The text states that “after 1870, the number of corporations in America rose dramatically.” How can you account for the rise of corporations during this period?

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The increasing complexity of American economic life is largely responsible for the rise in the number of corporations in the late nineteenth century. The worlds of manufacturing, transportation, and finance served the various needs of a growing population. Larger organizations could develop economies of scale. For instance, it could be more efficient to produce a certain type of good in a single factory, where all the machinery has been calibrated to produce that exact good, and then distribute it around the country. As a result, firms began to specialize in particular sectors of the economy. Individual proprietors were at a disadvantage due to these economies of scale in many areas.

The main advantages that corporations provided were to allow investors to pool their capital so that risk could be allocated in the most efficient way possible and to protect investors from individual liability. Instead of starting a business oneself, corporations made it possible for investors to place a small sum of capital into a corporation, secure in the knowledge that they would not be personally liable and at worst would lose their investment. This encouraged the risk-taking and development that helped American industry and technology grow in the late nineteenth century.

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