The manufacturing and banking industries of the late nineteenth century produced businesses that were unprecedented in the U.S. \"Big Business\" generated wealth in staggering concentrations and made a few men richer than anyone could have imagined.
Andrew Carnegie and the Rise of Big Business: Andrew Carnegie’s spectacular climb from rags to riches reached mythic proportions for Americans. He also symbolized the rise of Big Business. He mastered the telegraph, railroad, petroleum, iron, and steel industries and pioneered the introduction of modern management techniques and strict accounting principles.
Carnegie and the Pennsylvania Railroad: Carnegie and the Pennsylvania Railroad: Andrew Carnegie was trained in organizational and management techniques at the Pennsylvania Railroad. As he and the company matured it grew into the largest privately owned company in the world and Carnegie helped make the Pennsylvania railroad a model of industrial efficiency. Carnegie also learned financial lessons from J. Pierpont Morgan, a founding partner in Drexel, Morgan and Company. Drexel, Morgan and Company created the modern investment company which facilitated the trading mechanisms that attracted world-wide investors. Drexel, Morgan and Company grew rich selling railroad stocks. Andrew Carnegie and Morgan prospered in their relationship as well.
Carnegie Becomes a Financier: Between 1856 and 1872, Andrew Carnegie had proven himself a master of the railroad industry, a brilliant bureaucratic manager, and a shrewd financial manipulator. He had made unheard of sums of money, most of it from revenue from capital, as he said, \"something that I had not worked for with the sweat of my brow\".
Carnegie Dominates the Steel Industry: Carnegie took his knowledge of management to the iron industry forcing it to bend to his will. His greatest achievement as an entrepreneur was his introduction of modern management techniques to American industry. But it was in steel, which was more suited to the railroad industry than iron, where Andrew Carnegie made his mark -- and another fortune. The transition from iron to steel came about because of the Bessemer process and the transportation of iron ore from its source in Michigan to the mill in Pennsylvania. But without Carnegie’s access to vast amounts of investment capital (his and his friends’) the steel industry would have been slow to take off. Carnegie’s steel mills soon supplied America’s railroads and his fanatical cost-control techniques ensured financial success.
Big Business Consolidates: Big Business required huge investments of capital and only big investment houses could meet the demand. Big Businesses were so big that rarely did one person own and operate them. Instead Big Business was run by a well-ordered bureaucracy and it ran continuously. Profits were protected by eliminating or at least reducing competition. The most common strategy designed to reduce competition was vertical integration which was an attempt to control as many aspects of a business as possible. The trust, or later the holding company, was an attempt to create a monopoly in which internal competition was regulated and external competition eliminated. The face of the American economy was changing during the last decades of the nineteenth century and the faces that symbolized the change were America’s socially elite.
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