Produced by The James J. Kelly Library Of St. Gregory's
University, and Alev Akman
THE AGE OF BIG BUSINESS, A CHRONICLE OF THE CAPTAINS OF INDUSTRY
By Burton J. Hendrick
New Haven: Yale University Press
Toronto: Glasgow, Brook & Co.
London: Humphrey Milford Oxford University Press
1919
CONTENTS
I. INDUSTRIAL AMERICA AT THE END OF THE CIVIL WAR
II. THE FIRST GREAT AMERICAN TRUST
III. THE EPIC OF STEEL
IV. THE TELEPHONE: AMERICA'S MOST POETICAL ACHIEVEMENT
V. THE DEVELOPMENT OF PUBLIC UTILITIES
VI. MAKING THE WORLD'S AGRICULTURAL MACHINERY
VII. THE DEMOCRATIZATION OF THE AUTOMOBILE
BIBLIOGRAPHICAL NOTE
THE AGE OF BIG BUSINESS
CHAPTER I. INDUSTRIAL AMERICA AT THE END OF THE CIVIL WAR
A comprehensive survey of the United States, at the end of the Civil
War, would reveal a state of society which bears little resemblance to
that of today. Almost all those commonplace fundamentals of existence,
the things that contribute to our bodily comfort while they vex us with
economic and political problems, had not yet made their appearance.
The America of Civil War days was a country without transcontinental
railroads, without telephones, without European cables, or wireless
stations, or automobiles, or electric lights, or sky-scrapers, or
million-dollar hotels, or trolley cars, or a thousand other contrivances
that today supply the conveniences and comforts of what we call our
American civilization. The cities of that period, with their unsewered
and unpaved streets, their dingy, flickering gaslights, their ambling
horse-cars, and their hideous slums, seemed appropriate settings for
the unformed social life and the rough-and-ready political methods of
American democracy. The railroads, with their fragile iron rails, their
little wheezy locomotives, their wooden bridges, their unheated coaches,
and their kerosene lamps, fairly typified the prevailing frontier
business and economic organization. But only by talking with the
business leaders of that time could we have understood the changes that
have taken place in fifty years. For the most part we speak a business
language which our fathers and grandfathers would not have comprehended.
The word "trust" had not become a part of their vocabulary; "restraint
of trade" was a phrase which only the antiquarian lawyer could
have interpreted; "interlocking directorates," "holding companies,"
"subsidiaries," "underwriting syndicates," and "community of
interest"--all this jargon of modern business would have signified
nothing to our immediate ancestors. Our nation of 1865 was a nation of
farmers, city artisans, and industrious, independent business men, and
small-scale manufacturers. Millionaires, though they were not unknown,
did not swarm all over the land. Luxury, though it had made great
progress in the latter years of the war, had not become the American
standard of well-being. The industrial story of the United States in
the last fifty years is the story of the most amazing economic
transformation that the world has ever known; a change which is fitly
typified in the evolution of the independent oil driller of western
Pennsylvania into the Standard Oil Company, and of the ancient open
air forge on the banks of the Allegheny into the United States Steel
Corporation.
The slow, unceasing ages had been accumulating a priceless inheritance
for the American people. Nearly all of their natural resources, in
1865, were still lying fallow, and even undiscovered in many instances.
Americans had begun, it is true, to exploit their more obvious, external
wealth, their forests and their land; the first had made them one of
the world's two greatest shipbuilding nations, while the second had
furnished a large part of the resources that had enabled the Federal
Government to fight what was, up to that time, the greatest war in
history. But the extensive prairie plains whose settlement was to
follow the railroad extensions of the sixties and the seventies--Kansas,
Nebraska, Iowa, Oklahoma, Minnesota, the Dakotas--had been only slightly
penetrated. This region, with a rainfall not too abundant and not too
scanty, with a cultivable soil extending from eight inches to twenty
feet under the ground, with hardly a rock in its whole extent, with
scarcely a tree, except where it bordered on the streams, has been
pronounced by competent scientists the finest farming country to
which man has ever set the plow. Our mineral wealth was likewise lying
everywhere ready to the uses of the new generation. The United States
now supplies the world with half its copper, but in 1865 it was
importing a considerable part of its own supply. It was not till
1859 that the first "oil gusher" of western Pennsylvania opened up an
entirely new source of wealth. Though we had the largest coal
deposits known to geologists, we were bringing large supplies of this
indispensable necessity from Nova Scotia. It has been said that coal
and iron are the two mineral products that have chiefly affected modern
civilization. Certainly the nations that have made the greatest progress
industrially and commercially--England, Germany, America--are the three
that possess these minerals in largest amount. From sixty to seventy
per cent of all the known coal deposits in the world were located in our
national domain. Nature had given no other nation anything even remotely
comparable to the four hundred and eighty square miles of anthracite in
western Pennsylvania and West Virginia. Enormous fields of bituminous
lay in those Appalachian ranges extending from Pennsylvania to Alabama,
in Michigan, in the Rocky Mountains, and in the Pacific regions. In
speaking of our iron it is necessary to use terms that are even more
extravagant. From colonial times Americans had worked the iron ore
plentifully scattered along the Atlantic coast, but the greatest field
of all, that in Minnesota, had not been scratched. From the settlement
of the country up to 1869 it had mined only 50,000,000 tons of iron
ore, while up to 1910 we had produced 685,000,000 tons. The streams and
waterfalls that, in the next sixty years, were to furnish the power
that would light our cities, propel our street-cars, drive our
transcontinental trains across the mountains, and perform numerous
domestic services, were running their useless courses to the sea.
Industrial America is a product of the decades succeeding the Civil
War; yet even in 1865 we were a large manufacturing nation. The leading
characteristic of our industries, as compared with present conditions,
was that they were individualized. Nearly all had outgrown the household
stage, the factory system had gained a foothold in nearly every line,
even the corporation had made its appearance, yet small-scale production
prevailed in practically every field. In the decade preceding the War,
vans were still making regular trips through New England and the Middle
States, leaving at farmhouses bundles of straw plait, which the members
of the household fashioned into hats. The farmers' wives and daughters
still supplemented the family income by working on goods for city
dealers in ready-made clothing. We can still see in Massachusetts rural
towns the little shoe shops in which the predecessors of the existing
factory workers soled and heeled the shoes which shod our armies in the
early days of the Civil War. Every city and town had its own slaughter
house; New York had more than two hundred; what is now Fifth Avenue was
frequently encumbered by large droves of cattle, and great stockyards
occupied territory which is now used for beautiful clubs, railroad
stations, hotels, and the highest class of retail establishments.
In this period before the Civil War comparatively small single owners,
or frequently copartnerships, controlled practically every industrial
field. Individual proprietors, not uncommonly powerful families which
were almost feudal in character, owned the great cotton and woolen mills
of New England. Separate proprietors, likewise, controlled the iron and
steel factories of New York State and Pennsylvania. Indeed it was not
until the War that corporations entered the iron industry, now regarded
as the field above all others adapted to this kind of organization. The
manufacture of sewing machines, firearms, and agricultural implements
started on a great scale in the Civil War; still, the prevailing unit
was the private owner or the partnership. In many manufacturing lines,
the joint stock company had become the prevailing organization, but even
in these fields the element that so characterizes our own age, that of
combination, was exerting practically no influence.
Competition was the order of the day: the industrial warfare of
the sixties was a free-for-all. A mere reference to the status of
manufactures in which the trust is now the all-prevailing fact will
make the contrast clear. In 1865 thousands of independent companies were
drilling oil in Pennsylvania and there were more than two hundred which
were refining the product. Nearly four hundred and fifty operators were
mining coal, not even dimly foreseeing the day when their business would
become a great railroad monopoly. The two hundred companies that were
making mowers and reapers, seventy-five of them located in New York
State, had formed no mental picture of the future International
Harvester Company. One of our first large industrial combinations was
that which in the early seventies absorbed the manufacturers of salt;
yet the close of the Civil War found fifty competing companies making
salt in the Saginaw Valley of Michigan. In the same State, about fifty
distinct ownerships controlled the copper mines, while in Nevada the
Comstock Lode had more than one hundred proprietors. The modern trust
movement has now absorbed even our lumber and mineral lands, but in 1865
these rich resources were parceled out among a multiplicity of owners:
No business has offered greater opportunities to the modern promoter of
combinations than our street railways. In 1865 most of our large cities
had their leisurely horse-car systems, yet practically every avenue had
its independent line. New York had thirty separate companies engaged
in the business of local transportation. Indeed the Civil War period
developed only one corporation that could be described as a "trust"
in the modern sense. This was the Western Union Telegraph Company.
Incredible as it may seem, more than fifty companies, ten years before
the Civil War, were engaged in the business of transmitting telegraphic
messages. These companies had built their telegraph lines precisely as
the railroads had laid their tracks; that is, independent lines were
constructed connecting two given points. It was inevitable, of course,
that all these scattered lines should come under a single control, for
the public convenience could not be served otherwise. This combination
was effected a few years before the War, when the Western Union
Telegraph Company, after a long and fierce contest, succeeded in
absorbing all its competitors. Similar forces were bringing together
certain continuous lines of railways, but the creation of huge trunk
systems had not yet taken place. How far our industrial era is removed
from that of fifty years ago is apparent when we recall that the
proposed capitalization of $15,000,000, caused by the merging of the
Boston and Worcester and the Western railroads, was widely denounced as
"monstrous" and as a corrupting force that would destroy our Republican
institutions. Naturally this small-scale ownership was reflected in the
distribution of wealth. The "swollen fortunes" of that period rested
upon the same foundation that had given stability for centuries to
the aristocracies of Europe. Social preeminence in large cities rested
almost entirely upon the ownership of land. The Astors, the Goelets,
the Rhinelanders, the Beekmans, the Brevoorts, and practically all the
mighty families that ruled the old Knickerbocker aristocracy in New York
were huge land proprietors. Their fortunes thus had precisely the
same foundation as that of the Prussian Junkers today. But their
accumulations compared only faintly with the fortunes that are
commonplace now. How many "millionaires" there were fifty years ago
we do not precisely know. The only definite information we have is a
pamphlet published in 1855 by Moses Yale Beach, proprietor of the New
York Sun, on the "Wealthy Men of New York." This records the names
of nineteen citizens who, in the estimation of well-qualified judges,
possessed more than a million dollars each. The richest man in the list
was William B. Astor, whose estate is estimated at $6,000,000. The next
richest man was Stephen Whitney, also a large landowner, whose
fortune is listed at $5,000,000. Then comes James Lenox, again a land
proprietor, with $3,000,000. The man who was to accumulate the first
monstrous American fortune, Cornelius Vanderbilt, is accredited with a
paltry $1,500,000. Mr. Beach's little pamphlet sheds the utmost light
upon the economic era preceding the Civil War. It really pictures an
industrial organization that belongs as much to ancient history as the
empire of the Caesars. His study lists about one thousand of New York's
"wealthy citizens." Yet the fact that a man qualified for entrance into
this Valhalla who had $100,000 to his credit and that nine-tenths
of those so chosen possessed only that amount shows the progress
concentrated riches have made in sixty years. How many New Yorkers of
today would look upon a man with $100,000 as "wealthy"?
The sources of these fortunes also show the economic changes our country
has undergone. Today, when we think of our much exploited millionaires,
the phrase "captains of industry" is the accepted description; in
Mr. Beach's time the popular designation was "merchant prince." His
catalogue contains no "oil magnates" or "steel kings" or "railroad
manipulators"; nearly all the industrial giants of ante-bellum
times--as distinguished from the socially prominent whose wealth was
inherited--had heaped together their accumulations in humdrum trade.
Perhaps Peter Cooper, who had made a million dollars in the manufacture
of isinglass and glue, and George Law, whose gains, equally large,
represented fortunate speculations in street railroads, faintly suggest
the approaching era; yet the fortunes which are really typical are those
of William Aspinwall, who made $4,000,000 in the shipping business, of
A. T. Stewart, whose $2,000,000 represented his earnings as a retail and
wholesale dry goods merchant, and of Peter Harmony, whose $1,000,000 had
been derived from happy trade ventures in Cuba and Spain. Many of the
reservoirs of this ante-bellum wealth sound strangely in our modern
ears. John Haggerty had made $1,000,000 as an auctioneer; William L.
Coggeswell had made half as much as a wine importer; Japhet Bishop had
rounded out an honest $600,000 from the profits of a hardware store;
while Phineas T. Barnum ranks high in the list by virtue of $800,000
accumulated in a business which it is hardly necessary to specify.
Indeed his name and that of the great landlords are almost the only
ones in this list that have descended to posterity. Yet they were the
Rockefellers, the Carnegies, the Harrimans, the Fricks, and the Henry
Fords of their day.
Before the Civil War had ended, however, the transformation of the
United States from a nation of farmers and small-scale manufacturers
to a highly organized industrial state had begun. Probably the most
important single influence was the War itself. Those four years of
bitter conflict illustrate, perhaps more graphically than any similar
event in history, the power which military operations may exercise in
stimulating all the productive forces of a people. In thickly settled
nations, with few dormant resources and with practically no areas of
unoccupied land, a long war usually produces industrial disorganization
and financial exhaustion. The Napoleonic wars had this effect in Europe;
in particular they caused a period of social and industrial distress in
England. The few years immediately following Waterloo marked a period
when starving mobs rioted in the streets of London, setting fire to
the houses of the aristocracy and stoning the Prince Regent whenever he
dared to show his head in public, when cotton spindles ceased to turn,
when collieries closed down, when jails and workhouses were overflowing
with a wretched proletariat, and when gaunt and homeless women and
children crowded the country highways. No such disorders followed the
Civil War in this country, at least in the North and West. Spiritually
the struggle accomplished much in awakening the nation to a
consciousness of its great opportunities. The fact that we could
spend more than a million dollars a day--expenditures that hardly seem
startling in amount now, but which were almost unprecedented then--and
that soon after hostilities ceased we rapidly paid off our large debt,
directed the attention of foreign capitalists to our resources, and gave
them the utmost confidence in this new investment field. Immigration,
too, started after the war at a rate hitherto without parallel in our
annals. The Germans who had come in the years preceding the Civil War
had been largely political refugees and democratic idealists, but now,
in much larger numbers, began the influx of north and south Germans
whose dominating motive was economic. These Germans began to find their
way to the farms of the Mississippi Valley; the Irish began once more
to crowd our cities; the Slavs gravitated towards the mines of
Pennsylvania; the Scandinavians settled whole counties of certain
northwestern States; while the Jews began that conquest of the tailoring
industries that was ultimately to make them the clothiers of a hundred
million people. For this industrial development, America supplied the
land, the resources, and the business leaders, while Europe furnished
the liquid capital and the laborers.
Even more directly did the War stimulate our industrial development.
Perhaps the greatest effect was the way in which it changed our
transportation system. The mere necessity of constantly transporting
hundreds of thousands of troops and war supplies demanded reconstruction
and reequipment on an extensive scale. The American Civil War was the
first great conflict in which railroads played a conspicuous military
part, and their development during those four years naturally left them
in a strong position to meet the new necessities of peace. One of
the first effects of the War was to close the Mississippi River;
consequently the products of the Western farms had to go east by
railroad, and this fact led to that preeminence of the great trunk lines
which they retain to this day. Almost overnight Chicago became the great
Western shipping center, and though the river boats lingered for a
time on the Ohio and the Mississippi they grew fewer year by year.
Prosperity, greater than the country had ever known, prevailed
everywhere in the North throughout the last two years of the War.
So, too, feeding and supplying an army of millions of men laid the
foundation of many of our greatest industries. The Northern soldiers in
the early days of the war were clothed in garments so variegated
that they sometimes had trouble in telling friend from foe, and not
infrequently they shot at one another; so inadequately were our woolen
mills prepared to supply their uniforms! But larger government contracts
enabled the proprietors to reconstruct their mills, install modern
machines, and build up an organization and a prosperous business that
still endures. Making boots and shoes for Northern soldiers laid the
foundation of America's great shoe industry. Machinery had already been
applied to shoe manufacture, but only to a limited extent; under the
pressure of war conditions, however, American inventive skill found ways
of performing mechanically almost all the operations that had formerly
been done by hand. The McKay sewing machine, one of the greatest of our
inventions, which was perfected in the second year of the war, did as
much perhaps as any single device to keep our soldiers well shod and
comfortable. The necessity of feeding these same armies created our
great packing plants. Though McCormick had invented his reaper several
years before the war, the new agricultural machinery had made no great
headway. Without this machinery, however, our Western farmers could
never have harvested the gigantic crops which not only fed our soldiers
but laid the basis of our economic prosperity. Thus the War directly
established one of the greatest, and certainly one of the most romantic,
of our industries--that of agricultural machinery.
Above all, however, the victory at Appomattox threw upon the country
more than a million unemployed men. Our European critics predicted
that their return to civil life would produce dire social and political
consequences. But these critics were thinking in terms of their own
countries; they failed to consider that the United States had an immense
unoccupied domain which was waiting for development. The men who
fought the Civil War had demonstrated precisely the adventurous, hardy
instincts which were most needed in this great enterprise. Even before
the War ended, a great immigration started towards the mines and farms
of the trans-Mississippi country. There was probably no important town
or district west of the Alleghanies that did not absorb a considerable
number. In most instances, too, our ex-soldiers became leaders in
these new communities. Perhaps this movement has its most typical and
picturesque illustration in the extent to which the Northern soldiers
opened up the oil-producing regions of western Pennsylvania. Venango
County, where this great development started, boasted that it had more
ex-soldiers than any similar section of the United States.
The Civil War period also forced into prominence a few men whose methods
and whose achievements indicated, even though roughly and indistinctly,
a new type of industrial leadership. Every period has its outstanding
figure and, when the Civil War was approaching its end, one personality
had emerged from the humdrum characters of the time--one man who, in
energy, imagination, and genius, displayed the forces that were to
create a new American world. Although this man employed his great
talents in a field, that of railroad transportation, which lies outside
the scope of the present volume, yet in this comprehensive view I may
take Cornelius Vanderbilt as the symbol that links the old industrial
era with the new. He is worthy of more detailed study than he has ever
received, for in personality and accomplishments Vanderbilt is the most
romantic figure in the history of American finance. We must remember
that Vanderbilt was born in 1794 and that at the time we are considering
he was seventy-one years old. In the matter of years, therefore,
his career apparently belongs to the ante-bellum days, yet the most
remarkable fact about this remarkable man is that his real life work did
not begin until he had passed his seventieth year. In 1865 Vanderbilt's
fortune, consisting chiefly of a fleet of steamboats, amounted to about
$10,000,000; he died twelve years later, in 1877, leaving $104,000,000,
the first of those colossal American fortunes that were destined to
astound the world. The mere fact that this fortune was the accumulated
profit of only ten years shows perhaps more eloquently than any other
circumstance that the United States had entered a new economic age. That
new factor in the life of America and the world, the railroad, explains
his achievement. Vanderbilt was one of the most astonishing characters
in our history. His physical exterior made him perhaps the most imposing
figure in New York. In his old age, at seventy-three, Vanderbilt married
his second wife, a beautiful Southern widow who had just turned her
thirtieth year, and the appearance of the two, sitting side by side in
one of the Commodore's smartest turnouts, driving recklessly behind a
pair of the fastest trotters of the day, was a common sight in Central
Park. Nor did Vanderbilt look incongruous in this brilliant setting. His
tall and powerful frame was still erect, and his large, defiant head,
ruddy cheeks, sparkling, deep-set black eyes, and snowy white hair
and whiskers, made him look every inch the Commodore. These public
appearances lent a pleasanter and more sentimental aspect to
Vanderbilt's life than his intimates always perceived. For his manners
were harsh and uncouth; he was totally without education and could write
hardly half a dozen lines without outraging the spelling-book. Though he
loved his race-horses, had a fondness for music, and could sit through
long winter evenings while his young wife sang old Southern ballads,
Vanderbilt's ungovernable temper had placed him on bad terms with nearly
all his children--he had had thirteen, of whom eleven survived him--who
contested his will and exposed all his eccentricities to public view
on the ground that the man who created the New York Central system was
actually insane. Vanderbilt's methods and his temperament presented
such a contrast to the commonplace minds which had previously dominated
American business that this explanation of his career is perhaps not
surprising. He saw things in their largest aspects and in his big
transactions he seemed to act almost on impulse and intuition. He could
never explain the mental processes by which he arrived at important
decisions, though these decisions themselves were invariably sound. He
seems to have had, as he himself frequently said, almost a seer-like
faculty. He saw visions, and he believed in dreams and in signs. The
greatest practical genius of his time was a frequent attendant at
spiritualistic seances; he cultivated personally the society of mediums,
and in sickness he usually resorted to mental healers, mesmerists,
and clairvoyants. Before making investments or embarking in his great
railroad ventures, Vanderbilt visited spiritualists; we have one
circumstantial account of his summoning the wraith of Jim Fiske to
advise him in stock operations. His excessive vanity led him to print
his picture on all the Lake Shore bonds; he proposed to New York
City the construction in Central Park of a large monument that would
commemorate, side by side, the names of Vanderbilt and Washington; and
he actually erected a large statue to himself in his new Hudson River
station in St. John's Park. His attitude towards the public was shown in
his remark when one of his associates told him that "each and every one"
of certain transactions which he had just forced through "is absolutely
forbidden by the statutes of the State of New York." "My God, John!"
said the Commodore, "you don't suppose you can run a railroad in
accordance with the statutes of the State of New York, do you?" "Law!"
he once roared on a similar occasion, "What do I care about law? Hain't
I got the power?"
These things of course were the excrescences of an extremely vital,
overflowing, imaginative, energetic human being; they are traits that
not infrequently accompany genius. And the work which Vanderbilt did
remains an essential part of our economic organization today. Before his
time a trip to Chicago meant that the passenger changed trains seventeen
times, and that all freight had to be unloaded at a similar number
of places, carted across towns, and reloaded into other trains. The
magnificent railroad highway that extends up the banks of the Hudson,
through the Mohawk Valley, and alongside the borders of Lake Erie--a
water line route nearly the entire distance--was all but useless. It
is true that not all the consolidation of these lines was Vanderbilt's
work. In 1853 certain millionaires and politicians had linked together
the several separate lines extending from Albany to Buffalo, but they
had managed the new road so wretchedly that the largest stockholders in
1867 begged Vanderbilt to take over the control. By 1873 the Commodore
had acquired the Hudson River, extending from New York to Albany, the
New York Central extending from Albany to Buffalo, and the Lake Shore
which ran from Buffalo to Chicago. In a few years these roads had been
consolidated into a smoothly operating system. If, in transforming
these discordant railroads into one, Vanderbilt bribed legislatures and
corrupted courts, if he engaged in the largest stock-watering operations
on record up to that time, and took advantage of inside information to
make huge winnings on the stock exchange, he also ripped up the old iron
rails and relaid them with steel, put down four tracks where formerly
there had been two, replaced wooden bridges with steel, discarded the
old locomotives for new and more powerful ones, built splendid new
terminals, introduced economies in a hundred directions, cut down the
hours required in a New York-Chicago trip from fifty to twenty-four,
made his highway an expeditious line for transporting freight, and
transformed railroads that had formerly been the playthings of
Wall Street and that frequently could not meet their pay-rolls into
exceedingly profitable, high dividend paying properties. In this
operation Vanderbilt typified the era that was dawning--an era of
ruthlessness, of personal selfishness, of corruption, of disregard of
private rights, of contempt for law and legislatures, and yet of vast
and beneficial achievement. The men of this time may have traveled
roughshod to their goal, but after all, they opened up, in an amazingly
short time, a mighty continent to the uses of mankind. The triumph
of the New York Central and Hudson River Railroad under Vanderbilt, a
triumph which dazzled European investors as well as our own, and which
represented an entirely different business organization from anything
the nation had hitherto seen, appropriately ushered in the new business
era whose outlines will be sketched in the succeeding pages.