Big Business and Industrialization in the US (Late 1800s)

Prior to the Civil War, railroads were the only big business in the US.
They became the model for big business development after the war, as the US rapidly industrialized.

Bureaucracies: Managed by professionals rather than owners.
- Led to the expansion of middle management.
- More staff, managers, and foremen were utilized.
Financing: Financed by a national banking system centered on New York's Wall Street.
Marketing: Marketed goods and services across the world.
Wealth Generation: Generated significant wealth for owners, leading to a new class of industrial magnates.
- Examples: Andrew Carnegie, John Rockefeller, JPMorgan, Vanderbilt.
New Business Practices: Adopted new accounting procedures and process management.
- Taylorism promoted efficiency.

Studying Carnegie's practices helps understand the new class of industrial capitalists, business innovations, and technological advancements of the period.
Came of age in the 1850s.
Early career:
- Worked at a textile mill.
- Messenger boy in a telegraph office, then telegraph operator.
Recruited by the Pennsylvania Railroad.
- Worked as a secretary and personal telegrapher for a superintendent.
Pennsylvania Railroad:
- Employed more than 4,000 people.
- Carnegie observed new business innovations that allowed trains to run on time and more efficiently.
- President J. Edgar Thomson practiced elaborate bookkeeping detailing minute aspects of operations.
Carnegie moved up the ladder and ran the Western Division as the Pennsylvania Railroad became the largest private company in the world.
By the 1870s, Carnegie owned and operated his own companies, building on Pennsylvania Railroad's examples.
- Owned the Keystone Bridge Company, which built the first steel arch bridge over the Mississippi River.

Vertical Integration: Lowered costs by purchasing related companies (suppliers and processors).
- Example: Purchased a controlling interest in the Union Iron Company to speed the flow to his Keystone Bridge Company.
- Eliminated middlemen to diminish time and costs.
Steel Production:
- Recognized steel as a better material for rails, railroads, boilers, locomotives, and railroad cars.
- Purchased a steel plant in 1873 to feed his bridge-making company and other companies.
- Bought iron mines to produce the raw material for steel.
- Sold steel to other industries.
- Cut steel prices in half over a fifteen-year period, lowering the cost of his other products.

Companies attempted to gain control of the market for a single product.
Rockefeller founded the Standard Oil Company in 1870.
Gained preferential shipping rates from railroads, giving him a pricing advantage.
- Offered railroads a larger volume of oil shipments in exchange for discounted rates.
Persuaded or coerced other local oil companies to sell their stock so that he controlled part or all of their companies.
By 1882, controlled over 90% of the US's oil refining industry.
Monopolies allowed Rockefeller to set prices as he liked because there was essentially no competition.

Politicians became concerned about large outfits like Standard Oil, fearing they dampened competition and would hurt consumers.
Attempted to restore competition by outlawing business combinations that were viewed as restraining trade or commerce (monopolies).
In practice, the act was poorly worded and difficult to apply.
- Used the words "trust" and "monopoly," but didn't define those terms.
Wasn't very effective and the emergence of industrial giants continued.
By 1910, the US had already seen the growth and dominance of companies like Goodyear, General Electric, Westinghouse, Nabisco, and Eastman Kodak.