a large amount of control and profit that was gained.
3. Social Darwinism
A.
Social Darwinism was the belief that those who were wealthy were being blessed by God and the poor were just inferior or did not try hard enough. Therefore, both groups deserved to be where they were in life.
B.
Social Darwinism helped Andrew Carnegie because, since he was rich, others believed that he was a good man. According to Social Darwinism, he had to be because God blessed him and the sign of that was his wealth.
4. Monopoly
A.
A monopoly was when one company had total control over an industry and the production of a product. They then were able to control prices, production, and wages. A monopoly is one person with total control.
B.
The fact that monopolies could exist helped Carnegie. When Carnegie had total control they were able to make a large profit. The large profit clearly helped Carnegie. Another company that benefitted from monopolies was Standard Oil Company. John D. Rockefeller had a lucrative monopoly over the oil industry. Also, J. P. Morgan's United States Steel had a monopoly over the steel industry after Carnegie.
5. Holding company
A.
A corporation that just buys out other companies in order to establish a monopoly. Once the largest company is bought, what was a holding company had a monopoly.
B.
A holding company, United States Steel, would one day buy out Carnegie, making it difficult to explain how holding companies helped Carnegie. Andrew Carnegie's company was not a holding company because it functioned as a company that did more than just buy out other companies, but one could say that the company used some of the same ideas as a holding company. It also could be assumed that if other companies were just being bought by one holding company and nothing was doen with them, that perhaps they gave Carnegie less companies to buy up and more control. Yet United States Steel greatly benefited from holding companies.
6. Trust
A.
A trust is when the stock of two competing companies is given to a board of trustees. These trustees are responsible for running the two companies, although they were separate, as one company. John D. Rockefeller implemented this idea with the Standard Oil Company, but it was not a legal merger.
B.
As mentioned above, businesses and tycoons clearly benefitted from trusts. These boards and stock exchanges helped Standard Oil merge and take over other companies until they obtained the monopoly that was desired. This monopoly would then bring them a large profit, clearly helping them.
7. The perception of tycoons as “robber barons”
A. A "robber baron" is basically one who steals from others in order to obtain their fortune.
C. How did it harm businesses such as Standard Oil and tycoons like John D. Rockefeller?
The perception harmed Standard Oil and John D. Rockefeller because the term "robber barons" was negative and just displayed Rockefeller as a power-hungry, greedy man. This would not make people want to buy from Standard Oil, which would harm Rockefeller.
8. Sherman Antitrust Act
A. The Sherman Antitrust Act was put into place in 1890 in an attempt to keep competition alive. The technical reason for the act was to make trusts illegal.
C. How did it harm businesses such as Standard Oil and tycoons like John D. Rockefeller?
The Sherman Antitrust Act made trusts illegal because the government was worried that large companies would kill the competition of the economy. This hurt Standard Oil and Rockefeller for two reasons. The first was that Rockefeller had often used trusts in the past to gain control and he could not longer do that. The second was that Rockefeller was on the large companies that the government was worried about, which may have put Standard Oil int he wrong spotlight.
Great analysis Molly! I think this is wuite thorough although be sure to consider more of how this affected the present day. In particular, without such historical development of 'big business', do you think one of the most impactful companies of the 21st century on college students across the United States would have formed? I'm talking about Dunder Mifflin of course - perhaps this is an area worth thinking about for an Extended Essay, as it would be ideal to gain this perspective by interviewing Michael Scott, one of the most influential managers of our time, as a primary source. He loves sharing his wisdom with the world, particularly about starting sentences in a way where not even he knows where they're going, and I'm sure would love to discuss further with you! Anyway cheers and good luck in your IB adventures!
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