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Business, Big

BUSINESS, BIG

BUSINESS, BIG. When used in the context of American economic development, the term "big business" refers to the concentration of industrial and financial power that began in the second half of the nineteenth century and continued through the end of the twentieth. The concentration of economic power began with the transformation of the United States in the nineteenth century from an agrarian, handicraft economy to an industrial, factory economy. By 1900, the United States had become the largest industrial nation in the world. This growth was due to factors including a pro-business political climate; a burst of inventions such as the telephone, the electric light, and the automobile; the availability of vast natural resources; a growing population; and improved production methods, including the division of production into discrete steps, each performed by a separate worker.

This economic growth in part depended on, and in part created, aggregations of wealth among a few individuals and the companies and banks they controlled. Andrew Carnegie, a steel magnate, became one of the world's richest men. J. P. Morgan gained extraordinary wealth in banking and finance, as did John D. Rockefeller in oil, James B. Duke in tobacco, and Cornelius Vanderbilt in steamships, railroads, banking, and manufacturing. Because the government did little to regulate business during the nineteenth century, these and other "robber barons" were able to gain monopoly or near-monopoly power in their respective industries. This was accomplished through several means, including mergers with competing businesses and the formation of trusts, where a group of managers controlled rival companies without formal ownership of the businesses. This concentration of economic power in a few giant corporations made it possible to take advantage of the efficiencies and stability that come with large-scale production, but it also gave corporations the ability to manipulate prices and government policy.

Big business thrived also because of the absence of any meaningful counterweight to its influence. Unions were very weak. Many states restricted union activity, companies routinely terminated union members, and federal or state troops often helped companies break strikes. Courts were also very supportive of corporate power. In 1886, the Supreme Court held that corporations were "persons" for the purposes of constitutional protections, such as equal protection. In 1905, in Lochner v. New York, the Court struck down a New York state law limiting the number of work hours for bakers, saying that such laws were contrary to the freedom of contract implicit in the Constitution. Employers thereafter used Lochner to strike down minimum-wage laws.

Meanwhile, states competed among themselves to be the place where companies chose to incorporate, because of the large fees thus generated. Earlier, states routinely placed restrictions on the size, life span, and activities of corporations, as well as their ability to hold stock in other companies. In 1889, New Jersey adopted a statute that released corporations from such regulation, and so many businesses rushed to incorporate in New Jersey that the entire expenses of the state were eventually paid out of incorporation fees. Other states, seeking to stem the flow of businesses to New Jersey, were forced to remove many of their own restraints on corporations. This came to be known as "the race to the bottom."

Public outcry against the power of corporations led the federal government to adopt the Sherman Antitrust Act in 1890, which outlawed any contract, combination, or conspiracy in restraint of trade and prohibited market monopolies. The act had little meaningful effect. Other than bringing about the breakup of a few large conglomerates, such as Rockefeller's Standard Oil Company, the act did little to alter the balance of economic power. Instead, courts often applied the act against unions, saying that strikes and other labor organizing efforts interfered with commerce.

The Great Depression, which began in 1929, began to have some effect on the power of big business. After business could not pull the nation out of depression, many people lost faith in business executives and began to look to the government and the labor movement for help. The Supreme Court overturned Lochner, empowering the government to enact economic regulation to limit the power of business, protect the rights of unions to organize, and secure minimum wages and reasonable hours for workers.

The framework of governmental regulation and trade union representation provided some measure of balance to the economic power of business during the middle of the twentieth century. The efforts to regulate business and the market gained energy again in the 1960s and 1970s, when the federal government passed a host of regulatory initiatives to assist workers and to control the power of big business. These initiatives included the Occupational Health and Safety Act, anti-discrimination initiatives, increases in the minimum wage, and a host of environ-mental laws including the Clean Air Act and the Clean Water Act. Throughout the post–New Deal period until the early 1970s, average weekly wages (in real terms) rose, and income inequality fell.

During the last two decades of the twentieth century, business interests regained much of the influence they had lost during the middle of the century. Beginning with the strongly pro-business Reagan and Bush administrations, and continued by the Clinton administration, the federal government took a less strict attitude toward controlling monopolies and limiting the power of businesses. Bolstered further by a strong stock market, particularly in the 1990s, businesses merged at an unprecedented rate. The total dollar volume of mergers increased throughout the 1990s, setting new records in each year from 1994 to 1999 (see Mergers and Acquisitions). Many companies became globalized, diversifying their manufacturing and sales internationally. Spurred by major technological advances, technology, computer, software, and media conglomerates became some of the most powerful companies in the United States. By late 1999, the size and economic power of some companies rivaled that of nations. The total value of the stock of International Business Machines (IBM) was roughly equal to the gross domestic product (GDP) of Colombia, Microsoft's capitalization was equal to the GDP of Spain, and American Express's capitalization equaled the GDP of New Zealand.

Meanwhile, wages for working people stagnated, and inequality between the rich and poor became worse than at anytime since the 1940s. Compensation for corporate chief executive officers rose almost 600 percent during the 1990s, but average weekly wages for the working class were lower than in the early 1970s. In 1998, the CEO of the software giant Microsoft, William H. Gates 3d, had personal wealth of $50 billion, more than the combined net worth of the poorest 40 percent of the U.S. population. Union membership declined sharply, and stood at historically low levels. Some analysts argued that the power of business at the end of the twentieth century rivaled that at the end of the nineteenth.

BIBLIOGRAPHY

Beatty, Jack. Colossus: How the Corporation Changed America. New York: Broadway Books, 2001.

Derber, Charles. Corporation Nation: How Corporations Are Taking Over Our Lives and What We Can Do About It. New York: St. Martin's Press, 1998.

Prechel, Harland. Big Business and the State: Historical Transitions and Corporate Transformation, 1880s–1990s. Albany: State University of New York Press, 2000.

Zinn, Howard. A People's History of the United States. New York: Harper and Row, 1980, pp. 247–289.

KentGreenfield

See alsoCorporations ; Labor .

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"Business, Big." Dictionary of American History. . Encyclopedia.com. 16 Aug. 2017 <http://www.encyclopedia.com>.

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"Business, Big." Dictionary of American History. . Retrieved August 16, 2017 from Encyclopedia.com: http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/business-big

big business

big busi·ness • n. large-scale or important financial or commercial activity: the children's toy market is big business now.

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"big business." The Oxford Pocket Dictionary of Current English. . Encyclopedia.com. 16 Aug. 2017 <http://www.encyclopedia.com>.

"big business." The Oxford Pocket Dictionary of Current English. . Encyclopedia.com. (August 16, 2017). http://www.encyclopedia.com/humanities/dictionaries-thesauruses-pictures-and-press-releases/big-business

"big business." The Oxford Pocket Dictionary of Current English. . Retrieved August 16, 2017 from Encyclopedia.com: http://www.encyclopedia.com/humanities/dictionaries-thesauruses-pictures-and-press-releases/big-business