Industrial Expansion and Concentration Overview

Study Notes

Industrial Expansion and Concentration

Sherman Antitrust Act of 1890 aimed to discourage unfair monopolies and promote free competition.
Vertical mergers, according to Chandler, integrate supply chain stages within a single corporation, minimizing reliance on external suppliers and increasing efficiency.
Horizontal mergers, as viewed by Chandler, consolidate operations, expand market share, and achieve economies of scale, which is especially beneficial for high infrastructure cost corporations.
Corporations merged to increase market power and achieve economies of scale.
Scientific Management, developed by Taylor, aimed to improve efficiency by analyzing tasks, standardizing workflows, and emphasizing performance-based rewards. Criticized for dehumanizing workers and prioritizing profit over worker satisfaction. This was used in railroads.
Trusts consolidated multiple companies under a single board to reduce competition and increase influence.
Holding companies gained power by owning controlling shares in various companies, enabling centralized management and reducing competition.
Standard Oil was accused of monopolistic practices including price fixing, predatory pricing, and trust formation.
Predatory pricing is a strategy of temporarily lowering prices below cost to drive out competitors, eventually returning prices higher.
Industrial Revolution drove the trend towards oligopolies (big business) by enabling large firms to dominate industries and control most of the market via economies of scale.
The use of mass production and technological advancements during the Industrial Revolution led to oligopolies.
Evolution of energy shifted from traditional sources (wood, coal) to more efficient fuels (oil, electricity), powering new technologies like automobiles and electrical grids.
Labor force increased in worker production significantly, due to machines, division of labor, and standardized processes. This led to harsh work conditions.

Money, Prices, and Finance in the Postbellum Era

Coinage Act of 1873 (Crime of '73): Demonetized silver, leading to the U.S. adopting a gold standard and sparking debates over monetary policy.
Government reduced inflation after the Civil War by returning to the gold standard, reducing war-time spending, and limiting currency in circulation.
Supply-side economics during the Industrial Revolution involved reducing barriers to business, like taxes and regulations.
Real wages initially stagnated or fell in the beginning of the Industrial Revolution, but wages increased over time as productivity rose.
Gold Standard favored gold as the backing for currency, aiming for stability and trust.
Free Silver movement advocated for unlimited silver coinage to increase the money supply helping farmers and debtors.
During this time "sound money" (gold standard) ensured currency stability versus potentially inflationary policies (free silver)
Bank runs are when many depositors simultaneously withdraw money due to fears the bank will fail.
Inflation decreases value of money, helping debtors reduce real value of debt, but hurts creditors. Deflation increases value of money, helping creditors, but hurts debtors.
State banks were often chartered by state governments and operated under less strict regulation than national banks. National banks were federally chartered, required U.S. Treasury bonds, and issued national currency.
Greenbacks were paper currency issued by the U.S. government during the Civil War, not backed by gold or silver; this resulted in inflation and reduced purchasing power.
National Banking Act of 1863 established systems of nationally chartered banks that issued stable, government-backed currency.

The Contraction Act, Resumption Act, & Banking Panics

The Contraction Act of 1866 aimed to reduce the amount of greenbacks, but failed to stabilize the economy.
The Resumption Act of 1875 aimed to restore the gold standard; tying the currency to gold aided in restoring confidence in the U.S. dollar.
Business cycles are periods of economic expansion followed by contraction, are affected by money supply.
The Federal Reserve Act of 1913 created a central banking system to manage money supply and provide stability to banks. The Federal Reserve was created to prevent banking panics, as a lender of last resort.

General Economic Principles and Other Topics

Quantity Theory of Money (QTM): Suggests that money supply changes directly affect price levels. Inflation occurs when money supply increases without corresponding increase in production.
Gold Standard ties currency to a fixed quantity of gold, limiting money supply growth and stabilizing inflation.
Good deflation happens when reduced prices result from increased productivity, not reduced money supply.
Bad deflation happens when reduced prices are caused by shrinking money supply, hurting debtors.
Banking panics occur when depositors simultaneously withdraw money due to fear the bank will fail.
Important graphs in the chapter show changes in general prices and money supply during the Postbellum era.