Lecture 3

1/31/10 10:08 PM Question for today How and why did bug business become so prominent in the period? Railroads Pioneers of big business Large capitalization and mew management techniques Carried heavy loads of debt and there was intense competition among railroads Intense competition led to instability in the industry, the kept cutting their rates and they couldn?t afford to do so. 1870s: pools created to set up uniform rates, informal agreements, the efforts were not successful because they were not enforced Robber Barons Standard Oil ? first trust 1881, built up by John D. Rockefeller, he considered competition wasteful and inefficient Controlled 90% of US oil refining. He bribed competitors He had spies in his company and his competitors He intimidated and threatened competitors A trust was where a board of trustees held the shares of a number of companies in trust Trust becomes synonymous with Monopoly Trust Movement: whiskey, lead, sugar Lead to Antitrust movements Holding Companies, 1890s, took advantage of a New Jersey law that allowed companies to purchase other companies, also pioneered by Rockefeller, another word for a merger Significance of big business Changed the way US did business Prior to Trusts and holding companies small business was prevalent Increased attention to growing gap between rich and poor Mark Twain, The Gilded Age Describes a period of gaudy excess and corrupt politicians, etc. Grange Laws 1869 ? 1874 First people to mobilize an effort to regulate Railroads Efforts of western farmers Founded 1867 Difference between long haul and short haul rates Could be cheaper to send things long distance because RR?s wanted the money of the big businesses \1873 depression exacerbated the farmers discontent and they began to mobilize, they were able to look to the larger problems, they realized they would have to cooperate with businessmen Munn v. Illinois 1877, an example of the courts upholding Grange laws Grange laws establish maximum rates that RR?s and grain elevators could charge Wabash et al v. Illinois, 1886, Supreme court decision to reverse its ruling in Munn vs. Illinois because RR?s cross state lines, state legislatures don?t have the right to regulate rates Interstate Commerce Commission Public outcry over Wabash case put pressure on congress and congress ended up passing the Interstate Commerce Act in 1887 Interstate Commerce Act 1887 ?reasonable and just? rates; public rate schedules; discontinue rebates (for big business), etc. Important as a precedent because it was the first Federal regulatory agency: ICC Significant because it was a precedent for reform Not very successful because the ICC lacked the backbone to enforce the act ?Nothing but the feed and fight? Political cartoon, farmer and multi-headed cattle Interpretation: He is so busy fighting the trusts that weeds are starting to grow, one of the potential things that?s growing is anarchy A time of great labor strife Sherman Anti-Trust Act (1890) Declared illegal ?every contract, combination?or conspiracy in restraint of trade or commerce.? Very weak sword against trusts E.g. American Sugar Refining Co. NOT a trust, but unions were Big Picture: People were starting to be concerned about regulating big business, not until early 20th Century would presidents take the action to the next level Social Darwinism and the Gospel of Wealth Widespread beliefs in limited government, laissez-faire, and competitive individualism All of these together are components of social Darwinism, Origin of the Species (1859) Herbert Spencer applied Darwin?s ideas to human society : social Darwinism The world got better due to relentless competition, survival of the fittest Social Darwinism William Sumer, What Social Classes Owe Each Other (1883) Industrialization 1/13/10 11:05 AM Underlying social laws govern a seemingly chaotic world 1/31/10 10:08 PM 1/31/10 10:08 PM