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Home -> Burton J. Hendrick -> The Age of Big Business, A Chronicle of the Captains of Industry -> CHAPTER I

The Age of Big Business, A Chronicle of the Captains of Industry - CHAPTER I










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

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

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.

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