June 2014 1-02: How far did the rise of big business change the American economy in the years 1890 to 1920? [24 marks]

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How far did the rise of big business change the American economy in the years 1890 to 1920? [24 marks]

Advantages

  • Dynamic captains of industry emerged during this period.  These individuals became the driving force of economic expansion through their leadership and entrepreneurial skills.  They included men such as Carnegie and Rockefeller.
  • Big business was efficient.  For specific industries they owned the raw materials, the production and distribution methods and the sales. This highly structured organisational framework served to strengthen the role of big business in the economy’s growth.
  • Trusts were created. These came to be dominant organisations and controlled markets, prices and wages. This meant they had an enormous influence of national economic policy making.
  • Large scale investment was possible due to the wealth of the corporations.
  • Creation of Ford’s assembly line, revolutionised the automobile industry.

Disadvantages

  • Governments introduced a range of measures to control the power of big business by limiting the power of monopolies e.g. the Sherman Anti-Trust Act (1890).
  • The influence of big business was not evident in the Democratic Party.
  • There was a growing anti-big business movement in the development of organised labour and trade unions. These organisations were rapidly growing in strength, and therefore influence. These were politically influential and independent of big business influence.
  • The political, and therefore the economic influence of big business, was challenged by both the Popularists and Progressivists.
  • Mass immigration provided a cheap labour source and higher demand.
  • The USA was rich in natural resources needed for industrial growth. Economic expansion was certainly viable.
  • The transport infrastructure e.g. railways, was already well-established by 1890.
  • Impact of war in particular world war one. USA emerged as the world’s creditor nation.

Evaluation

The role of big business was essential in the economic expansion of the USA but this was by no means the sole or primary factor.  There were constraints on business and other factors such as mass immigration, which significantly contributed to economic growth over and above any contribution made by big business.

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