Robber Barons or Captains of Industry?
Near the end of the 1800s a handful of men controlled much of the country's wealth. While their contributions to
American industrialization are immeasurable, many people at the time described these industrialists as "robber barons" who
would stop at nothing to increase their wealth at the expense of others. Some of these men, however, used their great
fortunes to create institutions, which have supported medical research that led to cures for diseases and educated countless
numbers of disadvantaged people.
One of the earliest and most successful industrialists of the 1800s was John D. Rockefeller, commonly referred to
as the richest man in history. Rockefeller was one of the first people to realize the importance oil would play in American
society. He invested most of his money in petroleum. By the time others realized the value of oil, Rockefeller had already
gained control over so much of that natural resource that he could manipulate prices to eliminate his competitors.
Rockefeller accomplished this by lowering the price of his oil every time a competitor entered the market. Without the
ability to make a profit, the competition would often sell its oil holdings to Rockefeller.
With little competition, Rockefeller soon grew wealthy from the world's increasing demand for oil. After some
time, many people began to accuse Rockefeller of holding a monopoly on the oil industry. A monopoly enabled him to
destroy or absorb any business that competed with his Standard Oil Company. In 1911 the United States Supreme Court
ruled Standard Oil was in violation of the Sherman Antitrust Act, which forbids companies from conspiring to force out
competitors. The court ordered that Standard Oil be broken into several smaller companies. Rockefeller, however, still
owned large shares of each company.
Throughout his life, Rockefeller gave millions of dollars to charities. In 1884, Rockefeller contributed money to
found Spelman College in Atlanta, Georgia, a college for African-American women. Rockefeller also was a major
contributor to the University of Chicago and Johns Hopkins University in Baltimore, Maryland. Rockefeller donated more
than $500 million to charity throughout his life.
Andrew Carnegie was another successful industrialist of the 19th century. Carnegie was born in Scotland and
began his career in railroads. After some time, Carnegie realized the steel industry offered greater wealth because steel was
used in all sorts of industries. Carnegie founded a steel company in Pittsburgh, Pennsylvania, and began making large sums
of money providing steel needed for railroad tracks, steam locomotives, bridges, and manufacturing machines.
As his contemporary, John D. Rockefeller, had used his dominance of the oil industry to control prices, Carnegie
used his control of the steel industry to destroy competitors through his ability to control prices. Also like Rockefeller,
Carnegie was often accused of heavy-handed tactics. In 1892 during the Homestead Strike, Pinkerton detectives Carnegie's
company had hired killed a number of strikers. Although Carnegie was out of the country at the time, strikers blamed him
for the bloody standoff.
Andrew Carnegie spent the last part of his life giving away the millions of dollars he had made during his career.
Heavily committed to education, Carnegie funded the Tuskegee and Carnegie institutes. In addition, Carnegie's lifelong
love of books led him to donate funds to build more than 3,000 public libraries in America and Scotland. Even after his
death, the charitable contributions from Carnegie's estate continued to provide money to worthy causes. Carnegie is
responsible for more than $4.3 billion in charitable contributions. This makes him one of the greatest philanthropists in
history.
While steel and oil were critical to the industrialization of the Unites States, none of this would have been possible
without the money to develop these industries. J.P. Morgan provided much of the money that fueled America's
industrialization. He was one of the most powerful bankers of all time and specialized in making failing businesses
profitable. This process became known as "Morganization."
Morgan was also a wise investor and invested much of his money into steel, oil, and railroad companies. These
investments rewarded him with huge profits. Morgan's critics complained he made his money from hard-working people
who had struggled and saved to create profitable businesses. Morgan countered that if these people were so successful, they
would have made their loan payments. Had they done this, Morgan said, he would never have taken over and reorganized
their businesses.
Morgan's power extended to President Grover Cleveland. In 1895 the United States Treasury was almost out of
gold, and President Cleveland turned to Morgan for help. Morgan engineered a business deal that infused $65 million worth
of gold into the treasury and prevented a devastating economic panic in the United States.
Throughout his life, J.P. Morgan was a major contributor to medical schools such as Harvard and Trinity colleges. In
addition, Morgan donated much of his art collection to the Metropolitan Museum of Art and the American Natural History
Museum.
The legacies of Rockefeller, Carnegie, and Morgan are complex. On one hand, these men were merciless
businessmen who had no qualms about destroying competitors to expand their financial empires. Their charitable
contributions in life and death, however, are still saving lives and educating the underprivileged.
LAST Name: _________________________________
Robber Barons or Industrial Statesmen?
1. Who was known as the richest man in history? How did he make his fortune?
2. What term describes a situation where one company controls an entire industry and is so big and powerful
that all of its competitors are destroyed?
3.
J.P. Morgan was well known for restructuring businesses that had failed. What term was coined to describe
this process?
4. What name was given to industrialists who controlled much of the nation’s wealth? Do you believe this was
a fair term to use to describe them? Why or why not?
5. Name five institutions that prospered because of charitable contributions from Rockefeller, Carnegie, and
Morgan. Do you think their charitable contributions made up for the way these men made their fortunes?
6. Who is a modern-day person you think can be compared with these 19th century industrialists? Why?
Robber Barons or Industrial Statesmen?
In the late 1800s, many giant trusts and monopolies emerged. To this day, historians and economists
continue to debate the effects that the business leaders who formed these trusts and monopolies had on the
American economy. Some historians believe that these captains of industry undermined the American free
enterprise system. While these giants accumulated huge fortunes, small businesses perished. Other historians are
quick to defend men such as Rockefeller. In their view, these industrialists helped the economy to grow and to
develop new and efficient business and industrial methods.
ROCKEFELLER'S STANDARD OIL COMPANY CUTS PRICES TO KILL COMPETITION
Throughout her life, muckraker Ida Tarbell was concerned about the lack of competition between the small oil producers of
Pennsylvania and Standard Oil Company. In this excerpt, from The History of the Standard Oil Company, Tarbell wrote
about how Standard Oil dealt with competition. Her information is based on interviews with former Standard Oil Company
employees.
The marketing department of the Standard Oil Company is organized to cover the entire country, and aims to sell
all the oil sold in each of its divisions. To eliminate competition it had organized an elaborate secret service for
locating the quantity, quality, and selling price of independent or competitor shipments. Having located an order
for independent oil with a dealer, Standard Oil persuades the independent dealer, if possible, to cancel the order. If
this is impossible, Standard Oil threatens "predatory competition," that is, to sell at cost [the amount spent in
producing and manufacturing] or less until the rival is worn out. . . . The sureness and promptness with which
Standard Oil located their competitors' shipments was remarkable. The ruthlessness [harshness] and persistency
with which Standard Oil cut and continued to cut their prices drove small independent oil producers to despair.
Adapted from The History of the Standard Oil Company, Ida Tarbell (New York: McClure Phillips and Co., 1904).
1.
According to Ida Tarbell, how did Standard Oil eliminate competition?
2.
If you were an independent oil producer in the late 1800s, how would you have responded to Rockefeller's business
methods?
THE POSITIVE CONTRIBUTIONS OF JOHN D. ROCKEFELLER
In his two-volume biography, John D. Rockefeller, The Heroic Age of American Enterprise, historian Allan Nevins both
criticized Rockefeller and presented him as one of the great pioneers in American industrial history.
This is not to say that much of the criticism heaped upon Rockefeller and the Standard Oil Company was not
entirely true. The great combination made a cruel use in its early years, and particularly in 1875-79, of railroad
rate discriminations. It practiced espionage. It employed phony independent companies. It used "local priceslashing" to eliminate competitors. Its part in politics was sometimes blameworthy. It paid less attention than it
should have to systematic price-reduction. All this can be set off against its constructive achievements. The
Standard Oil Company eliminated waste and introduced many economies. It applied the Frasch process which
removed sulfur from crude oil and the Burton cracking, or refining process, which doubled the yield of gasoline
extracted from crude oil. It standardized products on a high level of quality. It developed valuable by-products
such as kerosene, gas oil, and lubricating oil. It assisted other industries in developing and improving lubricants,
such as petroleum jelly. It improved home distribution of its products.
Adapted from John D, Rockefeller, The Heroic Age of American Enterprise, Allan Nevins (New York: Scribner's and Sons, 1940).
3.
List three constructive achievements of the Standard Oil Company.
4.
Based on Tarbell's critical account and Nevins's list of the Standard Oil Company's achievements, do you think
Rockefeller had more of a positive or negative affect on the American economy? Explain.
THE GOSPEL OF WEALTH
Excerpted form Andrew Carnegie’s essay “Wealth” written in 1889.
In the last few hundred years, there has been a revolution. There used to be very little difference between the
way of life of a community’s leaders and the ordinary people. Now however, there is a tremendous difference
between the palace of the millionaire and the cottage of the laborer.
But this change is really a very good thing. In fact, it’s absolutely necessary for the progress of humanity,
because it is the rich who preserve the best literature and art and the other refinements of civilization.
Here’s how to solve the problem of poverty: Don’t pass any laws controlling either how businessmen make
money or what they do with it. Most of the community’s money will end up in the hands of a few men, but this is
all right if these men consider themselves not as owners of the money but merely as temporary keepers of it.
Because these men are wise (or they wouldn’t be rich) they will be able to make good decisions about how to
spend the money to help the community. In fact, their decisions will be better than those of the people of the
community themselves.
5.
How dies Carnegie view the disparities between the rich and the poor?
6.
How does he suggest solving the problem of poverty?
A STATEMENT BY JOHN D. ROCKEFELLER (1903)
The growth of a large business is merely a survival of the fittest. The American Beauty Rose can be produced in
the splendor and fragrance which bring cheer to its beholder only by sacrificing the early buds which grow up
around it. This is not an evil tendency in business. It is merely the working-out of a law of nature and a law of
God.
7.
How does Rockefeller justify his accumulation of wealth?