Weighing the Golden Heroes

Were the giants of the Gilded Age — John D. Rockefeller, Andrew Carnegie, Jay Gould, and J.P. Morgan — pious frauds who exploited and bilked the public on their way to achieving their ill-gotten millions? Or were they bold innovators and noble capitalists who established America as the richest, most productive country on the planet? Read the article below!

“The Tycoons: How Andrew Carnegie, John D. Rockefeller, Jay Gould, and J.P. Morgan Invented the American Supereconomy,” by Charles R. Morris. Times Books, 2005, 382 pages.
Liberty Magazine

Review by Mark Skousen

Were the giants of the Gilded Age — John D. Rockefeller, Andrew Carnegie, Jay Gould, and J.P. Morgan — pious frauds who exploited and bilked the public on their way to achieving their ill-gotten millions? Or were they bold innovators and noble capitalists who established America as the richest, most productive country on the planet?

Was Balzac onto something when he claimed that “behind every great fortune is a crime”? Or was Carnegie more accurate when he observed that “great inequality and concentration of business are essential for the future progress of the race”?

In the past, historians have taken positions at opposite poles in this debate in American history, when railroads, oil, and steel transformed the world economy. On the one hand are the muckraker Ida Tarbell and Marxist historian Matthew Josephson. Ida Tarbell’s “History of Standard Oil Company,” based on her famous 19-part series that ran in McClure’s Magazine from 1901 to 1903, is an expose of John D. Rockefeller. She has since been honored as one of the first female journalists, with the U.S. Post Office issuing a stamp in 2002. Her book hastened the breakup of Standard Oil in 1911. “They had never played fair, and that ruined their greatness for me,” she wrote. Since then, her historical accuracy has been challenged.

Charles Morris concludes, “The great power of Tarbell’s prose conceals the holes in her argument.” (p. 86) The railroad rebates Rockefeller engineered, which she described as “secret, unjust and illegal” were in fact neither secret, nor illegal, nor unjust. “There was no law against rebates, on either the federal or state level, and they were standard practice among all carriers,” states Morris. (88) Despite complaints at the time, the Cleveland refiners who were pressured to sell to Rockefeller were offered a fair price, and those who accepted Standard Oil stock became quite wealthy.

Matthew Josephson’s classic work, “The Robber Barons,” was published in 1934, during the depths of the Great Depression. It is still in print, and widely considered “the classic account” of the captains of industry. Josephson’s bias is apparent in his frequent citations of Thorstein Veblen, Charles A. Beard, and Karl Marx. Although written in an entertaining style, his history is cleverly prejudiced against the creators of industry. Witness its highlighting of their peculiar personal habits (for example, he claims that Rockefeller had a “queer habit of talking to his pillow”) and their misdeeds and deceptions, while it religiously avoids references to their positive contributions. In his chapter on J.P. Morgan, Josephson emphasizes Morgan’s imperial wizardry at 23 Wall Street, where he conspired to monopolize and unify the transportation business of Vanderbilt, Gould, Huntington, and Hill, and create the world’s first billion-dollar company, U.S. Steel. Yet he conveniently leaves out any mention of Morgan’s twice saving the U.S. Treasury from the gold drains and near bankruptcy of the 1890s, and his role as quasi-central banker in restoring order during the Panic of 1907. These omissions are a fatal flaw.

On the other extreme is Burt W. Folsom Jr.’s “Myth of the Robber Barons.” Folsom teaches history at Hillsdale College and lectures regularly at student conferences sponsored by Young America’s Foundation, which also published his book. He is in the vanguard of a revisionist movement reevaluating the genius of the barons of industry. Countering the standard textbook view that Commodore Vanderbilt’s actions in the steamboat business were “immoral and in restraint of trade,” he portrays Vanderbilt as an entrepreneur with “superior skills” in driving down prices and offering better services than his competitors. Unlike his rivals, Vanderbilt accomplished this feat without resorting to government subsidies. In his chapter on Rockefeller, Folsom shows how the oil magnate repeatedly slashed the price of oil and constantly expanded production, “refining oil for the poor man.” He paid fair prices in buying out his competitors, and paid his employees higher than market wages. “Standard Oil was rarely hurt by strikes or labor unrest,” states Folsom.

Folsom’s book is strangely hit and miss, probably because it was written as a series of articles, not a complete history, and his focus is on industrial giants who succeeded without state favors. His railroad chapters cover Commodore Vanderbilt and James J. Hill, but omit Jay Cooke. His banking chapter highlights Andrew Mellon, while hardly mentioning J.P. Morgan. His steel chapters focus on the Scrantons and Charles Schwab, rather than kingpin Andrew Carnegie. And despite the title of his book, Folsom never mentions Matthew Josephson, nor does he review “The Robber Barons.” Just as Josephson typically ignores the beneficial actions of the 19th century tycoons, so Folsom turns a blind eye to their shortcomings. His chapter on Carnegie Steel (under the title, “Charles Schwab and the Steel Industry”) ignores Carnegie’s flaws. Here are three cases omitted in Folsom’s book:

• In 1888 Carnegie wrote a letter to every railroad company in the United States, warning them that the new, cheaper steel process of his competitor Allegheny Bessemer was risky. He had no evidence for this accusation, but his complaint eventually forced Allegheny Bessemer to sell out to Carnegie Steel; afterwards, Carnegie adopted the new process.

• Carnegie had a policy of ruthlessly reducing costs, including wages, even while his company was making record profits. He offered bonuses and other incentives to managers, but the rank-and-file employees had to fight for every concession. Carnegie’s refusal to honor the new eight-hour workday the Carnegie Steel workers had negotiated was a major cause of the Homestead Strike of 1892, one of the worst labor strikes in U.S. history. When Carnegie ordered workers to return to the twelve-hour shift, the workers not surprisingly staged a strike, which Carnegie, through his partner Henry Clay Frick, violently suppressed.

• The dispute between Carnegie and Frick in 1899, when Carnegie tried to expel Frick from the firm and pay him only book value for his shares, would have wiped out 80 percent, or $10 million, of the fair market value of Frick’s holdings. Frick sued in court and won.*

This brings me to Charles R. Morris’ “The Tycoons,” which takes into account the latest economic research and analysis of the Gilded Age, and is not only comprehensive in its account of the major players in the early industrial age, but is evenhanded. He credits all four main characters — Carnegie, Gould, Rockefeller, and Morgan — with dogged determinism and entrepreneurial genius in expanding output, cutting prices, and “turning luxuries into necessities” (Carnegie’s description of capitalism).

As a result, America surpassed England in the late 19th century and rapidly became the dominant power in the global economy. But Morris doesn’t ignore their flaws. To Morris, Carnegie — despite his humanitarian acts — was “the most irritating” and“repellently smarmy,” a manager who issued pro-labor manifestos while he “steadily ratcheted up the demands on his workers and steadily cut their pay.” Jay Gould created the national railroad map that prevails today, but was “always financially stretched” and had “a strange streak of self destructiveness.” Morgan was the last of the great merchant bankers, engineering the first world class merger, U.S. Steel, but engaged in some questionable business dealings, and was in and out of bankruptcy for the rest of his days. Rockefeller comes off the best. “On balance,” Morris concludes, “while there were skeletons aplenty in John Rockefeller’s closet [Morris points to Rockefeller’s once lying under oath], he was not a brigand, or embezzler, or stock manipulator in the manner of the early Jay Gould.” (91) In depicting the Gilded Age’s tycoons as neither the saints of Folsom’s apology, nor the demons of Josephson’s and Tarbell’s rants, Morris himself has hit upon a fine balance.

*All three accounts are included in Les Standiford’s recent history of Carnegie Steel entitled “Meet You In Hell: Andrew Carnegie, Henry Clay Frick, and the Bitter Partnership that Transformed America.”

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