USH8: Robber Barons and the Gilded Age

Kenneth Davis points out that "In thirty-five years, from the Civil War's end to the twentieth century, America moved with astonishing speed from a war-torn nation of farmers to an industrial empire..." Howard Zinn's way of putting this is: "Between the Civil War and 1900, steam and electricity replaced human muscle, iron replaced wood, and steel replaced iron." Much of this was due to the industrial revolution--or more precisely, the 'Second Industrial Revolution', a revolution less of waterwheels and textile mills, and more of petroleum and steel--and the railroads built with petroleum, coal, and steel, as well as the banks filled with the money from petroleum, coal, steel, and especially the railroads. And all this industrialization made a lot of money for a few men who took advantage of all this. The polite term for them is 'Captains of Industry' but because of the unscrupulous dealings these men used to acquire their wealth, they're more commonly known as the Robber Barons.

While the modern railroad was invented and developed in Great Britain, and the first major US line ran through Maryland, the railroad became an important part of US history with the development of the 'Transcontinental Railroad' from Omaha, Nebraska, to Sacramento, California. As I noted in my post of 1/17/09 ('The Nation Grows'), in the early part of the nineteenth century a doctrine known as 'Manifest Destiny' became popular. As the US stretched toward the Pacific Ocean, the desire grew to have a way of getting from coast to coast. Although talk of a cross country railway began in the 1830s, the building of the transcontinental railroad began in earnest during the Civil War. The railroad was completed in 1869. Wikipedia states: "Complete travel from coast to coast was reduced from six or more months to just one week."

The first beneficiary of the railroad was a financier named Thomas Durant, who owned the Union Pacific railroad, as well as a company called Credit Mobilier which was supposed to be responsible for the construction of the track. Credit Mobilier got ninety-four million dollars for the work--but it actually cost them only forty-four million. Durant used the company to pay himself a fortune. Massachusetts Congressman Oakes Ames was also a director of the Union Pacific and gave shares of Credit Mobilier to other congressmen and various politicians to avoid any investigation. When this became known it caused a major scandal. Ironically, Durant left Union Pacific and financier Jay Gould became the dominant stockholder. Gould had already made money from the Erie Railroad and playing with the price of gold. Along with Union Pacific, he got control over three other western railroads and eventually well over a tenth of the country's rail lines. He also controlled the Western Union telegraph company. In 1886, railroad workers across the southwestern portion of the US struck against the lines he owned. He hired strikebreakers and Pinkerton detectives to break up the strike--with rather violent methods.

One of Gould's rivals was a man who started in the ferry business, Cornelius Vanderbilt. He began working on ferries as a boy and at 16 started his own ferry, between Manhatten and Staten Island, NY. During the war of 1812, he shipped supplies to US forts and in 1818, he got involved in steamboat travel, starting with ferries and eventually offering a travel route to California (cutting through Nicaragua) during the gold rush and competing with trans-Atlantic steamships. He also got involved as a director of the Long Island Railroad and from there began building his railroad empire, eventually leaving steamboats to concentrate on rail travel. He helped build the Grand Central Depot (eventually called Grand Central Terminal) and eventually extended his lines out to Chicago. This led him into conflict with Jay Gould, a conflict he lost. (His son, William would also get into conflict with Jay Gould, this time over who would own Western Union--Vanderbilt won this one, but Gould made the money out of the situation. These 'barons' weren't nice to anyone--including each other.)

But probably the top railroad and financial baron of them all was John Pierpont Morgan. JP Morgan began his career by financing the selling of defective guns during the Civil War. These rifles were bought from an army arsenel for $3.50 apiece (5000 of them), 'remachined', and sold back to the army for $22 each. They often blew off the thumbs of the soldiers firing them. He developed a railroad empire by acquiring lines (he gained control of the Albany and Susquehanna Railroad, taking it away from Jay Gould in 1869) and consolidating companies. By 1900, he owned almost half of the country's tracks. This was all done through the banking firm of J.P. Morgan & Co., one of the largest and most powerful banks in New York, and eventually the world. In 1895, when the US treasury was almost out of gold, Morgan led a syndicate of bankers that traded $65 million in gold for bonds, which they then resold making a profit of $18 million. In 1900, Morgan met Andrew Carnegie at a dinner party. Morgan asked Carnegie how much he would want for his steel company. Carnegie grabbed a piece of paper and wrote '$492,000,000'. The deal was closed without lawyers or a written contract and from that JP Morgan created US Steel.

Andrew Carnegie was a true case of working his way to the top. He was born in Scotland, came to the US at thirteen and immediately went to work at a cotton mill. By the time he was seventeen, he was working for a telegraph company. He became a telegraph operator and worked his way up to superintendent. He began investing in the railroads and related industries and did well with this. He invested in land in Pennsylvania where oil was found. Soon, he was a millionaire. He visited London in 1872 and saw the newly developed Bessemer method of steel production and soon left the railroad business and involved himself in the iron and steel industry. He eventually consolidated everything into the Carnegie Steel Company, which is what he sold to JP Morgan. He is often known as a philantropist today because he gave almost every cent he made away. (Unfortunately, this was sullied by a strike at the Carnegie Steel plant in Homestead, PA, that occurred while Carnegie was away in Scotland. One of his managers, Henry Clay Frick, cut the pay of the workers and demanded they drop their union. When they didn't go along, Frick locked them out and brought in strikebreaking workers. This led to a confrontation between the Pinkerton guards and the union workers. Yes, this is similar to the situation I described above with Jay Gould. This time it ended up in a battle where many of the workers were killed. This infuriated Alexander Berkman, an anarchist who believed violent acts would encourage the workers to revolt. Berkman got into see Frick and shot him three times. The workers, rather than arising, beat Berkman unconscious. Frick survived the shooting and Berkman spent fourteen years in prison. Carnegie, as I said, was in Scotland during the strike but he, as well as Frick, was very much against the union and the violence upon the workers became part of Carnegie's reputation.)

Perhaps the richest of these 'Barons' was John D. Rockefeller who began his career as a bookkeeper. Supposedly, in an early position he was asked to evaluate the monetary potential of oil for an interested company. The story is that he told them that it had no future, and then bought himself a refinery. In 1870 he created Standard Oil of Ohio which he built into an empire. At one point it controlled 80-90% of the US refineries; eventually Standard Oil became a 'trust', an idea cooked up by Rockefeller's lawyers, which made the Standard Oil Trust into 'holding company' that was controlled many other corporations, including the Chase Manhatten Bank. This was a way to get around the anti-monopoly laws that soon was copied by hundreds of others, including JP Morgan (which is how he controlled so much of the US railways). By the turn of the century Rockefeller had gone on to other pursuits (notably philantropy) and he was worth millions. Standard Oil reigned supreme until they were found guilty, in 1911, of violating the Sherman Anti-Trust Act and broken into several smaller companies.

I could go on to detail Andrew Mellon, Henry Ford, Marshall Field, William Randolph Hearst,etc (not to mention the Vanderbilt and Rockerfeller sons), but you get the idea. This was a time referred to as The Gilded Age (taken from the title of a novel co-authored by Mark Twain). It was a time of extreme wealth and opulence and a time when thousands upon thousands of workers died building railroads, mining coal, and mining iron. While the 'Barons' made fortunes, immigrants, working women, and even children toiled in mills and sweatshops. The railroads wiped out the last of the native lands and corruption was the order of the day. It was a time when the tycoons seemed out of control. It made the technology fortunes of the 1980s and 1990s seem minor by comparison.

And where was the government through all this? Kenneth Davis points out that the late nineteenth century hosted a number of the weakest presidents in US history: Andrew Johnson, US Grant, Rutherford Hayes, James Garfield, Chester Arthur, Grover Cleveland, and Benjamin Harrison. The ones that weren't outright corrupt had little sway over these economic empires.

But there were those who had enough. Next: the farmers revolt!


Quote of the Day: "...upon the sacredness of property civilization itself depends--the right of the laborer to his hundred dollars in the savings bank, and the equally legal right of the millionaire to his millions." - Andrew Carnegie

References:
Kenneth Davis, Don't Know Much About History
Wikipedia, various articles (especially the ones on the First Transcontinental Railroad, Robber baron, Gilded Age , and the various industrialists )
Howard Zinn, A People's History of the United States