American Colossus: The Triumph of Capitalism, 1865-1900

by H. W. Brands

  At first Strobridge and the others thought they could beat the problem if they removed the snow before the melt-freeze cycle set in. But the drifts themselves overwhelmed the men and their machinery. On one occasion a snowplow driven by five locomotives ground to an impotent halt under hundreds of tons of the fluff. The only solution seemed to be to catch the snow before it hit the ground. The crews tested snow sheds: sloped roofs erected during the summer to keep the grade and track clear. Adjustments were required to ensure that the roofs didn’t collapse under the weight of the snow, but in the end they solved the problem (and remain a feature of rail travel in the Sierra to this day).30

  IN THE SPRING of 1868 the Union Pacific crews crossed the Rockies in southwestern Wyoming. Durant couldn’t resist boasting to Stanford of the rapid progress the Union was making. “We send you greeting from the highest summit our line crosses between the Atlantic and the Pacific Oceans, 8200 feet above tidewater,” Durant said. “Have commenced laying iron on the down grade westward.” The Central’s nitro men had finished work on their summit tunnel a few months before, and though his company’s total mileage fell far short of the Union’s, Stanford refused to be provoked. “Though you may approach the union of the two roads faster than ourselves, you cannot exceed us in earnestness of desire for that event,” he said. “We cheerfully yield you the palm of superior elevation; 7042 feet has been quite sufficient to satisfy our highest ambition. May your descent be easy and rapid.”31

  Stanford was playing with words when he said the Sierra summit satisfied his “highest” ambition. He had no intention of letting Durant and the Union claim any more mileage than they deserved. By far the most difficult part of the Central route was now behind it, while the Union was just reaching the most technical portion of its route, between the Continental Divide and the valley of the Great Salt Lake. As the crews of the Central flew across the desert of northern Nevada and Utah, those of the Union blasted their way through the Wasatch Range. Each company enlisted Mormons to supplement its regular workforce; each spurred its crews to work as rapidly as they could. Such concerns for quality as had initially influenced corporate decisions now fell by the wayside. “Run up and down on the maximum grade instead of making deep cut and fills,” Collis Huntington advised, “and when you can make any time in the construction by using wood instead of stone for culverts &c., use wood.… If we should have now and then a piece of road washed out for the want of a culvert, we could put one in hereafter.” Mark Hopkins agreed; the overriding objective, he said, was “to build road as fast as possible of a character acceptable to the commissioners.” Not that the commissioners—the federal agents supposedly protecting the stake of taxpayers in the project—were expected to be any obstacle, for the same favors and promises that had brought Congress aboard in the first place were now being lavished on them. “We know the commissioners will readily accept as poor a road as we can wish to offer for acceptance,” Hopkins frankly remarked.32

  During the late winter of 1869 the two roads raced around the northern edge of the Great Salt Lake; in April the competing crews climbed Promontory Point from opposite sides. They finally met in early May. An elaborate ceremony was scheduled to mark the meeting of East and West, the defeat of geography by the forces of American enterprise, but a problem developed when crews of the Union Pacific, impatient at the tardiness of the company in paying wages, seized the ceremonial train carrying the Union directors to Utah and held them hostage. Later evidence suggested a scam: that Union director Durant put the workers up to the kidnapping in order to ensure payment to a construction subsidiary in which he had a major interest. “Durant is so strange a man that I am prepared to believe any sort of rascality that may be charged against him,” an associate remarked.33

  In fact, a great deal more rascality would soon be charged against Durant and his partners, but in the flush of success such minor sins were overlooked. Bret Harte commemorated the completion with a poem entitled “Opening of the Pacific Railroad”:

  What was it the Engines said,

  Pilots touching, head to head

  Facing on the single track

  Half a world behind each back?

  Walt Whitman weighed in with “Passage to India”:

  I see over my own continent the Pacific Railroad, surmounting every barrier;

  I see continual trains of cars winding along the Platte, carrying freight and passengers;

  I hear the locomotives rushing and roaring, and the shrill steam-whistle,

  I hear the echoes reverberate through the grandest scenery in the world.

  Other responses were more prosaic but not less significant. A wire connected the symbolic golden spike to a telegraph line that ran to Washington, New York, and other parts of the East, as well as to San Francisco. The electric echo of the hammer blows of Stanford and Durant was followed by messages from the news correspondents present. “The last rail is laid!” the reporter for the Associated Press wrote. “The last spike is driven! The Pacific Railroad is completed! The point of junction is 1086 miles west of the Missouri River and 690 miles east of Sacramento City.” The news set church bells ringing in Boston and New York, and the Liberty Bell in Philadelphia. Washington fired cannons; Chicago held a parade. San Francisco, which had jumped the gun with a party two days earlier, celebrated again, firing hundreds of cannon salutes from Fort Point on the Golden Gate and otherwise feting its deliverance from the tyranny of distance. William Sherman, whose first trip to California, during the Mexican War, had taken 196 days, wrote congratulations to the organizers of the epic project and to the “thousands of brave fellows who have fought this glorious national problem in spite of deserts, storms, Indians, and the doubts of the incredulous” and said he hoped to travel to California again soon, and much faster.34

  Chapter 3

  THE FIRST TRIUMVIRATE

  To many Americans of the Gilded Age, J. P. Morgan represented the ugly face of American capitalism. It didn’t help matters that Morgan’s face was indeed daunting. His nose was downright frightening: a “huge, more or less deformed, sick, bulbous mass in the center of his face,” according to Edward Steichen, the most celebrated photographer of the era and a man who made a profession and an art of studying faces. Morgan suffered from a severe case of acne rosacea, which left his nose chronically inflamed. His eyes were terrifying in a different way. Pale hazel, almost yellow, they burned with a fury that reminded Steichen of an express train hurtling through the night. An observer transfixed by their gaze had to turn away or risk obliteration beneath their weight and power.1

  In photographs Morgan invariably had the nose retouched, and he was said to retaliate against persons who even mentioned it. Yet he couldn’t do much about the working-class children who skipped rope to the rhythm of “Johnny Morgan’s nasal organ has a purple hue,” and when the Russian finance minister, Count Witte, suggested surgery, Morgan responded, “Everybody knows my nose. It would be impossible for me to appear on the streets of New York without it.” In one of his better moods he declared his nose “part of the American business structure.”2

  Morgan might have been too near the subject to offer an objective opinion on his nose, but no one knew more about the structure of American business than he. Even Morgan didn’t always know much; the great challenge for those engaged in enterprise during the Gilded Age was to acquire the strategic intelligence they needed to conduct their affairs successfully. What made Wall Street so tempting to speculators and manipulators like Jay Gould and Jim Fisk was the veil of ignorance that shielded the operations of nearly all the firms trading there. Corporations guarded their balance sheets as the proprietary information it was; not even to shareholders did boards of directors typically reveal reliable numbers on assets, revenues, and profits. Stock was issued at whim—which was what made watering stock so tempting. Insiders held an enormous advantage over everyone else; only the boldest or most foolish investors dared to tilt with the professional speculators on their own turf.
<
br />   If microeconomic intelligence (relating to individual firms) was hard to come by, macroeconomic intelligence (regarding the economy as a whole) was harder still. Gould and Fisk nearly cornered the gold market in large part because no one knew how much gold was available for sale, who owned it, or what the intentions of the owners were. The state of the broader money supply was even more unfathomable. Figures regarding overall employment, investment, inventories, imports and exports, and dozens of other essential attributes of the national economy were either notional or nonexistent. Navigating the American economy in the Gilded Age was often like venturing west from Europe during the Age of Discovery. Columbus and his fellow mariners possessed charts, but the large blank spots and the sectors labeled “Here be monsters” hardly inspired confidence in their accuracy. Similarly for the voyagers to the edge of the American economy. Newspapers provided information regarding business in the major cities, but this was usually anecdotal and episodic; meanwhile much of the rest of the country was economic terra incognita. An entrepreneur plotting a venture was reduced to the equivalent of dead reckoning—starting from a known point and pushing cautiously out from there, measuring motion forward by reference to the starting point, and preferably keeping in sight of land. Enterprises grew slowly and fitfully under these constraints; the audacious often sailed right off the edge of the economy into the abyss of bankruptcy.

  As in the Age of Discovery, when accurate maps were treated like crown jewels, verifiable intelligence commanded a premium in the Gilded Age. And no one possessed more accurate intelligence than J. P. Morgan. Other men—and the rare woman—dealt in commodities and corporate shares; Morgan dealt in these but mostly in business intelligence, which he leveraged to an extent that made him the arbiter of the nation’s economy and occasionally the most powerful man in the country. Most of those who watched him—and nearly everybody in America watched him at one time or other—assumed that his power derived from his large wealth. In fact his fortune was rather modest by comparison with those of the other moguls of the era. What distinguished Morgan was what he knew and how he employed that knowledge.

  HE STARTED INAUSPICIOUSLY enough, being born in the year of the Panic of 1837. But his grandfather capitalized on the chaos in the financial markets to purchase properties distressed to dimes on the dollar, and when the economy recovered, the elder Morgan grew wealthy. His son, Junius Spencer Morgan, diversified into commodities brokering, moving the family from Hartford to Boston and eventually to London, and multiplying the Morgan wealth in the transatlantic trade. Pierpont, as Junius’s son was called, went to school in Switzerland and college in Germany before returning to America to apply the mathematics in which he excelled.3

  In 1857 he entered the Wall Street firm of Duncan, Sherman & Company, the American agent of his father’s London house. He made a promising start in commodities, displaying a shrewd grasp of what people would pay for various things and an intuitive understanding of the larger currents affecting the Atlantic economy. The Civil War disrupted much of the transatlantic trade, especially that gulf stream of cotton that flowed from Southern plantations to the mills of the English Midlands, but like Daniel Drew, Morgan learned to fish in troubled waters. He left Duncan Sherman to start his own firm, and from the day J. P. Morgan & Company opened its doors at 54 Exchange Place, it earned a reputation as one of the canniest, boldest, and most successful houses in Wall Street.

  The end of the war curtailed the commodities boom, requiring Morgan to look elsewhere for the handsome profits to which he had grown accustomed. It didn’t take him long to realize that the troubled waters were now swirling about the railroad industry, where the Pacific road was being completed in a frenzied grab for federal land and loans and the Erie Railroad was being tossed up and down by Drew, Gould, Fisk, and other speculators. The signs of genius were beginning to show in Morgan, but even a dullard could discern that the rail industry would have to be restructured. Railroads, like other corporations, acquired capital for expansion (or reorganization) in two ways: by issuing equity (stock) or assuming debt (loans). The equity route left corporations at the mercy of speculators, as the Erie War had demonstrated. The debt path put the corporations in the hands of bankers. These were often better hands, in that the bankers took the long-term interests of a corporation more closely to heart than the speculators did, on account of the obvious fact that if the corporation didn’t survive, the bankers would lose their loans. Anyway, by the time the speculators had watered, floated, and sunk the stock of a corporation, the equity often wasn’t worth much. Debt and bankers were the last recourse.

  Morgan became a serious banker in 1871 when he allied with the Drexel house of Philadelphia to form Drexel, Morgan & Company, with its main office in New York City at the corner of Wall Street and Broad. From the beginning, Drexel Morgan’s reach was both transcontinental and intercontinental. Morgan’s family connection to London, where his father remained a force in banking, gave him entrée to the world of the European haute banque, where small groups of wealthy investors collaborated to share the risks and split the profits of challenging investment opportunities. European banks had underwritten the Pacific railroad and the Suez Canal, which opened within months of each other in 1869. Their loans bolstered governments in Europe, Asia, Africa, and both Americas. Their principals had nationalities but their assets were stateless, roaming the planet in search of the most lucrative prospects and the greatest returns.

  At the acme of this rarefied world was the Barings Bank of London, which had supplied the $15 million Thomas Jefferson paid Napoleon for Louisiana, before financing the indemnity France was forced to pay its vanquishers after Napoleon’s fall. Barings’s reach prompted the duc de Richelieu to remark, “There are six great powers in Europe: England, France, Prussia, Austria, Russia, and Baring Brothers.” Britain’s poet Byron called Barings and its banking kin “the true lords of Europe,” whose “every loan … seats a nation or upsets a throne.”4

  J. P. Morgan never quite upset a throne. But he did come to conceive of himself as a lord of America, with responsibility for rectifying the mistakes of lesser mortals, and power to match.

  ———

  WHILE MORGAN WAS being educated in the academies of Europe, John D. Rockefeller attended a harder school in America. His first teacher was his father, William Rockefeller, a confidence man, purveyor of snake oil, fornicator, liar, and cheat. A journalist contemporary of John D., writing about the father, aptly remarked, “He had all the vices save one—he never drank.” Yet Bill Rockefeller could be utterly charming. “He was the best-dressed man for miles around,” a neighbor in upstate New York remembered. “You never saw him without his fine silk hat.” The ladies loved him, to their dismay. He married Eliza Davison chiefly because her father was rich and Rockefeller hoped to claim her inheritance. But he refused to leave off with his other girlfriends. He brought one of these, Nancy Brown, into his and Eliza’s home as a housekeeper, and he proceeded to cohabit with both. He fathered a daughter by Eliza in 1838, and then a daughter by Nancy. In 1839 Eliza bore him a son, John Davison Rockefeller. Several months later Nancy gave him a fourth child, another girl.5

  Eliza was too smitten to terminate this ménage, but her brothers did it for her, compelling Rockefeller to dismiss Nancy. Yet their intervention hardly curbed his lust or diminished his appetite for unconventional arrangements. His work as a traveling huckster (“Dr. William A. Rockefeller, the Celebrated Cancer Specialist, Here for One Day Only. All cases of cancer cured unless too far gone and then can be greatly benefited”) carried him far from home, often for months at a time. On one journey to Ontario, Canada, he met a trusting young woman with equally trusting parents. Without divorcing or even informing Eliza and his family in New York, he married Margaret Allen and commenced a secret, second life with her.

  John D. Rockefeller (who insisted on using his middle initial from youth) knew little of his father’s escapades and admitted less. The boy was more directly influenced by
his mother, who suffered her husband’s sins in silence and prayer. Eliza was a Baptist, a child of the Second Great Awakening that swept through the “burned-over district” of upstate New York during the first half of the nineteenth century. She placed her trust in God and inculcated a puritan abstemiousness in her son. “The Baptists I knew listened to their consciences and their religious instructions, and not only did not dance in public places but did not dance anywhere and did not even concede the reputability of dancing,” Rockefeller remembered. “The theater was considered a source of depravity, to be shunned by conscientious Christians.” On the irregular occasions when Bill Rockefeller was home, he plied the children with candy and gifts, leaving matters of discipline to Eliza. She meted out enough for any two parents. “I made my protests, which she heard sympathetically and accepted sweetly—but still laid on, explaining that I had earned the punishment and must have it,” Rockefeller recalled. “She would say, ‘I’m doing this in love.’ ” Innocence was no excuse. “Never mind,” she said during one thrashing, when he convincingly complained that he hadn’t done what he was being punished for. “We have started in on this whipping, and it will do for the next time.” Not even heroism stayed her hand. John and his brother William went skating on the Susquehanna River despite her injunction against it; a comrade fell through the ice and would have drowned but for their quick thinking and brave action. When they got home she hailed their courage. “We thought we should be left off without punishment,” Rockefeller said. “But Mother gave us a good tanning nevertheless.”6