Larger Profits Through Increased Sales
- Three ways to increase sales:
a. To force other companies out of business.
b. To lower the price of a product that is similar to other products.
c. To offer a better product than other companies.
- Price cutting can be used by a large company to increase sales
by forcing smaller companies to be out of business by lowered prices.
Lower sales price
- Lowering prices can increase sales by attracting
- Two examples of companies that lowered prices and increased sales:
a. Hill's Great Northern Railroad
b. Carnegie's steel company
- Making better products can increase sales because buyers will buy
a better product if the costs are about the same.
- Because finding a way to make better products costs more money,
companies don't like to do it.
The Benefits and Drawbacks of Competition
- Two ways consumers can
benefits from competition:
a. Getting lower prices
b. Getting better products
- Railroad companies lower rates to cities served by other railroads
and increase rates to cities served by only one railroad because
Business Cooperation Leads to Monopolies
- A monopoly is a condition that one company controls nearly all of
one type of product or service. A monopoly affects
the consumer by resulting in higher prices.
- The well-known monopolies of the late 1800s:
a. The Northern Securities Company (railroad transportation)
b. Standard Oil (oil-refining)
c. Bell Telephone Company
The Depression of 1893
Results in More Monopolies
- The depression in 1893 started for the same reasons as the depression
in 1873 (too much expansion and the production of more goods than
could be sold).
- J. P. Morgan took advantage of the depression by buying ownership
of the many bankrupt railroads.
- J. P Morgan also formed the basis for the U.S. steel monopoly.
- Utility companies provide water, electricity, and sewage services.
Big Business Tried to Dominate Government
- The authors of the Constitution did not give the federal government
many powers because they wanted to prevent any leaders from making
laws that would dictate how people had to live.
- In the late 1800s, the federal government controlled four basic
a. Making treaties with foreign
b. Creating a military to protect the U.S.
c. Setting tariffs on imports
to the U.S.
d. Regulating trade between
- Tariffs can help American businesses by protecting from competition
outside the U.S.
- Tariffs can hurt consumers because they had to pay higher prices.
- Three groups of persons who had problems with big business owners:
a. Owners of small businesses
- Two things big business owners wanted government to do:
a. To keep high tariffs
b. Not to interfere with
how they did business
Three Different Levels of Government
- The three levels of government: a. Local b. State c. Federal
government had control over business in controlling interstate commerce.
Getting Government to Support Business
- A bribe is a secret payment to people to get them do something
- Three ways that wealthy business owners got government to support
a. By helping elect the politician who would support the interest
of big business
b. By becoming politicians themselves
c. By bribing politicians to vote a certain way
Big Business Influence at the Local Level
- City councils made decisions such as how much to spend on street
construction and how many policemen and firefighters to hire.
- City councilmen offered bribes to get contracts for their companies
to do work for the city or sell supplies to the city.
- The problem of using patronage
to select someone to do a job is that there is no effort to hire
the person that can do the best job.
- Businessmen were willing to use bribes to get contracts for utility
service because no competition allowed the company to charge high
rates and make large profit.
Big Business Influence at the State Level
- State governments supported business interests by not passing
laws that interfered with business or forcing them to help solve
problems they created because wealthy business owners could get
their supporters elected to the state legislature.
- The government in some states tried to control the rates of railroad
companies because their economies were based on farming that depended
on the railroads to ship them supplies and to transport their products
to market. This attempt was not successful because state governments
and the commissions could not control the railroad company operated
in more than one state.
Big Business Influence at the Federal Level
- Two ways that the federal government supported big business interests:
a. By always voting to keep tariffs high on imported goods
b. By passing weak laws that really didn't hurt businesses
- The Supreme Court weakened the laws to control big business by
often making rulings that decreased the effects of a law with a
favor of the interests of big businesses.
- Legislators wrote laws that couldn't be enforced
because they didn't specify penalties or how the law would be enforced.
Interstate Commerce Act
- The Interstate Commerce Act wasn't effective because it did not
provide for any punishment for railroad companies that violated
The Sherman Antitrust Act
- The Sherman Antitrust Act wasn't effective because the U.S. Congress
made the law unclear on purpose.
The Pendleton Act
- The Pendleton Act was passed to limit the patronage system. But
it was not successful because it only limited 12% of the federal
employees to pass a written ability test. A Civil Service Exam was
a written test for government jobs.
The Positive Effects of Big Business
- The country as a whole was much wealthier in the late 1800s.