The Rise of Big Business and Corporations in America: The Industrial
Revolution
The Rise of Big Business and the establishment of corporations emerged during the period of intense
economic and industrial growth during the
US
Industrial Revolution. New inventions, innovations and
technology provided the entrepreneurs of the era with the
opportunity to create the massive organizations so bringing about
the rise of Big Business and Corporations.
The Rise of Big Business and Corporations for kids: The U.S. Economy
The economy in the late 1800's was dominated by the
Big business and corporations that operated in the oil and petrol
business, the steel industry, the railroads, textiles and food
production that operated vast complexes of factories, warehouses,
offices, and distribution facilities and employed the majority of
the labor force in the United States.
The Rise of Big Business and Corporations: The Robber Barons and
Captains of Industry
The Rise of Big Business and corporations was driven by men of
vision who took risks developing new inventions whose determination
earned them vast amounts of money, fame and success. These men who
built the new industries all made a significant contribution to the
economy of the United States
by expanding markets and increasing trade.
These entrepreneurs also used new methods, inventions and technology
to increase productivity and create new jobs. The
Rise of Big Business and corporations saw varying business practices
and ethics which led to wealthy industrialists being referred to
either as
Robber Barons
or as
Captains of Industry.
The Rise of Big Business and Corporations: Charters replaced by
Corporation Laws
The Rise of Big Business and corporations in the United States
really began in the mid 1800's. Before this time
business entrepreneurs had to persuade a state legislature to issue
them with a charter. Charters (licenses to exist) were granted for a
limited time and could be revoked. This changed in the 1830s when
states began passing broad incorporation laws that allowed companies
to become corporations and issue stock without charters from the
state legislature.
The Rise of Big Business in America for kids: The Role of Corporations
The Rise of Big Business would not have been possible
without the corporation. What is a corporation?
● A corporation is an
organization formed with state governmental approval that is
owned by many people but treated by law as though it were a
single person that has its own powers, duties, and liabilities
● A corporation conducts
business, pays taxes and makes contracts, and can sue and be
sued
● A corporation can issue
shares of stock to raise large amounts of money with which to
start a business or increase its capital
● Shares of ownership called
stock
● The people who own
corporations are called stockholders
● Issuing stock allows a
corporation to spread the financial risk
The Rise of Big Business and Corporations for kids: Economies of Scale
The Rise of Big Business was made possible by establishing
corporations that used economies of scale. What are economies of
scale? ● Economies of Scale were
made possible by using the money raised from the sale of stock
● Big Business and
corporations could use this money to invest in the business to
increase their efficiency and profitability
● Big Business and
corporations were therefore able to invest in new inventions and
technology.
● They had the money to buy
many new machines and raw materials at highly competitive prices
● They had the money to
employ a vast labor force to increase productivity
● They were also able to
negotiate rebates from the railroads, reducing their operating
and shipping costs even further
● These practices allowed
Big Business and corporations to achieve what are called
Economies of Scale
The Rise of Big Business and Corporations: Small Businesses were
eliminated
The Rise of Big Business saw the corporations dominating all of the
important, major industries. They were able to make
goods more cheaply and quickly and cut prices by using using large
manufacturing facilities. They began to make enormous profits, which
attracted even more investors who bought shares of stock that
provided Big Business and corporations to make even more
investments. Existing businesses just could not compete and were
forced out of business - meaning more customers, limited competition
and the opportunity to increase profits even further.
The Rise of Big Business and Corporations:
Consolidation of Industry
Big Business and corporations became powerful and
started to fix prices. The organized 'Pools' by
which they maintained prices within an industry at
an agreed level. However, agreements were broken and
one 'Pool' member cut prices to steal customers from
the competition within the Pool. The Pool system
therefore did not last long but it had resulted in
reducing some large industries being run by just a
few extremely wealthy Big Businesses and
corporations.
The Rise of Big Business and Corporations for kids: The
Monopolies
The Rise of Big Business and corporations continued with the
emergence of monopolies. Monopolies were achieved
when a single corporation bought out all of the
competition and achieved control over an entire
market. A monopoly could basically set whatever
prices they wanted. The could increase prices at
will and exert power over their labor force by
cutting wages or increasing hours.
The Rise of Big Business and Corporations for kids: The
Trusts
The rise of monopolies held by Big Business and corporations were
addressed by passing new laws to make it illegal for
one company to own stock in other companies without
specific permission from the State Legislature.
Big Business and corporations then formed 'Trusts'
which enabled them to merge businesses without
violating the laws against owning other companies
which enabled them to
continue the practice of regulating the supply and
price of commodities. The establishment of the
Trusts were another way to monopolize an industry or
big business.
The Rise of Big Business and Corporations: Laws to
curb Monopolies
New laws were passed in response to
public demand that the monopolies be regulated.
The
1887 Interstate Commerce Act
was passed by Congress to curb the activities of the
railroads. The
1890 Sherman Antitrust Act was passed by
Congress to protect trade and commerce from unfair
business practices that limited competition, or
controlled prices. The Sherman Antitrust Act
ostensibly clamped down on monopolies, but in reality turned out to be pretty
ineffective until the
1904 Northern Securities Case.
The Rise of Big Business and Corporations for kids: Holding
Companies
The Rise of Big Business and corporations was allowed to continue
and exacerbated in 1889 when the state
of New Jersey passed a new incorporation law. This
law allowed companies to create a new organization
called a 'Holding Company'. A Holding Company owned
the stock of companies but
did not produce anything themselves. The
establishment of a Holding Company allowed for all
of its companies to be merged into one massive
organization. By the beginning of the 1900's the
United States had over 300 holding companies.
Ordinary Americans started to clamor for reforms during the
Progressive Movement and
Progressive Reforms were made at city, state and federal
levels.
The Rise of Big Business and Corporations in America
The Rise of Big Business and corporations therefore continued into
the 20th century. the major sectors of the nation's
economy were dominated by a small number of massive
corporations. Big Business and Corporations had
control over the railroads, banking,
steel, oil refining, meat packing and manufacturing.
The number of millionaires in America exceeded 4000.
The Rise of Big Business had
brought positive benefits to the economy of the
nation and helped to improve the lifestyles of many
Americans but their power also led to the abuse of
workers and the corruption of the political system.
For additional facts and information refer to
Industrialization in
America.
The Regulation of Big Business and Corporations in America
The Department of Commerce and Labor was established
by President Theodore Roosevelt during the
Progressive Era to reduce tensions between labor and
management. In 1904 the Supreme Court had ruled in
the
Northern Securities vs US legal case that the
company violated the Sherman Antitrust Law. After
the federal prosecution, the Northern Securities
company was dissolved, and other companies followed
suit - it was a victory for the opponents of
Social Darwinism. The Department of Commerce and
Labor included a division called the Bureau of
Corporations, which had the authority to investigate
and regulate corporations. This enabled the
government to have control over their activities
without having to sacrifice economic efficiency by
breaking up the trusts and holding companies.
Rise of Big Business in
America for kids - President Rutherford Hayes Video
The article on
the Rise of Big Business provides detailed facts and a summary of one of the important events during his presidential term in office. The following
Rutherford Hayes video will
give you additional important facts and dates about the political events experienced by the 19th American President whose presidency spanned from March 4, 1877 to March 4, 1881.
Rise of Big Business
in America
●
Interesting Facts about the Rise of Big Business for kids and schools
●
Summary of famous Rise of Big Business in US history
●
The Rise of Big Business in America
●
Rutherford Hayes Presidency from March 4, 1877 to March 4, 1881
●
Fast, fun facts about the Rise of Big Business in
America
● Rise of Big Business and Corporations
in America
●
Rutherford Hayes
Presidency and the Rise of Big Business and corporations
in America for schools,
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