Economic growth was dramatic but highly volatile. The combination of a market flooded with goods and the federal monetary policies (discussed later) that removed money from the national economy led to a relentless fall in prices. The world economy suffered prolonged downturns in the 1870s and 1890s. Indeed, before the 1930s, the years from 1873 t° 1897 were known throughout the world as the Great Depression.

Businesses engaged in ruthless competition. Railroads and other companies tried various means of bringing order to the chaotic marketplace. They formed “pools” that divided up markets between supposedly competing firms and fixed prices. They established “trusts”—legal devices whereby the affairs of several rival companies were managed by a single director. Such efforts to coordinate the economic activities of independent companies generally proved short-lived, disintegrating as individual firms continued their intense pursuit of profits.

To avoid cutthroat competition, more and more corporations battled to control entire industries. Many companies fell by the wayside or were gobbled up by others. The process of economic concentration culminated between 1897 and 1904, when some 4,000 firms vanished into larger corporations that served national markets and exercised an unprecedented degree of control over the marketplace. By the time the wave of mergers had been completed, giant corporations like U.S. Steel (created by financier J.P. Morgan in 1901 by combining eight large steel companies into the first billion-dollar economic enterprise), Standard Oil, and International Harvester (a manufacturer of agricultural machinery) dominated major parts of the economy.

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