The United States became a large subject to influence and change during the period of 1870 to 1900. This period was mainly governed by the rise of monopolies and its affects. Through the ideals represented by monopolies, a force broke into American society that negatively changed her business structure and the way that companies were run through the late nineteenth century.
America was supported with an economic system that went by the name of capitalism. Capitalism is An economic system characterized by freedom of the market with private and corporate ownership of the means of production and distribution that are operated for profit. This system let businesses run their own show. They had the freedom to grow at their own will and over take all businesses in the way. Such businesses began to sprout under this system. New industries began and supplies began to flourish. Due to the amount of supplies that were available to the customer, competition began. This competition, brought about by the demand of supplies, created the theory of supply and demand. Supply was the amount that the companies agreed to sell at an arranged price. Demand was the amount of customers willing to pay the specific price for the product. According to this theory, if supplies rose above demand then companies are forced to lower their prices to attract sales. On the other hand, if demand exceeds supply then sellers raise prices because the customers will be willing to pay the prices. This new concept affected the customer greatly. The prices he had to pay were dictated buy the amounts of customers there were interested in the product . Companies needed business, so they responded well to supply and demand. In order to attract the customer these companies had to present him with the better product for the lower price. Industries were at constant battle for their customers (profit). Solutions for new more efficient systems of production were being thought of by the soon to be monopolists.
The result of the period of competing between companies was the rise of monopolies. A monopoly is An exclusive ownership or control, as of a given commodity of business activity . Businesses wanted to beat out every one of their competitors. The large industries like steel, oil, and railroads are great examples of the dominance of one company and its control. Since the government did not put limits on the expansions of companies, they became animals in a lively jungle. The large companies swallowed the near by small businesses. Big businesses began to take over their industries. They eliminated their competitors. They dominated all of one entire industry. With this power they were able to reduce the amount of supplies and raise prices, in order to maximize profits. These monopolies took advantage of supply and demand. They also saw that the government was not concerned about business affairs at the time. They had complete control over who worked and who did not. They lowered wages to make production more efficient. Because one company had complete control over an entire industry, the number of workers who needed jobs were innumerable. Theses companies were able to control what they wanted to pay their workers because there was always someone out there that needed a job no mater what the pay was.
The industry of railroads began with the demand for them. This demand was very high and small companies found interest in the future of railroads. The industry was a very healthy one during its rising. The demand for transportation was starting to be met by the countless railroad companies. Soon the supplies began to exceed the demand. The industry grew too quickly. Small companies were unable to survive with the rest of it competitors. The larger companies began to grew faster and faster because they bought out the competitors. In a matter of years the entire industry fell into the hands of few. Cornelius Vanderbilt was the largest name in the railroad industry. He began his expansion by the combining of railroads. He purchased the Central Railroad and merged it with the Hudson River Railroad. He then spent large amount of money improving the rail system and its efficiency. He then began to buy every stock on sale. He wanted to be the one in charge and he was by buying out all his competition. His goal was to have a monopoly over all small business. He had the Grand Central Terminal in New York City built. With this he had an empire that controlled rails from New York to Chicago .
In Illinois the dictation of the railroad monopoly was felt. Since a few companies controlled this industry, power fell into the hands of few. The regulation on prices seemed unfair to the farmers. Companies were not charged the same as the farmers were. This shows how the monopoly can adjust to fit its own needs, not necessarily adjusting for the betterment of others. In order for an industry to rise as high as it did, many have to fall. In 1877 the problem with he farmers was taken to court in the case Munn versus Illinois. This case brought up the topic of who should regulate business interactions such as the transportation charge for different organizations. The court ruled that the government of the state of Illinois would regulate commerce on the rails . Ten years later, in 1887, the federal government passed the Interstate Commerce Act, which dealt with the problems that arose under the unrestricted competition. This act prohibited unreasonable rates for different groups in society. What this act did was forbid the use of many of the powers that the monopolies had .
John D. Rockefeller was the owner of Standard Oil Company. His company eventually eliminated competition by buying or gaining control of refineries through the east and mid west. He was able to prove that he was the man that would the head of the industry very early into his ambitions. He controlled about 90 percent of the nation s oil business. Rockefeller integrated his oil business from top to bottom. His organizational ideas for his industry were horizontal. This meant that he followed one of his products through all of its stages. For example, Rockefeller controlled the oil when it was drilled, through the refining stage, and he maintained control over the refining process turning it into gasoline. He came to be the dominant person in the oil industry. He believed primitive savagery prevailed in the jungle world of business, where only the fittest survived. Rockefeller believed in a very ruthless way of business. He was out to win and only win. He was now at the point that he controlled almost the entire oil industry, which was a necessity for the American people. They used his product for the heating of their homes, lamps, and for the few cars that were around. He almost had complete control over America. He treated his customers and workers cruelly and harshly. An example of his ruthless mind set and his power was when he threatened to start his own chain of grocery stores. The Standard Oil Company desperately wanted every possible company to buy their products (McCloskkey, p. 145). He threatened to start his own chain in order to force companies to buy his product and no others. If he were to begin his own chain of grocery stores, he would put all the local merchants out of business. People are living in fear of him. He has the power to raise prices as high as he wants and America has to pay for it. For the common man, live is a nightmare. Their jobs are not secure. Through this monopoly, Rockefeller could fire who ever and offer a lower wage and still have enough workers waiting to fill the spot.
In the steel industry, Andrew Carnegie developed a system known as vertical integration. This means that he cut out the middleman. Carnegie bought his own iron and coal mines because using independent companies cost too much and were inefficient. By doing this he was able to under sell his competitors because they had to pay the competitors they went through to get the raw materials. By underselling he attracted the more demand for his product. The larger demand for Carnegie s company caused other companies to fold. They could not beat his prices and in turn could not survive the jungle. He came out on top creating his own monopoly like Vanderbilt and Rockefeller. An example of his cruelty and misuse of power was encouraging unfriendly competition between two of his own workers. He would insist that they would outwit each other. He also treated his customers and worker like Rockefeller, with a cold heart and selfish attitude. He did everything for his benefit causing the rest of the nation harm.
In the years between 1870 and 1900, the nation of America experienced several new aspects of business. The people of the nation felt fear for their future. Monopolies jeopardized their lives and hopes. In a sense these trust brought jobs to society, which would be a positive aspect. Yet these jobs were not secure. The laborers found work to be intolerable and found themselves wishing that they could protest. They knew that if they did they would be easily replaced. Their lives were based on fear due to the new structure of business. The lives in fear were the lives that felt the negativity of big business.