Historians have often portrayed the capitalists who shaped post-Civil War industrial America as either admirable "captains of industry" or corrupt "robber barons". Evaluate which of these descriptions- "captains of industry" or "robber barrons"- is a more accurate characterization of these capitalists.
- John D. Rockefeller
o Controlled 95% of all oil refineries in the country by 1887
o Very effective management makes them more of a “captain of industry” than corrupt “robber barrons”.
§ Used horizontal integration and made Standard Oil Company the nucleus of a great trust of oil industries by 1882.
§ Sought to eliminate middlemen and competitors as he ordered people to “sell all the oil that is sold in your district”
§ Pursued tactic of “rule or ruin”.
o Ardent Social Darwinist
§ Was born to a poor family but successful businessman by 19.
· As a result justification that the poor are lazy = why they are not rich.
§ Justification was that the American Beauty rose could only be produced by “sacrificing the early buds that grew up around it”.
· Social Darwinists adapt Darwin’s theory of evolution of the “survival of the fittest” in this age of industrial laissez-faire capitalism.
· Swift and Philip Armour’s meat-packing business also blossomed with the American Beauty Rose theory.
§ The “time was ripe” for aggressive consolidation of the oil industries and we all had to save ourselves from the “wasteful conditions” of economy.
o Was Rockefeller involved in any corrupt deals?
§ “Swallowed” other industries through assigning the Standard Oil Company’s own directors in other companies.
§ “Let us prey” the unwritten motto.
- Andrew Carnegie
o Very effective management
§ Developed principle of vertical integration controlling all phases of manufacturing from one office.
§ Also eliminated middlemen’s fees.
§ His steel production would be one-fourth of nation’s Bessemer steel production
o A Gospel of Wealth believer
§ “A man who dies rich dies disgraced”
· After he earned his riches from selling his holdings to JP Morgan, he spent approximately $350 million on the public.
§ Previously also very poor and worked his way up.
o Was not in favor of monopolizing
§ Would have a partnership with many of the “Pittsburg millionaires”
- JP Morgan was “the banker’s banker”
o JP Morgan and “corruption”
§ Eliminated “wasteful competition” in the depression of 1890s when he palced officers of his own bank in various boards of directors of other companies.
§ Businessmen would go to his bank due to extreme competition and be victim of his method of control, “interlocking directorates”.
§ After buying Carnegie’s holdings for over $400 million, made the United States Steel Corporation which was the first billion dollar corporation.
· Estimated to be more than wealth of nation in 1900.
o Loaned $65 million in gold to the government to keep it above the $100 million minimum to help it out of the
§ Somewhat significant contribution (not solely for profit) as they agreed to obtain ½ of gold abroad and aid the government in preventing the outflow of gold.
The Vanderbilts
- “Commodore” Cornelius Vanderbilt
o New York Central railroads
o “The public be damned” – William Vanderbilt
§ Response to public complaints about high railroad prices due to monopoly in the area.
o Added steel rail onto his railroads for higher efficiency and greater load.
§ Inventions including standard gauge, Westinghouse air brake added to his railroad popularity.
- Social Darwinist
o Cornelius Vanderbilt – “Law! What have I got to do with the law? Hain’t I got the power?”
o Part of a modern corporation as railroads required a lot of money to build.
Swift and Armor
- Meat-packing business
The Railroad Kings
- Central Pacific Railroad supported by Big Four or chief financial backers of the enterprise.
o Included Leland Stanford and Collis P. Hungtington.
o Went through relatively little corruption and still managed to have millions of profit.
o Had same subsidies as the Union Pacific and worked w/ same haste with the Chinese
§ Thousands of deaths but expendable.
- James J. Hill
o Believed that prosperity of railroad depended on prosperity of area it served.
o Distributed land to farmers in his area to make enterprise very soundly organized.
The Philosophies
- Gospel of Wealth
o Industrial plutocrats like John D. Rockefeller and Andrew Carnegie agreed that the wealthy had to prove themselves morally responsible.
- Social Darwinism
o Most defenders of laissez-faire justified through applying Darwin’s “survival of the fittest” in capitalism
§ “Millionaires are the products of natural selection” – William Sumner
o Justification involved contempt for poor as many of the rich previously poor.
§ Reverend Russell Conwell – “There is not a poor person in the US who was made poor by his own shortcomings”
Corruption or not?
- When people failed to curb monopoly through state legislature, they appealed to Congress.
o Interstate Commerce Act 1887
§ Result of the Wabash Case that individual states had no power to regulate interstate commerce.
· More power to the monopolists
· Prohibited rebates and pools and required railroads to publish rates openly – also against unfair discrimination against shippers and charging more for a short haul than a long haul in the same line.
§ HV supervision of the railroads by the government was nominal (in name only).
o However the Sherman Antitrust Act of 1890 largely failed as it did not distinguish between “good” and “bad” trusts
§ Government would prove unable to control monopolists for a while as their lawyers would often find legal loopholes in it – it also restrained labor unions.
§ As a result more trusts formed in 1890s under President McKinley than any other.
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