The Growth of Big Business During the Glided Age
The Growth of Big Business
An economy has two aspects. The first is the ownership of the business and industry; the second is the determination of wages and prices. Broadly speaking, there are two major economic systems in place in the world. In a capitalist economy, private owners control business and industry, and the laws of supply and demand control prices and wages. In a socialist economy, the government controls business and industry and also wages and prices. The United States has a capitalist economy, founded on the constitutional right to own private property and a distrust of government control that has existed since before the American Revolution.
Until the Civil War, most American businesses had been small, usually owned and operated by one or two people and a small staff. However, a business owner with greater ambitions could not run multiple factories on this plan—the costs and expenses were so high that no individual would have enough cash available to keep the business running. Instead, an ambitious businessman (or woman) would acquire partners; together, they would set up a corporation. In a corporation, owners sell shares of stock in the company. Ordinary people purchase these shares as an investment. In exchange for the money they put in, they regularly receive sums of money based on the company’s profits (if any). The more stock a person owns, the larger his share of the profits will be. Soon there were so many big corporations in the United States that a stock market was needed. In a stock market, people buy, sell, and trade their shares, usually acting on the advice of a paid stockbroker.
In the same way that individuals united to form corporations, corporations united to form trusts. A board of trustees runs all the trust’s corporations as a single enterprise. When a trust gains control of all the corporations within one industry, it becomes a monopoly. Owners prefer a monopoly system because it eliminates competition and allows them to set prices as high as they please. Consumers oppose a monopoly system because they welcome competition; when corporations cannot monopolize, each one must try to attract customers by lowering prices or producing higher-quality goods.
Public criticism of trusts grew during the last quarter of the nineteenth century. Congress reluctantly acted on the issue by passing the Sherman Antitrust Act. The act banned trusts and monopolies, but failed to state exactly what a monopoly or a trust was. Without strong leadership in Washington that was determined to fight the abuses of big business, the Sherman Antitrust Act was impossible to enforce.
This table shows some of the key figures in American big business during the Second Industrial Revolution.
Successful industries gave rise to new industries. One was the stock market; another was advertising. Corporations used advertising to persuade people to buy their products or services. They spent a great deal of money on posters, newspaper advertisements, and other promotions. They hired artists to design logos that the public would recognize and remember. Department stores provided fancy bags, packages, and wrappings for people to take their purchases home in. Many companies made their products available by mail order to those who lived in rural areas; the appearance of the latest Sears, Roebuck or Montgomery Ward catalogue in a rural mailbox was an event.
As big businesses grew, middle-class and wealthy Americans enjoyed an era of unprecedented choices of consumer goods on which to spend their money. New stores were opening everywhere. Clothing and other items that had once been expensive were being mass-produced in great quantities. Fancy toys, books, furniture, and other goods of all kinds, both useful and frivolous, were for sale on every block of every major city or large town.
Practice questions for these concepts can be found at:
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