PART ONE
CHAPTER 1
The assassin who ended the life of Abraham Lincoln extinguished the light of the Republic. On April 14, 1865, after the president argued in the cabinet for generous treatment of the South, vanquished in the war between the states, he went to the theater. It was Good Friday and there was a conspiracy afoot to kill him. During the third act of the play at Ford’s Theatre in Washington, actor John Wilkes Booth, a fanatical partisan of the southern cause, stole into his box and shot him in the head at close range. Lincoln never regained consciousness and died early the next day. Until his death Lincoln had been a most controversial president—yet his secretary of war, Edwin Stanton, could justly claim, “Now he belongs to the ages.” The transfiguration of the murdered president cast a long shadow over American history from 1865 to 1901. In political terms, the period that begins with the assassination of one president ends with the assassination of another, William McKinley, in 1901.
These were formative years. The Industrial Revolution and the development of commercial monopolies, Reconstruction and the New South, the settlement of the West and closing of the frontier—all brought to the fore of politics a cast of characters that was very different from the statesmen, soldiers, and slaves of the Civil War. This was the heyday of the robber barons. Perhaps the most damaging accusation against Lincoln after his assassination was that to win the war he had been ready to sacrifice the ideals of the Republican party to spoilsmen and profiteers. Progressive journalist Lincoln Steffens observed that in England politics was a sport, in Germany it was a profession, but in the United States it was a business—and a corrupt one at that. Yet, in the absence of strong executive leadership during a prolonged period of social, industrial, and economic growth, Lincoln’s reputation soared ever higher. At the end of the century New England intellectuals criticized the cult of idolizing Lincoln in an anecdote about an American traveler to England who visited Oxford University. Confused by the architectural similarity between two of the colleges in Turl Street—Jesus and Lincoln—he exclaimed, “I can’t tell the difference between Lincoln and Jesus!” A passing student remarked that it was the same with all Americans. The allusion and the confusion were understandable. Lincoln had, after all, saved the Union in war, whereas his successors came close to losing the peace.
Mark Twain (center front) dining with resplendently attired friends amid the opulence of Delmonico’s, New York, on his seventieth birthday, November 30, 1905. From 1863, “Mark Twain,” a Mississippi River term for water barely safe for navigation, was adopted as a pseudonym by Samuel Langhorne Clemens (1835–1910)—variously, steamboat pilot, miner, journalist, raconteur, and novelist. It was he who coined “the Gilded Age” as title for a satire of political and financial corruption (1873), giymg a name to the expansionist period after the Civil War. (Prints and Photographs Division, Library of Congress.)
The West was settled at a fatal cost to Native Americans. The South was tied back to the Union at a humiliating cost to African-Americans. There were two depressions, in 1873 and 1893, each with devastating effects on the economy. The amazing industrial expansion of the United States was accomplished with considerable exploitation of factory artisans. The splendors of the new cities rose amid the squalor of industrial slums. The most damning indictment of this postwar American society was attributed to the future French prime minister Georges Clemenceau, who lived for a time in New York and New England. Noting its undoubted problems, he could claim the United States had gone from a stage of barbarism to one of decadence without achieving any civilization between the two.
Mark Twain paid a different but no less censorious tribute to the aspirations, autocracy, and affluence of the new American plutocracy of industrialists, financiers, and politicians in his Utopian satire, The Gilded Age (1873). The title takes its cue from Shakespeare. King John is dissuaded from a second, superfluous coronation with the argument, ‘To gild refined gold, to paint the lily,/ . . . Is wasteful and ridiculous excess.” And Lady Macbeth implicates King Duncan’s sleeping attendants in his murder by daubing them with blood from the dagger Macbeth has used to do the deed. “I’ll gild the faces of the grooms withal,” she says, “For it must seem their guilt.” Mark Twain took this grotesque pun of gold and crime a stage further. His title was to become a triple pun. To gilt and guilt were added guilds in the sense of interest groups, labor unions, and monopolies. Twain’s epithet, approved by his collaborator, Charles Dudley Warner, has survived as the most apt description of the period.
If the Gilded Age had a motto it might well have been, “The ayes have it,” not only for the celebrated interest in voting stock, but also for the eyes that rejoiced in the glitter of gold, and the I’s that define many of the pervasive social themes. Society was obsessed with invention, industrialization, incorporation, immigration, and, later, imperialism. It was indulgent of commercial speculation, social ostentation, and political prevarication but was indifferent to the special needs of immigrants and Indians and intolerant of African-Americans, labor unions, and political dissidents.
Whereas the Gilded Age had no predecessors, we may discern in three subsequent periods some of its features—notwithstanding the considerable differences between them. The first is the 1920s; the second, the period from 1945 to 1960; the third, the 1970s and 1980s. These were periods of predominantly (but not exclusively) Republican administrations. The government, as a whole, in each period was conservative. Accusations of nefarious links between politicians and businessmen and of widespread corruption in public life were rife. The presidency of Ulysses S. Grant in the 1870s is usually represented as a nadir of political probity. But the excesses of so-called carpetbaggers as well as of Congress and the administration in the 1870s pale in comparison with those of the Watergate burglars and White House staff during the presidency of Richard M. Nixon in the early 1970s. Yet the profligacy of the Ohio gang in the 1920s and the Republican chant of K1C2 (Korea, communism, and corruption) against the Democrats in 1952 have also remained a notorious part of the legend of the periodic corruption of public life in America.
Each period benefited from a boom in transportation—after 1865, the railroad; in the 1920s, the mass production of the automobile; from the late 1940s on, widespread commercial use of the airplane. Each enjoyed a revolution in communications—in the Gilded Age, telegraph and telephone; in the 1920s, motion pictures and radio; in the 1950s, long-playing vinyl phonograph records and television; in the 1980s, personal computers and compact discs. Innovations in transportation and communications together worked for a more homogeneous culture and a more informed citizenry, as well as having undisputed industrial and commercial significance in their own right.
Each period followed a war that left many Americans disillusioned, bitter, and confused: the Civil War, World War I, World War II, and the war in Vietnam. Their hostility to changed circumstances and the residue of hate engendered by the war but not yet expended partly account for the founding of the racist Ku Klux Klan after the Civil War and for its startling revival during the 1920s. This hostility was also vented against suspect ideologies. In the 1870s and 1880s labor unions were tainted by presumed association with anarchists, and the Haymarket anarchists of 1886 were tried without justice. The Great Red Scare of 1917-1921 against radicals expressed genuine if exaggerated anxiety about the dangers of a communist revolt, which was confirmed in the 1920s by the prejudicial treatment of the anarchists Sacco and Vanzetti. In 1950 Senator Joseph McCarthy lent his name to another wave of anticom-munist hysteria that had been growing with the cold war.
The unsuccessful Second Indochina War of 1961-75 left bitter scars on American society. In their anguished protests against its conduct, liberals and radicals hurled accusations of indifference and injustice against the political establishment concerning its attitude toward African-Americans and other ethnic minorities, as well as toward women and the poor. The 1970s and 1980s also revealed society’s recurrent obsession with intolerance and indulgence. In the 1970s the Republican party was tarnished by the burglary of the Democratic headquarters in the Watergate complex in 1972 and the stew of self-perpetuating politics by an oligarchy in the Nixon White House. Also tainted were such government agencies as the FBI and the CIA when congressional disclosures mounted about their illegal harassment of American citizens whose political views did not accord with those of the leadership of the two political parties. All this was most disturbing to a people reared in the belief that it was only the rulers of totalitarian regimes who prevented full freedom of expression. Moreover, allegations about overgenerous campaign contributions by big business to Republican coffers, sometimes laundered through Mexican banks, once again roused cries of anger about the overly close relationship between government and business.
In 1986 exposure of the Iran-Contra affair, in which the United States had supplied Iran with guns and munitions in exchange for the release of American hostages as well as for funds that were subsequently diverted to counterrevolutionaries in Nicaragua against the wishes of Congress—all arranged by Republican politicians and military personnel–once again suggested how insidious connections could develop between government, business, and military.
There was also considerable public anxiety expressed by revelations about insider trading on Wall Street, in an escapade in which Ivan Boesky became the principal culprit. A Wall Street crash in 1987 triggered a depression that had been incipient for many years, given the problems of American industry and manufacturing and the increasing debtor status of the United States. The depression deepened in the early 1990s. President George Bush’s (1989–93) initial statements about the depression amounted to a doctrine of nonrecognition, and government remedial policies were nowhere in sight. It was like the restoration of an old-world picture of the Republicans as described in the 1930s by Herbert Hoover and in the 1890s by the nominally Democratic Grover Cleveland. The depression of the 1990s occurred in a period when the problems of acute social dislocation for the truly disadvantaged in the inner cities continued to upset liberal confidence in social progress. Meanwhile, the religious right, including southern ultraconservatives and fundamentalists, warned America about liberalism in religion and politics as a subversive threat to the very fabric of society.
In short, some political and cultural attitudes of the Gilded Age long survived the close of the nineteenth century when the period itself had ended.
Industrial Progress
During the Gilded Age natives and immigrants alike were more interested in the stars in their eyes than the stripes on their backs. The promise of American life lay in its industrial future. As early as 1871 Congress resolved that in the centennial of 1876 Americans should appraise their achievements, “the natural resources of the country and their development, and of its progress in those arts which benefit mankind, in comparison with those of older nations.” The commemorative Centennial Exhibition, which opened on the banks of the Schuylkill River outside Philadelphia for five months beginning on May 10, 1876, was conceived in a very different spirit from the celebrations for the bicentennial in 1976. Instead of political achievement, it emphasized America’s mastery in the application of science. As such, it constituted an industrial revelation of America to the rest of the world.
The assassination of Abraham Lincoln (1809-65), the president who had saved the Union, was a disaster of the first magnitude for the United States at the close of the Civil War. The deed cast its dark shadow over Reconstruction and history has agreed with Mark Twain that what should have been an age golden with industrial opportunity turned out, instead, to be gilded, guilded, and guilt-ridden. While Alexander Gardner was taking the photograph on April 10, 1865, Lincoln moved his hands. In keeping with a national need to transform mementoes of the murdered president into icons, the finished image was altered, stilling the president’s hands, darkening his suit and the background, while leaving untouched the ravages of care on his face. This is the starker and more poignant original version. (Library of Congress.)
Memorial Hall in Philadelphia was built in modern Renaissance style to exhibit American arts and culture. But nearby was Machinery Hall, a more austere yet more inviting building. It was guarded by a huge breech-loading cannon, the symbol of war, and by the Corliss steam engine. This enormous 1,400-horsepower machine, designed to furnish power to all the exhibits inside Machinery Hall, astonished the 9,910,966 visitors that summer. It weighed nearly 1.7 million pounds and yet ran without vibration or noise. Here was a new symbol of peace and progress. Inside the hall inventions in the fields of agriculture, transportation, and machinery were given special prominence. By its display of drills, mowers, and reapers, of lumber wagons and Pullman sleeping cars, of sewing machines and typewriters, of planes, lathes, and looms, the United States demonstrated its preeminence in mechanics. As the Times of London reported on August 22, 1878, “the American mechanizes as an old Greek sculpted, as the Venetian painted.” Novelist William Dean Howells gave his verdict to the Atlantic Monthly of July 1876. It was in engineering, rather than in art, that “the national genius most freely speaks: by and by the inspired marbles, the breathing canvases . . . [F]or the present America is voluble in the strong metals and their infinite uses.” America’s destiny lay in industrial development.
Between 1865 and 1901 the American Industrial Revolution transformed the United States from a country of small and isolated communities scattered across 3 million square miles of continental territory into a compact economic and industrial unit. Thus, the rural Republic of Lincoln and Lee became the industrial empire of Roosevelt and Bryan. The United States already had the prerequisites for such a transformation. It was fabulously rich in minerals, possessing about two-thirds of the world’s coal; immense deposits of high-quality iron ore; great resources of petroleum; and, in the West, a natural treasury of gold, silver, and copper.
Although in 1860 the United States was still a second-rate industrial power, by 1890 it led Britain, France, and Germany. The value of its manufactured goods almost equaled the total of the others. The accompanying table, adapted from Historical Statistics of the United States (1975), shows increases in the production of raw materials between 1860 and 1900. It was precisely because the base of industry before the Civil War was so narrow that its advance seemed so spectacular later on.
The giant Corliss engine in Machinery Hall was a star attraction of the 1876 Centennial Exhibition outside Philadelphia, the first of the great industrial expositions in America, and was taken as a symbol of American industrial progress. After the exhibition closed, the engine was used to drive machinery in the Pullman works outside Chicago. The illustration first appeared in Harper’s Weekly on May 27, 1876. (Library of Congress.)
There were five keys to America’s astonishing industrial success: a superabundant supply of land and precious natural resources; excellent natural and manmade systems of transportation; a growing supply of labor caused by natural growth of population and massive immigration; special facility in invention and technology; and superb industrial organization. Thus what brought the American Industrial Revolution to fruition was human initiative, ingenuity, and physical energy.
The Agricultural Revolution hastened the Industrial Revolution in various ways. An increase in production per farmer allowed a transfer of labor from agriculture to industry without reducing the country’s food supply. Moreover, such expanding agriculture did not need the transfer of limited capital from industry to agriculture. Indeed, the profits derived from agriculture could be used for buying manufactured goods, thereby further stimulating industry and manufacturing. There were two manufacturing belts across the nation. One stretched along the Atlantic coast from Maine in the North to Virginia in the South. The other was west of the Allegheny Mountains and north of the Ohio River, extending from Pittsburgh and Buffalo in the East to St. Louis and Milwaukee in the West.
From the middle of the century to the 1890s the railroads were the basis of the new industrial economy. They made possible the development of new areas of commerce as well as that of steel, iron, coal, and other industries. But in the 1890s it was the complex, varied urban market with its demand for a wider range of refined materials and manufactured goods that replaced the railroads as the principal stimulus of the economy as a whole. In the 1890s American cities were modernized, and steel was the essential medium used for building bridges, piping water and sewage, transmitting gas and electricity, and constructing ever higher buildings.
Iron replaced wood; steel replaced iron; and electricity and steam replaced horsepower. In 1870 agricultural production surpassed industrial production by about $500 million. Both were increasing year by year. But by 1900 manufacturing had increased by more than four times. Thus, industrial production now exceeded agricultural production by $13 billion to $4.7 billion. In every decade the levels of production increased in the oil refineries of Ohio and Pennsylvania; the iron and steel mills of Michigan, Illinois, and Pennsylvania; the meatpacking plants of Cincinnati and Chicago; the clothing and shoe factories of New England; and the breweries of Chicago, St. Louis, and Milwaukee. The number of people engaged in manufacturing was 2¼ times as great in 1890 as in 1870; in mining 2½ times as great; in transportation and public utilities 2½ times; in construction 2 times.
TABLE
Industrial Production, 1860 and 1900
Industrial growth and westward expansion were assured by the revolution in transportation and the revolution in communications. There was a spectacular growth in population, from 35,701,000 in 1865 to 77,584,000 in 1901. Yet these widely dispersed people felt part of a unified whole. A transcontinental railroad network brought farm and factory, country and town closer together. Telegraph and telephone, electricity and press increased public knowledge, business efficiency, and political debate.
By their aptitude for invention and their ability to harness the inventions of others to their own purposes, Americans acquired a facility for turning raw materials into finished industrial products. Between 1860 and 1890 as many as 440,000 patents were issued for new inventions. During the Gilded Age the most significant American inventions, whether new or improved, were those that could hasten and secure settlement: the steam boilers of Babcock and Wilcox; the electric lamp of Thomas Alva Edison; the telephone of Alexander Graham Bell; the telegraph stock ticker of E. A. Callahan; linoleum; the elevator of Elisha G. Otis; machine tools of Pratt and Whitney; the elixirs of John Wyeth; the newspaper linotype compositor of Ottmar Mergenthaler; and the typewriter of Christopher Sholes. The fundamental principles behind many of these and other inventions had long been understood. But not until technology could fashion tools of great delicacy could they be put into practice. Thus, the inventions depended on improved technology and they in turn transformed that technology, making possible ever more inventions of still greater refinement.
One reason why American technology in general became so advanced was the relatively high cost of labor in America that encouraged industrialists to invest in mechanizing. Moreover, the large domestic market allowed for great economies of scale. In addition, Americans in general were far less bound than Europeans by tradition and thus far more willing to try out new methods. Contemporary editor Mark Sullivan traces this facility to a natural ingenuity and determination in the people: “Intellectual freedom and curiosity about the new, the instinct of the American mind to look into, examine, and experiment—this led to, among other things, a willingness to ‘scrap’ not only old machinery but old formulas, old ideas; and brought about, among other results, the condition expressed in the saying that ‘American mechanical progress could be measured by the size of its scrapheaps.’”
Edison and Bell
In the field of scientific invention the best prizes fall to those who see the need and find the means to meet it. The American inventors Thomas Alva Edison and Alexander Graham Bell saw the need to transmit light and sound and found the incandescent light bulb and the telephone, the motion picture and the phonograph. They were, perhaps, the only authentic heroes of the age. They transformed the society into which they were born by an astute blend of inventive genius and technological knowledge. Their fame was spread by the communications they devised. They seemed like heroes because they combined technical expertise in the new field of communications with the sort of traditional pioneer spirit that had the tenacity to see a novel idea through from start to finish. The American humorous magazine Puck of July 1880 explained why such a man as the boastful but enterprising Edison should be taken as a symbol of national optimism in industrial progress: “Edison is not a humbug. He is a type of man common enough in this country—a smart, persevering, sanguine, ignorant show-off American. He can do a great deal and he thinks he can do everything.”
Edison and Bell were strict contemporaries—both were born in 1847—and their talents were as complementary as melody and harmony are in sound. However, both of them recognized in silence a golden opportunity. Bell’s mother and his wife were both deaf, and he became a teacher of deaf-mutes. Edison went deaf. He and Bell acquired special insight into the world of communication that they were determined to expand. Their inventions were not the happy result of accident and intuition but of back-breaking trial and error in painstaking experiments carried out night after night for months—and sometimes for years. In fact, Edison’s most famous remark was, “Genius is 1 percent inspiration and 99 percent perspiration.” They regarded science, not as an absolute, but as an infinitely expanding world in which to seek was to find. Thus, they were well equipped for the competitive worlds of business and industry when business and industry were putting a special premium on increasing efficiency by improving communications. Indeed, their careers were governed by the priorities of business.
What industrialists and businessmen wanted was a better telegraph. The electric telegraph, first made practical by the English inventors Sir William Cooke and Sir Charles Wheatstone, had already been instrumental in winning the Civil War. The states of the Union were linked together by thousands of miles of overhead wire. But although there were 37,000 miles of wire in 1865, this was nothing compared with the 215,000 miles in existence by 1900 through which millions of short and long pulses of electricity flowed each day. As with other inventions in communication, telegraphy was, necessarily, a matter of commerce. During the 1870s and 1880s various attempts were made to bring it under the control of the federal government. But the backers had not the force of the major company, Western Union, organized by Hiram Sibley of Rochester, New York, and Ezra Cornell (founder of Cornell University), who were determined to consolidate the service as a private monopoly. By the end of the century Western Union owned about 90 percent of all telegraph lines. However, with the amazing expansion of business and industry the telegraph was being required to deliver more than Western Union’s system, the automatic, was capable of doing. The automatic was economical for use over short lines with heavy traffic. But its speed decreased over greater distances—transmitting no more than 80 or 90 words per minute, far less than the 1,000 words it claimed. Edison, Bell, and other inventors were in feverish competition with one another to devise improved means of communication by telegraph or some alternative to it.
Thomas Alva Edison, born in Milan, Ohio, was the youngest of seven children of a feckless Canadian immigrant and a mother who made herself a martyr to her husband’s bizarre life-style before she slid into madness and an early death. Edison was a sickly child who suffered from periodic bronchial infections and had little formal schooling. At sixteen he became a telegraph transmitter and receiver and worked in various northern and southern cities. For several years he led the life of a rolling stone gathering neither moss nor morse, but increasing deafness of the middle ear, caused by scarlatina, was concentrating his mind wonderfully. When he was twenty-one he bought a copy of Michael Faraday’s Experimental Research in Electricity and found the English scientist’s accounts of his experiments so lucid and compelling that he determined to perform them himself. Previously, his exploration of chemistry and electricity had been haphazard. Now he spent much of his monthly salary of $120 on books, chemicals, and electrical equipment. At a time when it seemed that every telegrapher was trying to make a duplex—an apparatus to send two messages, one in either direction, on the same wire simultaneously—he claimed to have invented one. After repairing the telegraphic gold price indicator at the gold exchange in New York in 1869, he acquired the reputation of being able to eliminate bugs and was made supervisor of the machine. He won the confidence of financiers, who commissioned him to make an improved stock ticker, and in January 1871 he created the Edison Universal Stock Printer, an automatic machine capable of transmitting between 200 and 300 words a minute and far superior to any in use before.
With the continuing support of his investors the twenty-four-year-old inventor set himself up in Newark, New Jersey, as an independent manufacturer of stock tickers with two other scientists, English immigrant Charles Batchelor and Swiss immigrant John Kruesi. They had the scientific training Edison lacked. He would conceive a plan that Batchelor would turn into an exact drawing and from which Kruesi would make the model. In 1873 Edison devised both the diplex and the quadruplex telegraphs. The diplex could send two different messages together on one wire in the same direction. The quadruplex could send two in both directions at once, so that only one wire was now required instead of four, as previously. The quadruplex was sold to financier and railroad entrepreneur Jay Gould.
In 1876 Edison established the world’s first industrial research laboratory at Menlo Park, twelve miles south of Newark, a prototype of company laboratories of the future. That summer he worked on the electromotograph, acoustic telegraph, autographic telegraph, speaking telegraph, electric pen, and mimeograph; and, in the fall, on the electrical dental drill and an electric sewing machine.
Both Western Union and its rival, Atlantic and Pacific, for whom Edison worked, claimed rights to the quadruplex. Their legal battle led to a sensational trial in the spring of 1877 that made Edison’s name widely known. The Telegrapher of March 25, 1876, had already called him “the professor of duplicity and quadruplicity.” But the rival companies settled out of court and agreed to share the income from the new system.
It was Edison’s natural serendipity that led him to invent the phonograph in 1877. What he was searching for was a way to record messages for commercial purposes. What he found was a new world of entertainment. He discovered that he could retain sound by attaching a stylus from an embossing telegraph to a telephone speaker and shouting into it while running a band of paraffined paper rapidly underneath the speaker. The paper could be replayed with the stylus; thus the sound, though indistinct, could be recorded. He continued to experiment with alternate means of recording—cylinder, disk, and paper bands. He tested the new toy with cheeky rhymes, such as:
Mary has a new sheath gown,
It is too tight by half.
Who cares a damn for Mary’s lamb,
When they can see her calf!
Edison disclosed his new invention to the National Academy of Sciences in Washington on April 18, 1878, and the excitement was such that two women fainted. President Rutherford B. Hayes got his wife out of bed in the middle of the night so that they could hear it at a midnight matinee at the White House.
Thomas Alva Edison (1847-1931), the most prolific inventor in history, with one of his early phonographs in 1878. His inventions in the field of communications provided the sinews for the transformation of America from an agrarian to a complex industrial and urban society. (Library of Congress.)
Having found a way to record sound, Edison now decided to find a way to transmit light. By the 1870s various types of electric arc lamps were available, but because of the enormous power they supplied and the gases they gave off they were suited only to large halls or open spaces. However, a consortium of New York financiers, including banker John Pierpont Morgan, believed that Edison could invent a more practical electric lamp and, in November 1878, subsidized his newly formed Edison Electric Light Company. The crucial breakthroughs in the search for a practicable electric lamp were the invention of a special generator (the long-waisted Mary Ann) and the carbon-filament lamp. Edison discovered that carbon remained stable in a nearly perfect vacuum. But he was unable to bake carbon wire in spiral form. It was only when his associate, Charles Batchelor, shaped the wire into a horseshoe that the first viable incandescent lamp was realized. It burned for sixteen hours on November 17, 1879.
Edison understood the significance of publicity and realized that it was important to have his system of electric lighting accepted in London and Paris as soon as possible. He thus made installation in these capitals a priority in the summer of 1881 before laying the mains for a central power station in New York at Pearl Street at the end of the year. Supported by Morgan, he moved his Edison Illuminating Company to New York; and there, on September 4, 1882, he switched on electric lights in the “House of Morgan,” the New York Stock Exchange, the New York Times, the New York Herald, and other buildings in lower Manhattan. By 1883 Edison had 246 plants making electricity for 61,000 lamps. Artificial light could continue day and night, thereby increasing the industrial potential of factories, the commercial potential of offices, and the social life of city and home.
Alexander Graham Bell (1847-1922), the inventor of the telephone, with his wife Mabel, and daughters Elsie (left) and Marian (“Daisy”), in 1885. Like his great rival Edison, Bell was one of the few genuine heroes of the Gilded Age. He seemed to combine stunning expertise in the rapidly expanding world of communications with the traditional pioneer spirit. (Gilbert H. Grosvenor Collection of Alexander Graham Bell Photographs; Library of Congress.)
Edison’s plant used direct current. Electricity could be transmitted long distance only by first increasing and then lowering the voltage in alternating current. George Westinghouse of Pittsburgh devised a transformer in 1886 that could transmit high-voltage alternating current over long distances. In 1888 a Hungarian immigrant and engineer, Nikola Tesla, invented an alternating current motor that converted electricity into mechanical power. Westinghouse and Tesla subsequently worked together to improve their inventions. They used alternating current to light the Columbian Exposition in Chicago in 1893. The inventions of Westinghouse and Tesla suggested the future use of hydroelectric power, and by the end of the century Niagara Falls was harnessed for electric power.
The use of electric motors in manufacturing made electricity the cleanest and most convenient form of industrial power yet known. Electric power was being used widely in transportation by the 1890s. Frank J. Sprague introduced the first electric street railway in Richmond, Virginia, in 1888. His invention, affording cheap, rapid, and clean transportation, was soon adopted by other cities anxious to free themselves from the pollution and risk of fire from steam trains.
Edison, who always plowed his money back into new research, opened a new laboratory of grand design, ten times larger than Menlo Park, at West Orange, New Jersey, in 1887. He now employed 120 research assistants, and eventually the laboratory was surrounded by an industrial estate of 5,000 people making goods from his inventions.
The competitive claims of the rival systems, direct and alternating current, were hotly contested by Edison and Westinghouse. During the 1890s and in the 1900s the benefits of alternating current over direct current became increasingly evident, and gradually, the United States was converted to alternating current. One important victory for its proponents was the adoption of alternating current by the hydroelectrical power plant at Niagara Falls in 1893, where the International Niagara Commission transmitted electricity to Buffalo, New York, twenty-two miles away. By 1898 the use of alternating current had developed to the point that it was carrying 30,000 volts along a three-phase seventy-five-mile line service between Santa Ana and Los Angeles, California. In 1899 a seventy-mile line from Colgate Hydro Station to Sacramento, California, carried 40,000 volts. The pattern was set for ever longer lines, carrying ever higher voltages. In 1907 engineers Edward Hewlett and Harold Buck developed suspension insulators. By 1920 some lines were carrying up to 132,000 volts and a few up to 150,000 volts.
Electricity was a new form of physical energy, greater than the sum of all previous forms of energy. Journalist Mark Sullivan described how, at the turn of the century, “electricity was streaking up and down the country, literally like lightning—wires to provide it with a pathway were everywhere being extended, like long nerves of new growth, from central power houses, from the city to the suburb, longer and longer capacity for transmission carrying it to distant villages, from the villages to the farm—everywhere ending in a switch, by the turning of which man could tap for himself a practically limitless reservoir of physical power.” It was a case of many lights make hands work.
In the twentieth century the history of electricity and Edison’s career diverged. Electricity, and its uses, were no longer the property of Edison alone. Because of a parallel public demand for ever more electrical power, engineers devised new propulsion systems to carry it. During the 1890s they used steam-reciprocity engines to drive electrical generators but these proved too large and heavy and tended to pulsate while rotating. In 1903 they began using 5,000 kilowatt steam-turbine-driven generators that allowed for increased output. Yet they, too, had problems, primarily output capacity and high consumption of fuel.
Despite the fact that many of his inventions were worth millions of dollars, Edison’s career was plagued by financial insecurity. He had no professional skills as a businessman, turning over his affairs to successive financiers in exchange for ready cash, and subsequently quarreled with them when he thought he had been badly treated. A compulsive spender on equipment and research, he could not bring himself to balance income and expenses. He made and lost several fortunes. His business dealings had taught him to trust nobody and to expect the worst from human nature. But his newfound ruthlessness was so ill concealed that he alienated his associates and damaged himself commercially. This partly explains how he lost control of his own company. In February 1892 the General Edison Electric Company merged with its great rival, Thomson-Houston. The new corporation, capitalized at $50 million, was named, quite simply, General Electric. It had a new president, Charles Coffin. For Edison, the unkindest cut was the exclusion of his name from the company’s title. Edison eventually sold many of his shares. He squandered the $4 million he had gained from the electric lamp on a foolhardy attempt to mine, or mill, iron ore magnetically.
However, he recovered his personal fortune in the two revolutions he started in the world of entertainment. By 1899 the sales of the springmotor phonograph amounted to $500,000, although the mass production of records as disks did not begin until February 1902, after Eldridge Johnson had organized the Victor Talking Machine Company in 1901. Edison also introduced a mutation of the phonograph that completely transformed entertainment. From Eadweard Muybridge, an English immigrant who produced still photos of nudes for stereoscopic projection that he called “Animal Locomotion,” Edison conceived the idea of moving, talking pictures. Ever since 1878, when he won a bet for Governor Leland Stanford of California that a horse in full gallop had all four feet off the ground, Muybridge had been widely recognized as an expert in sequential photography. Four years earlier he had scored a succés de scandale by killing his wife’s lover and persuading a jury to acquit him of murder.
Using celluloid film produced by George Eastman of Rochester, New York, Edison devised a kinetoscope that cast separate still photos on a screen one after the other so rapidly that the pictures seemed to be moving. It was the first invention that Edison fully developed before putting on the market. The first public showings were in New York City, in Broadway kinetoscope parlors with slot machines that charged ten cents for a program lasting sixteen seconds. The subjects were violent and included lynchings, scalpings, and beheadings.
The transformation of these hole-in-the-corner affairs into large-screen exposures was the work, not of Edison, but of little-known inventor and realtor Thomas Armat of Washington. Edison’s backers knew that the new invention would have more appeal to the public if it carried Edison’s name. Accordingly, when the Amazing Vitascope was shown to the press on April 3, 1896, it was described as “Thomas A. Edison’s latest marvel.” Armat was initially quite content to forgo the credit and take the cash. A renegade Edison associate, William Dickson, developed a camera taking pictures eight times larger than Edison’s. He filmed the Empire State Express, and, when his show opened at Hammerstein’s Theater on October 12, 1896, the sight of the great train hurtling along was so realistic that the alarmed audience stampeded for the exits.
Whereas Edison became the most prolific inventor in the history of the world, holding patents for over a thousand inventions, his great rival, Bell, held patents for only eighteen. He preferred to concentrate on what he regarded as his true profession, teaching the deaf. Alexander (“Graham”) Bell was the second of three sons of Alexander Melville Bell, a noted professor of elocution in Edinburgh and London who invented a universal phonetic alphabet called visible speech. The three sons were to continue the work of the father. But after two died of tuberculosis, the family emigrated to Canada, settling in Brantford, Ontario, in 1870. Alexander Melville Bell had good reason to believe that visible speech would be better received in the New World than in the Old, where phoneticians had resisted his progressive ideas.
Alexander Graham Bell began teaching deaf-mutes in Boston in 1871, where he met Gardiner Greene Hubbard, an affluent businessman and philanthropist. One of Hubbard’s daughters, Mabel, had been deaf from scarlet fever since the age of five. She became one of Bell’s pupils. He fell in love with her and they were married. Bell was very sensitive to the psychological plight of children imprisoned by their physical disability. He had an extraordinary capacity for reclaiming recalcitrant children and gained the support of Sarah Fuller, a prominent Boston teacher of the deaf. He became interested in multiple telegraphy as a means of communication and tried to make an instrument for transmitting sound vibrations. His father, who had seen two sons fall victim to overwork and die as a result of his own ambitions and progressive methods, begged him to give up the attempt. In the early days he regarded Alec’s obsession with the telephone as a needless distraction from teaching that, far from making his fortune, would, instead, damage his ability to earn a living.
Bell’s considerable reputation as a teacher led Lewis Monroe, dean of the School of Oratory of the recently formed Boston University, to offer him a chair in vocal physiology and elocution in 1873. This provided him with a permanent base from which he could pursue his research. Bell was the first person to realize that the electrical transmission of the human voice was physically possible and commercially practicable. He conceived the idea of the telephone in July 1874. The caller would speak into vibrating plates or reeds, thus inducing a continuous fluctuating current that would carry the exact amplitude and frequency of his voice along a wire. At the receiver an electromagnet would transform the current into pulses or undulations of magnetic force that would then act on another array of tuned reeds to reproduce the original sound.
Gardiner Hubbard was greatly excited by the idea. He was opposed to Western Union because it was a monopoly and favored a United States Postal Telegraph Company. On March 7, 1876, Bell obtained patent number 174,465 for the telephone despite his competitors, who included Edison, Elisha Gray, and Paul La Cour of Copenhagen. On March 10, 1876, he and his assistant, Thomas Watson, had their first intelligible conversation by telephone from adjacent rooms. The new invention in an imperfect state was demonstrated to a large audience at the Massachusetts Institute of Technology on June 23, and on June 25, at the instigation of Hubbard, to three judges at the Philadelphia Centennial Exhibition. The judges pronounced Bell’s telephone “perhaps the greatest marvel hitherto achieved by the electric telegraph.” The interest of Emperor Pedro II of Brazil, who attended these demonstrations, was decisive. His prestige ensured the sort of full publicity for the new invention that the press might not otherwise have conferred.
Bell obtained a second patent, number 186,787, for an improved model on January 30, 1877. However, a host of detractors tried to transfer the honor from Bell to one of his rivals, such as Gray or Philip Reis. Western Union, threatened in its monopoly of communications, brought together a motley collection of rival claimants to dispute Bell’s authorship and impugn his character.
Hubbard organized the Bell Telephone Company and secured as president the outstanding services of Theodore N. Vail, who had it incorporated in July 1878. Western Union established a rival in December 1878, the American Speaking Telephone Company, but not before the Bell Company had sued for an injunction in Massachusetts against Western Union’s agent, Peter Dowd, for renting out telephone transmitters illegally. The case was first heard on January 25, 1879. Western Union claimed that Elisha Gray had first invented the telephone and that Amos Dolbear had perfected it. Bell produced a letter he had received from Gray dated March 5, 1877, acknowledging Bell’s prior claim, and this crucial piece of evidence was taken as positive proof that Bell had conceived, made practical, and patented the telephone before anyone else. The Dowd case was resolved on November 10, 1879, when Western Union agreed to forfeit its telephone business and to assign all its telephone patents to the Bell Company in return for 20 percent of telephone rental receipts for seventeen years.
The first commercial telephone switchboard was established in New Haven, Connecticut, in 1878. By March 1880 there were 138 exchanges and some 30,000 subscribers. In 1887 there were 743 main and 444 branch exchanges and over 150,000 subscribers. In 1880 the various companies were reorganized as the American Bell Telephone Company; then, in 1885, as the American Telephone and Telegraph Company. In 1900 there was on average, however, only 1 telephone for every 66 people.
Railroads
The railroad, which had been in existence for three decades before the Civil War, was transformed out of all recognition in the thirty years that followed. The iron-and-steel rail network extended some 35,000 miles in 1865; in 1870 it was 53,000 miles; in 1880, 93,000 miles; in 1890, 164,000 miles; in 1900, 193,000 miles. American rail mileage was greater than that in Europe, and almost the whole population lived within the sound, if not the sight, of a locomotive. The American Industrial Revolution depended on the ability to move raw materials, agricultural produce, and manufactured articles quickly from site to city. American railroads carried 10 billion tons of freight per mile of track in 1865 and 79 billion tons per mile in 1890. Moreover, the real cost of shipping freight fell steadily in the late nineteenth century, from an average of 2 cents a mile for every ton in 1865 to about .75 cents in 1900.
The story of how the great railroad lines were built is epic, encompassing such physical qualities as energy, enterprise, and endurance, all the virtues from courage to conviction, and all the vices from avarice to anger. These were heady days of achievement that seemed romantic to the generation involved. Young ladies were compared to locomotives because they also drew trains and transported males.
Congress gave as much attention to the railroads as to any economic or social problems, recognizing that the railroads were the sinews of industrial development. Between September 1850, when Congress made its first land grants to the Illinois Central and Mobile and Ohio railroads, and March 1871, when it made its last grant to the Texas and Pacific, the federal government had made more than 170 million acres available to more than 80 different railroad companies. Half of them never laid the lines, and some 3 5 million acres were returned. Land grants were the basis of easy credit in the initial stages of construction. Some roads sold off this land. The Union Pacific disposed of extra land in Nebraska to farmers at prices ranging from $3 to $5 an acre in the 1870s. They thus advanced settlement and ensured business. In these different ways federal land grants defined the site of railways and made them financially sound.
It was the railroads that made possible both the settlement and the development of the West. The opening of the first transcontinental railroad in 1869 was as significant an event for Americans as was the contemporary construction of the Suez Canal in Egypt for Europeans, and far more so than the landing of men on the moon a century later. The pioneer of a transcontinental line was Theodore Dehone Judah of the Central Pacific who was not content with dreaming about a railroad across the Sierra Nevada but actually worked out a possible route and founded a company to carry it out. He managed to capture the imagination of Leland Stanford, governor of California, who was able to provide proper political support for the project. When the Central Pacific Railroad was organized in June 1861, it was as a private enterprise. But it would have collapsed without public funds. Both Sacramento and San Francisco became stockholders. In 1864 the California legislature displayed its confidence in Stanford, recently retired as governor, by agreeing to underwrite the interest on the company’s bonds at a rate of 7 percent. Judah, the original founder of the Central Pacific, also enticed an unscrupulous businessman, Collis P. Huntington, to act as his agent in the East. It was Huntington’s task to procure and dispatch necessary supplies. Associated with them was construction manager Charles Crocker. He had no practical training or skills but he was a born leader of men.
The Pacific Railroad Act, signed by Lincoln on July 1, 1862, had authorized the Central Pacific to extend eastward from Sacramento, California, and the Union Pacific to extend westward from the Missouri River. The Union Pacific had been created by federal charter with a capitalization of $100 million. The federal government was to grant it ten (later twenty) alternate sections of public lands for each mile of track laid. So eager was the federal government to unite the country by rail that the act of 1862 contained essential and generous loan provisions. Central Pacific and Union Pacific were loaned $16,000 per mile for construction costs over the easiest part of the route; $48,000 per mile over the most difficult mountainous section, the Rockies and Sierras; and $32,000 per mile on other areas.
Construction of the Central Pacific began in Sacramento in January 1863, but at first progress was so slow that only eighteen miles were laid in 1863 and only twelve miles in 1864. Even after the company began to employ conscientious Chinese immigrants, the line moved at a snail’s pace. Crocker’s engineer did not dare use the new steam drill, and his men nibbled at rocks with pickaxes and dug tunnels with their bare hands. Work was sometimes interrupted by avalanches and blizzards. Consequently, the laborers spent half of their time clearing the completed line of boulders and snow.
The last spike. The historic photograph of emissaries and construction workers at Promontory Point, near Ogden, Utah, on May 10, 1869, celebrating a momentous occasion when the first transcontinental railroad across the Americas was completed by the meeting of the Central Pacific (moving from the West) and Union Pacific (moving from the East). The last spike was ceremoniously driven into the tracks. While workers in the rear hold a bottle of champagne aloft, Central Pacific chief engineer Samuel S. Montague (center left) shakes hands with Union Pacific chief engineer Grenville M. Dodge (center right). (Library of Congress.)
The Union Pacific, moving from the East, faced different but equally dramatic difficulties: attacks by Native Americans. Construction gangs lived in squalid shantytowns that became ghost towns after a section of the line was completed. When the two lines met at Promontory Point, near Ogden, Utah, on May 10, 1869, the Central Pacific had completed 689 miles of track; the Union Pacific had laid 1,086 miles. As the telegraph tapped the news across the country celebrations began in Chicago, Washington, New York, and San Francisco.
Despite the fact that physically the railroad was a daring achievement, in financial terms the entrepreneurs and their private promoters had risked little. The federal government had lent its prestige, authority, and resources to the enterprise. Thus private backers, intent on a fat buck if not a fast one, were assured of high returns. They awarded the most profitable contracts to their own construction companies and supply firms. If they could not be paid in cash they took kind: railroad bonds. Their profits, like their innermost motives, remain obscure. The great enterprise had its share of shady episodes. Thomas Durant, vice president of the Union Pacific, and his friends bought up a Pennsylvania firm, Credit Mobilier, that was licensed for a whole range of fund-raising activities. The men in charge of Union Pacific voted construction contracts to dummy companies that awarded them to Credit Mobilier. Thus, they were able to raise unnecessarily large funds for building the road and then to divert these monies into their own pockets. It was said that Credit Mobilier showed profit of ioo percent on the original investment. The scandal was exposed in 1872 and 1873 and had significant political repercussions.
The panic of 1873 and the ensuing depression delayed but did not halt construction of other transcontinental lines. The Northern Pacific was completed in 1883, the Atchison, Topeka and Santa Fe in 1883, and the Great Northern in 1893.
Besides astonishing growth, railroads benefited from a whole series of technological advances that led to a more efficient and better-integrated system across the country. The most significant was the introduction of steel rails, more capable of carrying the heavier locomotives and longer trains of the Gilded Age than the old prewar iron rails. In 1872 the United States manufactured 809,000 tons of iron rails and only 84,000 tons of steel rails. In 1877 more steel rails were made than iron rails. By 1895 iron rails were no longer being made, and 88 percent of railroad tracks were made of steel.
Because in 1865 there was no uniform gauge across the country, at that time freight could move neither quickly nor freely. Movement was impeded by delays caused in coupling or braking cars manually, differences in time between adjacent areas, and the hazards of inadequate train control. By 1880 older railroads in the East and Midwest adopted a uniform track gauge of 4 feet 8½ inches. On the mistaken assumption that a different gauge could deter invasion, much of the South was laid with a wider gauge of 5 feet. In the West, to minimize the dangers of mountain traffic, many roads laid very narrow tracks. But connection was the essence of commerce and communication. When the change to a regular standard came, it came quickly. Much of the South accepted the standard gauge on May 31, 1886, and by 1890 it was uniform in all regions.
Another improvement was the adoption of standard times. In the first years after the Civil War trains did not always run on time. They would stop at an isolated house to pick up only a few passengers or a package for a town. The Old Colony Railroad in Massachusetts used to stop at Wheat Sheaf Lane every day to collect eggs from an old woman. Once she told the engineer there that she only had eleven eggs and persuaded him to wait until the hen laid the extra egg to make up the full dozen. Such practices did not increase industrial efficiency or public esteem. The Delaware, Lackawanna and Western Railroad, or D, L & W, was known as the Delay, Linger, and Wait. The Newburgh, Dutchess and Connecticut, or N, D & C, was the Never Did and Couldn’t.
Railroads compounded their problems by measuring time according to the local time of their major stations. The B & O used Baltimore time on its eastern routes, Columbus time for Ohio, and Vincennes time for the West. Thus, the station at Buffalo had three clocks and the station at Pittsburgh had six, each showing a different time. Once widely separated communities were brought into the same commercial basin such differences caused endless confusion. Therefore, William F. Allen, secretary of the General Time Convention, devised a scheme of four time zones across the country: Eastern, Central, Mountain, and Pacific. Their times were based on the mean sun time on the meridians near Philadelphia (75th), Memphis (90th), Denver (105th), and Fresno (120th). In October 1883 the railroads agreed to accept it, and they put the plan into effect at noon on Sunday, November 18, 1883. The impact of this decision was truly revolutionary. As the Indianapolis Sentinel proclaimed in a much quoted passage:
People will have to marry by railroad time, and die by railroad time. Ministers will be required to preach by railroad time, banks will open and close by railroad time; in fact the Railroad Convention has taken charge of the time business, and the people may as well set about adjusting their affairs in accordance with its decree.
However, people were as much concerned with the dangers of rail travel as with the time it took. Accidents, sometimes involving heavy loss of life, were common. The most disastrous were at Revere, Massachusetts, in 1871 when two trains collided; at Ashtabula, Ohio, in 1876 when a fire broke out after a train crashed through a bridge; and at Chatsworth, Illinois, in 1887 when more than eighty people were killed. The causes were inept management, inadequate bridges, and insufficient fire precautions.
American inventors found the means to improve safety and lessen the risk of accident with new couplers, brakes, and signals. In 1868 Confederate veteran Eli H. Janney devised a coupler that worked like the hooked fingers of two hands. It was adopted first by the Pennsylvania Railroad, and by 1887 it was being used throughout the country. George Westinghouse invented the air brake in 1869 when he was only twenty-two. He got the idea of stopping trains with air after reading how French engineers cut tunnels into rock with compressed air. The railroad commissioner for Iowa, Lorenzo S. Coffin, persuaded the state assembly to pass laws requiring trains in the state to use the new brakes and couplers. Coffin and other state railroad commissioners called for federal legislation, and eventually Congress passed a Railroad Safety Appliance Act in 1893. By 1900, 75 percent of locomotives had been fitted with air brakes and 96 percent had automatic couplers. Safety was also improved by better signaling, such as the block-signal control invented by engineer Ashbel Welch, the closed electric track signal circuit, and the electric compressed air switch.
Still not satisfied, passengers wanted comfort as well as safety. In 1867 George Pullman of Chicago founded the Pullman Palace Car Company and introduced the hotel car, a combination sleeping and dining car. In the next year the deluxe dining car, the Delmonico, went into service on the Chicago and Alton Railroad. It was an immediate success. This was the turning point in the fortunes of his company, which was commissioned to turn out sleeping, parlor, and dining cars by the thousands during the following years. Many were private cars for businessmen and industrialists who wanted to outdo one another in extravagance and luxury. In the 1880s George Pullman’s sleeping and dining cars became so common that the term “Pullman” was synonymous with first-class rail service. However, there was no pleasing some people. Comedian De Wolf Hopper told a New York audience in 1900 that he had returned to Broadway revue to escape railway sleeping cars. After a picturesque account of the hazards of traveling by rail he concluded, “When I finally reached Washington and a stationary bed, I had to hire two men to shake the bed all night and pour cinders down my neck.”
Railroad development provided the sinews of the American Industrial Revolution. Its expansion and contraction were largely responsible for the financial health of the economy. For example, the root cause of the depression of 1873 was railroad collapse. And the railroads collapsed because they were overextended. Railroad construction had already doubled from 35,000 to 70,000 miles since the Civil War. Two-thirds of the increase had been in the West, which was sparsely populated. Thus, most railroads there had little business and were unprofitable. For instance, in 1872 no more than a third of the 350 railroad companies could pay their stockholders any dividends.
The failure of a leading investment bank, Jay Cooke and Company, precipitated a general panic. Cooke was financing the Northern Pacific Railroad, the second transcontinental line across America. In 1873 Cooke was funding its construction in the Northwest and underwriting some bonds at a price to guarantee dividends of 8.5 percent. But the railroad was already so overextended that it could yield no dividends at all. Cooke and other bankers had already allowed railroads like the Northern Pacific excessive credit. But when money became tight, they were not able to continue the process by selling more bonds. Money deposited in Cooke’s New York branch was siphoned away to the West to pay for seasonal crop shipments there. On September 18, 1873, Cooke’s bank failed, and its branches in New York and Philadelphia were closed.
Until then no one had doubted the probity of Cooke and Company. In Philadelphia a newsboy who shouted the story was arrested for slander. But it was true. People panicked. They wanted to trade in their stocks and shares for cash. In the headlong rush the value of stocks fell dramatically. The New York Stock Exchange closed for ten days from September 20. Railroads were the worst hit. Eighty-nine defaulted on their bonds. Construction ceased. By 1874, 500,000 men were out of work. Breadlines were becoming a regular feature of city life. But that was only one part of the story. Supply industries—iron, steel, lumber, glass, upholstery—also suffered. So did industries that relied on railroads to carry their goods. By the end of 1873 there were 5,000 commercial failures. The total investment lost was $775 million.
The hopes that died with the depression revived at the end of the decade. New farming areas in the West had come into production by 1879, and agricultural production was twice as high as it had been in 1873. The resulting increase in railroad traffic brought renewed interest and investment in railroads until 1882. Thus, in three years—1880, 1881, and 1882—more than 28,000 miles of railroad were laid, each creating new opportunities for agriculture and industry, especially in the West and South.
Robber Barons
The way railroads were established and fortunes made from their operation has colored most interpretations of the Gilded Age according to which sharp practice became standard practice in commerce and politics. Whereas English historian Thomas Carlyle called the entrepreneurs of the Industrial Revolution “captains of industry,” they were known more commonly in America as robber barons. The term was first conferred by disgruntled farmers in Kansas specifically on railroad magnates in 1880.
There were in fact two distinct types, or generations, of robber barons. Strictly speaking, the first were not industrial entrepreneurs at all but rogue financiers. Many had made fortunes in the war and were still anxious to make a killing, especially in railroads and public utilities. It did not matter to them that the cost might be economic or political stability. To this category we can assign the unholy trio of Jay Gould, Jim Fisk, and Daniel Drew. Their nefarious activities spread through whatever aspects of public life they could penetrate and defile. “His touch is death,” exclaimed Daniel Drew of Jay Gould. The most notorious act of Gould and Fisk was not in railroads but gold. On Gould’s advice, President Ulysses S. Grant appointed one General Daniel Butter-field as head of the subtreasury. What he did not realize was that Butterfield was involved with Fisk and Gould in a scheme to make a killing on the New York gold market by hoarding gold. Because of their gold corner, the price of gold rose from 132 to a peak of 162. By September 24, 1869, “Black Friday,” scores of Wall Street bankers faced ruin. The corner collapsed when Grant and Secretary of the Treasury George S. Boutwell began to sell $4 million of government gold to depress the market. In the process they unintentionally harmed hundreds of businessmen, especially importers.
The trio became railway kings en route to untold fortunes. For example, Jay Gould controlled in succession the Erie, the Union Pacific, and the Wabash. Eventually he owned Western Union, and the Manhattan Elevated and Texas Pacific railroads. His associate, Jim Fisk, was soon known as the Prince of Erie for being “first in the pockets of his countrymen.”
The most common device for making money out of corporations, whether railroad or industrial, was to overcapitalize them—to launch stocks and shares beyond the true value of the business. It was said of any company that was overcapitalized that it had “watered stock.” The term originated with Daniel Drew in his early days as a cattle drover. His cattle were kept thirsty throughout the drive from Putnam County, in upstate New York, to New York City, fed with salt, and were allowed water only immediately before they arrived at the Third Avenue drovers’ market where they appeared bloated and, therefore, beefy enough to buy.
The later generation of robber barons was no less ruthless than Gould, Fisk, and Drew. But they were providing the public with a service. They aimed for monopoly control of a product or market, but not simply to control prices. They determined to replace fierce industrial competition with sound commercial order. From 1890 financier John Pierpont Morgan, for example, strove to secure profitable symmetry in the overextended railway system.
Between these two generations of robber barons were a few transitional figures, rapacious men capable of criminal acts for commercial gain but who nevertheless worked within the letter (if not the spirit) of the law. Such a pivotal man was Cornelius Vanderbilt, the founder of a railroad dynasty. Furthermore, it was the opulent life-style of his gregarious and extroverted family that gave the Gilded Age much of its well-deserved reputation for display in high society.
Cornelius (“Commodore”) Vanderbilt was born in 1794 at Stapleton, Staten Island, the fourth of nine children of a subservient ferryman and his aggressive, acquisitive wife. At seventeen he could not persuade his father to expand the family business of ferrying and market gardening and cajoled his mother into loaning him the money to start a rival ferry service. From these small beginnings, and taking advantage of such crises as the War of 1812, the gold rush of 1849, and the Civil War, he built up a profitable steamboat operation worth perhaps $11 million by 1862. During the Civil War, however, he realized that it was on land rather than sea that the United States’ destiny lay. Only the railroad could follow armies in the field and penetrate the empty interior of the West.
Vanderbilt plowed his war profits into the great railroad boom. He determined to acquire control of a crucial route for passengers and freight alike, that from New York to the Great Lakes. In 1862 he began investing in two rival railroads, the New York and Harlem and the New York and Hudson, and in 1867 he took over a third, the New York Central. He and his eldest son, William Henry, persuaded the state assembly to allow them to combine these properties into the New York Central and Hudson River Railroad. He had himself voted a bonus of $20 million in watered stock and a bonus of $6 million in cash.
The main competitor of the New York Central was the Erie, a railroad controlled by Daniel Drew, James Fisk, and Jay Gould. Vanderbilt fought a rate war against the Erie. He once cut the rate for cattle between Buffalo and New York on the New York Central to $1 a head as part of the battle. However, his rival, Jim Fisk, did not retaliate in kind. He took advantage of Vanderbilt’s cheap fares by buying beef in Buffalo that he then shipped on the New York Central. He thus made a profit on the price of beef in New York City while at the same time weakening the Vanderbilt system, which had to accommodate extra freight below cost.
Between 1864 and 1872 Gould, indulging in his usual practice of watering the stock, increased the nominal value of Erie common stock from $24 million to $78 million. Vanderbilt now intended to buy the Erie and end the competition. He began acquiring the new stock. But as fast as he did so the unholy trio issued more, with the blessing of the state assembly at Albany. Even Vanderbilt’s great fortune was insufficient to buy out his rivals. He admitted defeat gracelessly, complaining that “it never pays to kick a skunk.” The reputation of the Erie was ruined, however. To investors it was “the scarlet woman of Wall Street.” It paid not a single dividend between 1873 and 1942.
Gould and Drew quarreled and Gould ousted Drew, who lost his fortune in the panic of 1873. In 1872 Gould himself was forced to resign. Fisk’s brilliant career came to an even more abrupt end. He discovered that one man’s folly was another man’s wife. He was shot and killed by one of the other suitors of his mistress, Josie Mansfield.
When Cornelius Vanderbilt died in 1877 at the age of eighty-three, he was the richest man in America. The bulk of his fortune of at least $70 million went to his eldest son, William Henry, whom he considered the one competent and obedient member of his family who could keep the empire united. William lived to enjoy the family fortune for only another eight years. By ruthless manipulation of capital and labor alike he increased it, so that when he died in 1885 he was the richest man in the world. His brutal handling of strikes made him one of the most unpopular men in America, and to him was attributed the notorious declaration, “The public be damned!” In fact, he had put his trust in the financier John Pierpont Morgan, who was about to take the best railroad prizes for himself.
John Pierpont Morgan was born in Hartford, Connecticut, in 1837, the son of a small-town businessman, Junius Morgan. In 1854 Junius became a partner of an American financier living in London, George Peabody. John Pierpont, a robust child struck down by rheumatic fever that left him with one leg shorter than the other, was sent first to a Swiss school on Lake Geneva and later to the University of Góttingen to complete his education. He subsequently managed his father’s affairs in New York. During the Civil War his reputation was tarnished by damaging allegations about his part in the Hall carbine affair, whereby faulty breechloaders were sold back to the army for six times their original price. It did not help matters that he had the first telegraph wire on Wall Street installed so that he could receive news from the battlefields immediately and speculate in gold according to the fortunes of the North.
Morgan and his partners in the new firm of Drexel, Morgan and Company, formed in 1871, were determined to bring order to the chaotic jumble of competing, superfluous, and inefficient railways. In 1878 as a first step they acquired the Long Island Railway. They also persuaded the new Vanderbilt heir, William Henry, to sell 250,000 shares of the New York Central to English investors and to combine the Central with the Wabash. Morgan’s aims were threefold: to secure real support from overseas investors, usually financiers associated with his father; to eliminate price-cutting and alternative routes and thus raise profits; and to assume indirect control through ownership rather than direct control by administration.
In the East competition was internecine and began to involve other industries when steel magnate Andrew Carnegie supported the Vanderbilt lines against the Pennsylvania and its ally, George Pullman, in the 1880s. This intense struggle was resolved only by the intervention of Morgan, who, after careful planning, invited the warring factions to a peace conference aboard his yacht, the Corsair, in New York Harbor in July 1885. They paid him a cool million for acting as honest broker and abandoned additional competitive railroad projects.
The House of Morgan had a uniform policy to all the insolvent companies it penetrated. It dried out the old stock, issued new bonds at a lower rate of interest, and insisted on consolidation or collusion with rivals. Once it had achieved a maximum of voting stock, it persuaded shareholders to surrender their duties to Morgan or his nominees on the board. This reputation for organizing himself and his staff into various interlocking directorates led to Morgan and his junior executives being called “Pierpontifex Maximus and his Apostles” and *’Jupiter Morgan and his Ganymedes.” The titles were apposite. Morgan, who loved the high life and had put on the flesh of success, was much seen in the company of actresses. Twice married and with three children, he nevertheless liked to gaze at a former Harvard football star, Robert Bacon, whom he had made his most trusted assistant. The way robber barons like Morgan flaunted their wealth, wining and dining with actresses, gave rise to this anecdote of 1900 that pays tribute to Morgan’s florid countenance and bulbous nose: “I got a pearl out of a fresh oyster at Shankley’s,” remarked one chorus girl to another. “That’s nothing,” said her friend, “I got a whole diamond necklace out of an old lobster.”
By the close of the century Morgan was in control of the South Atlantic, the Erie, the Reading, and the Northern Pacific railroads, and exercised some control of the Baltimore and Ohio, and the Atchison, Topeka and Santa Fe. However, one magnate always resisted his external magnificence and challenged the myth of his necessity. That was Edward H. Harriman. Harriman predicted that Morgan would fail to reform the Erie and the Union Pacific, worked against him behind the scenes, and was proved right. Morgan and his associate, James Hill, decided to buy Harriman’s road, the Chicago, Burlington, and Quincy, and began to acquire shares in secret. When he discovered what was happening, Harriman retaliated by buying himself into a Morgan road, the Northern Pacific. Their confrontation led to a panic on the market on May 9, 1901—“Blue Thursday.” Hill devised a face-saving compromise whereby the roads would be linked in a holding company, the Northern Securities Company, capitalized at $400 million, which was registered in New Jersey on November 13, 1901.
The improvement of the telegraph and the invention of the telephone had rendered time no object to industry and commerce. The expansion of the railroad had reduced the significance of distance. Morgan now held the keys to time and place and would make new fortunes from them both. Time and place were less important than money.
Having achieved sufficient lines with enough capacity for current traffic in the period to 1893, railroad construction declined thereafter. Individual roads no longer needed to compete with one another for business with the old ferocity. There was not the same urge to expand in order to anticipate the moves of a rival. Further expansion would simply cost more than any resultant savings from a more comprehensive and efficient network. However, the railroads had been the first modern companies to find the route to effective management of large-scale industry. Whereas early industries had been local, based in one particular region, railroads now spanned the whole country, employing tens of thousands of men across thousands of miles of track. The only contemporary precedent for enterprise on such a scale was the Union army during the Civil War—another public bureaucracy with a hierarchical structure. Thus it was from the army that the railroads took their particular form of corporate structure. Each giant railroad, like an army, was composed of several divisions led by an area manager who was accountable to a general staff at headquarters. These local divisions, in turn, were composed of a series of lesser units each assigned specific tasks, such as engineering, maintenance, or administrative duties. Here was a peacetime army with its regiments, battalions, companies, and platoons. In the railroad companies and later the industrial corporations, a chain of command extended from individual section leaders at the base of a pyramid to the company president and board of directors at the apex. Moreover, there could only be a proper coordination of activities between the widely separated component parts of these corporations if the company adhered to some sort of schedule, and this could only be defined and maintained by a standard system of timekeeping. In short, the new form of enterprise grew out of the new technology in industry.