Domination

Andrew Carnegie

Andrew Carnegie

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.

Eliminating competition

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 more buyers.
Two examples of companies that lowered prices and increased sales:
a. Hill's Great Northern Railroad
b. Carnegie's steel company

Better products

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 of competition.

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.

Monopolies

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 activities:
a. Making treaties with foreign countries
b. Creating a military to protect the U.S.
c. Setting tariffs on imports to the U.S.
d. Regulating trade between the states
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
b. Workers
c. Consumers
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
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 dishonest.
Three ways that wealthy business owners got government to support them:
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 law.

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