ROBBER BARONS
CHAPTER SEVENGRANDEURS AND MISERIES OF EMPIRE-BUILDING
THE decade after the Civil War was on the whole an ingenuous and light-hearted one. Certain of its aspects made it appeal to later historians as a “Gilded Age”; and its closing years (of depression) alone suggested a Tragic Era. The Americans largely worked hard, drank hard, boasted often and loudly, and contended fiercely with each other for the same objects, while thinking the same thoughts and wondering at the same miracles of mechanical progress, or of Manifest Destiny in its ascending march, “uniform, majestic as the laws of being, sure of itself as the decrees of eternity.” Everywhere was observed the same banging and hammering of “empire-” or mere town-building ; the tumult of gold rush or land boom ; everywhere the towns are “live,” the streets of all the cities “are filled with brilliantly garbed shoppers and theaters, hotels and railways are crowded with jubilant throngs laden with inexhaustible sums of money.”
To our great good fortune, Mark Twain, the true child of the Gilded Age, swam at the vortex of the rush of gold-seekers, in the region of the Comstock Lode. Here at Virginia City he describes in “Roughing It” the sidewalks swarming with people, the streets themselves crowded with freight teams and other vehicles :
Joy sat on every countenance, and there was a glad, almost fierce intensity in every eye that told of the money-getting schemes that were seething in every brain and the high hope that held sway in every heart. Money was as plenty as dust. . . . There were military companies, fire companies, brass bands, banks, hotels, theaters, “hurdy-gurdy houses,” fights, murders, inquests, riots, a whiskey mill every fifteen steps, a dozen breweries, and half a dozen jails and station-houses in full operation, and some talk of building a church. The “flush times” were in magnificent flower !
If the Americans thought of themselves at all, it was as a restless, pushing, energetic, ingenious race, Henry Adams reflected—adding that this was perhaps not universally correct. Uncritically they accepted the same standards of merit to which Charles Dickens and so many other visiting moralists alluded so often.
“Well, sir, he is a smart man,” was the repeated defense made of the famous persons who had so quickly preëmpted railroads, ore fields and harbor rights. Jay Gould was universally envied for his smartness and so was Jim Fisk smart ; and though Beecher thundered at him as “the glaring meteor, abominable in his lusts, and flagrant in his violation of public decency,” the age admired him without stint ; at his worst “he had only done what others would have done in his place.”
In the fall of 1870, following a dispute over wages, there was a strike of the brakemen on the Erie Railroad, and Fisk, vowing that he would never “submit to dictation,” gathered together a thousand armed men, whom he sent up from New York under orders to shoot any workers who offered resistance. In this way he put down the “revolt” with great promptitude, and the press brimmed over with plaudits for the Prince of Erie. But if titles (Prince or Colonel) and honors were showered upon Fisk, statues were erected to the equally formidable Vanderbilt, who had managed to pour some $53,000,000 of “absolute water” into his railroads and turn this into gold ! After the final consolidation of the New York Central system, extraordinary public honors were paid to the new owner and master, in May, 1869—though to be sure some of these festivals were bluntly ordered and paid for by himself. A statue was unveiled with much ceremony in a station at St. John’s Park ; and upon the pediment of the new railroad warehouse in Hudson Street memorial bronzes in alto relievo represented the Commodore himself, larger than life, standing in a central niche “rather stiff and dressed in the fur-lined coat he was fond of wearing.” On either side he was flanked with an immense field of bronze devoted to the story of his life ; marine affairs were represented on the right, sailing vessels, war vessels and Pacific Mail steamboats ; while on the left were his railroad bridges, steam locomotives, and passenger cars. A popular and elegant orator of the day, Mayor Oakey Hall of Tweed Ring fame, likened Vanderbilt to Franklin, Jackson and Lincoln, as “a remarkable prototype of that rough-hewn American character which can carve the way of every humbly-born boy to national eminence . . .”; while a Bishop prayed that “as riches and honors had been heaped on Vanderbilt, he might devote all his ability to the cause of humanity and seek to lay up treasures in Heaven.”1
For in truth a people who gave themselves as in a crusade, as Mr. Van Wyck Brooks has called it, to the exploiting and the organizing of the material resources of their continent, saw the grand social result achieved only in measure with the vigorous self-seeking of individual appetites. Hence the age adored a Vanderbilt or a Fisk, as models of roughness and strength, of shrewdness rather than of taste or moral refinement ; and it tolerated the adulteries of Henry Ward Beecher no less for his silver tongue of a demagogue than for the reason that his religious newspapers and lecture business were projects of national scope. But then also, because of the very uniformity and poverty of private lives in the average, it may have enjoyed all the more freely, as Paxton Hibben suggested, “the atmosphere of profligacy” which surrounded Dr. Beecher no less than “Colonel” Fisk.
The ceremonies at this time in honor of the Iron Horse, and of the Vanderbilts, Huntingtons and Fisks who bestrode it, reflected faithfully how the railroad developments of the time symbolized the nation’s Manifest Destiny. “Surveying the whole field . . . I fixed on the railroad system as the most developing force and largest field of the day and determined to attach myself to it”—so wrote a young New Englander whose family line boasted two Presidents, and who in another time might have carried on the family traditions 0f public service. Yet now groping for a “career open to talent” the younger Charles Francis Adams struck for the railroad field, though he knew the hazards, knew how dark and double were the ways here.
But those who could not become railroaders might at least invest in their stocks and bonds. Everybody was a speculator ; everybody made “ventures,” as an observer of 1870, Medberry, reported. Railway bonds sold like “hot cakes” abroad and at home ; speculators in all kinds of schemes sought bonanzas for their greed. Medbery, in his “Men and Mysteries of Wall Street,” relates :
Gold was the favorite with the ladies. Clergymen affected mining stock and petroleum. Lawyers had a penchant for Erie. Solid merchants preferring their customary staples, sold cotton or corn for future delivery or bought copper or salt on margin.
The one fact that seemed to make prosperity perennial was the vast expansion of the railroads and all the resultant activities : the heightened demand for coal, iron, engines and materials, the kindled excitement in the factories, the call for laborers on every side, the rising wages, the swollen profits, the luxurious spending. Between 1865 and 1873, 35,000 miles of railway track were laid—as much as was built in the two generations preceding, and in itself a tenth of the whole world’s railway mileage. With towns, such as Chicago, Duluth or St. Paul, doubling or quintupling in the decade, credit easy and optimism cheaper still, land- and town-site booming more and more frenzied, immense sums of money, saved or borrowed, were being invested with a beautiful abandon in heavy industrial goods, in the machinery not only of present transportation but of future growth. . . . With prices high, with bumper crops flowing over the new railways to Europe from the swiftly opened West, and their mortgage debts redeemable in “legal tender,” even the most hard-bitten farmers became enthusiastic, enjoying great gains by inflated prices of wheat (at $2.5o a bushel), and buying stock in railway and banking enterprises. States and communities were vying with each other to promote the building of roads “that could not do anything but a paper business for years to come,” as J.G. Pyle writes, “and the reckless discounting of these securities for the benefit of promoters and construction companies . . . the hypothecation of the future proceeded rapidly, built a towering pyramid of hope.” For the sake of railways most of which had only a future usefulness, the people turned over the proceeds of fifteen hundred million dollars, “not of money, but of grain, clothing, coal, iron and other substances,” as an English economist, Professor Bonamy Price, remarked after 1877 ; goods which they actually possessed or expected to produce in the future. In return for these sums, they had the securities or promises of the railroads (and allied enterprises) to pay them interest and dividends, promises well rated and respectfully regarded and having a high market value so long as the course of empire-building remained as uninterrupted, “uniform, majestic . . . sure of itself” as ever.
What rude awakenings the young nation must suffer repeatedly ! After the moods of despair or disgust aroused by the report of the Gold Conspiracy, in 1870, it had gone back to its exacting tasks only to be startled anew by the scandals of the Tweed Ring in 1871. Here were episodes which could no longer be dismissed with the shrug or wink of indifference. “What are you going to do about it ?” Tweed had been wont to say. But the predictions of the political engine erected in Tammany Hall had gone too far. When the City of New York’s debt was being doubled every two years, it was high time for the business men’s Committee of Citizens to expel the marauders.
The trail had led once more to the Opera House of the Erie ring ; for, as one of Fisk’s earliest biographers observed in 1871, “Tammany Hall and the Erie Ring were fused together and . . . contrived to serve each other faithfully.”2 Tweed was disgraced, and he and Peter Sweeney were hastily dropped by Gould from the railroad’s board of directors. And now Jim Fisk could no longer, at his pleasure, imprison in the Ludlow Street jail journalists who libeled him—as in the case of the intrepid Bowles of the Springfield Republican.
Enemies crept around more and more boldly as the disrepute of the Erie, called “Scarlet Woman” among railroads, increased. The vast sums of money raised by watering its capital continually were being poured into “the laps of wantons” by Fisk, according to common rumor. The princely suite of offices above the opera, barricaded and guarded, was the scene of nightly carousing and gambling. The scandals now rapidly multiplying concerning Tweed, Sweeney, Fisk, Josie Mansfield and their circle began to injure the credit standing of the company, at a time when financial conditions abroad were already shaken by war in France. The foreign, especially the British, holders of its bonds and stocks could liquidate their investments only at severe sacrifice. And each accident or wreck which caused the newspapers to scream in headlines “Erie Massacre !” only increased the trouble. The conviction spread among the weightiest persons, such as Junius Morgan, the Rothschilds, and August Belmont, that the Erie money machine had “gone too far,” and like the Tweed Ring, in its drunkenness of power no longer observed the least of the proprieties.
Jay Gould and Fisk had fortified their position remarkably, a short time before, by causing the New York State Legislature to pass the Erie Classification Act. By this extraordinary measure, only one-fifth of the board of directors could be voted for or changed in any single year’s election. Hence, without even possessing a dominant stock-ownership, the Gould-Fisk management could perpetuate itself for years to come, and easily prevent outside interests from entering the control. When English investors had complained of Gould’s policies—especially of all the printing of bonds which debased their investments—Gould had easily aroused the native lawgivers to defend him against resentful attacks of the hated Britishers. Catch an Albany statesman helping John Bull ! The long-swindled faction of Englishmen, who had many millions of pounds at stake, were then forced to abandon all legal attempts to obtain justice. With growing alarm the English saw that when they sent over newly purchased Erie stock to be transferred to their names, and to be voted as they desired, President Gould seized upon it and used their proxies himself, while the courts (Judge Barnard) and the state legislature upheld his actions. This was too much for human flesh to bear : it was not mere skullduggery ; it was theft.
“Impatient of the Law’s delay,” as the New York Assembly’s investigating committee of 1873 related, the foreign faction had begun, toward 1871, an elaborate political campaign against the “pirates” Gould and Fisk. American leaders, high in public esteem, including General Daniel Sickles, William Evarts and General Samuel Barlow, were employed as counsels to direct a “defense fund” which began at $300,000 and mounted afterward to $750,000, according to some estimates. These quantities of gold were employed in Albany to lay “substantial reasons” before the legislators on behalf of the unhappy British money-lenders. This was of course the one practical remedy for their trouble. To Gould’s dismay, it began to take effect.
In a recent stock-market foray—the Chicago & Northwestern corner—Henry N. Smith, a member of the Erie ring, saw himself knifed in the back by his chief ; the cornered stock had gone down, instead of up, as he had been led to expect. Ruined, he had turned upon Gould in vengeance, stolen the books of the Erie and given them over, together with other damaging evidence he possessed, to the counsel for the protesting faction, General Barlow. Gould’s enemies gaped at the documents in their hands ; they had enough, plainly, to place the crafty Jay behind prison bars.3 It was at precisely this dangerous moment in the affairs of the Erie ring (November-December, 1871), with Tweed on the verge of destruction, Judge Barnard helpless to aid them, and incriminating evidence fallen into the hands of their financial enemies, that Jim Fisk too was involved in dark private scandals.
His fair yet unfaithful mistress Josie had for some seasons formed her fatal attachment to the gilded youth Ned Stokes, upon whom in turn she lavished much of the money which the Prince of Erie paid her. Stokes, though of good family originally, had turned blackmailer because of his chronic need for money. Through collusion with Miss Mansfield, he had armed himself with the most compromising letters which Fisk had written her, wherein the railroad baron was shown to be not merely a transgressor of the Ten Commandments, but also—and what could be worse !—a cuckold. The unhappy Fisk had paid and paid, to avoid publicity, sums ranging between $5,000 and $25,000 at a time. Then, unable still to redeem his letters, and harassed beyond endurance, he had stopped paying the shameless pair, and suffered that his once adored Josie should enter suit against him. The country at large now licked its chops as the scandal of this suit burst forth in the preliminary hearings of November 25, 1871. The public was promised by the metropolitan press that at the ensuing trial there would be “complete and damaging exposure of the crimes of said Fisk, Jay Gould and their confederates, and their division of the Erie Railroad spoils with the Tammany Ring.” The affair ranked almost as high in the public favor as the melodramatic trial of Henry Ward Beecher and Libby Tilton.
Late in December, a few days before hearings in the case of Mansfield vs. Fisk were to be resumed, Jay Gould in deep alarm at so many ominous developments decided that Fisk must go. With little sentiment he asked his brother-in-arms to resign from the board of directors of Erie. He was now working in desperate haste upon a plan for the “reformation” of the Erie board under respectable leadership, including such leading figures as John Jacob Astor, August Belmont, Levi P. Morton ; it was a plan, to be sure, which considered not for a moment the relinquishment of absolute power over the money machine in his hands. But the problem of Fisk soon solved itself adequately.
Renewed hearings in the case of Mansfield vs. Fisk on January 6, 1872, had proved sensational enough to please the strong appetites of the press. The cast was excellent : Miss Mansfield testifying against Jim Fisk was a fascinating Phryne, in a robe of “heaviest black silk, cut à l’Impératrice,” while the “exquisite Ned Stokes . . . an Apollo, all glorious in a new Alexis overcoat of a dull cream color” was Gilded Youth itself ; and Jim Fisk, joweled, corpulent, with full mustachios, made a first-rate villain, equal to dishonoring a good woman and, for the sake of money, calumniating a youth of family as the “fancy man” of a demimondaine.
After the day’s calamitous mischances, Fisk, bewildered and wretched in all his bulk, returned to Pike’s Opera House (in the afternoon) where he busied himself in the arrangements for his departure from the Erie management. Then at four o’clock he walked to the Grand Central Hotel at Broadway and Fourth Street, on some obscure mission of his own. He was ascending the grand staircase of the hotel when the maddened Stokes, waiting for him pistol in hand, appeared at the landing above and fired point-blank at him. Fisk cried out in terror and pain, fell and rolled down several steps. He struggled to rise. Once more Stokes fired into his body, and fled, only to be seized in the street a few minutes later.
Late that night the Prince of Erie breathed his last. His body lay in state at the Opera House, while the grief-stricken Erie and Tammany men wept freely over his bier. The funeral was splendid ; the Ninth Regiment, followed by a great crowd, paraded in honor of the dead Robin Hood. A meteor of the financial skies had passed off into the darkness beyond. Nast’s bitter cartoon on that day showed Tweed, Gould and David Dudley Field mourning over the grave of Fisk, and was entitled : “Dead Men Tell No Tales !”
2
In these days there were strange lights and sounds everywhere, many signs of ill-omen to be read. Above the wreckage of reputations and hopes scandal would be floating like a pall over the blessed land. In the early weeks of 1872, Jay Gould was barricaded in his Erie citadel, while a line of sentinels defended him against the insurgent stockholders who were vigorously leading the “Erie Revolution.”
Under renewed pressure the “reform” legislature at Albany repealed the Erie Classification Act. A new board of directors was now elected, and a new president in Gould’s place. Yet Gould not only continued to hold the fort by force of arms, but tenaciously fought, at many a litigious turret and battlement, each step in the advance of the scaling party.
In this opéra-bouffe siege of Pike’s Opera House, the fickle public and press applauded each gain of the brave revolutionists, as yesterday they had cheered on Gould and Fisk against Vanderbilt. When the “revolutionists” made exposures, and opened suit against Gould for $12,800,000, Erie’s stock crashed in the market, everything looked dark for Gould, and the public cheered wildly. Finally, on March 11, 1872, in a virtual coup de main, the soldiers of the party of dissenting stockholders headed by their “other” president, one Archer, succeeded in storming the Erie offices, overpowering the Erie thugs, and possessing themselves of the company’s books and papers. The triumph of the Erie Revolution was attended with general jubilation throughout the country and a break in Wall Street.
Bearding Gould in his den, the insurgents waved in his face the evidence they had, which was incriminating enough to send him to jail. But instead of the implacable foe they knew, they found a man of lowered resistance who made gracious gestures of conciliation. Let there be peace, he said, like the victor of Appomattox. He offered upon the spot to lay the whole case for arbitration before Horace Greeley, the sage of New York. This being refused by the conquerors, Jay Gould not only bowed to the inevitable and abdicated, but in the complex, protracted negotiations in which both parties must be presently involved he generously offered to cooperate with his erstwhile opponents !
At bay, he himself offered to make restitution, though it would ruin him. He would restore as much as he could of the “plunder” alleged to be twelve or thirteen millions of dollars—if they would leave him his financial life. And more, he whispered into their ears, the railroad property they had captured at last had nothing left in it. There were no visible assets, as they perceived, against the $64,000,000 of securities which he and his associates had printed during the past five years. But if they would only be his friends, enter into an alliance with him quietly, and follow him—for who knew the labyrinthine way better than the wily Gould ?—he would not only restore, but would lead them into the promised land. There would be gold enough for all.
A Molière, a Balzac alone could paint the strong passion, the glittering eyes of greed, which Gould, Circe-like, aroused in the swine, jackals and wolves who pursued him : the Dixes, Belmonts, Astors, Morgans, Goldschmidts, and others who figured in the dissenting stockholders’ faction. What he asked of them was that they cease combat, join arms with him, as soldiers of fortune, against the common enemy outside. He would conduct great pool operations in the Erie stock in whose profits they would all rejoice with each turn of the wheel.
Now the situation was changed ; the insurgent stockholders and their lawyer-generals were no crusaders for religious virtue, but practical, upstanding business men, seeking to recover lost moneys. Gould’s offer was to replace some six millions in securities and money, while in return he was to receive from them an option on 200,000 shares of Erie stock at 30, the low price to which it had fallen. By engineering a bull movement, raising Erie stock to 60 or 75, he would further revive their depreciated holdings.
The bargain was struck in secret ; all pending suits were withdrawn by the “revolutionists” and the slippery Gould began his uncanny prestidigitation. On one day, as a recent biographer of his relates, “it was reported that Gould intended to restore the plunder he had taken, and Erie advanced violently. Then a denial would follow, and the stock declined.” But with each change in the market Gould and his mates were forehanded, buying at the bottom and selling at the top. Then with a flourish, “as publicly as possible,” according to the plan, the agreement of restitution was announced : Gould was to turn over the Opera House and adjoining buildings held in his name, and in addition stocks to the par value of $6,000,000. At this favorable news Erie bounded forward sensationally, and Gould unloaded all his 200,000 shares through his many brokers, “reimbursing me for the money I have paid Erie,” as the New York Times reported him to have said on January 24, 1873. This was Jay Gould’s last bow to the Scarlet Woman of railroads. The securities he had surrendered proved to be worth only $200,000. The road was looted. Once more this craftiest of Americans had outmaneuvered his enemies and out of defeat snatched new millions.
3
Gould was still at large, traveling for his health in the Far West, and studying with interest divers railroad properties there ; but the evil he did lived after him. The subsequent collapse of the Erie Railroad, and the distribution among so many investors of its worthless paper (in lieu of their savings) were the pre-conditions, as Charles F. Adams, Jr., noted, “intimately connected with the sharp stringency then existing in the money market.”
Nor was he the only destroying power now moving through the land. At the very moment of the scandals concerning Fisk, and the Erie Revolution, tumultuous uprisings in the Oil Regions of Pennsylvania were following John D. Rockefeller’s masterly campaigns of expropriation.
Early in 1872, by a leak of information, word appeared in the press of the Oil Regions “of a gigantic combination among certain railroads and refiners to control the purchase and shipment of crude and refined oil from this region.” Then, shortly afterward, by a premature error, a subordinate official announced the proposed new schedule of freight rates doubling the old ones on February 26, 1872. The meaning of this was at once plain to the men along Oil Creek. These turbulent, easy-going oil-diggers realized that their margin of profit would be wiped out, that the oil combination, already called the “Anaconda,” would seize the whole refining industry and have the producers at their mercy. The Oil War of 1872 was on.
On February 27, the streets of Titusville, Pennsylvania, were black with demonstrating oil-diggers. The Oil City Derrick had made known the names of the South Improvement ringleaders in a blacklist. Mass meetings, parades, speeches exhorting to burn the enemy refiners’ oil, to tap the enemy tanks, to lynch the “conspirators.” A secret association of the independent oil men was formed at once and bound its members by fiery oaths and ritual to “unite against the common enemy,” to stop all oil production, to sell no more to the refiners who were members of the Combination or Anaconda. Petitions were addressed to the Pennsylvania legislature and to Washington. Among the practical measures urged by the marchers and demonstrators was the building of an independent railroad freight line, since from the existing railroads the oil men “expected only robbery.” It was further advocated that an independent pipe line be built by government subsidy.
The stoppage of oil began. For a time no one would sell the buyers of the Rockefeller combination oil at any price offered. The men of the South Improvement Company could wait, though their refineries must be shut down for lack of crude oil. They could wait patiently until famine and greed broke the ranks of the fighting oil-diggers, marching in holy union today, but hungry for money tomorrow, and torn with dissension or suspicion. These men were known to be long on protest, but short on money for the fight.
Yet the oil war continued with unexampled bitterness. The producers knew only that a fiendish, an unheard-of conspiracy was directed against them ; they moved not a drop of oil, and their clamor steadily filled the press, alarmed the statesmen. Though Rockefeller, Flagler and their partners kept quiet, hoping the storm would blow over, the railroad barons leagued with them were the first to give way.
The historic American experiment in large-scale combination had met with a fanatical resistance on the part of the individualists of the Oil Regions, which caused losses to the railroads. The aged Commodore of the New York Central, who had some years before placed his son William Vanderbilt in the management of his property, ordered the freight tariff reduced. He said ingenuously : “I told Billy not to have anything to do with that scheme. . . .” The railroad barons, who had shown little honor in the first place, were also the first to show the white feather and make public expiation. The oil of “outside” refiners moved again over their lines.
At a secret meeting of the independent oil men with the railroad chiefs, Scott and William Vanderbilt, Rockefeller and his agent P.H. Watson (who was actually president of the South Improvement Company) intruded themselves boldly and, denying their part in the combination, made efforts to placate their opponents and participate in the new agreements promulgated. They were ejected with quite violent language, and Rockefeller went away “seeming very blue indeed.” The uprising, then, was no mere sound and fury this time. In response to the popular agitation, the Pennsylvania legislature soon revoked the charter of the South Improvement Company. The Anaconda was slain ; the individualists of oil were jubilant at their victory, and sold their oil now freely to the broken parts of the combination at momentarily high prices. John D. Rockefeller, in wary retreat, brooded thoughtfully over the lessons of his first great industrial battle.
Time would prove if he were right. Would not the chaos of “oversupply” and falling prices reappear tomorrow to harass the heedless diggers of oil ? Then he would cling to his plan, which was the thing of destiny ; the cleverest, and now the most vociferous of his adversaries, men like John Archbold and Henry Rogers, would comprehend this and join forces with him. There was to be little peace for him ; and in the ceaseless conflicts of his age, he would be tempered into a great war lord.
During forty years the Standard Oil men marched from trial to trial like habitual felons, before the public was convinced that it was not dealing with the archcriminals of the age, but with destiny.4 The opposition was always on behalf of a laissez-faire individualism. Miss Tarbell, in her crusading days, before she turned official apologist for famous capitalists, was but championing (and in the name of her expropriated father) the wastefulness, the competitive anarchy of the independent Pennsylvania oil-producers. Rockefeller, on the other hand, was literally the instrument of economic determinism ; he was the more or less conscious guiding genius of a process of concentration which held in view the national (and even international) rather than the local organization of oil exploiting. Under his example American capitalism advanced swiftly toward a new phase, transforming, as the most profound social prophet of the century was saying at this very time, “the pigmy property of the many into the titan property of the few, transforming the individual and scattered means of production into socially concentrated forms.” This is the true character of the historic process which passes before our eyes in the American scene of the ’70s and ’80s.
It was an age which seemed “gilded” or “tarnished” or “dreadful” or “tragic” by turns ; yet an immensely fruitful age, under whose surface movements of strife and confusion, of repulsion and attraction, one capitalist expropriated others, the strong steadily went on destroying the individual independence of the weak, and in systematic fashion “the large capitals got the better of the smaller ones.” Thus all the scattered individual means of production were being brought together, as Marx wrote, into the “new centralization,” hastening the development of society, breeding the new technical means for “those tremendous industrial undertakings which can only arise as the outcome of the centralization of capital.” And the birth-throes of a new social order, but added to the turbulence of the age, with its sounds of ringing arms, its shouts of the conquerors, groans of the fallen. Under Rockefeller, a giant industrial machine was raising itself over the land.
Thenceforth, though persecuted and pilloried, himself the most hated man of the age, he would retain his lead, hang on like death to his great unifying idea, advancing anew after each momentary retreat, evading all attempts at regulation, until the Standard Oil, with its refineries, pipe lines, tank wagons, ships and foreign terminals, had become an industrial empire as far-spreading as the British Empire, until Babylon and Nineveh and Peiping were illuminated by Standard kerosene. Rockefeller’s organizing genius would create the “mother of Trusts,” soon to spawn a score of other great “Trusts” in whiskey, cattle, beef, sugar, coal, iron and copper. The Standard Oil “Trust,” as a corporate device, as a capitalist construction, had the beauty of one of the new steel suspension bridges. A bridge between the past and the future.
4
While Jay Gould kept the marketplaces of the Eastern cities in turmoil, his railroading exploits surpassed by only little a hundred other such “operations” carried on simultaneously in all parts of the country. Thus the long-established Baltimore & Ohio Railroad had been expanding its capital debt continually, by selling its securities to foreign investors. “Notwithstanding these great increases in liabilities,” writes John Moody, “the company continued to report large surpluses and to pay large dividends—generally ten percent annually”—and this right through the battles of the Civil War when much of its trackage was destroyed. In the same way, Carnegie’s friend Thomas Scott had floated many millions in bonds against the charter he had obtained for the Texas & Pacific Railroad, which was to run from the Mexican Gulf ports to Southern California, although but a few miles of the road had been actually constructed. The sagebrush deserts of the Far West, like the rich prairies of the Northwestern territories, were carved up with brief, inglorious “streaks of rust,” running under grand names such as “St. Paul & Pacific,” or “Kansas Pacific,” endowed with subsidies in cash or millions of acres of land grants, but all equally impoverished and often boasting of nothing more than one or two worn-out locomotives and ten miles of track. Scandal and heavy misfortune followed these hopeful ventures, of which the notorious Union Pacific affair was the outstanding example at the time.
All through 1872, in the Credit Mobilier, the construction company which had built the first transcontinental road, “thieves’ quarrels” had been brewing, but were kept muffled up to the hour of Grant’s election. Ever since the railroad had been completed three years before, the brothers Ames, as one faction, and the group headed by Durant had been at loggerheads over their shares of the rich building contracts. The litigation between the factions revealed how Oakes Ames, Representative from Massachusetts, had been distributing a quantity of stock among the most influential members of Congress ever since 1867. The investigations he had sought to forestall by such artful measures burst forth like a bombshell in January, 1873. Jay Cooke, using all his mighty influence in Washington, had been unable to stop the exposures, which he declared were “nonsense” and would damage our credit abroad, but which everyone clamored for.
“The House seethed like a cauldron,” the watching lobbyist Henry Cooke wrote to his brother. “You cannot imagine the demoralization in Congress.” Called to testify to his part before the House, and believing his case desperate, Oakes Ames called the roll of corruption himself from a memorandum he drew from his pocket. In the gifts of the Credit Mobilier (in its preferred list one might say nowadays) were implicated Republicans and Democrats alike : James Garfield, a future President ; the Democratic floor leader, James Brooks (who had got $15,000 so that the other side would be “taken care of”) ; the Vice-President, the Vice-President elect, and numerous Senators and Representatives. Colfax, Garfield, Wilson and others lied or brazened their way out of the scrape. In scenes of soaring passion, witnessed by galleries packed with the throng of Washington society, bitter recriminations flew back and forth. It came out that the direct profit of the group in the Credit Mobilier must have exceeded $33,000,000, as shown in the House Report of February 20, 1873 ; other estimates ran as high as $50,000,000 (forever unaccounted for). By fraudulent procedure the first mortgage securing the government’s loan of $27,000,000 had been set aside, and a new first mortgage executed and sold, the proceeds of which were also diverted to the holding company.
In a fury the “radical” Republican machine had turned upon Ames and impeached him, Claude Bowers holds, “as a warning to corrupt Congressmen against turning State’s evidence.” The Democrat Brooks was similarly expelled “for being a Democrat”; while the rest whose names were smirched by the inquiry, and who expostulated bravely a la James G. Blaine, were exonerated and survived. Yet the tale of appalling waste, of crime and turpitude shook the whole country like a mighty quake and set many a weak structure to rocking. In the bourses panic seethed ; thousands lost their savings in Union Pacific’s fall, while distress spread quickly to the grain-growing regions. From the rostrum the tribunes of the people, those who had not frequented the railroad barons, began to speak out, in tones soon to become familiar whenever such provocation arose, against the giant corporations which overran the country, “wielding and controlling immense sums of money and thereby the greatest influence and power . . . so that in effect, in many State Legislatures, they became the ruling power of the State.” The era of Tarnished Reputations unrolled itself, and the lingering humiliation it brought is commemorated in one of the eloquent speeches of Senator George Hoar, some time afterward :
When the greatest railroad of the world, binding together the continent and uniting the two great seas which wash our shores, was finished, I have seen our national triumph and exaltation turned to bitterness and shame by the unanimous reports of three committees of Congress that every step of that mighty enterprise had been taken in fraud.
5
These days even the Indians were restive. In the summer of 1873 raids by the embittered Sioux along the extending line of the Northern Pacific in the Yellowstone Valley caused the death of five or six white railroad workers. At the instance of Cooke troops were called to cover the advance of the engineers. The bearded cavalrymen in blue crossed the Missouri River in large force, with the audacious ill-starred Custer at their head. As the soldiers cleared the Black Hills of their red-skinned proprietors, the pioneers crept behind them, grubbing the earth for gold and silver.
Jay Cooke, the heroic financier of the war, who now carried forward the country’s second transcontinental railroad, had attained after the war a style of grandeur scarcely known in all the Western world. His mansion outside of Philadelphia, “Cooke’s Castle,” as Justice Chase called it, had fifty-two rooms ; its walls were decorated with frescoes, and further ornamented with three hundred paintings and statuary and glass paintings of Indians all about. It contained a theater, fountains, conservatories, and finally an Italian garden, “facing a wall built to resemble the ruined castle of some ancient nobleman.” But like Robert Morris before him, Jay Cooke too lived in agony among his marble halls and palace walls.
Among the many burdens which weighed down the great banker in 1872 had been the election of Grant, most costly and yet necessary to him. Again and again he had had to help “save a state”—this at a time when but a fifth of the railroad loans he needed could be sold in London or anywhere, while drafts upon his office for “construction” continued regularly at the rate of $1,000,000 a month. His methods of business harked back to an older, simpler period, when the alliance with press and political cliques was an open and direct affair. He would groan at the importunities of a Blaine, a Chase ; to him the politicians were so many Oliver Twists. To add to his woe a section of the Northern Pacific tracks, hastily engineered, suddenly sank into a northern lake and had to be resurrected with great pains. The titular president of the company, one Smith, had to be ousted suddenly for excessive corruption. By the beginning of 1872, the railroad had overdrawn $1,600,000 ; a year later, its overdrafts stood at $5,500,000, its bonds were selling at a heavy discount, and all of this must be carried by one man.
It is the tragedy of the banker that he must exude confidence among all who surround him, come what may. Gigantic successes ever since 1861 had made the Tycoon seemingly invincible. To his partners who bombarded him with warnings nowadays as the Credit Mobilier scandals spread mistrust of such projects as his, this eternal optimist, calm, white-bearded, ruddy-complexioned, with the eyes of a young man, gave no sign of fear. In his great pride he gave repeated assurances of his ability “to make good.” Money loaned at times at 160 per cent a year ; it was so scarce that laborers on the Northern Pacific were paid in vouchers or scrip after October, 1872. Yet Cooke determined to launch a great pool, creating a bull movement in his securities and distributing added quantities of them among the public. To win quick profits and tide him over his difficulties, he prepared also for the new government the refunding operations of 1873, by which $300,000,000 must be financed. But lo, here in a field where he had been supreme for a decade and held a complete monopoly, a cabal was suddenly directed against him by his rivals.
In June, 1871, Pierpont Morgan, who had won respect by force of arms as well as business acumen, joined forces with Anthony Drexel, the largest banker, after Cooke, in Philadelphia. Drexel, Morgan & Co. was a powerful combination, aided by the prestige of the Drexels in Philadelphia and linked with the bank of J.S. Morgan in London. Joining with other envious spirits “young Morgan,” as Cooke called him, moved to wrest the monopoly of government financing from the Tycoon in the year following.
Drexel “owned” Childs, the head of the Philadelphia Ledger, which had never ceased attacking the Northern Pacific as a “South Sea Bubble.” Now they caused the rumor to be circulated that Cooke needed the new government funding operation “to bolster up their credit, which had been impaired by the connection with the Northern Pacific.” So the contest between the jealous bankers led to a resounding failure for the $300,000,000 government loan of February, 1873. The Cooke party was disgusted by the sabotage of the Morgan and Drexel group ; but though news of the failure caused the price of gold to rise in London, and money to become “tight,” with dangerous consequences everywhere, Morgan might exult now at having conquered a measure of financial equality with Cooke.5
The seven years of plenty after the war must now make way for seven years of dearth in a land literally “flowing with milk and honey.” The excesses of the “golden age” caused forebodings even after 1871 and 1872, though they were but the natural, characteristic movements of the appetites of greed which consumed all who marched in the great procession toward fortune. In those who led the procession dishonesty, chicane, vulgarity and a fierce passion for lucre were curiously united, as the Beards have observed in their history, “with an intelligence capable of constructing immense agencies for economic services to the public. . . .” A mere handful of contemporaries, such as Charles Francis Adams, Jr., shook their heads because the stock exchanges seemed the haunt of
gamblers and thieves ; the offices of our great corporations appeared as secret chambers in which trustees plotted the spoliation of their wards . . . the halls of legislation were transformed into a mart where the price of votes was haggled over, and laws, made to order, were bought and sold.
Alarming incidents succeeded themselves. In November, 1871, the Chicago fire and the simultaneous failure of Charles Yerkes, the embezzling stockbroker of Philadelphia, sent their distressing vibrations not only through North America but through Europe. With one movement Europe now sought to throw back the American securities she had purchased with such abandon yesterday, into the limbo of crudeness and insecurity which the American society now seemed to her. It was a picture that was only too true.
The settlers who had so swiftly opened the new lands could no longer sell the mountainous stores of grain which they brought forth. Nor could they buy the wares of merchants and manufacturers. The war in France, a crash in the bourse of far-off Vienna in 1872, timed with the frauds of the Union Pacific, had slackened the pace of railroad-building, and this in turn spread idleness to the factories, shops and mines who gave the materials for empire-building. Soon the till was bare. It was as if a landowner in possession of a rich estate had determined to spend twice the increment from his estate in drainage construction. The drainage was an excellent operation which would benefit the land when it was done ; but in mid-career he must pause. His savings and his income were gone ; a part of his land must now be sold to pay for the drainage system which, left incomplete, helped as yet in no way, and burdened him the more. So with America and its railway madness.
The whole country had strained its nerves to the utmost to build up, to double its transportation machinery within eight years, exceeding by far its needs for a long time to come. Technicians pointed out afterward that in 1860 there had been 1,026 inhabitants for each mile of railroad ; but by 1873 there were only 590 for each mile of track. The railways earned, as a rule, little or no return ; in the future they would stand us in good stead, and it was a splendid “saving” on the part of the community. But government, investors and foreign bankers had provided some three billions of dollars, Europe roughly half of this. The Americans besides borrowing to the limit had plunged all their savings in “long-term capital goods,” in land, railroads and factories—they had no ready money, only title to “frozen assets.” Now what if all at once optimism should be replaced by fear, at home and abroad, while the foreign banker or the widow on the farm clamored for ready money, for gold, in lieu of the promises on paper they possessed ? Would the skyscraper of hopes come tumbling down ?
Early in September, 1873, “that consummate master of speculation,” as the press habitually named Mr. Jay Gould, sniffed the gathering storm. In the marketplace there was mounting excitement ; borrowers were called by banks ; bears hammered all the list ; more borrowers were called. On September 8 one large firm of money-handlers, known to be connected with crippled railroads, closed its doors ; on September 13, another. Rumors besieged the stoutest reputations, and a newspaper editor implored the Mephistopheles of Wall Street to do his fellow citizens the favor of quitting the country for “a third of a century.” In Philadelphia, the façade of Cooke & Co. remained imposing, calm ; behind its doors the partners whispered in low voices, or fumbled in strong boxes with masses of Northern Pacific bonds, notes upon railway iron and land companies.
“I feel an unfailing confidence in the God in whom we put our trust,” wrote Jay Cooke to his brother. “I do not believe He will desert us.”
On the night of September 17th, President Grant arrived at “Ogontz,” the palace of Cooke, ate, drank with him and smoked the private brand of cigars which the Tycoon always kept in readiness for him. In this peaceful magnificence, sitting for long hours, speaking almost not at all with his dignified friend, the little General was shyly happy. In the morning the two men lingered over their breakfast, while Cooke, impassive as usual, read alarming telegrams from his partner Fahnestock in New York. At once Cooke proceeded to his Philadelphia office by carriage, revealing nothing to the President. There he learned that at eleven o’clock Fahnestock, having drawn a number of prominent bank presidents into his office, had at last with their advice closed the doors of the branch in New York. The great doors of Jay Cooke & Co. in Third Street, Philadelphia, creaked and were swung shut a few minutes later, while Jay Cooke, turning his face away from the men who surrounded him, wept freely.
“The news spread like a fire in one of the Northern Pacific’s own prairies,” writes Oberholtzer. The largest and most pious bank in the Western world had fallen with the effect of a thunderclap. Soon allied brokers and national banks and 5,000 commercial houses followed it into the abyss of bankruptcy. All day long, in Wall Street, one suspension after another was announced ; railroads failed ; leading stocks lost 30 to 40 points, or half their value, within the hour ; immeasurable waves of fear altered the movement of greed ; the exchanges were closed ; the stampede, the “greatest” crisis in American history, was on.
“All about the failure of Jay Cooke !” newsboys hawked throughout the country.
For ten days the mad rout continued. The stronger railroad chiefs, bankers and industrial captains fought each other mercilessly amid the wreckage of their broken hopes and enterprises. It was a sauve qui peut of rats. A Jay Gould flies about preying upon the rich débris ; and in the vast confusion, hulking figures such as that of Cornelius Vanderbilt stand out, moving vigorously in their own defense. To the appeals of his fellows Vanderbilt is adamant. “He had no intention of being caught up in the whirlpool himself and engulfed with the rest of the ruined,” writes his biographer. So a Morgan, a Rockefeller, a Carnegie rode out the storm with damage more or less, while in the jettison of great enterprises and invaluable assets younger adventurers, hitherto unknown, a Harriman, a Frick, plunged in to wrest many a prize from the financially dead and dying.
In the recoil of the forward movement all the services administered by the existing economic institutions, all circulation of things, is halted while the “flight of capital” continues and money passes out of circulation into hoarding. Where yesterday credit flowed liberally to finance stores of goods, to move commodities of all sorts, to aid the various projects of empire-builders, now no celebrated name, no merchandise commands any money value in the marketplace but gold itself. The wealth of mountains of ore, of iron foundries, of machines and factories, of rich farm lands, of ships and railroad tracks, is called nothing but illusion. From 1873 to 1879, according to important personages in the iron trade who were associated with Carnegie, “you could not give away a rolling mill”; nor could a 2,000-mile-long transcontinental railroad be sold even for a bagatelle. Now the constructive effort of those who yesterday were advancing the public good by seeking their own selfish ends is seen but as the dance of pursuers and possessors.6
The winter of 1873-1874 was one of extreme suffering. Midwinter found tens of thousands of people on the verge of starvation, suffering for food, for the need of proper clothing, and for medical attendance. Meetings of the unemployed were held in many places, and public attention called to the need of the poor. The men asked for work and found it not, and children cried for bread. . . . The unemployed and suffering poor of New York City determined to hold a meeting and appeal to the public by bringing to their attention the spectacle of their poverty. They gained permission from the Board of Police to parade the streets and hold a meeting in Tompkins Square on January 13, 1874, but on January 12 the Board of Police and Board of Parks revoked the order and prohibited the meeting. It was impossible to notify the scattered army of this order, and at the time of the meeting the people marched through the gates of Tompkins Square. . . . When the square was completely filled with men, women and children, without a moment’s warning the police closed in upon them on all sides.
One of the daily papers of the city confessed that the scene could not be described. People rushed from the gates and through the streets followed by mounted officers at full speed, charging upon them without provocation. Screams of women and children rent the air, and the blood of many stained the streets, and to the further shame of this outrage it is to be added that when [the attention of] the General Assembly of New York State was called to this matter they took testimony, but made no sign.
Soon the famished workers made haste to offer their labor for anything that might be paid them, where they had formerly enjoyed relatively high wages. Here was one of the “goods” of the immense debacle coming out. In the annals of the great industrial barons it is told in one instance after another how each grasped at the uncommonly favorable opportunities offered to him. Thus Rockefeller after manly expiation had come to terms with the diggers of oil and entered a contract to buy a great part of their crude petroleum at the high price of $3.25 a barrel—a contract which depended upon an unfeasible pledge on their side to limit output. When as foreseen they could not control their flushing wells, he turned upon them saying : “You have not kept your part of the contract—you have not limited the supply of oil—” and cut his price to $2.50 ; then as the depression deepened, to $2, and later to 82 cents a barrel, while his own refined product was lowered in more moderate stages and the profit margin remained high. Carnegie on the other hand, who also possessed, as it was said of Rockefeller, the sense of “the critical moment for action,” now pushed rapidly the construction of his huge steel mills. It was his genius to realize “that the real time to extend your operations was when nobody else was doing it,” an associate said. By using cheap labor freely during the depression he would be fortified against competitors when the flush period returned. So at the same time Jay Gould roved through the West eyeing the ruined hulks of transcontinental railroads ; while newcomers armed with capital lustfully appraised the value of mighty fragments cast off, the disjecta membra of an industrial system’s agony. It was a profound truth that Carnegie uttered afterward : “ The man who has money during a panic is the wise and valuable citizen.”
1 On all the bonds of the New York Central Vanderbilt caused his portrait, one of the finest physiognomies in America according to Greeley, to be engraved. A bondholder appeared before him one day and said : “Commodore, glad to see your face on them bonds. It’s worth 10 per cent. It gives everybody confidence.” The Commodore smiled grimly, the only recognition he ever made of a compliment. “’Cause,” explained the visitor, “when we see that fine noble brow, it reminds us that you never’ll let anybody else steal anything ! ”—C.K. Croffut, “The Vanderbilts.”
2 Judge Barnard, who had discharged injunctions like thunderbolts on behalf of Vanderbilt yesterday, was today at the complete service of the Erie ring ; his person and office were part of the spoils involved in the alliance with the Tweed organization. Thus, at the time of the Albany & Susquehanna affair, Judge Barnard would issue whatever court orders were necessary to the lords of Erie, sometimes holding himself in readiness for their call at the apartment of Josie Mansfield, where he was not averse to the charms of cards, champagne and vivacious feminine company.
3 According to indications in the recently published “Letters of Henry Adams” (Boston, 1930, General Barlow told Henry’s brother Charles of his discoveries, and by these the two brothers were led to issue their “Chapters of Erie” in Octobr, 1871, which, appearing at the time of Tom Nast’s powerful caricatures, played its own part in the drama.
4 The Common Law, since the time of Elizabeth, had condemned Monopoly or Conspiracy in trade, such as tended “to the impoverishment of divers artificers and others who before by the labor of their hands in their art or trade have maintained themselves and their families, who will now of necessity be constrained to live in idleness and beggary.” Such statutes reflected the responsibility of the Tudor regime for the survival of its peasants and laborers at a stipulated level of existence, a responsibility which was completely rejected as a feudal relic by the new barons of eighteenth- and nineteenth-century industrialism.
5 Though widespreading disaster flowed from the jealous contentions of the bankers behind closed doors in Washington, Drexel and his friends boasted of having downed Jay Cooke, according to the private reminiscences of a Philadelphia financier noted in Barron’s diary long afterward.
6 Repeatedly Marx in his analysis of capitalism dwells upon the indignity of the money system which gave humans the air of crawling upon all fours. In a panic, owing to the general disturbance of the pecuniary mechanism, he demonstrates in “Capital,” Volume I, “money suddenly quits this ideal form of money of account and materializes as hard cash. Profane commodities can no longer replace it. The use value of commodities becomes valueless, and their value is replaced by their own form of value. A moment earlier, the bourgeois, drunk with the arrogance of prosperity, was ready to declare that money was a pure illusion, and to say that commodities were the only money. Now when the crisis comes the universal cry is that money is the only commodity. As pants the hart for cooling streams, so does his spirit pant for money, the only wealth.”