Study Notes on the Rise of Big Business in Birmingham

Economic Impacts, Equity, and History of Birmingham

Section I: The Magic Behind the Magic City

Chapter 4: The Rise of Big Business

Introduction to the Era of Big Business

  • Setting the Stage: A significant transition period marked by economic and industrial transformation.

  • Imagery of Change: Transition highlighted by shipping watermelons by rail from Atlanta, Georgia, illustrating the evolution of transportation and trade.

The Impact of Industrialization

  • Timeline of Patents:   - 1790—1860: 31,000 patents recorded.   - 1860—1930: Expansion to 1.5 million patents.

  • Energy Expansion:   - 1870’s: 16 million horse-power utilized.   - By 1929: Energy increased to 1.6 billion horse-power.

  • Conclusion: These developments contributed to the broader narrative of American industrialization.

Effects of Industrialization

  • Material Life: Transformation of the physical items workers interacted with daily.

  • Work Structure:   - Shift from indentured servitude to wage-based employment.   - Implications for workers’ rights and job security.

  • Economic Life:   - Rise of capitalist institutions aligned with the expansion of big businesses.

Key Players in the Industrial Revolution

  • Questions on Responsibility:   - Who was responsible for this transformation?     - Government roles, business initiatives, or popular demands?

The Mechanism of the Market

  • Incentives for Behavior:   - The potential for profit drives business actions and decisions.   - Exploration of morally questionable endeavors to gain wealth.

  • Examples of Money-Making:   - Considerations on bizarre or unethical avenues people pursue for financial gain.

Profits as Motivation

  • Business Profitability Insights:   - Positive example: Moderna, which saved an estimated 14 million lives with a $50 billion revenue trajectory.   - Negative example: Wells Fargo, which faced $3 billion in legal fees due to the ghost accounts scandal.

Inventors and Entrepreneurs of the 1800s

  • Famous Figures:   - Thomas Alva Edison: Noted for his continuous stream of inventions and the establishment of entrepreneurial ventures.

  • Small Business Owners:   - Identifying the role of inventors in business creation, including significant figures like Gustavus Swift in meat packing and James Buchanan Duke in the cigarette industry.

Demographics of Business Owners

  • Ordinary Businessmen: Majority were not inventors, highlighted by their socioeconomic status.

  • Characteristics:   - Predominantly white, native-born individuals from middle- to upper-class backgrounds.

Concept of Robber Barons

  • Definition: Refers to the large-scale business moguls of the era known for unethical practices.

  • Notable Figures:   - Jay Gould: Known for investing profits into personal ventures, manipulating stock value, and unethical practices.   - Actions included watering stock, bribery, and employing market rumors to inflate stock prices.

  • Impact: Despite dubious ethics, robber barons contributed to economic growth.

Economic Contributions by Robber Barons

  • Cornelius Vanderbilt:   - Pre-Civil War, average rail line was 100 miles; post-war, he established crucial connections (e.g., New York to Chicago).

  • Perception of Wealth:   - Attitude prevalent during the time emphasized the goodness of money and demonized obstacles to profit.

Excessive Spending Trends

  • Competitive Extravagance: Wealthy individuals often sought to showcase their wealth through ostentatious displays (e.g., monkey parties, horseback dinners).

  • Cultural Reflection: Questions about whether such spending habits have persisted into modern times.

Social Darwinism in Business

  • Theory Overview:   - Concept that the most fit businesses will survive, used to justify aggressive competition and growing income inequality.

Transition from Robber Barons to Bureaucrats

  • Case Study: Andrew Carnegie:   - Early Life: Born in a Scottish attic to working-class parents, migrated to Pennsylvania, began career as a telegraph runner.   - Successful Investments: Partnered with Thomas Scott and invested in other ventures leading to significant wealth.

  • Philanthropic Turn:   - Expressed a desire to resign at age 35 to focus on philanthropy, heavily influenced by Henry Bessemer's steel innovations.

Carnegie's Contributions and Legacy

  • Business Success: Despite the Great Depression, he built one of the largest steel plants in the United States.

  • Philanthropy:   - Known for establishing libraries, funding Carnegie Mellon University, initiating the first pension fund for employees, and financing cultural landmarks like Carnegie Hall.