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After meeting Bessemer, Carnegie opened a steel mill in Pittsburgh in 1875 and began using the Bessemer process. On one trip, he met Sir Henry Bessemer, who had invented a new process for making high quality steel efficiently and cheaply. As part of his business activities, Carnegie often traveled to Europe. By his early 30s, he quit his job to concentrate on his investments. When Scott was promoted, Carnegie became the new superintendent.Ĭarnegie bought shares in iron mills and factories that made sleeping cars and railroad locomotives, as well as a company that built railroad bridges. He worked his way up to become secretary to Thomas Scott, a superintendent of the Pennsylvania Railroad. A Scottish immigrant, Carnegie went to work at age 12 in a textile factory. The remarkable life of Andrew Carnegie illustrates the rise of big business in the United States. As a result, by the late 1870s, competition had reduced many industries to a few large highly efficient corporations. As a result pools generally broke apart whenever one member cut prices to steal market share from another. As a result, even though the laissez-faire economy meant that companies could try to fix prices, companies that formed pools found that it also meant they had no legal protection and could not enforce their pool agreements in court. Another term for a pool that is used today is cartel.Īmerican courts and legislatures, however, were suspicious of pools because they interfered with competition and property rights.
How did the bessemer process benefit carnegie’s monopoly? free#
With no regulations governing their competition, companies were also free to make deals with each other to fix prices by organizing pools, or agreements to keep prices at a certain level. This situation demonstrated one of the potential costs of laissez-faire. Cutting prices to beat the competition also cut into profits. What new business strategies allowed businesses to weaken or eliminate competition?Īlthough a laissez-faire economy benefited consumers because the intense competition led to falling prices, business leaders did not like the intense competition that had been forced on them. Rebates from the railroads further lowered their operating costs. Of course, this also led eventually to one of the major costs of laissez-faire economics: small businesses, many family owned, that could not compete with large corporations were forced out of business. They could produce more goods at a lower cost and could stay open in bad economic times by cutting prices to increase sales. In these circumstances, big corporations had several advantages. Operating costs, such as wages, were such a small part of total costs that it made sense to continue operating, even in a recession. Big manufacturers, however, had the high fixed costs of building and maintaining a factory, while operating costs were low. If sales dropped, it was cheaper to shut down temporarily. Small manufacturers usually had low fixed costs but high operating costs. Operating costs are incurred when running a company (wages, shipping costs, buying raw materials). Fixed costs are costs a company pays even if it is not operating (loans, mortgages, and taxes). They achieved economies of scale, in which the cost of manufacturing is decreased by producing goods quickly in large quantities.Īll businesses have fixed costs and operating costs.
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With the money raised from selling stock, corporations could invest in new technologies, hire large workforces, and purchase machines. The freedom to form a corporation was one of the great benefits of the laissez-faire approach to economics in the later half of the 1800s. In the 1830s, however, states began allowing companies to become corporations and issue stock without a charter from the legislature. Before the 1830s, few corporations existed because entrepreneurs had to convince state legislatures to issue them charters. Selling stock allows a corporation to raise money while spreading out the financial risk. Stockholders own corporations through shares of ownership called stock. The corporation, an organization owned by many people but treated by law as though it were a person, made big business possible. What advantages do large corporations have over small businesses?īy 1900, big business dominated the economy, operating vast complexes of factories and distribution facilities.
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Retailers began using new techniques to attract consumers. Following the Civil War, large corporations developed that could consolidate business functions and produce goods more efficiently.