The Rise of Big Business

Topics: Corporation, Economics, Capitalism Pages: 8 (2971 words) Published: September 27, 2010
Today, the Big Business is one of the main features of the modern economic environment. Big Business refers mainly to corporations, huge economic entities operating for profit and distributing the ownership by the means of stocks. The Big Business started to grow in America after the Civil War, in the 1860s and already reached its peak of strengths by the “roaring” 1920s. Although Big Business faces much social and governmental control nowadays, its power is still enormous. Large business corporations provide most of economic output, employment places, financial investments, and production output. Politics is also very much influenced by the large corporations and is often forced into pursuing businesses’ strategic interests. Even average citizens get much of Big Business influence through employment, and corporations’ PR campaigns, marketing strategies, and other public policies. David Korten, in his book When Corporations Rule The World, points out that often corporations have more power than a state. Korten argues that, “Corporations have emerged as the dominant governance institutions on the planet, with the largest among them reaching into virtually every country of the world and exceeding most governments in size and power. Increasingly, it is the corporate interest more than the human interest that defines the policy agendas of states and international bodies… ”. The impact of the corporations on the society is so great that the economic analytics have even labeled the modern political and economic system as corporate capitalism. Thus, the contemporary economic environment can be without much doubt considered the world of “Big Business”.

Most explanations of the reasons for the rapid growth of business outline three main factors. First, it is the shift from water-powered to coal-powered factories, which enabled manufacturers to locate their plants nearer to markets and suppliers. The new technology also allowed producing bigger quantities of goods at a lower price, while the quality has also risen significantly. Second, the transportation improvements allowed firms to distribute their products to regional or national markets. A great role here was played by the development of railroad. Instead of only being able to ship goods to a local and regional market, railroads now made it possible for companies to ship and sell their goods outside traditional local markets. But even though the railroad now made it possible for the companies to sell their products to other regions, they had now to find a way of paying for shipping and still being able to reach Break-even point and compete with other regional companies. Third reason is the development of new financial institutions, such as the stock market, commercial banks, and investment houses, which increased the availability of investment capital. Although these factors create an impression that the rise of Big Business was a rather orderly process, this was actually not the way it happened. The rise of Big Business came largely as a response to the hostility of business environment, where the challenges of competition were compounded by frequent economic contractions or panics, and other features of economic instability. The most violent contractions happened in the periods of 1873-1878 and 1893-1897. During one of such panics in the mid-1870s, 47,000 businesses went bankrupt.

The rapid corporate growth in America started in the end of 1860s, after the end of Civil War. The first period of Big Business rise, also known as corporate revolution or great merger movement, coincided with important changes in the American society. These were the end of Civil War, abolishment of slavery and several other political reforms, resolution of social tension between the North and the South, and economic recovery of the South, known as Reconstruction. Unlike the Civil war and Revolution, Rise of Big Business took place without violent political transformation because the preceding...
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