Topic: The
Transformation of America
Learning Objective:
You will be able to write how the innovations made in the
late 1800s lead to the success of corporations.
Do Now:
1. Define
Monopoly.
2. Give an
example of a monopoly present today.
Direct Instruction:
I - Economic Theory:
Along with the technological advancements in America came
the construction of different economic beliefs.
·
Laissez-Faire Capitalism: The theory that calls
for no government regulation on economic matters.
o
Laissez-Faire is a French term for “let it be.”
·
Social Darwinism: The “fittest” person,
business, or nation should and would rise to positions of wealth and power.
o
Took Darwin’s theory of natural selection and
translated it to the business world.
Many people supported the idea of Social Darwinism.
Educators, businessmen, and clergymen supported the idea of Social Darwinism.
Some clergy offered religious support to the idea, suggesting that great wealth
was a sign of Christian virtue.
II - Quote Analysis:
Baptist Minister Russell H. Conwell
“You ought to get rich, and it is your duty to get rich … To
make money honestly is to preach the gospel.”
- What is the minister saying is the Christian
thing to do?
- Why would having money make you a good
Christian?
- Why would the church want rich supporters?
- Do you think Conwell would be in favor of
Laissez-Faires?
Good Vs Bad:
Robber Barron: The industrialist was seen in a negative light because the land they would use for railroads or oil would be taken away from the people.
Captain of Industry: Helped people and gave back to the community.
Activity: Pull the keywords out of the following and fill out the chat for Homework
In the late 1800s there were a
number of different forms of businesses. There were proprietorships which were
small enterprises (businesses) owned by individuals or families. These
businesses had the chance to be successful but lacked the ability for expansion.
There were also partnerships which were enterprises that were owned by two or
more people. These are also small businesses that had the ability to grow
larger based upon duel ownership (owned by two people). Lastly there are
corporations which are large enterprises that are jointly owned by a large
number of stockholders (people). Those people own stock in the company which
are pieces of the company. In exchange for their stock they receive a share of
the company’s profits through this partnership.
There were some advantages and
disadvantages to all types of businesses at this time. With a small business the
advantages are the ability to have a small, but successful business. Less
profit is made, but there is also less work. One disadvantage is that you will
make less money in the long run. The same can be said for partnerships. All
though there is the possibility for expansion it is unlikely. Some advantages
for corporations are that they are able to obtain more money through the sale
of stocks. The stock holders are not responsible for the corporation’s debt
because there is no head of the company. Also the corporation exists no matter
who the owner of the stock is, unlike if one partner in a partnership were to
die or something were to happen to the soul owner of a proprietorship. However,
with corporations competition is fierce and prices and profits fluctuate
greatly.
The corporations tried to find a
way around the disadvantages created by conducting business. With these
disadvantages in corporation management came the formation of trusts which are
agreements or pacts between corporations, which gave control of their business
to a board of directors. The directors then ran the companies as single
enterprises. That means that a board of directors ran multiple areas of
business which often gave them complete control over that area if business. If
the trust that was created had gained exclusive control over an industry they
then obtained a monopoly.
One leader of industry was Andrew
Carnegie, he was a shining example of success for the existence of corporations.
Over the course of his career he had obtained a monopoly in the steel industry.
What Carnegie lacked in the knowledge of the production (making) of steel, he
gained in the ability to run a business. Carnegie filled his factories with the
most modern machines, experts on the product of steel, and would do anything to
beat competitors. He started using different forms of business practices such
as Economics of Scale and Vertical Integration.
Economics of scale was the practice of producing large quantities of a
product (steel) in order to increase profit when sold, because it took less
money to produce. He also started vertical Integration which was acquiring
(getting) companies that supplied the raw materials in order to control cost of
supplies. After successfully pioneering (starting) the market of steel
production Carnegie retired in 1901. He was able to sell his company, The
Carnegie Steel Company to banking tycoon J.P. Morgan for nearly $500 Million;
he easily became the world’s richest man.
Another leader of industry was John
D. Rockefeller with the oil industry, an industry which he also monopolized. Similar
to Carnegie, Rockefeller began small and worked his way up the ladder to
success. He too used the tactic (strategy) of vertical integration. However,
unlike Carnegie he began horizontal integration which was a more vicious (mean)
form of business. Horizontal integration did not allowing other companies to
obtain (get) the supplies at a reasonable price, which would force them to fall
apart or sell out to Rockefeller.
Businesses used Corporations,
trusts, and vertical and horizontal integration to increase profits. In an
attempt to stop the use of trusts or the establishment of monopolies, the
government adopted the Sherman Antitrust Act. This act distinguished these two
things as unlawful. Though due to the constraints that comes with defining what
constitutes a trust or a monopoly this was hard to enforce. The United States
government had a difficult time controlling the way in which a business was
run.
Exit ticket/ Summary
What innovations helped the success of
John D. Rockefeller and Andrew Carnegie?
