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Corporations in the 19th Century - Accurate Essays

Corporations in the 19th Century





Corporations in the 19th Century

            In the past, corporations were largely unregulated. Historians argue that corporate power went unchecked in the 19th century. Initially, corporations were non-profit, and were formed to improve the welfare of the society by building infrastructure. As Britain colonized America, it sought charters to build roads, schools, railways and hospitals to enhance the lifestyle of British immigrants. Such tasks required large companies to accomplish them. However, as time elapsed, such activities became business ventures geared towards making money. Charter seekers strived to be the only ones in the industry by using all means possible to eliminate competition. Monopoly power and capitalism were used by owners of corporations to gain unfair advantage in the industry.

In the early 19th century, businesses were mostly on a small-scale, with no plans for the future. Later in the century, small businesses began to consolidate to form large companies with monopoly power. Leaders in the corporate world forced the shareholders in the industry to give their shares to a board of trustees and in return, they would be given interest-yielding certificates. In this way, unchecked monopoly power posed a threat to democracy (Avenger & Shmidheister 89). Shareholders in different companies were coerced into sell their shares to one company, building up that one company while destroying other companies. This led to decreased competition and eventually, creation of monopolies or trusts.

Among these trusts were the American Tobacco Company and Standard Oil. Unregulated corporations also led to the rise of capitalism. Corporations came into existent almost solely for the reason of making more and more money. Monopoly power gives the dominating company command over the prices it charges for its goods and services. Such companies misused this power by charging extremely high prices to make profit. The state had a huge role to play in this. Because of economies of scale, the state offered protection to certain large companies, such as those that constructed roads. In this way, no other company could be licensed to operate in that industry. As a result, monopolies enjoyed the profits that came with being the only ones in the industry.

Another cause for monopoly power was the desire to have total control over the source of raw materials, production and supply of the product. For example, the American Tobacco Company incorporated vertical integration in its operations. In this, it started to produce its own tobacco rather than buying it from farmers, and after manufacturing the tobacco, distributing it itself instead of using middlemen. It spread out its operations to Britain, Japan and China, but was dissolved in 1911 under the Antitrust Act of 1890. Standard Oil, a trust, produced, transported, refined and marketed its oil. Integration of these activities led to the collapse of small companies that could have done them.

Unchecked corporate power threatened democracy in another way. By getting rid of all other companies in the industry, the supply of a particular good or service was left to one company. This denied consumers a range of goods to chose from, as they only had one supplier at their disposition. It also accelerated the development of capitalist economy. Capitalism lays great emphasis on the private ownership of property (Avenger & Shmidheister 56). Goods and services are produced with the aim of making profit and the question of what to produce and who to produce for are determined by purchasing power of an individual. Social stratification in society became clearer; it was easy to distinguish the haves from the have-nots.

In the 19th century, there was also control over the media. Media houses were used by monopolies to give partial information to the public. Pleasant information was let out while unpleasant information about the companies was withheld from the public eye. This action manipulated the public to view the companies in a positive light. In that period, the media did not have the freedom to delve into the dark side of issues, being forced to highlight only the good side. The media was also not allowed to air divergent views from members of the public concerning certain corporations, further misleading the public to the advantage of the monopolies.

Another failure in regulating corporate power arose in the accounting and auditing department. In addition, accounting and audit firms became moneymaking ventures. Therefore, they could be easily manipulated by corporate bodies to conceal information on the financial status of the company. If they choose to reveal information, they risked losing the big monopolies as their client, hence no profit. Because of the lack of regulation of companies, many succeeded in hiding their true financial status. An example is if the companies were making high profits, this information was withheld from shareholders so as not to give them a share of the profits in terms of dividends.

Most of this has changed in the recent past. Laws and policies were implemented to mitigate the destructive effects of unregulated corporations. For example, President William McKinley of the United States embraces an anti-trust strategy to curb this monopoly power. As a result, there came the US antitrust law. The Sherman Act prohibits “every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce.” (Beach 601). The Act illegalized monopolies and trusts. The result was the disintegration of large companies into smaller, competitive corporations. Reforms to corporate power were championed for by Theodore Roosevelt in a trust busting campaign.

Another strategy is to require corporate bodies to be audited by independent accounting firms, and to make the findings known to the public. The media also has more freedom than it used to have. It is expected to uncover the truth and air it to the public. Monopolies can no longer conceal information on their activities and performance. Unlike before when there was no control over price, today, there are price ceilings. Firms have a limit to the price they can charge for their goods and services. In this way, all companies in the playing field operate on level ground.


Works Cited:

Avenger, Plaid & Shmidheiser, Klaus. The Plaid Avenger’s World. Atlanta: Kendall Hunt, 2008. Print.

Beach, Charles. A Treatise on the Law of Monopolies and Industrial Trusts, As Administered in England and in the United States of America. New York, NY: The Lawbook Exchange Ltd, 2007. Print.



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