Monopolists of the Gilded Age
Economic abstractions sometimes hide the human drama of monopoly. so we close this section by recounting one of the most colorful periods of American business history. Because of changing laws 2nd customs. monopolists in today’s Ameria bear little resemblance to the brilliant, unscrupulous. 2nd often dishonest robber barons of the Gilded Age (1870-1914). legendary figures like Rockefeller. Vanderbilt. Rothschild, and Morgan were driven to create entire industries lib railroads or oil. provide their finance. develop the frontier, destroy their competitors. and pus on fabulous fortunes to their heirs. The last three decades of century America experienced robust economic lubricated by tremendous graft. Daniel Drew was a rustler. horse trader, and ~ who mastered the trick of “watering the stock.” This his cattle of water until they reached the he then a thirst with salt and allowed the beasts to engorge,on water just before being Later would “water their stock” by inflating the of their securities. The railroaders of the American frontier ~ were among the most unscrupulous entrepreneurs on record.
The transcontinental railroads were funded with vast federal land grants, aided by bribes and stock gifts to numerous members of Congress and the cabinet.’Shortly after the Civil War, the wily railroader Jay Gould attempted to comer the entire gold supply of the United States. and with it the nation’s money supply.Gould later promoted his railroad by describing the route of his northern lines now bound much of the year-u a tropical paradise, filled with orange groves. banana plantations; and monkeys. By
century’s end, all the bribes, land grants. watered and fantastic promises had led to the greatest rail system in the world. The story of john D. Rockefeller epitomizes the nineteenth- century monopolist. Rockefeller saw visions of riches in the fledgling oil industry and began to organize oil refineries. He was a meticulous and sought to bring “order”, to the quarrelsome wildcatters. He bought up competitors and consolidated his hold on the industry by persuading the railroads to give him deep and rebates and supply information about his competitors.
When competitors stepped· out of line, Rockefeller “r’s railroads refuse·l to ship their oil 2nd even dumped it on the ground. By 1878, John D: controlled 9S percent of the pipelines 2nd oil refineries in the United States. Prices were raised 2nd stabilized, ruinous competition was and monopoly was achieved. Rockefeller’ devised an in genius new device to ensure control over his alliance. This was the “trust,” in which the stockholders turned their shares over to “trustees” who would then the industry to maximize its profits. Other industries imitated the Standard Oil Trust, and soon trusts were set up in kerosene, sugar. whiskey. lead, salt, 2nd steel. These practices so upset agrarians and populists that the nation soon antitrust laws (see Chapter 17). In 1910, the Standard Oil Corporation was dissolved in the first great victory by the Progressives against Big Business.” Ironically, Rockefeller actually profited from the breakup because the price of Standard Oil shares Soared when they were offered to the public.
Great monopolies produced great wealth. Whereas the United States had three millionaires in 1861,there were of them by 1900 ($ I million at the turn of the century is equivalent to about $100 million in today’s dollars). Great wealth. in turn begot conspicuous consumption (a term introduced into economics by Thorstein Veblen in The Theory of the Leisure 1899). like popes and aristocrats of an earlier era, American tycoons wanted to transform their fortunes into lasting monuments. The wealth was spent in constructing princely palaces such u the “Marble House,” which can still be seen in Newport, Rhode Island; in buying vast art, which form the core of the great American museums like New York’s Metropolitan Museum of Art; 2nd i!,1 launching foundations and universities such is those named after Stanford, Carnegie, Mellon, and Rockefeller. Long after their: private monopolies were broken up by the government or overtaken by competitors. 2nd long after their wealth was largely dissipated by heirs and overtaken by later cenerations of entrepreneurs, the philanthropic legacy of the robber barons continues to shape AmeriCUl arts, science, and education.
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