Evaluation of the rise of big business: “Robber Barons” or “Captains of Industry”?
the crest of the wave of industrialization were men
have asked: were the early business leaders unscrupulous thieves who ruthlessly
exploited their laborers and ruined their competitors while making obscene
Or were they instead bold, innovative leaders who led the entire country to a new prosperity?
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.
Questionable business practices
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
Thus were many of their activities simply based on ignorance of how this new order was working and were not intentionally deceptive
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.
provided concrete examples of industrial espionage and dirty tricks to undercut
documented bribery of politicians for special favors
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
low wages and a managerial class violently opposed Unions, wages and standard
of living were higher in American than anywhere else at that time.
incomes rose--this is what attracted immigrants
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.
prices consistently fell because of monopolies.
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.
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
saw rapid economic growth with real administrative and financial genius and
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
The capitalists take the big risks & bring innovation to industry so they
deserve whatever they get.
These men risked a lot and should therefore reap the biggest rewards
study of 43 Gilded Age capitalists only 3 invented anything connected with their
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-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
merits or problems w/ big business, Americans were ambivalent about big business
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:
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
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
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
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.