The 19th century was a time of great change in America. Over the century the American population grew significantly and the the economy developed across the American continental landmass from the Atlantic to the Pacific. As the economy grew, more recognisably modern companies came into being. Here, Richard Bluttal returns and considers whether leaders of some of the largest companies were robber barons or captains of industry: Cornelius Vanderbilt, Andrew Carnegie, J.P. Morgan, and John D. Rockefeller.
John D. Rockefeller in 1895.
On February 9, 1859, Henry J. Raymond, editor of the New York Times, said something strange about Cornelius Vanderbilt. Raymond didn’t like Vanderbilt, a steamship tycoon with such a vast fleet he was known as the Commodore, then the highest rank in the United States navy. In an editorial titled “Your money or your line,” Raymond blasted him for taking a large monthly payment from the Pacific Mail Steamship Company in return for Vanderbilt’s foregoing competition on the sea lanes in California. “Like those old German barons, who from their eyries along the Rhine, swooped down upon the commerce of the noble river and wrung tribute from every passenger that floated by,” Raymond wrote,” Mr.Cornelius Vanderbilt …..has insisted that the Pacific Company should pay him toll, taken of all of America that had business with California.” Though Raymond never used the phrase “robber barron”, his editorial was the first known of the metaphor in American journalism. This phrase conjures up greedy individuals running around destroying competitors, and rigging the market. What is strange is that this is not what Raymond meant. Raymond attacked Commodore for pursuing a “competition for competition’s sake, competition which crowds out legitimate enterprises.
Large enterprises
Starting in the middle of the nineteenth century the first true enterprises began to emerge. After the Civil War, geography and the idea of entrepreneurship influenced the growth and expansion of the United States. As the United States transformed into an industrial society with little regulation of business, it was possible for small numbers of men to dominate crucial industries. The five keys to America’s industrial success were; superabundance of land and precious resources, excellent natural and manmade systems of transportation, invention and technology, a growing supply of labor, and superb industrial organization. Its soil, forests, wildlife and minerals provided the basis for economic activity for its early peoples. Tribes followed buffalo on the Great Plains, others developed economics based on woodland game, marine animals or fish from its many rivers and two oceans. In the 1800’s settlers found cooper, lead, gold, silver nickel and zinc far below beneath the soil, the country was rich in these minerals and had immense deposits of high quality ore, great resources of petroleum and in the West a natural treasury of gold, silver and cooper. As to our natural resources, there were huge amounts of fossil fuels, coal and natural gas reserves. The internal natural waterways became the fastest way to transport goods, cities sprang up such as New Orleans on the Mississippi river and Chicago on Lake Michigan. Cities like Boston and Philadelphia developed as trading centers at transportation crossroads. Moving west, cities developed across the landscape. Physical features influenced growth of cities- St. Louis at the juncture of the Mississippi and Missouri rivers. In the late 1800s better means of transportation encouraged concentration of industries in cities, all fueled by the abundance of natural resources. One major influence that drove America’s technological development was the spectacular expansion of the nation’s boundaries, population, and economy. The territorial size of the United States quadrupled from 1800 to 1900, a nation spanning the continent from Atlantic to Pacific. Within these decades we acquired Florida from Spain and the Oregon Territory from Great Britain. In 1869 we purchased Alaska from Russia and then the Hawaiian Islands. The census of 1800 recorded a total population of 5.3 million people; by 1900, the United States was home to more than 75 million. The need to connect and supply this expansive nation encouraged the development of innovations in transportation, communication, and manufacturing.
Over the course of the late 1800s, entrepreneurs like Cornelius Vanderbilt, Andrew Carnegie, John D. Rockefeller and J.P. Morgan helped to shape the growth of American industry. Some people saw them as Captains of Industry because they were inventive, hardworking and led the way in the rise of American business. Others saw them as Robber Barons because they were ruthless and self-centered entrepreneurs whose aggressive business practices destroyed the smaller competitors and drove many companies out of business. The men who were called robber barons were often portrayed in a positive light, as “self-made men” who had helped build the nation and in the process created many jobs for American workers. However, the public mood turned against them in the late 19th century. Criticism from newspapers and social critics began to find an audience. And American workers began to organize in great numbers as the labor movement accelerated.
Events in labor history, such as the Homestead Strike and the Pullman Strike, intensified public resentment toward the wealthy. The conditions of workers, when contrasted with the lavish lifestyles of millionaire industrialists, created widespread resentment.
Even other businessmen felt exploited by monopolistic practices as it was virtually impossible to compete in some fields. Common citizens became aware that monopolists could more easily exploit workers.
There was a public backlash against the lavish displays of wealth often exhibited by the very wealthy of the age. Critics noted the concentration of wealth as evil or weakness of society, and satirists, such as Mark Twain, derided the showiness of the robber barons as “the Gilded Age.”
Cornelius Vanderbilt
As a boy, the younger Vanderbilt worked with his father on the water and attended school briefly. When Vanderbilt was a teen, he transported cargo around the New York harbor in his own periauger. Eventually, he acquired a fleet of small boats and learned about ship design. Cornelius Vanderbilt initially made his money in the steamships business before investing in railroads. In 1817, Vanderbilt went to work as a ferry captain for a wealthy businessman, Thomas Gibbons, who owned a commercial steamboat service that operated between New Jersey and New York. The job provided Vanderbilt the opportunity to learn about the burgeoning steamship industry. In the late 1820s, he went into business on his own, building steamships and operating ferry lines around the New York region. Shrewd and aggressive, he became a dominant force in the industry by engaging in fierce fare wars with his rivals. In some cases, his competitors paid him hefty sums not to compete with them. (Throughout his life, Vanderbilt’s ruthless approach to business would earn him numerous enemies.)
Vanderbilt fervently believed in laissez-faire economics, using it to great advantage in crushing his rivals. After a lifetime on the sea, he shifted all focus to railroads in 1863. Cornelius Vanderbilt gained control of most of the railroad industry. He offered rebates to customers and refused service for people traveling on competing railroad lines. He lowered the rates on his railroad in order to gain more business. He drove competing railroad companies out of business and bought up their railroad lines. Small railroads were swallowed up by Vanderbilt’s massive corporation. Vanderbilt led the drive for consolidation and gained control of most of the railroad business. Vanderbilt also tried to “corner”, or completely control, the stock in the Erie Railroad Company, leading to a dispute between railroad millionaires. He encouraged these battles because he usually won and benefitted. His control of the New York railroad system led to the development of what is now Grand Central Station, and one of the nation’s first giant corporations, N.Y. Central & Hudson River Railroad. Vanderbilt also used his money to help others. He donated money to colleges and universities and helped to develop churches. He lived modestly, but his children built a number of mansions (many on Long Island), which came to symbolize what was known as the “Gilded Age.”
Andrew Carnegie
In 1892 Andrew Carnegie’s steel mill in Homestead, PA was threatened to grind to a halt over a worker’s strike. Workers wanted to unionize over incredibly unsafe working conditions, and Carnegie didn't want this because it meant shorter hours for the workers, which would result in less steel being produced, and would cost him money. As a result he sent his most trusted assistant to Homestead to deal with the situation. Mr. Frick decided to hire Pinkertons to protect the plant from any strikers who may destroy the factory. Pinkertons were armed guards who were mostly former soldiers, and were viewed as a paid military force. They were known to be tough for anyone who hired them.
Below are the letters from Frick to Carnegie
My Dear Mr. Carnegie, I have arrived in Homestead in investigate the labor strike, and things are as good as they could be right now. I have hired 300 Pinkerton to protect the plant against any striking workers who may damage it. They will arrive on Tuesday, and should quell any unrest. The local newspaper is not reporting the current labor situation favorably, and seem shocked that we would attempt to guard and protect our property! In response I had an article published in all of this evenings papers alerting them of our response to the strike, and I think that our position within the community is well defined. We shall, of course, keep within the law, and do nothing that is not entirely legal. Yours truly, Mr.Frick
Frick, Cable just received. All anxiety gone since know you stand firm. Never employ one of these rioters. Let grass grow over work. Must not fail now. You will win easily. Next trial only stand firm. Law and order work. I could support you in any form. (Western Union Cable Message from Scotland.
With the arrival of the Pinkertons on July 6, violence immediately broke out. Strikers were throwing rocks at the armed Pinkertons, and they fired back into the crowd with their guns. In response 5,000 men from a neighboring mill arrived at Homestead to help defend the fallen workers. This event turned so chaotic that the state militia had to be called the following day to try to end the violence. By July 18 the entire town was placed under martial law. In the end 12 were killed, 23 wounded, and the Homestead plant remained without a union. Carnegie’s reputation was permanently damaged by the Homestead events.
Andrew Carnegie helped build the formidable American steel industry, a process that turned a poor young man into the richest man in the world. In 1865, Carnegie helped form the Keystone Bridge Company, a company that replaced wooden railroad bridges with steel. After meeting Henry Bessemer, the inventor of a new iron-to-steel converter, on a trip to England in 1873, he became convinced that the future of American industry was in the manufacture and use of steel. On his return to Pittsburgh, he built the J. Edgar Thomson Steel Mill near Pittsburgh using the ideas being developed by Bessemer in England. The "Carnegie Empire" was born. In 1899, Carnegie consolidated all of his holdings into the Carnegie Steel Company, making it the largest steel company in the world. In 1901, he sold the company to J.P. Morgan's United States Steel Company for $250 million, and from that point on, Carnegie devoted himself full-time to his various philanthropic projects.
At a time when America struggled -- often violently -- to sort out the competing claims of democracy and individual gain, Carnegie championed both. He saw himself as a hero of working people, yet he crushed their unions. One of the most successful entrepreneurs of his age, he railed against privilege. A generous philanthropist, he slashed the wages of the workers who made him rich.
J.P. Morgan
One of the most controversial figures of the 19th century was J.P. Morgan, a banker and financier who was instrumental in the formation of several major corporations. While Morgan was incredibly wealthy and influential, there is debate over whether he should be classified as a robber baron or a captain of industry. Those who view Morgan as a robber baron point to his involvement in the creation of monopolies, his manipulation of the stock market, and his ruthless business practices. However, others argue that Morgan was simply a product of his time and that he helped to fuel America’s economic boom in the late 19th century. Ultimately, the debate over whether Morgan was a robber baron or a captain of industry is a complex one. However, there is no denying that he was one of the most important and controversial figures of his time.
His millionaire father, Junius, made his fortune by investing other people’s money and helped found modern investment banking. When John Pierpont, or JP, was a child, Junius had him handle a million dollars in cash, however, there is no denying that he was one of the most important and controversial figures of his time.
JP Morgan wastaught early to avoid risk. Morgan escaped military service during the Civil War by paying $300 to a substitute to fight for him. During the war he bought five thousand rifles at $3.50 each and sold them on at $22 apiece. The rifles were `defective and some shoot off the thumbs of the soldiers, firing at them. Later, a congressional committee noted this but a federal judge upholds the deal and Morgan is exonerated.
At face value, Morgan contributed greatly to American industry. He invested in Thomas Edison and the Edison Electricity Company; helped to create General Electric and International Harvester; formed J.P. Morgan & Company; and gained control of half of the country’s railroad mileage. He also created the first billion-dollar company, U.S. Steel. At one point in his life, he was a board member of as many as 48 corporations. However, Morgan engaged in some unethical and anticompetitive practices to ward off competition. For example, he was believed to head a money trust that controlled the banking industry and was commonly considered a figurehead of Wall Street. He also created a monopoly by slashing the workforce and their pay to maximize profits while eliminating the competition. Workers’ wages were often as low as a dollar a day or less, and conditions for employees were poor, with increased fatalities even as wages grew.
Despite the numerous negatives associated with how Morgan built his wealth, some of his actions did benefit the United States and society. For example, his wealth was so vast that he was able to help bail out the federal government twice during an economic crisis, first in 1895 and again in 1907.
John D. Rockefeller
Industry during this time could not have expanded so quickly in the United States without the nation’s rich supply of natural resources. In 1859, Americans discovered oil as a valuable new resource. Titusville, Pennsylvania, where the first oil strike occurred, brought hundreds of prospectors to western Pennsylvania in search of oil. Among those was John D. Rockefeller. He did not choose to drill for oil, but instead built an oil refinery to purify the oil so that it can be used. Rockefeller believed competition was wasteful and used his profits to buy up other refineries, creating Standard Oil Company of Ohio. He was a brilliant entrepreneur yet shrewd businessman. He did whatever he could to get rid of his competition, including slashing his prices to drive out rival oil companies. He forced railroad companies, who wanted his business, to give him secret rebates and lower his shipping costs. He had an advantage over his competitors. Rockefellers Standard Oil Trust created a monopoly over the oil industry, controlling almost 95% of oil refineries. Although criticized by journalists for his corrupt business practices, he was able to improve his public image throughout his life by philanthropy or giving his money away to charitable causes. He funded organizations and churches that assisted freedmen in the south. He also created colleges and universities for African-Americans. He also provided money to medical institutions.
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Now read Richard’s piece on the history of slavery in New York here.
