Rise of Big Business in America During the Gilded Age

00:10:30
https://www.youtube.com/watch?v=XBedKq5aZYg

Summary

TLDRThis lesson explores the growth of big businesses in the Gilded Age during America's second industrial revolution. Businesses, particularly corporations like Standard Oil, grew due to laissez-faire economic policies and the ability to sell stock, which provided significant capital. Corporations took advantage of economies of scale, enabling them to decrease manufacturing costs while increasing production. Techniques like horizontal integration (eliminating competitors) and vertical integration (controlling the means of production) allowed these businesses to dominate industries. Monopolies emerged when a single company controlled most of an industry, leading to issues like higher prices and lack of innovation. Trusts and holding companies further consolidated power, diminishing competition and influencing government. Political cartoons of the time criticized the overwhelming power of these monopolies.

Takeaways

  • 🏦 Corporations thrived due to laissez-faire policies and stock selling.
  • 📉 Economies of scale reduced manufacturing costs, increasing efficiency.
  • 📈 Horizontal integration eliminated competition, strengthening dominance.
  • 🔗 Vertical integration streamlined production by controlling supply chains.
  • 💰 Monopolies could manipulate markets, raising concerns about prices.
  • 🎭 Trusts and holding companies aimed to control the marketplace.
  • 🛢️ Standard Oil exemplified aggressive tactics to dominate the oil industry.
  • 📰 Political cartoons depicted the extensive power of monopolies.
  • ⚖️ Monopolies wielded influence over government policies.
  • 📚 Understanding these concepts is crucial for studying the Gilded Age in history.

Timeline

  • 00:00:00 - 00:05:00

    The video explores the rise of big business during the Gilded Age in America's second industrial revolution, emphasizing how corporations became powerful due to laissez-faire attitudes. Corporations, like Standard Oil, sold stock to raise capital, allowing for massive investments in business operations. The economies of scale meant that as corporations grew, production costs decreased, enabling companies like Standard Oil to outcompete smaller firms through lower prices, eventually leading to horizontal integration by purchasing or driving competitors out of business. Another strategy was vertical integration, where companies like Carnegie Steel controlled the supply chain by owning all necessary resources, thus lowering costs and increasing production speed.

  • 00:05:00 - 00:10:30

    The concept of monopoly is introduced, where businesses like Standard Oil controlled a majority of the industry, here the oil industry, leading to price manipulation and stifled innovation due to lack of competition. Trusts and holding companies were also formed to consolidate power and dominate markets. Monopolies were often depicted negatively in political cartoons, reflecting their influence over government and the economy. The lesson highlights the significance of these developments as corporations leveraged economies of scale and integration strategies to reduce costs, increase profits, and dominate industries, which led to unfair business practices during the Gilded Age. This serves as a foundation for understanding the corporate influence in American history.

Mind Map

Video Q&A

  • What is a corporation?

    A corporation is a business that sells stock to raise capital, allowing stockholders to become part owners.

  • How did corporations grow during the Gilded Age?

    Corporations grew due to laissez-faire attitudes and the ability to sell stock, enabling them to raise large amounts of money.

  • What is economies of scale?

    Economies of scale refer to the cost advantages that businesses obtain due to their size, allowing them to decrease costs and increase output.

  • What is horizontal integration?

    Horizontal integration occurs when a company expands within a marketplace by eliminating competition, often through aggressive pricing tactics.

  • What is vertical integration?

    Vertical integration involves a company controlling its supply chain by owning all the materials and processes needed to produce its products.

  • Why are monopolies considered bad?

    Monopolies can raise prices drastically due to lack of competition and discourage innovation.

  • What is a trust?

    A trust is a group of businesses run by a board of trustees with the goal of eliminating competition and controlling the marketplace.

  • What is a holding company?

    A holding company is a business that owns stock in other companies, coordinating them as one large operation.

  • How did Standard Oil contribute to monopolies?

    Standard Oil used strategies like horizontal and vertical integration to dominate the oil industry and eliminate competitors.

  • What was the impact of monopolies on the government?

    Monopolies wielded significant financial and political power, influencing government decisions and policies, as depicted in political cartoons.

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  • 00:00:00
    [Music]
  • 00:00:01
    this video lesson will take a brief and
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    simple look at the rise of big
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    business during the gilded age in
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    american history
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    so this is during america's second
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    industrial revolution
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    and we need to understand what's
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    happening in businesses to allow them to
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    become
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    so powerful and so intrusive in american
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    society
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    so in the early 1800s corporations are
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    going to emerge as the dominant
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    form of business corporations have been
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    around for a long time but there were
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    some rules and regulations
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    in place that made forming corporations
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    and having them grow to the size they're
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    going to a little bit more difficult
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    but with more laissez-faire attitudes
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    towards business corporations are going
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    to grow tremendously in the 1800s
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    a corporation is a business that sells
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    stock in order to raise
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    capital stock is actual ownership in the
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    corporation and capital of course
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    is money so how exactly does this work
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    well it's pretty complex so very simply
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    stated
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    standard oil would issue stock and sell
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    it and make it available to the public
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    people would purchase stock in standard
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    oil and actually
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    become what are called stockholders that
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    they would actually be
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    part owners of the company a very small
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    percentage depending on how much you
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    purchased
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    what a standard oil going to do with the
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    money that they raise by selling that
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    stock
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    they're going to take that money and
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    they're going to invest it back into
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    their business they're going to purchase
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    materials
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    purchase lands hire employees do
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    advertising whatever it is that they
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    need to do
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    in hopes of generating more revenue so
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    that investment in
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    more oil drills and oil derricks should
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    result in
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    greater profits which are then paid and
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    shared back to the stockholders
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    in the form of dividends that's a pretty
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    simple look at how this all works
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    but selling stock allowed corporations
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    to raise massive amounts of money
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    and gain a tremendous advantage in the
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    marketplace
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    that brings us to the economies of scale
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    so as corporations grew the overall cost
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    of manufacturing
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    ultimately decreases when you produce
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    more goods at a faster rate corporations
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    were able to invest in the newest
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    technology
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    hire more employees build more effective
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    machines
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    which increase their manufacturing
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    capabilities decrease their production
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    and
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    decrease their costs so standard oil can
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    invest more money into its business
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    producing more and more and more
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    oil which ultimately allows it to
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    produce that oil
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    cheaper and sell it for 20 cents a
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    gallon
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    smaller companies like ramage oil
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    which only produces a small amount of
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    oil
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    can't afford to sell it at 20 cents a
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    barrel and has to sell it at 80 cents a
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    barrel
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    standard oil is simply bigger more
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    efficient more productive
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    and therefore their costs are lower
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    eventually rammage oil is going to go
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    out of business because they can't
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    compete with standard oil
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    and eventually ramaj oil is going to
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    disappear and
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    standard oil will simply purchase their
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    resources and add them
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    to their own this was very common for
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    standard oil to do
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    they drove out their competition because
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    they were so large and so effective
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    they could afford for the short term to
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    lower the price of their oil to let's
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    say five cents a barrel
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    which would then put all of the
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    competitors in that marketplace out of
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    business
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    and standard oil could buy them up this
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    is known as horizontal integration where
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    a company expands within the marketplace
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    by putting competition out of business
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    after standard oil takes out their
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    competition they can raise their prices
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    back
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    up to 20 cents a gallon and now they
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    have an even larger share of the
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    marketplace
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    another way that these corporations
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    gained power and influence
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    was by controlling the means of
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    production
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    so for example andrew carnegie made
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    steel
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    steel is made up of coal and lime and
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    iron
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    other things as well but we'll focus on
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    just these three things
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    carnegie was purchasing the coal and the
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    lime and the iron from
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    other manufacturers and other producers
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    well
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    why not just own them yourself and not
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    have to pay anybody else
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    and that's exactly what carnegie's going
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    to do that's known as
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    vertical integration so he's going to
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    purchase and own all the materials that
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    he needs to make his steel so he's going
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    to purchase
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    the iron fields he's going to purchase
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    the line quarries he's going to purchase
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    the coal mines
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    and then after that initial investment
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    pays off he owns
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    everything so he's not sending any of
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    his money
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    to any outside companies or corporations
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    this in the long term is going to lower
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    his cost and speed up his production
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    because he controls the flow of
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    materials needed to produce his steel
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    so the economies of scale are going to
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    be huge advantages to
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    corporations like standard oil and like
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    carnegie steel
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    the use of horizontal integration is
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    going to take out competition
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    while the use of vertical integration is
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    going to streamline your manufacturing
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    and production
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    and continue to lower your costs and
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    allow you to dominate the marketplace
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    this leads us to monopoly one of the
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    biggest terms from this period of time
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    monopoly is when one business controls
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    the majority of
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    an industry that business in this case
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    being standard oil
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    and the industry being the oil industry
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    so in a monopoly one business controls
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    the majority of the product or the
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    resource
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    in that industry and by 1880
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    rockefeller controlled 90 of america's
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    oil
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    so why are monopolies bad why are we
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    going to see
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    some content later on in our course
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    about getting rid of monopolies
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    well a monopoly could raise prices
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    drastically if you controlled all the
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    resources in that industry
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    then you're free to raise or lower the
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    prices however you see fit
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    because you have eliminated all of your
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    competition
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    without effective competition prices can
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    and will usually go up and there's no
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    incentive to innovate
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    competition between businesses makes
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    sure that each business stays fresh
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    that they are looking for ways to remain
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    innovative and competitive with
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    other businesses when you have a
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    monopoly in the marketplace
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    these things tend to not happen although
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    standard oil
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    was not really guilty of raising their
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    prices drastically
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    as they had to compete against an
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    international market
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    some other ways that businesses were
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    able to manipulate the system and gain
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    tremendous power were to form
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    trusts again we're looking at very
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    simple definitions and very simple
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    examples of these things because
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    this is a history class not an economics
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    class
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    but a trust is a group of businesses
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    that are run together by a board of
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    trustees whose goal basically
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    is to eliminate competition and to
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    control the marketplace
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    they're interested in fixing prices and
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    collaborating together
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    to squash their common competition
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    standard oil is going to form a trust in
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    1892.
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    basically you hand over your stock to a
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    board of trustees and that small board
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    of trustees
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    runs all the businesses together
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    rockefeller also created a holding
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    company this was something that was also
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    done by other
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    business leaders of the time a holding
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    company is a business that literally
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    doesn't produce anything it simply holds
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    or owns
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    stock in other companies new jersey
  • 00:07:39
    passed a law that said that a
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    corporation could own stock in another
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    one and that's where holding companies
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    came from
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    it's a business that just holds stock in
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    other companies
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    and again runs them together as one
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    large enterprise
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    dominating the market eliminating
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    competition
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    and putting more power and more wealth
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    in the hands of a few
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    people monopolies became targets for
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    political cartoons and reformers as
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    we're going to see
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    getting into the progressive era this
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    political cartoon
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    shows standard oil as a octopus a very
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    common symbol used to show the power
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    and danger of monopolies tentacles
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    wrapped around the u.s
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    capitol wrapped around the supreme court
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    and eyes fixed on the white house
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    which hasn't quite been put into the
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    grasp of standard oil
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    but you can get the implication here
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    from this cartoon
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    that standard oil is eyeing up the white
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    house and in this one too this is the
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    senate chambers in the u.s congress we
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    can see in the back of the chamber
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    standing looking over top of all the
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    senators are all of these
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    trusts including the standard oil trust
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    the sugar trust the coal trust the steel
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    beam trust
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    and they are literally bags of money
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    which would show their financial
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    influence over these senators
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    their power their wealth dominating the
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    government
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    the sign here in the top says this is a
  • 00:09:07
    senate of the monopolist by the
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    monopolist and for the monopolists
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    uh clearly indicating that the monopoly
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    has control over the senate
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    the people's entrance is closed and
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    barred
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    indicating that the people no longer
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    have a voice in this chamber of
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    government
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    and that the senate operates under the
  • 00:09:26
    eyes and control
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    of the trusts
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    so what are some big takeaways we need
  • 00:09:33
    to know moving forward in our study of
  • 00:09:35
    american history
  • 00:09:36
    during this time period well again this
  • 00:09:38
    is a
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    very basic introduction to these
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    concepts but we need to be aware of them
  • 00:09:43
    moving forward
  • 00:09:44
    corporations developed and grew
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    extremely wealthy and extremely powerful
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    we'll continue to look at some examples
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    of corporate power moving forward
  • 00:09:53
    how do they do this by using the
  • 00:09:55
    economies of scale
  • 00:09:56
    and vertical and horizontal integration
  • 00:09:58
    which allowed them to
  • 00:10:00
    reduce their costs to increase their
  • 00:10:02
    profits and to eliminate competition in
  • 00:10:04
    the marketplace
  • 00:10:05
    this gave them monopolies and trusts
  • 00:10:07
    which allowed them to gain control over
  • 00:10:09
    entire industries eliminate their
  • 00:10:11
    competition
  • 00:10:12
    while engaging in unfair business
  • 00:10:14
    practices
  • 00:10:16
    so that's a quick look at the rise of
  • 00:10:18
    big business during the gilded age
  • 00:10:20
    hopefully you got something out of this
  • 00:10:22
    lesson and are able to apply it to your
  • 00:10:24
    american history studies
Tags
  • Gilded Age
  • big business
  • corporations
  • monopoly
  • Standard Oil
  • economies of scale
  • horizontal integration
  • vertical integration
  • trust
  • holding company