Evaluation of the rise of big business: “Robber Barons” or “Captains of Industry”?

 Riding the crest of the wave of industrialization were men alternately called the Captains of Industry and the Robber Barons by the people of their day. Photos of Gilded Age Businessmen

 Historians have asked: were the early business leaders unscrupulous thieves who ruthlessly exploited their laborers and ruined their competitors while making obscene fortunes?

 Or were they instead bold, innovative leaders who led the entire country to a new prosperity?

 Well, perhaps they are both. Let's look at how historians have evaluated the activities of business elites, considering the pros and cons of the businessmen of the Industrial Revolution. 

1. Questionable business practices

Pro:  America faced new problems and challenges with the advent of industrialization & big business. Monopolies and trusts were simply the business leaders' ways of dealing with business on a large scale.

 Thus were many of their activities simply based on ignorance of how this new order was working and were not intentionally deceptive or malicious.

Con: Even pro-business historians do not discount the facts of chicanery by early business leaders- they are too well documented beginning with Henry Demarest Lloyd's book Wealth against Commonwealth (1894), a history of the Standard Oil company. 

He provided concrete examples of industrial espionage and dirty tricks to undercut competition

 He documented bribery of politicians for special favors 

He disclosed poor treatment of workers--low wages, union busting, and poor working conditions--while the corporate leaders made staggering wealth

2. Contributions to the American quality of life  

Pro: Despite low wages and a managerial class violently opposed Unions, wages and standard of living were higher in American than anywhere else at that time.

Everyone's incomes rose--this is what attracted immigrants

 Con: American productivity did indeed produce a remarkable standard of living, but there was increasing inequality between incomes and classes

 The rich were prospering at a far faster rate than were the poor, which meant that the relative incomes of the lower classes (not their absolute income) was less than in other industrializing nations. 

Moreover, the standard of living was much higher in many other industrializing nations.

 3. Monopolies led to more efficient production, which lowered prices.

Pro: Consumer prices consistently fell because of monopolies.

Con: This was true to a certain extent, prices of some goods fell from 25% to 50%. Still, this happened across the board regardless of whether the industry monopolized or not.

          A direct connection between rise of monopolies & lowering of prices is hard to prove.      

 Profit margins did improve between the costs of raw materials & finished goods as well.

4. The ends justify the means - whatever brought us to the top of the economic order was acceptable

Pro: US saw rapid economic growth with real administrative and financial genius and innovation

Con:  the growth rate of US industry was good but was not spectacular relative to other countries at the time (Sweden, Denmark, Canada) or relative to other 20th century capitalist countries

 5. The capitalists take the big risks & bring innovation to industry so they deserve whatever they get.

 Pro: These men risked a lot and should therefore reap the biggest rewards

Con: In a study of 43 Gilded Age capitalists only 3 invented anything connected with their industry.  Further, monopolies reduced capital risks & many industrialists were protected by government subsidies - i.e. like the RR's    

Finally, the pace of technological development in many key industries indicates caution not risk.  Old methods of productions continued on a larger scale long after they were obsolete

 Example: The textile industry: more efficient ring spindles invented in 1845 but less effectual mule spindles continued on a large scale until 1900

Example: In iron & steel, the number of  inefficient forges & bloomeries kept expanding after introduction of more efficient pudding & rolling methods

 6. If everyone likes it, it must be ok

Pro: The pro-business Republican party was well-received and popular, and most people were content with the times because there was prosperity

Con: It was definitely true that pro- business politics were very popular with politicians and the public. Nonetheless, this was not monolithic--there was a rising tide of discontent.

 The late 19th century was an era of popular protest songs that many people sang at work and around the piano at night in the parlor

 There were very high levels of strike activity: 1896 - 1900 were 390 workers stoppages due to labor discontent

Whatever the merits or problems w/ big business, Americans were ambivalent about big business monopolies

 Monopolies in oil, steel tobacco, sugar, transportation, and other industries seemed to violate laws of fair competition.

 Many were concerned less about consumers--i.e. a fear that monopolies led to high prices--as about limiting opportunities for other entrepreneurs

 So, an anti-trust movement appeared in the 1880s & managed to get several laws passed at the state level

But most trusts operated across state lines, so federal laws were needed. This led to the:

1890 Sherman Anti-trust Act: "Every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce among the several states or with foreign nations is hereby declared illegal."

 

Violations were a misdemeanor

 

Persons found guilty could be fined or imprisoned

 

Corporations could be considered "persons" and trusts could be ordered dissolved

 Enforcement of Sherman was difficult as long as politicians were tied to business leaders

 

of 8 cases against corporations brought from 1890-1893, government prosecutors lost 7  

The Supreme Court dealt the death blow to this act in U.S. V. Knight, 1895

 

The American Sugar refining company bought up 98% of the sugar refining industry

 

The Supreme Court declared this corporation was not doing trade or commerce; rather they were manufacturing, so the law did not apply  

Sherman was not applied to another corporation until Teddy Roosevelt took on the trusts at the turn of the 20th century

 

It was, however, applied to labor unions

 

Several court cases ruled that strikes were restraint of trade and declared them illegal

 One case made it to the Supreme Court: in 1905 the Supremes ruled that the Danbury Hatters union was in violation of Sherman and ordered them disbanded.

 In the end, the main reason for problems enforcing Sherman was the ideology of Laissez Faire, which we will discuss next week.