Sedition·com (mature content)
History of the United States by Charles A. Beard and Mary R. Beard

«·BUSINESS ENTERPRISE AND THE REPUBLICAN PARTY · The Supremacy of the Republican Party (1861-85)·»

Railways and Industry

The Outward Signs of Enterprise.—It is difficult to comprehend all the multitudinous activities of American business energy or to appraise its effects upon the life and destiny of the American people; for beyond the horizon of the twentieth century lie consequences as yet undreamed of in our poor philosophy. Statisticians attempt to record its achievements in terms of miles of railways built, factories opened, men and women employed, fortunes made, wages paid, cities founded, rivers spanned, boxes, bales, and tons produced. Historians apply standards of comparison with the past. Against the slow and leisurely stagecoach, they set the swift express, rushing from New York to San Francisco in less time than Washington consumed in his triumphal tour from Mt. Vernon to New York for his first inaugural. Against the lazy sailing vessel drifting before a genial breeze, they place the turbine steamer crossing the Atlantic in five days or the still swifter airplane, in fifteen hours. For the old workshop where a master and a dozen workmen and apprentices wrought by hand, they offer the giant factory where ten thousand persons attend the whirling wheels driven by steam. They write of the “romance of invention” and the “captains of industry.”

Copyright by Underwood and Underwood, N.Y.
A Corner in the Bethlehem Steel Works

The Service of the Railway.—All this is fitting in its way. Figures and contrasts cannot, however, tell the whole story. Take, for example, the extension of railways. It is easy to relate that there were 30,000 miles in 1860; 166,000 in 1890; and 242,000 in 1910. It is easy to show upon the map how a few straggling lines became a perfect mesh of closely knitted railways; or how, like the tentacles of a great monster, the few roads ending in the Mississippi Valley in 1860 were extended and multiplied until they tapped every wheat field, mine, and forest beyond the valley. All this, eloquent of enterprise as it truly is, does not reveal the significance of railways for American life. It does not indicate how railways made a continental market for American goods; nor how they standardized the whole country, giving to cities on the advancing frontier the leading features of cities in the old East; nor how they carried to the pioneer the comforts of civilization; nor yet how in the West they were the forerunners of civilization, the makers of homesteads, the builders of states.

Government Aid for Railways.—Still the story is not ended. The significant relation between railways and politics must not be overlooked. The bounty of a lavish government, for example, made possible the work of railway promoters. By the year 1872 the Federal government had granted in aid of railways 155,000,000 acres of land—an area estimated as almost equal to Pennsylvania, New York, Connecticut, Rhode Island, Massachusetts, Maine, New Hampshire, and Vermont. The Union Pacific Company alone secured from the federal government a free right of way through the public domain, twenty sections of land with each mile of railway, and a loan up to fifty millions of dollars secured by a second mortgage on the company’s property. More than half of the northern tier of states lying against Canada from Lake Michigan to the Pacific was granted to private companies in aid of railways and wagon roads. About half of New Mexico, Arizona, and California was also given outright to railway companies. These vast grants from the federal government were supplemented by gifts from the states in land and by subscriptions amounting to more than two hundred million dollars. The history of these gifts and their relation to the political leaders that engineered them would alone fill a large and interesting volume.

Railway Fortunes and Capital.—Out of this gigantic railway promotion, the first really immense American fortunes were made. Henry Adams, the grandson of John Quincy Adams, related that his grandfather on his mother’s side, Peter Brooks, on his death in 1849, left a fortune of two million dollars, “supposed to be the largest estate in Boston,” then one of the few centers of great riches. Compared with the opulence that sprang out of the Union Pacific, the Northern Pacific, the Southern Pacific, with their subsidiary and component lines, the estate of Peter Brooks was a poor man’s heritage.

The capital invested in these railways was enormous beyond the imagination of the men of the stagecoach generation. The total debt of the United States incurred in the Revolutionary War—a debt which those of little faith thought the country could never pay—was reckoned at a figure well under $75,000,000. When the Union Pacific Railroad was completed, there were outstanding against it $27,000,000 in first mortgage bonds, $27,000,000 in second mortgage bonds held by the government, $10,000,000 in income bonds, $10,000,000 in land grant bonds, and, on top of that huge bonded indebtedness, $36,000,000 in stock—making $110,000,000 in all. If the amount due the United States government be subtracted, still there remained, in private hands, stocks and bonds exceeding in value the whole national debt of Hamilton’s day—a debt that strained all the resources of the Federal government in 1790. Such was the financial significance of the railways.

Railroads of the United States in 1918

Growth and Extension of Industry.—In the field of manufacturing, mining, and metal working, the results of business enterprise far outstripped, if measured in mere dollars, the results of railway construction. By the end of the century there were about ten billion dollars invested in factories alone and five million wage-earners employed in them; while the total value of the output, fourteen billion dollars, was fifteen times the figure for 1860. In the Eastern states industries multiplied. In the Northwest territory, the old home of Jacksonian Democracy, they overtopped agriculture. By the end of the century, Ohio had almost reached and Illinois had surpassed Massachusetts in the annual value of manufacturing output.

That was not all. Untold wealth in the form of natural resources was discovered in the South and West. Coal deposits were found in the Appalachians stretching from Pennsylvania down to Alabama, in Michigan, in the Mississippi Valley, and in the Western mountains from North Dakota to New Mexico. In nearly every coal-bearing region, iron was also discovered and the great fields of Michigan, Wisconsin, and Minnesota soon rivaled those of the Appalachian area. Copper, lead, gold, and silver in fabulous quantities were unearthed by the restless prospectors who left no plain or mountain fastness unexplored. Petroleum, first pumped from the wells of Pennsylvania in the summer of 1859, made new fortunes equaling those of trade, railways, and land speculation. It scattered its riches with an especially lavish hand through Oklahoma, Texas, and California.

John D. Rockefeller
John D. Rockefeller

The Trust—an Instrument of Industrial Progress.—Business enterprise, under the direction of powerful men working single-handed, or of small groups of men pooling their capital for one or more undertakings, had not advanced far before there appeared upon the scene still mightier leaders of even greater imagination. New constructive genius now brought together and combined under one management hundreds of concerns or thousands of miles of railways, revealing the magic strength of coöperation on a national scale. Price-cutting in oil, threatening ruin to those engaged in the industry, as early as 1879, led a number of companies in Cleveland, Pittsburgh, and Philadelphia to unite in price-fixing. Three years later a group of oil interests formed a close organization, placing all their stocks in the hands of trustees, among whom was John D. Rockefeller. The trustees, in turn, issued certificates representing the share to which each participant was entitled; and took over the management of the entire business. Such was the nature of the “trust,” which was to play such an unique rôle in the progress of America.

The idea of combination was applied in time to iron and steel, copper, lead, sugar, cordage, coal, and other commodities, until in each field there loomed a giant trust or corporation, controlling, if not most of the output, at least enough to determine in a large measure the prices charged to consumers. With the passing years, the railways, mills, mines, and other business concerns were transferred from individual owners to corporations. At the end of the nineteenth century, the whole face of American business was changed. Three-fourths of the output from industries came from factories under corporate management and only one-fourth from individual and partnership undertakings.

The Banking Corporation.—Very closely related to the growth of business enterprise on a large scale was the system of banking. In the old days before banks, a person with savings either employed them in his own undertakings, lent them to a neighbor, or hid them away where they set no industry in motion. Even in the early stages of modern business, it was common for a manufacturer to rise from small beginnings by financing extensions out of his own earnings and profits. This state of affairs was profoundly altered by the growth of the huge corporations requiring millions and even billions of capital. The banks, once an adjunct to business, became the leaders in business.

Copyright by Underwood and Underwood, N.Y.
Wall Street, New York City

It was the banks that undertook to sell the stocks and bonds issued by new corporations and trusts and to supply them with credit to carry on their operations. Indeed, many of the great mergers or combinations in business were initiated by magnates in the banking world with millions and billions under their control. Through their connections with one another, the banks formed a perfect network of agencies gathering up the pennies and dollars of the masses as well as the thousands of the rich and pouring them all into the channels of business and manufacturing. In this growth of banking on a national scale, it was inevitable that a few great centers, like Wall Street in New York or State Street in Boston, should rise to a position of dominance both in concentrating the savings and profits of the nation and in financing new as well as old corporations.

The Significance of the Corporation.—The corporation, in fact, became the striking feature of American business life, one of the most marvelous institutions of all time, comparable in wealth and power and the number of its servants with kingdoms and states of old. The effect of its rise and growth cannot be summarily estimated; but some special facts are obvious. It made possible gigantic enterprises once entirely beyond the reach of any individual, no matter how rich. It eliminated many of the futile and costly wastes of competition in connection with manufacture, advertising, and selling. It studied the cheapest methods of production and shut down mills that were poorly equipped or disadvantageously located. It established laboratories for research in industry, chemistry, and mechanical inventions. Through the sale of stocks and bonds, it enabled tens of thousands of people to become capitalists, if only in a small way. The corporation made it possible for one person to own, for instance, a $50 share in a million dollar business concern—a thing entirely impossible under a régime of individual owners and partnerships.

There was, of course, another side to the picture. Many of the corporations sought to become monopolies and to make profits, not by economies and good management, but by extortion from purchasers. Sometimes they mercilessly crushed small business men, their competitors, bribed members of legislatures to secure favorable laws, and contributed to the campaign funds of both leading parties. Wherever a trust approached the position of a monopoly, it acquired a dominion over the labor market which enabled it to break even the strongest trade unions. In short, the power of the trust in finance, in manufacturing, in politics, and in the field of labor control can hardly be measured.

The Corporation and Labor.—In the development of the corporation there was to be observed a distinct severing of the old ties between master and workmen, which existed in the days of small industries. For the personal bond between the owner and the employees was substituted a new relation. “In most parts of our country,” as President Wilson once said, “men work, not for themselves, not as partners in the old way in which they used to work, but generally as employees—in a higher or lower grade—of great corporations.” The owner disappeared from the factory and in his place came the manager, representing the usually invisible stockholders and dependent for his success upon his ability to make profits for the owners. Hence the term “soulless corporation,” which was to exert such a deep influence on American thinking about industrial relations.

Cities and Immigration.—Expressed in terms of human life, this era of unprecedented enterprise meant huge industrial cities and an immense labor supply, derived mainly from European immigration. Here, too, figures tell only a part of the story. In Washington’s day nine-tenths of the American people were engaged in agriculture and lived in the country; in 1890 more than one-third of the population dwelt in towns of 2500 and over; in 1920 more than half of the population lived in towns of over 2500. In forty years, between 1860 and 1900, Greater New York had grown from 1,174,000 to 3,437,000; San Francisco from 56,000 to 342,000; Chicago from 109,000 to 1,698,000. The miles of city tenements began to rival, in the number of their residents, the farm homesteads of the West. The time so dreaded by Jefferson had arrived. People were “piled upon one another in great cities” and the republic of small farmers had passed away.

To these industrial centers flowed annually an ever-increasing tide of immigration, reaching the half million point in 1880; rising to three-quarters of a million three years later; and passing the million mark in a single year at the opening of the new century. Immigration was as old as America but new elements now entered the situation. In the first place, there were radical changes in the nationality of the newcomers. The migration from Northern Europe—England, Ireland, Germany, and Scandinavia—diminished; that from Italy, Russia, and Austria-Hungary increased, more than three-fourths of the entire number coming from these three lands between the years 1900 and 1910. These later immigrants were Italians, Poles, Magyars, Czechs, Slovaks, Russians, and Jews, who came from countries far removed from the language and the traditions of England whence came the founders of America.

In the second place, the reception accorded the newcomers differed from that given to the immigrants in the early days. By 1890 all the free land was gone. They could not, therefore, be dispersed widely among the native Americans to assimilate quickly and unconsciously the habits and ideas of American life. On the contrary, they were diverted mainly to the industrial centers. There they crowded—nay, overcrowded—into colonies of their own where they preserved their languages, their newspapers, and their old-world customs and views.

So eager were American business men to get an enormous labor supply that they asked few questions about the effect of this “alien invasion” upon the old America inherited from the fathers. They even stimulated the invasion artificially by importing huge armies of foreigners under contract to work in specified mines and mills. There seemed to be no limit to the factories, forges, refineries, and railways that could be built, to the multitudes that could be employed in conquering a continent. As for the future, that was in the hands of Providence!

Business Theories of Politics.—As the statesmen of Hamilton’s school and the planters of Calhoun’s had their theories of government and politics, so the leaders in business enterprise had theirs. It was simple and easily stated. “It is the duty of the government,” they urged, “to protect American industry against foreign competition by means of high tariffs on imported goods, to aid railways by generous grants of land, to sell mineral and timber lands at low prices to energetic men ready to develop them, and then to leave the rest to the initiative and drive of individuals and companies.” All government interference with the management, prices, rates, charges, and conduct of private business they held to be either wholly pernicious or intolerably impertinent. Judging from their speeches and writings, they conceived the nation as a great collection of individuals, companies, and labor unions all struggling for profits or high wages and held together by a government whose principal duty was to keep the peace among them and protect industry against the foreign manufacturer. Such was the political theory of business during the generation that followed the Civil War.

«·BUSINESS ENTERPRISE AND THE REPUBLICAN PARTY · The Supremacy of the Republican Party (1861-85)·»