Warm-Up Trusts and Big Business

Monopolies and Trusts

Monopoly – The exclusive of the

or a

Example: Microsoft.

Trust – A large or that gains

(or attempts to gain)

Example: AT&T Inc.

Lesson Objectives

By the end of this lesson, you should be able to:

• Explain Carnegie’s integration practices.

• Describe Rockefeller’s integration practices.

• Explain how and reduced

in the Gilded Age.

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W Words to Know
2K
Write the letter of the definition next to the matching word as you work through the
lesson. You may use the glossary to help you.

A. a person who sets up a business or

____ coke businesses, taking on financial risks in the
hope of profit

B. a large company or business combination that

____ entrepreneur
gains (or attempts to gain) control of a market

C. the exclusive possession or control of the

____ horizontal integration supply of or trade in a commodity or service

D. a coal by-product that is used as fuel

____ laissez-faire E. the doctrine that government should not

interfere in commercial affairs beyond what is
necessary to keep the peace and protect
____ monopoly property rights

F. a monopoly in which a single company

controls the raw materials and factories that
____ trust
produce a product

G. a monopoly in which one company attempts

____ vertical integration to take complete control of a single stage of
production or a single industry

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? Lesson
Question
Slide
Andrew Carnegie (1835–1919)
2
• Emigrated from Scotland at age thirteen

• Started working for the Pennsylvania railroad in 1853

• Began investing and growing his fortune in 1856

• Retired from the railroad to start his own company after the Civil

War

Carnegie moved toward a monopoly.

1856

Learned of Bessemer process

1875

Opened his first steel plant

1881

Invested in a coke company

Coke is a coal by product that is used as fuel .

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Slide
Carnegie moved toward a monopoly.
2
1883

Bought homestead works

1889

Bought Allegheny steel

1892

Formed Carnegie steel

4 Carnegie’s Monopoly: Vertical Integration

In 1892, Carnegie combined his dozens of companies into one giant corporation:

Carnegie steel .

• Included iron mines, coke fields, steel mills, and railroads

• Controlled raw material , the

means of production , and transportation of the

product—a practice called Vertical integration

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Slide
This graphic shows a practice called vertical integration.
4

Carnegie Steel Company

Transportation

Steel Mills
Means of Production

Iron mines

Coke Fields

5 Carnegie’s Effect on the Steel Industry

Cut costs to drive steel prices prices down, forcing competitors

out of business

Bought competitors who had created new innovations in the industry

By 1900, controlled 25% of the nation’s steels output

In 1901, sold his company for $480 million, approx. $250 billion today

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Slide
John D. Rockefeller (1839–1937)
8
• Was a child Entrepreneur , a person who sets up his

own business

• Got his first job at age sixteen

• Started his first business at age nineteen

• At age twenty-four, opened his first oil refinery

Rockefeller assembled a trust.

1863

Excelsior Works

1866

Standard works

1870

Standard oil

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Slide
Rockefeller assembled a trust.
8
1872

cleveland massacre

1880

Control of 90% of US oil refining

1882

standard oil trust

10 The Standard Oil Trust: Horizontal Integration

In 1882, Rockefeller and his partners created the Standard Oil trust ,

a “corporation of corporations.”

• Included oil wells , pipelines , rail lines ,

tank cars

• Owned or controlled more than 90% of the

oil-refining capacity in the United States

• Controlled a single stage of production or distribution—a

practice called Horizontal integration

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Slide
Monopolies and Competition
13
Many Americans did not like monopolies, believing they:

• led to reduced competition

• resulted in higher prices for consumers

• controlled wages and salaries for workers in their industry

Americans demanded government action .

14 Why weren’t monopolies illegal?

Until the 1890s, the government had a policy called Laissez-faire .

• “ Hands-off ” approach to business

• Believed to be best for economic growth

• Few laws to regulate business practices during the

Gilded Age

• Laws generally designed to help businesses , not workers

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? Lesson
During the Gilded Age, how did companies build monopolies?
Question

Answer

Slide
Review: Captains of Industry: Andrew Carnegie
2
• Built his empire in the

• Controlled every stage of steel production, a process called

• Sold his empire and became one of the in US history

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Slide
Review: Captains of Industry: John D. Rockefeller
2
• Built his empire in the

• Structured his company, , as a

• Controlled 90% of US oil refineries, creating a

• Controlled one stage of the production process, a process called

Review: Laissez-Faire Government

• Monopolies reduce , resulting in for

wages and consumers.

• There were preventing the

during the .

• This is due to the government’s policy of .

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Use this space to write any questions or thoughts about this lesson.

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