22 ChaPter^1
also creating “efficiency” in production and management. Politically, those
with power sought “representation” by controlling public officials at all level.
It was a “harmony of interests.”
The biggest development, of course, was the corporation. Corporations had
existed for some time before the late 1800s but they were mostly public-
private combinations given monopoly privileges by the state to build infra-
structure, like canals. The first huge corporations emerged in the railroad
industry, not surprisingly. As businesses grew to massive size, it was essential
to organize them differently. A Mom and Pop business could not operate at
a significant level, and even banks would not have enough money to lend to
larger businesses to considerably expand their firms. To truly create a big busi-
ness, much more capital would be needed. Capital was not just money, but
funds used particularly to develop and grow an industry, make a profit, rein-
vest, and continue to expand [A hundred-dollar bill used to buy a pair of
shoes is not capital; money used to invest in a plant to produce them and make
a profit is capital].
Hence, the incorporation of American business.. .. By establishing a cor-
poration, the owners of a business could sell stock, or shares – a percentage of
ownership in the company. In that way, they were able to get considerably more
capital, as those well off enough to have some extra money could buy stock,
and investments like the railroad were considered reasonably safe and profitable.
By going to the public for money, corporations had access to more capital than
ever before. Additionally, corporations were safer for business owners because
they limited their risks [“limited liability,” it was called]. If one owned a busi-
ness by himself, he was liable for all losses if the company tanked, and his
creditors could seize all his possessions. In a corporation, one was only liable
for his own investment, and if the company failed, the only losses incurred
would be that investment in stock, and the investor would not be liable for any
corporate debts accumulated beyond that [as evidenced in modern corporate
meltdowns like Enron or the Wall Street failures of the early 2000s].
Corporations brought with them attempts to control markets, to create
oligopolies–a business environment where just a few firms owned all the key
businesses in a particular field–or monopolies–where one firm dominated the
entire industry. Indeed, many of the leading businessmen of this era could
realistically be called oligarchs, or individuals who controlled a particular indus-
try, owned immense wealth, and had powerful political influence as well.