Capitalist development in the United States went hand in hand with corruption, particularly as this was linked to the state and the development of the railways. The post-bellum South was as corrupt as the North, perhaps more so because its economy needed reconstructing and this could not happen without government money. But corruption, bribery, and the private use of public money were pervasive everywhere.80 Legislatures throughout the North awarded special charters to railroad, mining, and manufacturing companies. Although American capitalists were in principle against state regulation, they welcomed state regulation of the railways – a fairly common contradiction, as self-interest regularly triumphs over principles. J. Pierpont Morgan and other magnates explained that, because of the great importance of railways, ‘we cannot uphold a system of operating public highways … which is controlled absolutely by a few individuals who tax production and commerce at will, and who practically dictate what rewards the producer, manufacturer and merchant shall receive for his labour.’81 Between 1862 and 1872 the federal government awarded large tracts of territory and millions of dollars in direct subsidies to railway companies.82 By 1896 the amount of money received and spent by the railway system amounted to 15 per cent of GNP and exceeded public expenditure. Some 800,000 men, 3 per cent of the nation’s entire workforce, were employed by the railways.83 No wonder the railway barons were so powerful and no wonder many politicians were in their pockets. When greed is all-pervasive, it does not pay to be honest. By 1913, observers such as Werner Sombart could write: ‘Whatever the results of the capitalist spirit may be, you will find them developed to their utmost in the United States today. There the strength of that spirit is as yet unbroken; there the whirlwind still rages.’84 Yet, the data suggest that middle-class Americans had an increasingly unfavourable view of big business in the years 1880 to 1910, peaking in the mid-1890s.85 Farmers were even more anti-business and were particularly against the railways, largely because of the exorbitant rates they charged.86
One of the ideas sustaining the new capitalist spirit was a cool-headed adaptation of social Darwinism and positive science. William Graham Sumner, an Episcopalian minister with a chair in political economy at Yale, and who believed that democracy was ‘the pet superstition of the age’, was the leading American follower of Herbert Spencer, who brought together economics and natural selection.87 In his 1902 essay ‘The Concentration of Wealth: Its Economic Justification’, Sumner explained that millionaires were ‘a product of natural selection’.88 He was also one of the first to put forward a justification for the concentration of wealth, revived in more recent times under the quaint expression ‘trickle-down economics’ (or, in its educated form, supply-side economics), when he wrote that ‘no man can acquire a million without helping a million men to increase their little fortunes all the way down through the social grades … it is an error that we fix our attention so much upon the very rich and overlook the prosperous mass …’89 Sumner felt that government should deal only with ‘the property of men and the honour of women’.90 As usual, the intellectuals – both those in favour of capitalism and those against it – acted as provocateurs, testing ‘advanced’ ideas that practical politicians could not possibly implement in their pure form. Considering the relatively recent rise in the United States of a form of fundamental Christianity that espouses both neo-liberal principles and creationism – the rejection of Darwin’s theory of evolution in favour of the biblical account – it is ironic that, traditionally, much pro-capitalist thought in America was influenced by social Darwinism (i.e. Herbert Spencer’s Darwinism, not Darwin’s), while some strands of fin-de-siècle American progressive thought, such as that represented by the populist leader William Jennings Bryan, were opposed to the theory of evolution.
America had not invented capitalism but it invented the capitalists. Not that Europe was deprived of capitalists, but these were seldom glamourized and were usually overshadowed by aristocrats, people for whom being rich was natural and effortless. In 1870 among the richest in Europe were the Rothschild banking family (of Jewish-German origins) and the steel magnate Eugène Schneider, who had become rich in one generation (his father, Antoine, had been a bankrupt notary).91 These ‘new’ capitalists and others like them (pejoratively referred to as nouveaux riches) who dominated finance and industry did not really alter significantly the hierarchy in French society.92 They simply bought their place in the world of the old elites. The new American elites were quite different. The great entrepreneurs were Jay Gould, Cornelius Vanderbilt, and E. H. Harriman (railways), John D. Rockefeller (railways, gas, Standard Oil, and National City Bank), J. P. Morgan (First National Bank, Chase Manhattan Bank, United Steel, and General Electric), James Buchanan Duke (American Tobacco Company), Henry O. Havemeyer (sugar), George Eastman (founder of Eastman Kodak), and Andrew Carnegie (US Steel).93 These were the celebrated and despised ‘robber barons’, a term used pejoratively to denote capitalists in the nineteenth century and popularized in 1934 by Matthew Joseph-son in his classic The Robber Barons: The Great American Capitalists, 1861–1901, and then in endless Hollywood films.94
The ‘robber barons’ were increasingly reviled in the years following the Civil War, when a particular kind of anti-big-business populism haunted the United States – as if to occupy the space which, in Europe, was that of socialism. There was, in America as elsewhere, a strand of society that hated the rich. Edwin L. Godkin, founder of the radical weekly The Nation (1865), wrote in 1866 that America was ‘a gaudy stream of bespangled, belaced, and beruffled barbarians …’ and berated the rich for lacking both culture and imagination.95 In 1876 a radical paper, the weekly National Labor Tribune (Pittsburgh), asked: ‘Shall we let the gold barons of the nineteenth century put iron collars of ownership around our necks as did the feudal barons with their serfs in the fourteenth century?’96 On the Christian side of the spectrum Washington Gladen, minister of the First Congregational Church in Columbus, Ohio, the outspoken leader of social Christianity, argued that unbridled competition was the antithesis of Christian love.97
Between the end of the Civil War and the mid-1890s two movements of agrarian protest emerged: the Granger movement, particularly active in the older wheat areas: Illinois, Wisconsin, Iowa, and Minnesota; and the Populists in newer ones such as Dakota, Nebraska, and Kansas. The odium of the farmers was directed at bankers and speculators. ‘The capitalist produced no wealth, the farmer argued, but merely manipulated it to the disadvantage of those engaged in physical work.’98
Meanwhile, the large corporations, through mergers, trusts, and cartels, tried to eliminate competition.99 They organized cartels, entered into agreements, and, far from trying to compete, sought monopolistic positions. This, they thought, was part of the march of civilization. They believed that monopolies (theirs, in particular) would provide better goods at lower cost. They regarded unrestricted competition as an evil, ‘a deceptive mirage’ (the view of an American Tobacco Company executive), while Charles Francis Adams, Jr, president of the Union Pacific Railroad, announced that the principle of consolidation was a ‘natural law of growth’.100
The workers, too, organized. Two national trade union organizations emerged in the 1870s and 1880s – the National Labor Union and the Knights of Labor. The unions, however, were weak, inevitably so, since their birth, not accidentally, coincided with a massive wave of immigration. The main political battle was between the representatives of the new urban corporate industrial elite (the Republican Party) and those of the agricultural frontier (the Democrats). The latter, as well as the short-lived People’s Party (the Populists), represented the cotton and wheat farmers of the Plains hurt by falling prices in the 1880s. These wanted government assistance against the corporations and they wanted the government to regulate the economy in order to restore competition. They were defeated by the Republicans. But even the champions of large-scale ‘corporate’ capitalism rejected competitive markets and price competition. Pierpont Morgan, the world’s most powerful banker a
t the end of the nineteenth century, wanted to bring the market’s ‘destructive’ forces (destructive of his banking empire, that is) under control.101
John D. Rockefeller, the oil tycoon, had looked forward to an economy dominated by a few giant corporations (especially his own) cooperating to avoid ‘wasteful’ competition:
Probably the greatest single obstacle to the progress and happiness of the American people lies in the willingness of so many men to invest their time and money in multiplying competitive industries instead of opening up new fields, and putting their money into lines of industry and development that are needed.102
And, with candour difficult to imagine today, he praised the state for helping his company, Standard Oil: ‘One of our greatest helpers has been the State Department in Washington. Our ambassadors and ministers and consuls have aided to push our way into new markets to the utmost corners of the world.’103
‘Real’ capitalists were often ambivalent about laissez-faire. They somewhat understood that the free market, like socialism, was very nice in theory but seldom worked in practice. They wanted a state that protected them from competition, that is, from market forces. In the real world of capitalist enterprises, the protectionists prevailed. In the more rarefied sphere of ideas, the true liberals held sway. Capitalists needed a state to lord it above them, discipline them, nurture them, and to kill a few to save the rest: a real Hobbesian state overseeing the war of all against all. Stateless capitalism never had a chance.
The chief myth of Americanism was embodied in the popular ‘dime’ novels of Horatio Alger with their heart-warming stories of young orphans coming to the city from the country, who, with some hard work and plenty of amazing luck, became successful. These rags-to-riches stories (almost one hundred novels all telling more or less the same story) became The American Story. Some of the time, as was the case with Andrew Carnegie, the son of a Scottish weaver who lost his job to mechanization, it was even true. While such possibilities remained open to the blessed few, the more usual path to great wealth and power was to join a large corporation and make it to the top (the simplest and less laborious route being, of course, to inherit wealth from one’s parents). Big companies continued to dominate American society, in spite of repeated attempts to curb their power by politicians like Theodore Roosevelt, who denounced their social irresponsibility and arrogance, and urged that Rockefeller’s Standard Oil Company be dismembered because it accounted for 80 per cent of US oil production.
The federal government was in the business of helping business, especially big business, throughout the nineteenth century. Only towards the end of the century, when it was too late, did regulation kick in with the passage, in 1890, of the Sherman Antitrust Act. However, it did little to contain the Great Merger Wave of 1898 to 1902, when perhaps as much as one-half of American manufacturing capacity merged – probably because the Act, which was largely against cartels and price-fixing, actually encouraged mergers.104
That anti-competition practices should have started in the railways is not surprising: they were a very small number of large enterprises, with high initial costs, competing for the same business. Once the volume of traffic began to fall off (because the networks had been established) they tried to agree not to compete.105 For obvious reasons it was almost impossible for the individual states to regulate the railways since they operated interstate.106 This is the kind of combination the Sherman Antitrust Act was designed to prevent. Its language reflected the outlook of the small producers. It was not anti-capitalist, only against large-scale capitalism. Senator John Sherman, who introduced the bill that bears his name, declared that unless one heeded the appeal of the people who were feeling the impact of the giant corporations, the people would follow ‘the socialist, the communist, and the nihilist’.107
However, as the political climate changed, the Sherman Act became a major weapon in the hands of President Theodore Roosevelt, who in 1904 won an antitrust suit against Northern Securities, a huge railways conglomerate that ranked second only to US Steel.108 Elected triumphantly in 1904 for a full term with 56.4 per cent of the vote, Roosevelt continued to pursue progressive policies, including a wealth tax, and filing more than thirty-five antitrust actions in the oil, meat packing, and tobacco industries against escalating opposition in Congress.109
In 1909, Standard Oil was broken up and forced to sell all its thirty-three subsidiaries, a verdict confirmed by the Supreme Court in 1911. The company did not suffer unduly and had anyway been facing international competition from Royal Dutch Shell (which had amalgamated in 1907) and the Anglo-Persian Oil Company (which became BP in 1954). Rockefeller, by far the largest shareholder of Standard Oil, became even richer after being granted his share in all the new companies. Once the lengthy litigation was over, the shares escalated, increasing five times in the ten years after 1911.110
In the 1890s the main target of the anti-monopoly campaigners had been the railway industry, the linchpin of American capitalism. The railway owners argued that the problems of the industry could be mitigated if competition was contained. The Interstate Commerce Act of 1887, however, specifically outlawed pooling, in deference to anti-monopolistic feelings. The great railway strike of 1894 (the Pullman strike, named after the company making train carriages), opposed by the official unions, the American Federation of Labor (AFL), engendered considerable violence and anti-trade union repression. Troops were called in; thirty-four strikers were killed. George Pullman stood firm and the strike failed.111 Nevertheless there were also positive results for the workers. A commission appointed by President Grover Cleveland (a pro-business Democrat) offered a compromise. It met the anti-competition requests of the railway barons but, by pointing out that the railways affected every American citizen – at a time when judges regarded virtually all strikes as illegal – established the principle of compulsory arbitration in labour disputes.112
That period was characterized by ‘the bloodiest and most violent labor history of any industrial nation in the world’.113 That American workers were not happy could be measured not only by recording the number of strikes, but also by the – economically more costly – evidence of rapid job turnover, absenteeism, and alcoholism.114 Between 1880 and 1900 there were nearly 23,000 strikes in 117,000 firms in the United States. The violence and frequency of labour conflict had no effect in the highly competitive party-political arena. Politicians seldom did more than just express sympathy with the workers.115
Anxieties increased with the Depression of the 1890s. Some ‘progressives’ also asked for alcohol prohibition, immigration restrictions, and racial proscription. Yet most of these reformers accepted the basic premises of capitalism, and the changes proposed did not involve significant ideological realignment.116
For a while William Jennings Bryan, the Democratic candidate in the presidential election of 1896, came to represent political hostility towards American capitalism, though this did not stop William Randolph Hearst, the newspaper magnate (and the main inspiration for Orson Welles’s film Citizen Kane), from backing him in 1900.117 Bryan spoke of the need to stand ‘against the encroachment of organized wealth’, and in his acceptance speech for the Democratic nomination he declared that government agencies ‘have been so often prostituted to purposes of private gain’.118
Supported by the Populists, Bryan came close to obtaining a majority in the presidential elections of 1896 (and again in 1900). Yet he was an unusual anti-capitalist and sworn enemy of big business, for he was also a devout Presbyterian, a prohibitionist, and a creationist (he had a major role in the famous Scopes ‘Monkey’ trial in 1925 when he stood against the teaching of evolution in Tennessee schools), and he was deeply suspicious of industrialization and nostalgic for disappearing rural values, believing that virtue resided in those who stayed close to the land. He was a pacifist, yet, when he was Woodrow Wilson’s ineffectual Secretary of State (1913–15), he approved US military intervention in Mexico. Bryan obviously failed to impress the British
ambassador in Mexico, who thought him ‘like a horrid mass of jellified sentimentality from which a sharp beak occasionally pokes out and snaps’.119
In their struggle for the regulation of capitalism, Bryan and his Populist followers were supporting a growing trend. Interference in the market during the American Progressive Era (c. 1890–1920) was far greater at state level than at federal level, with the result that industrial states such as Wisconsin and New York were progressive, whereas others, such as Alabama, resisted protective labour legislation and crushed unionization to keep wages down.120 Alabama did not have much industry and unions were not important. They mattered much more where industry was more advanced. Enlightened elites were quite aware of that. In 1904, Theodore Roosevelt used the language of conciliation with the trade unions:
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