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History and Impact of Robber Barons

Info: 5237 words (21 pages) Essay
Published: 8th Feb 2020 in History

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The Gilded Age is most notable for the vast economic growth that spanned throughout the United States, the extensive political corruption that followed, and the large disparity between the rich and the poor that was created. Robber barons were largely responsible for this. Robber barons were men who became wealthy through corrupt and ruthless ways. Many times they used unfair economic strategies to eliminate their competition and attain more power. They often used their power to exploit others and to attain more wealth and authority over others. Wealth and status became important to them, as they would do anything to get more. Therefore, they often turned corrupt and ethically immoral. They made their employees work long hours for little pay, which created more poverty and an overworked nation. Many families could not feed their children because they were not getting paid enough, which caused widespread child labor. The working conditions for the workers were often dismal and caused many injuries and deaths. Despite using unethical ways to attain their wealth, many were also philanthropists and contributed positively to society and helped spur greater industrial change. Although some robber barons positively contributed to society, primarily through philanthropy or donations, ultimately, they caused more harm through unfair trading practices, driving companies out of business, stealing capital, and exploiting the workforce.

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Although some were born into wealth, most used dishonest economic techniques to attain their wealth and power. Because of the laissez-faire government, and bribed officials in the government, large corporations that they created were virtually indestructible. Robber barons used many unfair economic strategies to attain more wealth and power in a specific industry, many of which are deemed immoral today. These strategies created massive profits and power for the owners, but also led to many negative consequences. Many robber barons, such as John Rockefeller and Andrew Carnegie, used vertical and horizontal integration to become a dominant and prosperous corporation. Rockefeller forced many of his competitors out of business or bought them out at distressed prices that he set. This process of horizontal integration helped Rockefeller take over the oil industry, resulting in his control over 90% of the industry. This is very dangerous for consumers because Rockefeller could ration oil to his advantage to drive up prices. Using vertical integration, Rockefeller cut out the middleman, eventually owning everything needed to produce, refine and deliver oil. His main goal by doing this was to cut out any possible uncooperative middlemen who received a portion of his profits. These economic strategies cut out competition, and essentially capitalism. Although he did control 90% of the oil industry, he “allowed the remaining 10 percent to exist because it created the illusion of competition.”[1] These integration efforts drove many small businesses to bankruptcy because they were not able to compete with these dominant corporations. Robber barons were more interested in gaining capital than using fair economic strategies that would help everyone.

Although still legal, robber barons undercut their competitors to eliminate competition, vastly hurting other companies. To eliminate more competition, robber barons, especially in the railroad industry, began to lower prices pushing smaller business into bankruptcy because they were unable to compete. This had a devastating effect on businesses in the railroad industry, as many smaller businesses either got gobbled up by larger corporations or went bankrupt because of dubious practices of the large corporations. As a result, most railroad companies negotiated with shipping companies to determine an alliance where the shipping company would agree to only do business with one railroad business no matter to what extent other companies lowered their prices. In return, the railroad line would give the shipper a rebate on their total shipment.[2] An example of this was when Standard Oil joined the South Improvement Company (SIC), a secret partnership among railroad lines and oil refineries. In this partnership, the railroads would set high rates, but would pay rebates to those refineries in the partnership. Consequently, those not in the partnership paid much more, which caused many to go out of business. Rockefeller was a cutthroat businessman, he would call up non-members of the SIC, and explained the partnership. He then gave them a choice of either being bought out by Standard Oil, or ultimately go out of business. Within a year, all independent refineries in the area had either sold out to Standard Oil, or had gone bankrupt. What gave Rockefeller even more profits, was buying refineries for about 45% of their worth[3]. Mr. Alexander, one of the owners of a non-member refinery explained that “there was a pressure brought to bear upon my mind and upon almost all citizens of Cleveland engaged in the oil business. We were told that unless we sold out to the South Improvement Company we would be crushed out… We sold our company at a loss because we had no choice… When I heard of the deal they had, I decided to withdraw from the business rather than fight a monopoly with no chance of winning. They offered us only about 45 per cent of the value we placed on our refinery”[4]. Robber barons used harsh economic strategies, such as lowering their prices to an obscene rate, to crush and eliminate competition.

Another pricing scheme devised was the creation of pools in the railroad industry. Robber barons used economic strategies, such as pools, to eliminate competition, ultimately creating a monopoly rendering them very powerful. In these pools, competitors agreed not to sell below a predetermined rate. Subsequently, they began demanding higher and higher prices to transport crops, which angered farmers who relied on the railroads.[5] Farmers were already getting paid less for their products due to an abundance of crops on the market, and because of the monopoly over the shipment of grain, the railroads were able to charge high shipping rates, causing the farmers to become increasingly more in debt.[6] This process of forming pools to increase profits was also used in the salt industry, where salt companies were able to double the price of salt. Although this stabilized the market, it was negative for the consumers, who had to pay more for their product.[7] Underselling a product to decrease competition was not only used in the railroad industry but in most industries dominated by robber barons. The most used economic strategy used by robber barons was the use of monopolies and trusts. A monopoly is when one company or corporation has sole, or nearly sole, control over an industry, this gives the company a vast amount of power. Monopolies are very dangerous to the consumer because when a business has sole control over an industry, it can raise the prices with no opposition. Although the government did pass the Sherman Antitrust Act, which deemed monopolies illegal,  robber barons still found ways around it. Instead of controlling the company directly, these robber barons would control their companies indirectly through trustees.[8] Trusts ensured the survival of monopolies and the elimination of competition. Other than going directly against the American ideology of competition, monopolies are dangerous because one company can hold too much power. By 1912, robber baron J.P Morgan controlled 341 directors in 112 corporations and had a net worth of over $25 billion.[9] Using monopolies and trusts, robber barons could accumulate an unchecked amount of power and wealth. Robber barons used various economical methods to accumulate their wealth and power, most were detrimental to the consumer and society, many times, these strategies included taking over or bankrupting small businesses, making secret agreements with other corporations, or creating monopolies.[10] Using unlawful economic strategies such as pools, monopolies, and trusts robber barons were able to create dominant corporation that cut out other businesses.

Using unethical economic techniques, these robber barons created a vast amount of wealth and power, until they had almost full control of a specific industry. They continued this way through political bribery and corrupt practices. Robber barons were destructive to society because of their corrupt political methods to generate capital. Corruption in politics was widespread during this period. This caused many robber barons to take hold of the government to ensure the survival of their business and their practices. This can be seen in the political cartoon “Bosses of the Senate” by Joseph Keppler, large corporations are seen as giant money bags looming over the Senate.[11] The plaque declares that “this is the Senate of Monopolists by the Monopolists and for the Monopolists”, showing that the massive influence that large corporations had on the government. An example of the extreme corruption of this period was the teapot dome scandal. In 1922, President Harding transferred control over the Teapot Dome oil field from the navy to the Department of the Interior, ran by Albert Bacon Fall. Bribed by Sinclair Oil and Pan American Petroleum, Fall leased the rights to produce oil on the Teapot Dome oil field to them without allowing other companies to competitively bid.[12] The government was primarily controlled by large businesses, this corruption causes the elimination of competition and hurts other businesses not given an opportunity to even compete.

The government and corporations were very close, and many robber barons had control over officials that they bribed, using their control over the government they made sure that their corporations would not be destroyed by laws. Corporate influence on the government as well as their hands-off approach of industry can have detrimental effects on the economy and society. Robber barons, James Fisk and Jay Gould attempted to corner the gold market, by buying large amounts of gold, thus creating a smaller supply and increasing its value. They also bought a majority of the stock of the Wabash Railroad company, which was a transporter of wheat. At the time, foreign buyers paid for U.S. wheat with dollars bought with gold. Their idea was that if the price of gold went up, they would profit in two ways, one, from hoarding gold so the price of gold went up, and two, the foreign buyer would receive more wheat that would be exported by Wabash Railroad, further increasing their profits. In essence, these robber barons made “$15,000 ($263,000 in 2016) for every dollar rise in gold”, and by September 6th the price of gold had risen from $4.50 to $137 an ounce.[13] Throughout this, Gould had bribed and blackmailed many people, even attempting to bribe the President of the United States, President Grant. But on Sensing the scheme that was taking place, on September 23rd, 1869, Grant ordered the release of $4 million worth of gold; which caused the price of gold to immediately drop. Within fifteen minutes the price of gold dropped from $162.5 to $133, many were quick to sell creating massive devastation and panic on Wall Street. The economy was in turmoil, firms went bankrupt, thousands were financially ruined, and some businessmen even committed suicide; but the perpetrators of this mess were somehow unscathed. This day has become known as Black Friday.[14][15] Black Friday illustrates the power that big businesses have over not only the economy, but over politics too. These robber barons only cared about their individual benefits and not the benefit of the country and were willing to make others suffer for their success.

 Robber barons were destructive to society because of their political and economical corrupt methods to generate capital. Although not outlawed at the time, interlocking directorates was very common for robber barons. Interlocking directorates means having corporate members serving on boards of many companies, which is not harmful unless one company attempted to bankrupt another and transfer the benefits to another, at the expense of the stockholders.[16] These harmful effects can be seen in the Crédit Mobilier scandal, in which a robber baron was able to swindle the American government out of millions of dollars. As a way to expand Westward, the U.S. government gave out generous land grants to companies willing to lay tracks in the West. Although the land grants were generous, no companies accepted them because of the difficulty of laying tracks in the Rocky mountain terrain and traveling in Native American territory, until the Union Pacific accepted and hired Crédit Mobilier, a supposedly independent firm. However, this proved not to be the case, because the Vice President of Union Pacific, Thomas C. Durant, was also part owner of Crédit Mobilier. The original estimates for the construction of the track was set at a fair price, but Crédit Mobilier charged Union Pacific double, quickly throwing Union Pacific into debt and creating great losses for not only the stockholders and the U.S. government who provided large loans to the company, but the American public who had paid tax dollars supporting Union Pacific; while Durant pocketed millions in profit. To stop the scandal from becoming known to the public, Durant gave Congressman Oakes Ames Crédit Mobilier stock, and, in turn, Ames bribed other congressmen and government officials. Although the public was infuriated when this scandal eventually came into light, Durant and the corrupt officials were ultimately left unpunished.[17] Robber barons used unethical ways to achieve more power and wealth, and would even use corrupt methods that ultimately hurt others.

Another corrupt way that robber barons generated capital was through the selling of fraudulent stock. Robber barons used corrupt and unethical methods to attain more wealth, this ultimately hurt others involved. The most known for his corrupt behavior is robber baron Jay Gould who “issued millions of dollars worth of fraudulent stock and paid thousands of dollars more in bribes to judges and legislators”. His corrupt methods hurt other businesses at the expense of his wealth. He is not the only robber baron charged with using the corrupt method of selling fraudulent stock or watering stock, other prominent robber barons such as Daniel Drew and Cornelius Vanderbilt are also known for having used unethical ways and hurting others to become successful. For instance, Vanderbilt “earned” over $20 million by watering down stock (issuing stock at a higher price than its true value) and selling it for the price he believed it would become later. Although still corrupt, Vanderbilt used even more unethical ways to swindle others of money for his own individual success. When he learned that a group of stock traders began selling the Hudson River Railroad (HRRR) short. He then convinced the stock traders that the supporters on the railroad were in need of capital. The supporters sold their stock to the traders for cash, the supporters then bought as much stock as they could. Soon the stocks were cornered and the traders lost vast amounts of money. He corruptly ruined the lives of the traders for his own personal gain. Robber barons were ruthless in their pursuit of wealth and success and put themselves before everyone else. They used corrupt practices to put them ahead and to keep their competition out.

The industrial revolution created vast economic change for the US, but it also attracted many immigrants in search of jobs as well as laborers from rural areas into the booming cities. Because of the vast amount of workers available, employers were able to pay them very little because they were easily replaceable.  In addition, the labor they were required to do became less specialized, making working simpler for the worker. Like most employers at the time, robber barons took advantage of their workers, and put production over safety and their rights, and used whatever means necessary to increase production. Although their workweeks were long, often averaging over sixty hours a week they received meager pay. Desperate for more income, child labor became more common. Child labor was often exploited by the robber barons because, like the other workers, children suffered from a long work day but they were willing to receive less pay. Robber barons hurt many people, especially their workers, which, in turn, hurt society. The working conditions were often dismal and because at the time employers were not responsible for the safety of their worker, the robber barons chose increased production over workplace safety. Fires and workplace injury were not uncommon. To increase productivity the employers of a New York shirtwaist factory locked in their workers, on March 25th, 1911, a fire started and hundreds of workers were trapped in the burning building. 146 workers, mostly immigrant women and girls, died that day because of unsafe working conditions created by men who sought to increase their personal profit. At the time, employers were not held accountable for a workers safety, as can be seen by the many times that the supreme court sided with the employer that workers safety and their treatment is not the responsibility of the employer. Because of this, the laissez-faire policy in effect in the government and the many corrupt officials employed in the government, as well as the robber barons need to maximize profits created conditions that allowed workers to be exploited ruthlessly by unethical employers. Although the transcontinental railroad is an outstanding accomplishment for its time, and over 1,700 miles of track were laid, the number of people that suffered and died for this to happen was outrageous. These men worked for less than $1 a day, and the unsafe terrain caused many deaths due to Native American attacks, avalanches, and accidents. Not only was working for a robber baron dangerous for the worker, but many times robber barons techniques and strategies proved fatal for many, such as the Native Americans and those who got caught in the middle of the robber baron’s quest for more profits. The New York Central Railroad, controlled by robber baron Cornelius Vanderbilt, was notorious for a stretch of track that became known as “Death Avenue”. The train did not stop for anything in its way, and as a result, over the years, 548 people were killed and 1,574 injured, almost half being children. Overall, robber barons put their profits above human life, which had many negative consequences for society such as death, injury, suffering.

Because of their lack of rights, many workers formed unions to band against their employers to demand greater rights. Because of the rampant corruption during this time journalists took it upon themselves to write articles exposing the misdeeds of the robber barons, these journals were known as muckrakers. Robber barons hurt others and society by responding with violence when met with the a strike. Strikes became more common, and by the mid-1880s more than one thousand union strikes had occurred, because, through the work of muckrakers (someone who exposes corruption through publication), Americans began seeing the faults in these powerful robber barons. As can be imagined, robber barons did not respond well to these strikers because it halted their production and flow of cash. Which is why when there was a strike due to wages on the Erie Railroad, Fisk ordered over a thousand armed men to shoot any workers who attempted resistance. These strikes often proved to be violent and deadly to many involved. Since September 13, 1913, the United Mine Workers of America (UMWA) had been on strike against Colorado Fuel and Iron Company, controlled by robber baron John D. Rockefeller, for better pay and better working conditions. The Colorado National Guard was then deployed to protect the mine and reduce violence. On April 20, 1914, the National Guard opened fire on the strikers resulting in 25 killed, 11 of which were children. The main ideas in each strike revolved around better wages and working conditions. In the Pennsylvania railroad strike, against robber baron Thomas Alexander Scott, the strikers called out the robber barons for destroying businesses for the “purpose of building of building up individual interests”. Robber barons only cared about production and capital, when strikes halted their production, they met the strikers with violence as a way to break the strike and to continue production.

 Robber barons were notorious for hurting others in their pursuit of capital. Although the means by which they accumulated their wealth may not have been all ethical or legal, they donated millions to the betterment of society; as Carnegie explained in his book, “The Gospel of Wealth”, “There are instances of millionaires’ sons unspoiled by wealth, who, being rich, still perform great services in the community”.[18]  Many robber barons were philanthropists who donated millions for the betterment of society. Over his lifetime, Rockefeller donated more than $500 million and still continues to contribute through the Rockefeller Foundation. Despite being a philanthropist, his donations did not extend to his workers. Carnegie was notorious for his generous donations and his ideology about wealth. He outlined his beliefs about wealth and the wealthy in his book, “The Gospel of Wealth”. In this book, he explains that “this wealth, passing through the hands of the few, can be made a much more potent force for the elevation of our race than if it had been distributed in small sums to the people themselves”.[19] He believed that instead of leaving their money to their heirs or to the public after death, the wealthy should distribute their wealth among the people during their life. This ideology can be seen in his philanthropic efforts “for the improvement of mankind”.[20] He funded the creation 2,000 “free public libraries”, estimated to cost around $60 million dollars, and donated $300,000 to build the Carnegie library in Washington, D.C.[21][22] He embraced his notion that “The man who dies thus rich dies disgraced”.[23] In total, Carnegie donated approximately $350 million, $288 million in the U.S. and $62 to the British Empire. He created the Carnegie Institute of Pittsburgh, the Carnegie Institute of Technology, Carnegie Mellon University, built Carnegie Hall in New York City, and the Carnegie Institution of Washington to encourage research. During his lifetime Carnegie donated generously to create many educational institutes that greatly benefited society, and that are still enjoyed today.[24] As well, J.P Morgan donated many of his priceless paintings and other art objects to the Metropolitan Museum of Art. Although robber barons donated millions in their lifetimes, it did not better society because not everyone reaped the benefits from their donations.

Robber barons donated generously for the betterment of society, but they also helped the U.S when it was in need. Robber barons hurt many people to achieve the power that they had, many used that power in corrupt ways, although most used their wealth and power to hurt others and to better themselves, robber baron, J.P Morgan did aid the U.S. during crises.. In 1877, to pay its troops, Morgan lent the U.S. government $2 million. During the Panic of 1893 over four thousand banks failed and fourteen thousand businesses collapsed, the U.S. Treasury was in danger of collapsing, as it was almost bankrupt. In response, Morgan created a ring of American and European bankers to provide the U.S. government with $65 million in gold. This action likely saved the American banking system from collapse. Though, this was not a selfless move as he profited greatly. Once again, during the financial panic of 1907 which caused major bank failures and business closures, Morgan greatly contributed to society by assisting the government out of the economic downturn. He created a group of the most powerful bankers in New York, who would act as the central banking system, providing funds for financial institutions in need. He worked hard in an effort to save as many institutions as possible and was credited with saving the nation.[25] This shows that not only did robber barons give back to society through generous donations, but even saved America from itself. Robber barons also greatly benefited the economy and pushed American expansion. This expansion created greater competition. Robber barons eliminated competition by cutting their prices, which benefited the consumers. Although this did benefit the consumers, it did not last long as the robber barons created monopolies, pools, and trusts, which created even higher prices than before. Despite improving the economy, through industry, many times robber barons were the cause of a major dip in the economy. In 1901 the fierce competition between robber barons, James J. Hill and Edward H. Harriman causing stock prices to soar as well as a financial panic that ruined many businesses.[26] In addition, Gould’s and Fisk’s involvement in Black Friday also created panic and large a downturn in the economy. Despite the fact that robber barons donated millions, and at times saved the U.S, Morgan still profited from the transaction, and it still does not erase all the suffering caused as a consequence of their greedy actions. 

 Robber barons were notorious for two main ideas, philanthropy, and corrupt practices. They often trampled others and their businesses in their pursuit of economic success. The result of their actions were massive corporations founded on the basis of monopolies, corrupt and immoral practices, and the suffering of others. Although speaking about Rockefeller, this quote can be used to summarize every robber baron, “[John D. Rockefeller] didn’t care about anyone he did anything just to be rich and be the only company standing without any competition. He destroyed anyone else”. These robber barons were ruthless and would do or annihilate anything that stood in their way. This often took a physical and financial toll on workers, other businessmen and overall, everyone in society. They used unfair economic strategies to crush competition, which goes against American ideals and hurts other businesses. They bribed their way into power and to stay in power. Any form of resistance or opposition to their practices resulted in violence perpetrated by the robber baron, as well as death and suffering. Their strategies ended up hurting many innocent people and at times, the economy. Despite their large donations and aid, robber barons ultimately hurt many more people than they helped.


[1] Conley, Kevin. “Philanthropy: Built to Last.”

[2]Benson, Sonia, et al. “Railroad Industry.”

[3] Tarbell, Ida. The History of Standard Oil Company.

[4] Ibid pg 65

[5] Benson, Sonia, et al. “Railroad Industry.”

[6] Shi, David, and George Tindall. America. pg 727-728

[7] “The Robber Barons.” Development of the Industrial U.S. Reference Library, edited by Sonia G. Benson

[8] Burner, David, and Ross Rosenfeld. “Trusts.” edited by Stanley I. Kutler.

[9] “Morgan, J. P.” Biographies, edited by Sonia G. Benson, U.S. History in Context, 2006, pp. 162-75.

[10] Shi, David, and George Tindall. America.

[11] Keppler, Joseph. Bosses of the Senate. 1889.

[12] Scandals Involving the U.S. Government and Big Business. 2015. Gale,

[13] Christopher Jon Luke Dowgin. Sub Rosa. pg 244

[14]

[15] Benson, Sonia, editor. Black Friday. Gale,

[16] Phelps, Shirelle, and Jeffrey Lehman, editors. Interlocking Directorate. 2nd ed., U.S. History in Context, 2005. Gale pg 435

[17] Scandals Involving the U.S. Government and Big Business. 2015. Gale,

[18]   Carnegie, Andrew. The Gospel of Wealth and Other Timely Essays. North American Review, 1889.

[19]  Ibid

[20]  Ibid

[21]  Ibid

[22] Stamburg, Susan. “How Andrew Carnegie Turned His Fortune into a Library Legacy.” National Public Radio,        1 Aug. 2013,

[23] Carnegie, Andrew. The Gospel of Wealth and Other Timely Essays. North American Review, 1889.

[24] Andrew Carnegie. U.S. History in Context, 1998. Gale,

[25] Benson, Sonia G., editor. Morgan, J. P. Biographies. U.S. History in Context, 2006. Gale, pp. 162-175

[26] Ibid

 

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