Big businesses have changed the American economy in major ways over the years. Large companies fuel most technology investment and drive a big part of the country’s productivity growth. As these companies grew, they helped develop new industries and made it possible to create goods on a much bigger scale.
The impact was both positive and negative. Big businesses brought more jobs and wealth, but they also made competition harder for smaller companies and affected how laws and policies were made. Their rise shaped not only the way Americans work but also how cities and communities grew, as seen throughout the history of industrial growth and big business.
Key Takeaways
- Large companies played a key role in changing the U.S. economy.
- Big business growth led to new industries and more efficient production.
- Their influence reshaped competition and government policies.
Rise of Big Business in the American Economy
Big business transformed the United States, bringing rapid economic growth and reshaping industries. These changes created new opportunities but also raised concerns about wealth distribution and corporate power.
Historical Background and the Gilded Age
The late 1800s, known as the Gilded Age, was a time of fast industrial growth in America. Advances in technology and transportation, such as the railroad network, made it easier for goods and people to move across the country.
Factories spread quickly, and cities grew as people moved from rural areas and other countries to find jobs. Natural resources like coal, oil, and iron helped fuel this industrial boom.
During this period, government policies often supported business owners by keeping taxes low and limiting regulations. This allowed some people and companies to build huge fortunes while many workers earned low wages and worked in harsh conditions. The rise of wealthy industrialists and a growing middle class changed American society in lasting ways. More about this era can be found in this overview of the industrial growth.
Emergence of Major Corporations
Big businesses grew by merging with or buying smaller competitors. Corporations like Standard Oil, U.S. Steel, and the railroads became leaders in their industries. These companies used new management strategies, such as trusts and holding companies, to control prices, reduce competition, and increase profits.
Massive corporations collected large amounts of money from investors. As a result, manufacturing output rose from $3 billion to $13 billion between 1869 and 1910. You can read more about this at the rise of big business.
The concentration of power in the hands of a few corporations worried many Americans. Some believed this led to unfair business practices and hurt smaller businesses. Big business shaped the structure of the American economy that still influences it today.
Transformation of Major Industries
During the late 1800s and early 1900s, big businesses transformed several key industries by introducing new ways of making and moving products. This created larger profits, more jobs, and faster economic change, but it also brought challenges for workers and small companies.
Growth of Manufacturing and Mass Production
The manufacturing sector grew quickly as big businesses invested in factories and machines. Mass production made it possible to produce goods much faster and at lower costs. Industrial giants like steel and oil companies fed this growth by adopting new technologies and work methods.
This system allowed companies to hire more workers, including many immigrants, but also led to long hours and sometimes unsafe conditions. Many workers had low pay and faced difficult jobs, while business owners saw huge rises in wealth. The rise of company towns and large factories shaped how Americans lived and worked. These changes helped create a wealthier middle class, while widening gaps between the rich and poor. Learn more about how industrial growth changed society.
Expansion of Railroads and Related Sectors
Railroads became the backbone of the US economy. By linking cities and regions, railroad companies made it possible to move products and people over long distances quickly and efficiently. The rapid spread of railroads led to the growth of related sectors like coal, steel, and timber.
Railroad building required lots of labor and materials, which boosted demand in other industries. It also made it easier for farmers and factories to sell goods in distant markets. The power and wealth of major railroad companies sparked debates about fair prices, competition, and government regulation. For more on the importance of railroads and their impact on industry, visit Fiveable.
Impacts on Economic Growth and Structure
Big businesses have played a major role in shaping the U.S. economy through their influence on productivity, workforce patterns, and the expansion of industries. Their activities have brought both significant opportunities and important challenges for economic stability and job markets.
Contributions to Economic Growth
The growth of large companies led to major increases in productivity and efficiency. Businesses like railroads, steel, and oil companies were able to produce goods on a much larger scale than before. This allowed for lower production costs and made many consumer goods cheaper and more accessible.
According to the U.S. Census Bureau, economic growth during the rise of big businesses was rapid. The size and resources of these companies made it possible to invest in new technology and expand markets, both locally and internationally.
By pooling large amounts of capital, big businesses could take on major projects such as building railroads and factories. This helped the U.S. economy transform from mostly agriculture to a mix of manufacturing, services, and trade. Companies also provided steady demand for raw materials, boosting related sectors.
Shifts in Employment Trends
Large corporations changed the way people worked in America. Jobs shifted from small family farms or businesses to large factories and offices run by big companies. This shift caused a rise in factory, clerical, and service jobs, moving millions of workers from rural to urban areas.
Employment became more specialized, with workers taking on specific tasks instead of doing many jobs. This increased overall productivity but sometimes reduced job satisfaction due to repetitive work. The rise of big businesses also resulted in new management roles to organize larger workforces.
Today, a large portion of Americans buy goods and services from major companies, showing how much employment has become tied to these corporations. As noted by Chicago Booth, these trends have shaped modern job markets and influenced the way incomes are distributed across the country.
Competition and the Rise of Trusts
In the late 1800s and early 1900s, major corporations grew larger and more powerful. Their efforts shaped both the business landscape and the lives of workers and consumers.
Development of Monopolies
Large corporations began forming trusts, which are groups of companies managed by a single board. Their main goal was to control entire industries, such as oil, steel, and railroads. One example is Standard Oil, which became so powerful that it set prices for an entire market.
By working together, these businesses could avoid competing with each other. This led to the rise of monopolies—single companies or groups controlling most or all of a market. By 1904, more than 300 trusts controlled 40% of the manufacturing assets in the U.S. and held a capitalization of $7 billion (more detail here). This concentration of power often pushed out smaller competitors.
Effects of Monopolies:
- Higher prices for consumers
- Lower innovation and product quality
- Smaller businesses struggling or shutting down
Consumers often paid more because companies had little reason to lower prices when there was no competition (see how consumers were affected).
Influence on Market Competition
When a few trusts or monopolies dominated an industry, real competition nearly stopped. Big companies could set almost any price and determine what products were available.
This lack of competition made it hard for new businesses to start and grow. Existing small businesses often struggled to survive, leading to less variety and choice for buyers. Large corporations sometimes used unfair tactics, such as cutting prices briefly to drive rivals out and then raising them again once they dominated the market (read more about business tactics).
The concentration of power in a few hands also meant there was significant wealth inequality. The government later stepped in to regulate trusts and try to restore competition. These changes were meant to protect both consumers and smaller companies from unfair business practices (learn more about government intervention).
Corporate Influence on Government and Policy
Big businesses interact with the federal government in several ways. Their financial decisions, lobbying, and investments can change how laws are shaped and who benefits from them.
Federal Government Regulation
The relationship between big business and the federal government is complex. Many large companies try to shape regulations by lobbying Congress and federal agencies. They often use their resources to make campaign donations and hire experts who know the legal system well.
This influence can lead to rules that favor corporations over smaller businesses or regular citizens. For example, some companies support policies that reduce taxes for large firms or weaken environmental rules. Polls show that a large number of Americans believe big business has too much power in Washington, and some worry about scandals and government favoritism toward major corporations. A deeper look at big businesses and government highlights these concerns.
Corporations can also play a role in slowing down or blocking regulations that would cost them money, sometimes making government processes less effective.
Impact of Corporate Investment
Corporate investment reaches far beyond just making profits for shareholders. When big businesses invest in new equipment, factories, or research, they help the economy grow. These investments can mean new jobs and higher wages for workers.
However, not all impacts are positive. Large corporate investments tend to concentrate in specific regions or sectors. This can lead to economic growth in some communities, but leave others behind. Some writers have warned about the growing influence companies have on politics, especially through spending on lobbying and campaigns.
Lists of ways corporate investment affects policy and the economy:
- Job creation in major cities
- Advances in technology
- Shaping educational and training programs
- Regional economic gaps
The way that big businesses use their money can change the direction of public policy and who benefits from government action.
Long-Term Effects on the American Economy
Big businesses changed the structure of the U.S. economy. Their growth shaped how wealth, power, and jobs are divided across the country today.
Modern Legacy of Big Businesses
Large companies still play a major role in the American economy. They are responsible for producing many of the goods and services people use every day. Big businesses drive much of the country’s economic output and hire millions of workers across many different industries.
They have also increased consumer choice. Because of their size, big companies can offer lower prices and more product options, raising the purchasing power of many people. At the same time, some critics say big businesses can reduce competition and make it harder for smaller companies to survive.
Today, these companies are at the center of trade, technology, and investment. They help set trends and create new markets while shaping public policies that affect the economy. Their influence can be seen in every part of modern life.
