The Rise Of Big Business

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driving force behind the rise of big business

Back 1

improvements in technology

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big business

Back 2

an institution through which goods and services were finances, produced, and distributed

Front 3

traits of business in the first half of the 19th century

Back 3

- financed by one person
- failures were common
- personal tones

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fixed capital

Back 4

constant

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working capital

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variable

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major railroads

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NY, B&O

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price wars

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competitive weapon

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Granger Laws (1870s)

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set max rats and outlaw the charging of higher rates for short hauls than long ones

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Wabash, St. Louis & Pacific RR v. Illinois (1886)

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congress could regulate interstate commerce --> ICC

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1895-1905

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explosion of mergers

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vertical growth

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business would do more than just produce (market, distribute)

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examples of vertical growth

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Carnegie Steel
General Electric
- products were dangerous, sent people to install them

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forward integration

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closer to final rung

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backward integration

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away from rung

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oligopoly

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industry characterized by a few large companies

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economies of scale

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the cost advantages that a business obtains due to expansion. They are factors that cause a producer’s average cost per unit to fall as scale is increased.

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economies of scope

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improvements through other means (demand side of things)

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horizontal growth

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business would take over one aspect of industry (i.e. production, transportation, marketing)

airlines, supermarkets

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cartel

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loose form of organizational control that seemed to hold out the promise of halting over production and falling prices

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"constant returns to scale"

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a bigger factory would allow the production of more goods

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trust

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any apparent concentration of power

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examples of horizontal growth

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standard oil
american sugar refining
american tobacco

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price leadership

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dominant firm set a price and others followed

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state general corporation laws (NJ)

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allowed one corp to hold stock in others without having special permission

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sherman antitrust act (1890)

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intent was to slow or halt the spread of big business and collusive practices

encouraged a return to a competitive economy

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panic of 1893 triggered:

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a tidal wave of mergers

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entrepreneurs had to make three investments

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production facilities, build marketing and distribution networks, and manage everything to plan for the future

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new competition methods

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sales promotion

different alleged quality of goods

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the corporation affected

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politics, gender-class-ethnic order, reshaped labor,

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technology + science =

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new goods and consumption (way of life)

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reform groups

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populist party

national labor union, knights of labor

greenbacks

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bryan v. mckinley (election of 1896)

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bryan was defeated by a huge margin

ruined populist party hopes

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Rockefeller, Duke, etc abused power by...

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unfair practices: secret rebates, wage selective wars, refusing to supply wholesalers

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U.S. Bureau of Corporations

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set up to investigate and publicize the unethical competitive methods of offending businesses

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federal trade commission (1914)

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agency with limited enforcement powers as well as the right to investigate and publicize business activity

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standard oil case 1911

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supreme court announce the "rule of reason"

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rule of reason

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made distinction between good and bad

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major strikes

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pullman, homestead, railroad (1877), haymarket

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drive system

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workers moved from job to job, treatment of workers was harsh

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flexible production

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efforts to impose order in the chaos of labor relations

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taylorism

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industrial engineering

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welfare work

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employee-benefit

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systematic management

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massive efforts to learn what the workers knew, mgmt knew how jobs would find out how jobs were actually done, improvements

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taylorism + fordism =

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americanism

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unemployment =

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involuntary idleness

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main industry in MA

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shoes

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depressions -- reduced demand for goods -- businessmen responded by:

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cutting prices, reducing labor costs, producing for inventory

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reducing labor costs

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lower wages, short time, discharging employees, closing shop for a period or for good

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short time

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reducing output and limiting hours (part time)

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unemployment rate

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proportion that is idled at one given time

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unemployment frequency

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percent of force unemployed at same time during the year

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average laid off between 1885-1895

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1/3

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average number of months a worker would be idle

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3-4

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blue collar workers

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wear uniforms, more likely to be idle than white collar

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white-collar workers

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no manual labor

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uncontrollable acts of nature that could contribute to unemployment

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fires, collapses, droughts, floods, frozen rivers, seasonal rhythms

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cadences (rhythms of unemployment)

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episodic

casual

seasonal

technological

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episodic cadence

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sudden w/ little warning

fires, bankruptcy

one- shot occurrence

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casual cadence

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always unemployed temporarily, intermittent = way of life

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seasonal cadence

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more idleness in winter

migrants / immigrants to MA in good seasons

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technological cadence

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gradual

machines took human jobs

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reserve army

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always an involuntarily idle workers

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corporation

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Employs, creates wealth, has significant impacts on Presidential decisions

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cult of individualism

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o Working for yourself
o Most people wanted to have control over all aspects of their lives

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increasing returns to scale

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• when you proportion, your output is higher

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decreasing returns to scale

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• double inputs → less than the proportion of increase on outputs

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constant returns to scale

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• increase inputs proportionally → proportional increase in output

utilities

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big business happened because of 3 factors

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communications revolution

new financial capital

railroads

Front 69

1880-1895 was a period of

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competition