Economic growth and the rise of corporations

• Economic growth and the rise of corporations


  Saw an industrial revolution post civil war. 1859-99- value of manufactured products rose by 622%, $1.8 -> 13 billion
• Economic growth and the rise of corporations


  Reasons for industrial expansion

  • Developments of railroads and improved communications made it possible to exploit natural resources.
  • USA was growing through westward expansion and massive migration. Congress willing to impose high tariffs to protect domestic industry by keeping out cheaper imports.
  • Optimism encouraged risk-taking and entrepreneurship- successful industrialists such as Carnegie and J.P. Morgan were far more celebrated as role models than politicians
• Economic growth and the rise of corporations


  Railroads

  Saw huge growth after civil war: 40,000 miles of track 1830-70, 110,000 in next 20 years. First transcontinental railroad completed in 1869, there were 5 by 1900.

  Were private companies, but growth was facilitated by massive land grants from fed gov (up to 240,000 square miles which could be sold off to settlers when complete). Led to introduction of common time zones across the USA in 1883 and were indirectly responsible for the development of a transcontinental telegraph system, whose stations followed the railroads.
• Economic growth and the rise of corporations


  Problems with railroads

  Owners could be corrupt (gave profitable contracts to construction companies they owned). With huge sums necessary for construction, finance was often unstable and the economic depression from 1873-79, 25% of US railroads failed.
• Economic growth and the rise of corporations


  Oil

  Most successful firm was Standard Oil Company of Cleveland, founded by Rockefeller in 1870. It embraced modern technologies and ruthless business practices so that by 1879 it controlled 90% of the oil-refining capacity of the USA. The industry grew with the introduction of the motor car in the early 20th century.
• Economic growth and the rise of corporations


  Steel

  Production dominated by Carnegie, whose mills in Pittsburgh were responsible for 70% of the nations output by 1890. Much went to railroads.
• Economic growth and the rise of corporations


  The rise of corporations

  When Carnegie sold his steel company to J.P. Morgan in 1901, United States Steel became the worlds first 'billion-dollar corporation'. Growth of giant corporations was a feature of industrial development in which one company controlled productive processes in the manufacture of the product and the markets. Their power meant it was difficult for newcomers to enter the market of for smaller companies to remain.
• Economic growth and the rise of corporations

  Professionalisation of business

  As big businesses developed, they employed more managers, administrators and technical experts (e.g. Thomas Edison set up a research facility in 1876 at Menlo Park, New Jersey- developed phonographs and film projectors).

  By 1900, half the working pop were paid employees rather than self-employed
• Economic growth and the rise of corporations


  Trusts and monopolies

  Trusts were mergers and takeovers of smaller companies to create large corporations. By 1904, the largest 4% of US companies were responsible for 57% of total production (e.g. General Electricity controlled 85% of the nations output by the turn of the century). Many of these large corporations began to act like monopolies, which meant they could control supply and price, thus negating the idea of competition. Governments were often reluctant to tackle these corporations.