plus businesses even utilized subconscious advertising known H u m a n i t i e s

You are to view TWO of the videos dealing with Modern Business: Choices include two from the Men Who Built America, Andrew Carnegie, and The Rockefellers. You are to watch two of these videos, take notes and write a summary of two of the videos. Finally you are to tell which businessman impressed you most and why.

1-https://youtu.be/gR7oHh-fXUw 2- https://youtu.be/JQI5ozFdNYs the lecture:From 1600-1800 there were few ways of making money and relatively little money was made. Then came the arrival of the American Industrial Revolution, which means in simple English- the arrival of the factory system. The key individual who began the first successful factory in the early 1800s was Francis Cabot Lowell. Lowell was an enterprising American who traveled to England and was impressed by the factories there. So he came to Massachusetts and set up what would be known as the Lowell model. His goal was to establish a working textile factory that would provide mens’ clothing. First he needed power which meant in those days water power. He would have to locate his factory near running water. Then he would have to utilize the best technology available for weaving clothing; he also knew that he needed to employ people to work in his factory but he planned to pay them very little. The product was the beginning of mass production in American History. He was able to produce a large number of items in a relatively short time and to make a very good profit. This was the Lowell model and businessmen saw this model as the wave of the future and began to copy this model in manufacturing other products. John Deere, for example, knew that the major consumer in America at this time was the farmer, so he established a farm factory that produced one of the best sellers for the time- the steel plow. The American factory system was underway.

It was the Civil War that made mass capital a reality. There was an intensive demand for factory products during the war and more money was made than ever before. Once the war was over, businessmen wanted to continue this movement toward mass capital and the gospel of wealth philosophy was born. It started after the Civil War, filtered down to the general population, and is alive and well in America today. The gospel of wealth is the idea that money should be the goal of society and of individuals in society. This new concept ended the old value system and started the philosophy of modern America. The old value system revolved around the farmer. Success was measured in terms of farming, while the farmer was the role model and community values were important. These values ended after the Civil War with the arrival of the gospel of wealth. Money was now the goal of society and success was measured in terms of making money. And you could make money anyway you can; this means that the government should not be involved in what you are doing and should be inactive. Many writers refer to this idea as a “laissez-faire” hands off philosophy. The new role model was the businessman, while community values were replaced by individualism and individual achievement. Even the literature began to support this new philosophy. Writers such as Horatio Alger began to write popular novels based on the theme of rags to riches- how you could be born poor and yet become wealthy. You even used religion to support the idea by saying that salvation was a sign of salvation, although many also believed that in order to get to heaven you should be poor.

THE RISE OF BIG BUSINESSS

This philosophy started with the wealthy, but it did not take long for it to filter down to the general public. With this philosophy now in place, the rise of big business began. Let us examine the period 1865-1900 which featured the rise of big business and let us take the rise of the railroad business as the gospel of wealth in action. The major elements that existed with the rise of the railroad business would be found in the rise of other big businesses.

Element is a universal one among businesses then and now. It is the public demand for a product or a service. Businessmen are aware of the public need for a product or a service in order to make money. Often, of course, businessmen must create this demand. In the case of the railroad business, we are talking about a service business. This is a business involved in public transportation. Railroads first appeared around the year 1824 with a horse drawn railroad inappropriately called “the Rocket.” After the Civil War, as more and more Americans were crossing the Plains and head for the west coast, there are an increasing demand for a railroad system that would take them across the country; this would be a transcontinental railroad. Element two involved businessmen that were called both captains of industry, creative businessmen, and also robber barons, individuals who took advantage of the general public and who became involved in major consumer abuses. James Hill, Leland Stanford and Cornelius Vanderbilt were among those businessmen. Take the famous quote of Vanderbilt, when he said “let the public be damned.” His sentiments toward the general public were clear here.

Element three involves essential technology that will allow businesses to become big. In the case of the railroad we find the following essential technology and certain key individuals(inventors) behind the technology. At first railroads traveled along wooden rails, but the wood split and the railroad cars did not stay on the tracks. Steel rails replaced the wooden rails. George Westinghouse saw that railroad cars were beginning to travel much faster and he decided to develop an effective brakingsystem. Meanwhile, George Pullman saw the need for railroads cars that offered sleeping facilities as they traveled across the country; he developed sleeping cars and also dining cars. The technology for the rise of the railroad as big business began to appear. Element four involves the government. It is hard to relate to a time when the federal government was inactive and not involved with business. Individual success cannot be hampered by government regulation or control. There had never been government regulation or control up to this time in our history and as businesses began larger, businessmen wanted this inactive government to continue. But in some cases, as with the railroads, businessmen sought help from the federal government. In order to build an effective railroad system across the country, businessmen needed land and money. Congressmen who often owned stock in the emerging railroad business helped with both. Generous grants of land along with low interest loans were extended to railroad companies.

Element five is the creation of a monopoly where businessmen had no competition. Take the case of the transcontinental railroad. The Central Pacific Railroad Company built from Sacramento toward Omaha, while the Union Pacific Railroad Company built from Omaha toward Sacramento. By May, 1869, at Promontory Point, Utah, these two railroad companies came together and formed a transcontinental railroad. This was the only railroad line from Omaha to Sacramento and there was no competition. There was now a monopoly. This led to element six which was consumer abuse. Keep in mind that the federal government was inactive and many big businesses such as railroads featured monopolies. Consumers were now taken advantage of in a major way. The farmer really needed the railroad and the farmer was abused. Some examples of railroad abuses involve no fixed prices, no fixed schedules, kickbacks, favored shippers, and poor accounting systems. Bottom line: farmers were the major consumers abused by railroads and they were getting no protection from the government.

Element seven is the consumer fighting back and demanding regulation. The famers of the Midwest began to organize with the Grange. This was a farm organization that put pressure on Midwest state government to pass laws to begin the effective regulation of railroads. These were referred to as Grange laws. Now the railroad businessmen turned to the courts to overturn these laws. Eventually their cases reached the supreme court where they had many pro-business friends. The supreme court ruled that the Grange laws were illegal and could not regulate the railroads because they were involved in interstate transportation. Which means that no individual state could regulate the railroads. The final element involves the federal government. The federal government was the only entity large and powerful enough to effectively regulate big business. Farmers and other consumers began to put pressure on the federal government to effectively regulate the railroads. Finally out of Congress in 1887 came the Interstate Commerce Act which created the Interstate Commerce Commission. The ICC was supposed to bring about effective regulation of the railroad but pro-business individuals were placed on this commission. The bottom line is that there were be no effective regulation of the railroad by the federal government until after 1900. This was generally the case with all big businesses.

Of these major elements, the most important were the businessmen and the technology. This was the age of inventions and inventors. Of course, the importance of this technology was to lead to the rise of big businesses. Many key inventors such as Alexander Graham Bell could be listed, but the most important of them all was Thomas Edison. Edison developed more essential technology for business than any other single individual. There are many stories about this man who allegedly took advantage of his workers and who stole many ideas from people. But in spite of these stories, Edison was more important than any others. He brought effective lighting to America, created the stock ticker machine, the phonograph machine and the early motion picture machine. Of course, those captains of industry or robber barons would utilize this technology in the creation of their big businesses. We have already discussed the businessmen of the railroad system. There were many others whose names are still visible in society today. Take Dole- the businessman of the pineapple industry of Hawaii or J.C. Penney and Woolworth who created national retail stores. Swift and Armour were businessmen in the meat packing business, while Pillsbury was the key businessman in the flour milling business. Of all the businessmen at this time, the most important as well as successful were John D. Rockefeller and Andrew Carnegie.

ROCKEFELLER AND CARNEGIE

John D. Rockefeller was a product of the Midwest and was influenced by both of his parents. His father was a traveling salesman who believed that the goal of life was the making of money anyway you can. He taught John well and very early in his childhood money did become the goal of his life. On the other hand, he was influenced by his mother who taught him to be a moral individual and a very thrifty individual who would spend very little of his money. At a very young age, he loaned money to his friends and charged interest on the money. As a teenager in Cleveland, he started a turkey business. Eventually he became an accountant and saved a high percentage of his income. Stories still exist that he used one bar of soap for nearly one year and how he had intimate conversations with his pillow and how he married during his lunch hour, never took a honeymoon and gave his wife one penny a week for an allowance. On the other hand the life and times of Andrew Carnegie were very different. Carnegie was an immigrant child from Scotland who came to America looking for the American dream- the making of money. Unlike Rockefeller, Carnegie was a popular and outgoing individual who enjoyed his money and who took risks with the money. He worked his way up through the railroad system and invested money and took chances such as mortgaging his mother’s home.

Both Rockefeller and Carnegie would now be influenced by changing technology. George Bissell was aware that crude petroleum oil was found in rivers, streams and on top of the soil in various parts of the Northeast. That oil had little use except as a form of medicine that could cure various illnesses. Bissell developed a method to refine that oil which businessmen could utilize in their growing businesses. Meanwhile, George Bessemer was creating a way to make relatively cheap but effective steel. The technology was now in place.

Rockefeller took his money which had saved and put it into a refining business. His goal was to get a monopoly of oil refining in America. His business practices reflected his life. He followed the process of horizontal integration which is the control of a certain aspect of a business. Rockefeller wanted control of oil refining. In order to get that monopoly he watched every penny. He was both the owner as well as the manager. By doing this, he was able to offer the lowest prices for refined oil. The other companies could not compete and he began to force them out of business. By the time he created Standard Oil of Ohio he had controlled 90% of the refined oil in America. He had achieved a monopoly of refined oil and would become the ultimate model for horizontal integration. Carnegie in the city of Pittsburgh established Carnegie Steel which would utilize the Bessemer method. Carnegie employed the method of vertical integration. He wanted to set up a package that would involve the entire process from raw materials to the manufacture of steel to the marketing and distribution. His business methods were very different from that of Rockefeller. He separated ownership from management and hired Henry Frick to be his hired manager. He also took chances and risks with his money and enjoyed his money. He traveled and spent in money such as purchasing castles. In a short period of time he became one of the wealthiest men in America. He believed as did many wealthy men at this time that one should die poor. So as he got older, he began to divest himself of his money. He made donations for libraries and individuals and bought pipe organs for churches around the wold. It is estimated that he gave up over 400 million dollars in wealth; he even disliked inherited wealth and gave his children relatively little of his wealth. Before he died, he sold Carnegie Steel- a company that eventually manufactured 40% of America’s steel. Out of this company came U.S. Steel- the first company capitalized at over $1 billion. The making of money was now changing. It became more and more difficult to make a lot of money with little money.

By the late 1800s finance capitalism had arrived upon the scene. Business had become so large that bankers and investors now placed a major role. The new wealthy now came into existence. Take J.P. Morgan. Morgan was a New York banker who put together the financing for U.S. Steel and he received a commission for his services. Morgan put together more and more of these businesses and he became a very wealthy man. Bankers and investors now played an essential role in the further rise and expansion of business. Big business had now become reality.

THE ERA OF PROGRESSIVISM

By the late 1800s consumers were becoming increasingly aware of consumer abuses by big business and were putting more and more pressure on the federal government for action. In addition, there arose a series of writers referred to as “muckrakers” who focused on consumer abuses and who made the general public more aware of the abuses. Examples of these writers include Lincoln Steffens who wrote SHAME OF THE CITIES and who focused on the problems of life in the city of big business. Ida Tarbell wrote STANDARD OIL OF OHIO which showed the ruthless business practices of Rockefeller. Frank Norris wrote THE OCTOPUS- a study of the abuses of the railroad business, while Upton Sinclair in THE JUNGLE revealed the abuses of the meatpacking industry and warned Americans how male body parts were ground into the meat and how that sausage on your breakfast plate may be a male finger!! The growing pressure on the federal government led by the year 1900 to the arrival of the Progressive Era.

The Progressive Era in modern American history was from 1900 to 1920. In general progressivism was the arrival of an active federal government. The federal government now began to solve problems in society such as consumer abuses. The progressive era led to the beginning of the effective regulation and control of business and started with the presidency of Theodore Roosevelt. Theodore Roosevelt should be remembered as the first progressive president. He started progressivism by going to the supreme court and beginning to break up monopolies in business. He began to be known as “the trust buster.” In court today this process is called deregulation where monopolies are broken up. Then he created the Department of Commerce within his executive department; this department was to deal with business in America. In addition, he want to congress to get support of his programs and to pass laws that would begin to effectively regulate business. The Pure Food and Drug Act was one of the most important laws under Roosevelt that was passed by congress; this is also one of the most important laws for consumer protection. Before the passage of this law, there was little or no regulation of the food or drug industry. The Elkins Act was also a Roosevelt achievement; this law finally brought about the effective regulation of the railroads.

Progressivism continued and expanded with the presidency of Woodrow Wilson. Wilson had a Ph.D. in political science and became a very effective politician. He was responsible for the income tax amendment which was supposed to make the wealthy less wealthy and to give the federal government a stable source of income. Under Wilson congress passed the Federal Reserve Act created the federal reserve system to control the economy and the banking industry. Congress also passed the Federal Farm Loan Act which provided funds for farmers. Wilson also began to regulate business by passing laws to regulate working conditions. Another achievement of Wilson was the Underwood Tariff. This was the first time that a modern president was able to get congress to lower the tax on foreign imports. The climax of an early active federal government came with the presidency of Woodrow Wilson.

THE BIRTH OF MODERN BUSINESS

The 1920s featured a real decline in progressivism. The presidents of the 1920s were quite weak and congress was greatly influenced by business. Plus the prosperity of the 1920s led to full employment and rapid business growth. It was at this time that modern business was born. Major changes took place in business and in business practices and business that we know today began to be recognized. Financial capitalism became the normal practice for American business. Bankers and investors played an essential role in the growth and development of business and still do today. There occurred a permanent separation of owners and managers. Managers now became known as executives and were becoming increasingly trained to be managers. They were also being given more and more control of businesses. Businesses now took the legal form of corporations. This provided legal protection for businessmen and allowed them to sell stocks and bonds.

A new technology emerged that would become the technology of the future. We must give credit to Henry Ford who began to build Model T fords using assembly line production. Assembly line production would become the method for American mass production. This production would lead to the emergence of new useful devices such as the automobile, the radio, the vacuum cleaner and the refrigerator just to name a few. In order to create a consumer demand for those new products, businesses turned to mass advertising. Agencies in New York began to create ads for newspapers and magazines and commercials for radio. Plus businesses even utilized subconscious advertising known as subliminal advertising. Just think of how many times certain advertising songs and jingles have appeared in your head. In addition, businesses started credit purchasing. There were no credit cards at this time, but buyers could purchase items on credit. The philosophy was buy now-pay later. Finally many books appeared that praised the gospel of wealth and pushed the American Dream of making money. Bruce Barton, for example, wrote THE MAN KNOWBODY KNOWS. In this book he used Jesus Christ as the ultimate salesman with his sales team known as twelve apostles. Modern business was alive and well.

The false economy and prosperity of the 1920s began to unravel with the stock market crash in October, 1929 which was followed by the worst economic crisis in American History- the Great Depression. Businesses suffered like never before and with the election of Franklin Roosevelt in 1932 a new era arrived for American business. Actually things had gotten so bad for American business that they sought help from the federal government. This is the beginning of the permanent relationship between American business and the federal government. Initially the federal government under Franklin Roosevelt and his New Deal established a program of business relief known as the National Recovery Act. This law provided wage and price control; businesses who participated in this relief program put the symbol of the Blue Eagle on their windows.

Roosevelt now turned to permanent programs which would expand what Theodore Roosevelt and Woodrow Wilson started. Reform programs such as the Federal Housing Act which provided low interest loans for housing and greatly controlled the housing industry and the Banking Reform Act which gave the government much more involvement in the banking industry and the Securities and Exchange Act which strictly regulated the buying and selling of stocks and bonds created this permanent relationship between the federal government and business.

BUSINESS TODAY

World War II featured the high point of economic prosperity for American business and many businessmen came to the conclusion that war is good for business. After the war ended in 1945 there were other key changes that created American business today. We are in the age of the corporate state. There are now fewer and fewer corporations. They own various types of large businesses and offer less and less competition. In fact the corporate budgets today of many large corporation often involve much more capital than most state governments. In charge of those large and powerful corporations are trained executives. In order to become one today, you earn an MBA and when hired receive a sizeable salary. These trained executives are becoming a major force in America and those in the media have a great deal of control.

A new type of business practice has emerged and is known as the franchise. The idea behind the franchise is to sell an interest in a successful business. It is like a giant xerox machine for American business; businesses all over the country offer a copy of the successful business and American businesses now look very similar across the country. As one travels from mall to mall across the country, the same businesses with the same products are visible. It is true that McDonalds started the franchise business practice. Of course, if businessmen could have a successful franchise in the United States, they could have a successful franchise across the world. We now have the existence of the international franchise and the international gospel of wealth. If you can make money in the United States with a certain type of business, you can make money outside the United States. Disneyland, for example, is found in Japan as well as France. McDonalds is all over the world, even in Moscow, Russia. There is no doubt that the gospel of wealth is still alive and well today. You may even call it the lottery dream in California. But it is a little different than in the period after the Civil War. Today you must be aware of an active federal government and government regulations. So it is the gospel of wealth within limits.

New technology is still evident in American today and has created new businesses and new ways of living. The aerospace industry with companies such as Boeing Aircraft has created successful commercial flight along with space exploration. The media revolution is still an ongoing one from television to vcrs to dvds, while the computer revolution was truly a revolution and has changed life in America in a drastic way. This new technology has created new businesses and new products. Finally we are still victims of consumer abuses. Many writers such as John Kenneth Galbraith has made us aware of how businesses control the government and even control the military, while consumer advocates such as Ralph Nader with his Naders Raiders warn us about continuing consumer abuses by corporate giants such as General Motors.

America has come a long way from the early days of the Massachusetts factories. Businesses has gotten bigger and bigger, but now has a permanent relationship with the federal government and must be increasingly aware of that relationship. A major element in the growth and development of American business has been the working person- known as American labor.

PreviousNext