Handouts 1 3 AMERICAN INDUSTRIALISTS ROBBER BARONS OR

Handouts 1 3 AMERICAN INDUSTRIALISTS: ROBBER BARONS OR CAPTAINS OF INDUSTRY?

American Industrialization Outline

• • Industrialization and Big Business – New technology/inventions sets stage for industrial growth in America after 1850 – Big Business leaders John D. Rockefeller, Andrew Carnegie, Cornelius Vanderbilt and J. P. Morgan are viewed in two ways: • Captains of industry – Served the United States positively, created jobs – Philanthropists giving to charities, founding libraries and museums • Robber barons – Built fortunes from exploiting workers – Drained the United States’s natural resources – Social Darwinism—Big Business men justified what they did by Darwin’s theory of evolution “only the strong survive” – Federal Government—laissez faire policies, government hands off of business practices and people, no regulations – Creating a Big Business • Monopoly: buying out competitors in same business, prices rise (only one choice) • Trust: similar businesses turning over assets to a board to control prices and competition. • Consolidation: creating huge businesses controlled by one company (vertical integration and horizontal integration) – Some Americans believed Big Business was bad, that it didn’t protect workers and consumers. Federal Government begins to interfere: Sherman Anti Trust Act 1890: Law passed to restrict creations of big businesses. Began breaking big companies up. American Industrialization

Meet Andrew Carnegie The Two Andrews

Generous and naïve, while often grasping and ruthless, Andrew Carnegie personally embodied the contradictions that divided America in the Gilded Age. 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. The richest man in the world, he railed against privilege. A generous philanthropist, he slashed the wages of the workers who made him rich. The roots of Carnegie's internal conflicts were planted in Dunfermline, Scotland, where he was born in 1835, the son of a weaver and political radical who instilled in young Andrew the values of political and economic equality. His family's poverty, however, taught Carnegie a different lesson. When the Carnegies emigrated to America in 1848, Carnegie determined to bring prosperity to his family. Carnegie's climb from the slums of Pittsburgh to the mansions of New York paralleled America's transformation from a sleepy agricultural nation into the world's foremost industrial power. By 1868 Carnegie, then 33, was worth $400, 000 (nearly $5 million today); but his wealth troubled him, as did the ghosts of his radical past. He wrote himself a telling letter, promising that he would stop working in two years and pursue a life of good works: "To continue much longer overwhelmed by business cares. . . must degrade me beyond hope of permanent recovery. " Meet Andrew Carnegie

Yet Carnegie's business cares held him in sway. For three decades, he dominated the steel industry, and although he allowed himself time for vacations in Scotland for his troubled courtship of Louise Whitfield, his thoughts rarely strayed from his mills. Carnegie did not forget his radical roots. In a period of turbulent labor unrest, Carnegie publicly supported the unions. In his own mills, though, his position was less clear. He usually avoided using strike breakers, but drove a hard bargain and typically got his way, most notably during the bloody lockout at his Homestead works in 1892. With his partner Henry Clay Frick, Carnegie broke the steel unions. His empire grew. By 1900, Carnegie Steel produced more steel than the entire British steel industry. When he sold the company to J. P. Morgan in 1901, Carnegie personally earned $250 million (approximately $4. 5 billion today). Carnegie then turned his enormous energies to philanthropy and the pursuit of world peace, hoping perhaps that donating his wealth to charitable causes would mitigate the grimy details of its accumulation. In the public memory, he may have been correct. Today he is most remembered for his generous gifts of music halls, educational grants, and nearly 3, 000 public libraries. By the time of his death in 1919, he had given away over $350 million (more than $3 billion in 1996 dollars). Meet Andrew Carnegie

The Gospel of Wealth Andrew Carnegie, 1889

The problem of our age is the administration of wealth, so that the ties of brotherhood may still bind together the rich and poor in harmonious relationship. The conditions of human life have not only been changed, but revolutionized, within the past few hundred years. In former days there was little difference between the dwelling, dress, food, and environment of the chief and those of his retainers. . The contrast between the palace of the millionaire and the cottage of the laborer with us to day measures the change which has come with civilization. This change, however, is not to be deplored, but welcomed as highly beneficial. It is well, nay, essential for the progress of the race, that the houses of some should be homes for all that is highest and best in literature and the arts, and for all the refinements of civilization, rather than that none should be so. Much better this great irregularity than universal squalor. Without wealth there can be no Maecenas [Note: a rich Roman patron of the arts]. The "good old times" were not good old times. Neither master nor servant was as well situated then as today. A relapse to old conditions would be disastrous to both—not the least so to him who serves—and would sweep away civilization with it. . The Gospel of Wealth

We start, then, with a condition of affairs under which the best interests of the race are promoted, but which inevitably gives wealth to the few. Thus far, accepting conditions as they exist, the situation can be surveyed and pronounced good. The question then arises—and, if the foregoing be correct, it is the only question with which we have to deal—what is the proper mode of administering wealth after the laws upon which civilization is founded have thrown it into the hands of the few? And it is of this great question that I believe I offer the true solution. It will be understood that fortunes are here spoken of, not moderate sums saved by many years of effort, the returns from which are required for the comfortable maintenance and education of families. This is not wealth, but only competence, which it should be the aim of all to acquire. There are but three modes in which surplus wealth can be disposed of. It can be left to the families of the decedents; or it can be bequeathed for public purposes; or, finally, it can be administered during their lives by its possessors. Under the first and second modes most of the wealth of the world that has reached the few has hitherto been applied. Let us in turn consider each of these modes. The first is the most injudicious. In monarchial countries, the estates and the greatest portion of the wealth are left to the first son, that the vanity of the parent may be gratified by the thought that his name and title are to descend to succeeding generations unimpaired. The Gospel of Wealth

The condition of this class in Europe to day teaches the futility of such hopes or ambitions. The successors have become impoverished through their follies or from the fall in the value of land. . Why should men leave great fortunes to their children? If this is done from affection, is it not misguided affection? Observation teaches that, generally speaking, it is not well for the children that they should be so burdened. Neither is it well for the state. Beyond providing for the wife and daughters moderate sources of income, and very moderate allowances indeed, if any, for the sons, men may well hesitate, for it is no longer questionable that great sums bequeathed oftener work more for the injury than for the good of the recipients. Wise men will soon conclude that, for the best interests of the members of their families and of the state, such bequests are an improper use of their means. As to the second mode, that of leaving wealth at death for public uses, it may be said that this is only a means for the disposal of wealth, provided a man is content to wait until he is dead before it becomes of much good in the world. . The cases are not few in which the real object sought by the testator is not attained, nor are they few in which his real wishes are thwarted. . The growing disposition to tax more and more heavily large estates left at death is a cheering indication of the growth of a salutary change in public opinion. . Of all forms of taxation, this seems the wisest. The Gospel of Wealth

Men who continue hoarding great sums all their lives, the proper use of which for public ends would work good to the community, should be made to feel that the community, in the form of the state, cannot thus be deprived of its proper share. By taxing estates heavily at death, the state marks its condemnation of the selfish millionaire's unworthy life. . This policy would work powerfully to induce the rich man to attend to the administration of wealth during his life, which is the end that society should always have in view, as being that by far most fruitful for the people. . There remains, then, only one mode of using great fortunes: but in this way we have the true antidote for the temporary unequal distribution of wealth, the reconciliation of the rich and the poor—a reign of harmony—another ideal, differing, indeed from that of the Communist in requiring only the further evolution of existing conditions, not the total overthrow of our civilization. It is founded upon the present most intense individualism, and the race is prepared to put it in practice by degrees whenever it pleases. The Gospel of Wealth

Under its sway we shall have an ideal state, in which the surplus wealth of the few will become, in the best sense, the property of the many, because administered for the common good, and this wealth, passing through the hands of the few, can be made a much more potent force for the elevation of our race than if it had been distributed in small sums to the people themselves. Even the poorest can be made to see this, and to agree that great sums gathered by some of their fellow citizens and spent for public purposes, from which the masses reap the principal benefit, are more valuable to them than if scattered among them through the course of many years in trifling amounts. . . This, then, is held to be the duty of the man of Wealth: First, to set an example of modest, unostentatious living, shunning display or extravagance; to provide moderately for the legitimate wants of those dependent upon him; and after doing so to consider all surplus revenues which come to him simply as trust funds, which he is called upon to administer, and strictly bound as a matter of duty to administer in the manner which, in his judgment, is best calculated to produce the most beneficial result for the community—the man of wealth thus becoming the sole agent and trustee for his poorer brethren, bringing to their service his superior wisdom, experience, and ability to administer—doing for them better than they would or could do for themselves. The Gospel of Wealth

Introduction The Rockefellers

"Mr. Rockefeller, your fortune is rolling up like an avalanche! You must distribute it faster than it grows! If you do not, it will crush you and your children's children!" —Rev. Frederick Gates, hired by John D. Rockefeller to guide his philanthropy They feared the temptations of wealth, yet their estate was once described as the kind of place God would have built—if only he had the money. They amassed a fortune that outraged a democratic nation, then gave much of it away. They were the closest thing this country had to a royal family, but they shunned the public eye, retreating behind the walls of their palatial home at Pocantico Hills, New York. "The Rockefellers" is the saga of four generations of a legendary American family whose name is synonymous with great wealth. The story begins in the Christian revivalist fervor of the 1830 s with a marriage of opposites: Eliza Davison, a pious young woman, and "Devil Bill" Rockefeller, swindler, snake oil salesman, and eventually, bigamist. Their son, John D. Rockefeller, created an industrial empire—and a personal fortune—on a scale the world had never known. He ruthlessly crushed his competitors in the process, alienating the public and leaving a stain on the family name. His dutiful son, John D. Jr. , was a self sacrificing young man who devoted his life to redeeming his family's reputation. Junior's five sons scaled the heights of the American century. Introduction: The Rockefellers

One, Nelson, reached highest, exposing the very private Rockefellers once again to the harsh judgment of public opinion. In the 1960 s, a fourth generation of Rockefellers, "the Cousins, " rebelled against their family, which had come to personify what was then known as "the establishment. “ The world's first billionaire, John D. Rockefeller Sr. held 90 percent of the world's oil refineries, 90 percent of the marketing of oil, and a third of all the oil wells. Working methodically and secretly, he did more than transform a single industry. When he formed his feared monopoly, Standard Oil, in 1870 he changed forever the way America did business. Because of the ruthless war he waged to crush his competitors, Rockefeller was, to many Americans, the embodiment of an unjust and cruel economic system. Yet he lived a quiet and virtuous life. "I believe the power to make money is a gift of God, " Rockefeller once said. "It is my duty to make money and even more money and to use the money I make for the good of my fellow men. " By the end of his life, he had given away half his fortune. But Rockefeller's vast philanthropy could not erase the memory of his predatory business practices. In 1902, when Mc. Clure's magazine published journalist Ida Tarbell's scathing exposé of Standard Oil, it unleashed a torrent of rage. In 1911, Standard Oil was declared in violation of antitrust laws and dissolved. Introduction: The Rockefellers

John D. 's only son, Junior, faced an almost impossible task, says biographer Ron Chernow: "He had to figure out a way to change the image of this family without openly repudiating the father he loved. " The struggle took its toll. Junior suffered from incapacitating headaches and was forced to take rest cures to relieve the strain. In his quest for redemption and respectability, Junior would give away hundreds of millions of dollars, and would demand impeccable behavior from his six children. John D. III became a philanthropist and a valued expert on Asian affairs; Laurance, a leading venture capitalist and conservationist; Nelson was four times governor of New York and vice president of the United States; David, president of The Chase Manhattan Bank, was a leading figure in international finance; Winthrop was elected governor of Arkansas; Abby was deeply involved in cancer research. The Rockefellers transformed America, helping build many of the institutions that defined the United States in the 20 th century: the United Nations, Spelman College, Acadia National Park, Grand Teton National Park, the United Negro College Fund, Lincoln Center, Chase Manhattan Bank, Riverside Church, Pan American Airlines, Radio City Music Hall, The Cloisters, the University of Chicago, Rockefeller Center, Colonial Williamsburg, and the Department of Health, Education and Welfare to name just a few. Junior's wife, Abby, a leading patron of the arts, co founded the Museum of Modern Art, known to the third generation of Rockefellers as "Mother's museum. " Introduction: The Rockefellers

When he died at age 86, Junior left his six children and 22 grandchildren an invaluable inheritance: a name which stood not for corporate greed, but for "the well being of mankind. " Junior had lived to see his final vindication—the election of his son, Nelson, as governor of New York in 1958. "It was a sign that the people of the United States had in fact fully accepted the Rockefellers in spite of the early history of the family, " says Nelson's son, Steven. "Nelson had done something that no other Rockefeller had ever done, " says his biographer, Joseph Persico. "He had won the affirmation of the people. " Introduction: The Rockefellers

J. P. Morgan

One of the most powerful bankers of his era, J. P. (John Pierpont) Morgan (1837 1913) financed railroads and helped organize U. S. Steel, General Electric, and other major corporations. The Connecticut native followed his wealthy father into the banking business in the late 1850 s, and in 1871 formed a partnership with Philadelphia banker Anthony Drexel. In 1895, their firm was reorganized as J. P. Morgan & Company, a predecessor of the modern day financial giant JPMorgan Chase [& Co. ]. Morgan used his influence to help stabilize American financial markets during several economic crises, including the panic of 1907. However, he faced criticism that he had too much power and was accused of manipulating the nation’s financial system for his own gain. The Gilded Age titan spent a significant portion of his wealth amassing a vast art collection. J. P. Morgan: Early Years and Family John Pierpont Morgan was born into a distinguished New England family on April 17, 1837, in Hartford, Connecticut. One of his maternal relatives, James Pierpont (1659 1714), was a founder of Yale University; his paternal grandfather was a founder of the Aetna Insurance Company; and his father, Junius Spencer Morgan (1813 90), ran a successful Hartford dry goods company before becoming a partner in a London based merchant banking firm. After graduating from high school in Boston in 1854, Pierpont, as he was known, studied in Europe, where he learned French and German, then returned to New York in 1857 to begin his finance career J. P. Morgan

In 1861, Morgan married Amelia Sturges, the daughter of a wealthy New York businessman. Amelia Morgan died of tuberculosis four months after the couple’s wedding. In 1865, Morgan married Frances Louisa Tracy (1842 1924), the daughter of a New York lawyer, and the pair eventually had four children. J. P. Morgan: Banking Titan During the late 19 th century, a period when the U. S. railroad industry experienced rapid over expansion and heated competition (the nation’s first transcontinental rail line was completed in 1869), Morgan was heavily involved in reorganizing and consolidating a number of financially troubled railroads. In the process, he gained control of significant portions of these railroads’ stock and eventually controlled an estimated one sixth of America’s rail lines. J. P. Morgan: Congressional Investigation During Morgan’s era, the United States had no central bank so he used his influence to help save the nation from disaster during several economic crises. In 1895, Morgan assisted in rescuing America’s gold standard when he headed a banking syndicate that loaned the federal government more than $60 million. In another instance, the financial panic of 1907, Morgan held a meeting of the country’s top financiers at his New York City home and convinced them to bail out various faltering financial institutions in order to stabilize the markets. J. P. Morgan

Morgan initially was widely commended for leading Wall Street out of the 1907 financial crisis; however, in the ensuing years the portly banker with the handlebar mustache and gruff manner faced increasing criticism from muckraking journalists, progressive politicians and others that he had too much power and could manipulate the financial system for his own gain. In 1912, Morgan was called to testify before a congressional committee chaired by U. S. Representative Arsene Pujo (1861 1939) of Louisiana that was investigating the existence of a “money trust, ” a small cabal of elite Wall Street financiers, including Morgan, who allegedly colluded to control American banking and industry. The Pujo Committee hearings helped bring about the creation of the Federal Reserve System in December 1913 and spurred passage of the Clayton Antitrust Act of 1914. J. P. Morgan

Cornelius Vanderbilt

Shipping and railroad tycoon Cornelius Vanderbilt (1794 1877) was a self made multi millionaire who became one of the wealthiest Americans of the 19 th century. As a boy, he worked with his father, who operated a boat that ferried cargo between Staten Island, New York, where they lived, and Manhattan. After working as a steamship captain, Vanderbilt went into business for himself in the late 1820 s, and eventually became one of the country’s largest steamship operators. In the process, the Commodore, as he was publicly nicknamed, gained a reputation for being fiercely competitive and ruthless. In the 1860 s, he shifted his focus to the railroad industry, where he built another empire and helped make railroad transportation more efficient. When Vanderbilt died, he was worth more than $100 million. Cornelius Vanderbilt: Early Years A descendant of Dutch settlers who came to America in the mid 1600 s, Cornelius Vanderbilt was born into humble circumstances on May 27, 1794, on Staten Island, New York. His parents were farmers and his father also made money by ferrying produce and merchandise between Staten Island Manhattan in his two masted sailing vessel, known as a periauger. 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

In 1813, Vanderbilt married his cousin Sophia Johnson, and the couple eventually had 13 children. (A year after his first wife died in 1868, Vanderbilt married another female cousin, Frank Armstrong Crawford, who was more than four decades his junior. ) Cornelius Vanderbilt: Steamships In 1817, Vanderbilt went to work as a ferry captain for a wealthy businessman 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 1820 s, 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. ) In the 1840 s, Vanderbilt constructed a large brick home for his family at Washington Place, in Manhattan’s present day Greenwich Village neighborhood. Despite his growing wealth, the city’s elite residents were slow to accept Vanderbilt, considering him rough and uncultured. Cornelius Vanderbilt

In the early 1850 s, during the California Gold Rush, a time before transcontinental railroads, Vanderbilt launched a steamship service that transported prospectors from New York to San Francisco via a route across Nicaragua. His route was faster than an established route across Panama, and much speedier than the other alternative, around Cape Horn at the southern tip of South America, which could take months. Vanderbilt’s new line was an instant success, earning more than $1 million (about $26 million in today’s money) a year. Cornelius Vanderbilt: Railroads In the 1860 s, Vanderbilt shifted his focus from shipping to the railroad industry, which was entering a period of great expansion. He gained control of a number of railway lines operating between Chicago and New York and established an interregional railroad system. According to T. J. Styles, author of “The First Tycoon: The Epic Life of Cornelius Vanderbilt”: “This was a major transformation of the railroad network, which previously had been fragmented into numerous short railroads, each with its own procedures, timetables, and rolling stock. The creation of a coherent system spanning several states lowered costs, increased efficiency, and sped up travel and shipment times. ” Vanderbilt was the driving force behind the construction of Manhattan’s Grand Central Depot, which opened in 1871. The station eventually was torn down and replaced by present day Grand Central Terminal, which opened in 1913. Cornelius Vanderbilt

Cornelius Vanderbilt: Final Years Unlike the Gilded Age titans who followed him, such as steel magnate Andrew Carnegie (1835 1919) and oil mogul John Rockefeller (1839 1937), Vanderbilt did not own grand homes or give away much of his vast wealth to charitable causes. In fact, the only substantial philanthropic donation he made was in 1873, toward the end of his life, when he gave $1 million to build and endow Vanderbilt University in Nashville, Tennessee. (In a nod to its founder’s nickname, the school’s athletic teams are called the Commodores. ) The Vanderbilt mansions associated with the Gilded Age, including the Breakers in Newport, Rhode Island, and the Biltmore in Asheville, North Carolina, were built by Cornelius Vanderbilt’s descendants. (The 250 room Biltmore estate, constructed in the late 19 th century by one of Vanderbilt’s grandsons, is the largest privately owned home in the United States today. ) Vanderbilt died at age 82 on January 4, 1877, at his Manhattan home, and was buried in the Moravian Cemetery in New Dorp, Staten Island. He left the bulk of his fortune, estimated at more than $100 million, to his son William (1821 85). Cornelius Vanderbilt