Factors That Led to the Rise of Big Business in the Years after the Civil War - Essay Example

Topic 2 Factors That Led To the Rise of Big Business in the Years after the Civil War Introduction The American Civil War occurred between 1861 and 1865, which was fueled by slavery in the southern territories that were also known as the Confederate States of America. Other causes of secession included sectionalism, state rights, and protectionism among others (Roland 1861). The war led to the destruction of infrastructure in the South and the death of more than 600,000 soldiers. After its halt, there was the need for reconstruction in the states due to the economic, social, and political damages (Roland 1865). The stop of the war led to the rise of big businesses in the United Stated and mostly in the war-torn states. The rise was initiated by various factors that included social, economic, legal, and political. The big business era was a source of wealth and capitalization for many Americans most of who were involved in various national corporations that controlled markets (Wilson 214). Factors That Led To the Rise of Big Business in the Years after the Civil War 1. Abundant natural resources Sufficient resources such as oil, coal, and iron were foundations for the building of the states after the war. Adequate iron led to the production of iron and steel that were part of inputs in the big businesses. Steel was used to make railroads and cars that were used in the transportation of various products ranging from coal, ores, and agricultural produce from a state to another (Symonds). Oil was a precious good after its discovery, which was used in homes and to power machinery in some of the industries. Coal powered factories were efficient compared to water-powered; hence, the discovery of coal-fueled the increase of steel mills in the U.S. 2. Increased demand and population There was a rise in the number of immigrants to Southern States that provided a foundation for investors, investors, and labor. The immigrants worked in the big businesses and agricultural sector; hence, providing cheap labor. The high population required enhanced transportation methods leading to the increase in railroad networks. The increased demand led to a change in the social life of some of the citizens due to enhanced wealth sources. 3. Development of banks and financial institutions The banks offered loans that were sources of investment capital. Investors in the big businesses would seek assistance from banks to set up steel mills and railroads as part of the reconstruction. Stock markets were used by trusts such as Rockefeller’s to trade shares and purchase other corporations. 4. Lack of government interference The Federal Government did not regulate the operations and establishment of businesses. They were free to pool and set cartels that would increase competition opportunities. However, this factor led to the growth of monopolies in the steel, banking, and oil sectors. Free entry increased the number of firms being established. However, large corporations acquired small firms to decrease competition and start monopolies. TYPES OF LARGE BUSINESSES THAT EMERGED 1. Railroads There was the establishment of a network of railroad that connected various states using the same gauge. It was an opportunity for investment by most of the wealthy families. The rails would be used to transport agricultural produce that was part of the main activity in the Southern States. The railroads also contributed to the rise of other industries in the engineering fields because such as the invention of Pullmans sleeping car and the Westinghouses airbrake. The number of tracks owned reflected to the amount of profits being collected; hence, motivated other wealthy families to increase the number of railroad network in the U.S. Competition became part of the business whereby individuals would buy off other tracks to increase revenue. Steel companies Growth of the railroads contributed to the rise of the steel industry. It was preferred to iron due to its strong and light qualities. The reconstruction of the Southern States also called for the use of steel in buildings so that they would not be devastated in case of another war. The Bessemer process led to fast production of cheap steel from iron. It led to the influx of steel mills that attracted investors from other business fields. The railroads came in handy during the transportation of ore from the mines to the steel mills. The process led to the growth of both industries in the U.S. Demand from the rising number of storey building, and infrastructure increased the production process leading to maximization of profits and capitalization. 2. Oil industries Oil was discovered in Pennsylvania and led to a rush from rich families to take advantage of the resource. Rockefeller came up with a trust that controlled a large portion of oil refining in the country (Selcer 89). He used both legal and illegal methods to attain the status and enjoy monopoly benefits. The monopoly led to increased wealth in the families of members of the trust and corporations that controlled oil refining firms. 3. Banking and finance institutions The businesses had been established before the war but begun peeking during the reconstruction period. There were increased customers from the agricultural sector that needed loans to increase production. The introduction of agricultural machinery caused farmers to obtain loans from banks and other financial institutions so that they would purchase and increase competition. Other businesses such as the steel and rail needed loans for their expansion and had to seek them from banks. Wealth families also required the banks to offer storage for their cash and valuables. Investors who purchased stocks also required the corporations to get their share of dividends. Finance corporations were owned by investors and were used in the organizing and offering financial information to businesses. Ways in which these businesses consolidated their power The businesses were interconnected since there was less competition at the time. For example, the railroads business gave rise to the steel industry. The government has also believed in the Laissez-faire economics whereby businesses were at freedom to run without government interference (Wilson 214). The banking sector was linked to all businesses due to the offer of loans and financial advice. Wealthy Americans and investors that used their capitalization to purchase other big businesses owned the firms. J.P Morgan was in the banking sector but used his richness to purchase other businesses causing a rise in monopolies. Lack of proper regulations led to the rise of trusts such as Rockefeller’s that controlled the oil refining industry (Selcer 89). Profits were used to purchase and invest in other businesses such as the railroads. The monopoly activities led to consolidated power that was controlled by a few wealthy families. Steps that were taken to deal with their monopoly power During the late 1800, corporations were so big and powerful that they controlled the entire markets (Wilson 214). The rich were considered the reliable citizens because they would provide financially for the state. They overcharged fees and later paid rebates to politicians and legislators. The poor were suffering due to the monopoly power, and the government decided to come up with legislations to equalize the situation. The government issued minimum rate laws in the railroads business that would cater for the poor. It also came up with laws that controlled the free trade to prevent monopolies from build. Its interference would prevent trusts from purchasing other firms to ensure monopoly. Regulating businesses was an advantage to the consumer since he/she would purchase goods and pay for services at low prices due to the presence of competition. Why the efforts were unsuccessful Most of the legislators and politicians were members of corporations, trusts, and other big businesses; hence, they would pass rules in favor of their businesses. For example, when price ceilings were set for railroad fares Congress would later review the laws and pass them in accordance with personal interests. At times, it took strike and demonstrations to force the federal government to change the laws. CONCLUSION The increase of big businesses in the U.S led to an increase in the number of millionaires. It also contributed to the change in industrial production techniques (Symonds). The businesses acted as a foundation for modern industries in various fields including steel, oil, railroad, and banking. Finally, the big businesses have had a large contribution to capitalism and economic, social, and political development of the U.S. Works Cited Roland, Charles P. "Disrupted Decades: The Civil War and Reconstruction, and: The War That Never Ended: The American Civil War, and: The American War and Peace, 1860-1877 (review)." Civil War History: 157-59. Print. Selcer, Richard F. Civil War America, 1850 to 1875. New York: Facts On File, 2006. Print. Symonds, Craig. "American Civil War (1861-1865)." Civil War (US) (1861-65). 30 Jan. 2015. Web. 25 Feb. 2015. . Wilson, Mark. The Business of Civil War Military Mobilization and the State, 1861-1865. Baltimore: Johns Hopkins UP, 2006. Print. Read More