The American Promise: A Compact History, Third Edition
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CHAPTER 17: BUSINESS AND POLITICS IN THE GILDED AGE, 1870–1895
SEC 02 - FROM COMPETITION TO CONSOLIDATION
J. P. Morgan and Finance Capitalism
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John Pierpont Morgan, the preeminent finance capitalist of the late nineteenth century, loathed
competition and sought whenever possible to eliminate it by substituting consolidation and central
control.
At the turn of the twentieth century, J. P. Morgan dominated American banking, exerting an
influence so powerful that his critics charged he controlled a vast "money trust."
Morgan acted as a power broker in the reorganization of the railroads and the creation of industrial
giants such as General Electric and U.S. Steel.
His efforts to consolidate the railroad industry exacted a heavy toll; his overcapitalization of
railroads
saddled them with enormous debt, and the management style of the Morgan directors stressed
short-term profit rather than long-term innovation and growth.
In 1898, Morgan moved into the steel industry, directly challenging Andrew Carnegie.
The wily maneuvering of the two savvy businessmen made it difficult to determine who won this
challenge.
Morgan's acquisition of Carnegie Steel signaled the passing of one age and the coming of another:
Carnegie represented the old entrepreneurial order, Morgan the new corporate world.
Morgan, even more than Carnegie or Rockefeller, left his stamp on the twentieth century and
formed the model for corporate consolidation that economists and social scientists soon justified
using a new social theory known as “Social Darwinism”.
Social Darwinism and the Gospel of Wealth
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Drawing on the work of the naturalist Charles Darwin, Herbert Spencer and William Graham Sumner
developed a theory called social Darwinism, concluding that progress comes about as a result of
relentless competition in which the strong survive and the weak die out.
The idea of survival of the fittest had profound social significance.
Social Darwinist theory, which glorified the acquisition of great wealth, held that any efforts by the
rich to aid the poor would interfere with the laws of nature and slow evolution.
Andrew Carnegie softened some of the harshest features of social Darwinism in an essay titled "The
Gospel of Wealth," in which he preached philanthropy and urged the rich to "live unostentatious
lives" and "administer surplus wealth for the good of the people."
Social Darwinism nicely suited an age in which the gross inequalities accompanying industrialization
seemed to cry out for action.
Laissez-faire and the Supreme Court
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Social Darwinism, with its emphasis on the free play of competition and survival of the fittest,
encouraged the economic theory of laissez-faire, which held that the government should not
meddle in economic affairs, except to protect private property.
A conservative Supreme Court supported laissez-faire and used its power to protect business
interests; during the 1880s and 1890s, the Court increasingly reinterpreted the Constitution to
protect business from taxation, regulation, labor organizations, and antitrust legislation.