A Bit of Honest History of America--- Episode 3

         THE CAPTAINS OF THE INDUSTRIAL EMPIRES 

   Andrew Carnegie was a telegraph clerk at seventeen, then secretary to the head of Pennsylvania Railroad, then broker in Wall Street selling railroad bonds for huge commissions, and was soon a millionaire.  He went toLondon in 1872, saw the Bessemer method of producing steel, and returned to the United States to build a million-dollar steel plant.Foreign competition was kept out by a high tariff conveniently set by Congress, and by1880 Carnegie was producing 10,000 tons of steel a month, making $1.5 million a year in profit. By 1900 he was making $40 million a year, and that year, at a dinner party, he agreed to sell his steel company to J.P. Morgan. He scribbled the price on a note : $492,000,000. 
   Morgan then formed the U.S. Steel Corporation, combining Carnegie's corporation with others. He sold stocks and bonds for $1,300,000,000 [ about 400 million more than the combined worth of the companies] and took a fee of 150 million for arranging the consolidation.  How could dividends be paid to all those stockholders and bondholders ? By making sure Congress passe tariffs keeping out foreign steel ; by closing off competition and maintaining the price at $28 a ton ; AND BY WORKING 200,000 MEN TWELVE HOURS A DAY FOR WAGES THAT BARELY KEPT THEIR FAMILIES ALIVE. 
   And so it went, in industry after industry---shrewd, efficient businessmen building empires, choking out competition, maintaining high prices, keeping wages low, using government subsidies. These industries were the first beneficiaries of the "welfare state." By the turn of the century, American Telephone and Telegraph had a monopoly of the nation's telephone system, International Harvester made 85 percent of all farm machinery, and in every other industry resources became concentrated, controlled. The banks had interests in so many of these monopolies as to create an interlocking network of powerful corporation directors, each of whom sat on the boards of many other corporations. According to a Senate report of the early twentieth century, Morgan at his peak sat on the board of forty-eight corporations, Rockefeller, thirty-seven corporations. 
  Meanwhile, the government of the United States was behaving almost exactly as Karl Marx described a capitalist state : pretending neutrality to maintain order, but serving the interests of the rich. Not that the rich agreed among themselves ; they had disputes over policies.  But the purpose of the state was to settle upper-class disputes peacefully, control lower-class rebellion, and adopt policies that would further the long-range stability of the system. The arrangement between Democrats and Republicans to elect Rutherford Hayes in 1877 set the tone. Whether Democrats or Republicans won, NATIONAL POLICY WOULD NOT CHANGE IN ANY IMPORTANT WAY. 

   When Grover Cleveland, a Democrat, ran for President in 1884, the general impression in the country was that he opposed the power of monopolies and corporations, and that the Republican party, whose candidate was James Blaine, stood for the wealthy. But when Cleveland defeated Blaine, Jay Gould wired him :"I feel . . . that the vast business interests of the country will be entirely safe in your hands." AND HE WAS RIGHT. 
   One of Cleveland's chief advisers was William Whitney, a millionaire and corporation lawyer, who married into the Standard Oil fortune and was appointed Secretary of the Navy by Cleveland. He immediately set about to create a "steel navy," buying the steel at artificially high prices from Carnegie's plants. Cleveland himself assured industrialists that his election should not frighten them. "No harm shall come to any business interest as the result of administrative policy so long as I am President . . . a transfer of executive control from one party to another does not mean any serious disturbance of existing conditions." 
   The presidential election itself had avoided real issues ;  there was no clear understanding of which interests would gain and which would lose if certain policies were adopted. It took the usual form of election campaigns, concealing the basic similarity of the parties by dwelling on personalities, gossip, trivialities. Henry Adams, an astute literary commentator of that era, wrote to a friend about the election : 

   We are here plunged in politics funnier than words can express. Very great issues are involved . . . But the amusing thing is that no one talks about real interests. By common consent they agree to let these alone. We are afraid to discuss them. Instead of this the press is engaged in a most amusing dispute whether Mr. Cleveland had an illegitimate child and did or did not live with more than one mistress. 

   In 1887, with a huge surplus in the treasury, Cleveland vetoed a bill appropriating $100,000 to give relief to Texas farmers to help them buy seed grain during a drought. He said : "Federal aid in such cases . . . encourages the expectation of paternal care on the part of the government and weakens the sturdiness of our national character." But that same year, Cleveland used his gold surplus to pay off wealthy bondholders at $28 above the $100 value of each bond --- a gift of $45 million. 
   The chief reform of the Cleveland administration gives away the secret of reform legislation in America. The Interstate Commerce Act of 1887 was supposed to regulate the railroads on behalf of the consumers. But Richard Olney, a lawyer for the Boston and Maine and other railroads, and soon to be Cleveland's attorney general, told railroad officials who complained about the Interstate Commerce Commission that it would not be wise to abolish the Commission "from a railroad point of view." He explained : 

   The Commission . . . is or can be made, of great use tothe railroads. It satisfies the popular clamor for a government supervision of railroads, at the same time that supervision is almost entirely nominal . . . The part of wisdom is not to destroy the Commission, but to utilize it. 

   Cleveland himself, in his 1887 State of the Union message, had made a similar point, adding a warning : "Opportunity for safe, careful, and deliberate reform is now offered ; and none of us should be unmindful of a time when an abused and irritated people . . . may insist upon a radical and sweeping rectification of their wrongs."
   Republican Benjamin Harrison, who succeeded Cleveland as President from 1889 to 1893, was described by Matthew Josephson, in his colorful study of the post--Civil War years, The Politicos : "Benjamin Harrison had the exclusive distinction of having served the railway corporations in the dual capacity of lawyer and soldier. He prosecuted the strikers[of1877] in the federal courts. . . and he also organized and commanded a company of soldiers during the strike. . ." 
  Harrison's term also saw a gesture toward reform. The Sherman Anti-Trust Act, passed in 1890, called itself "An Act to protect trade and commerce against unlawful restraints" and made it illegal to form a " combination or conspiracy" to restrain trade in interstate or foreign commerce. Senator John Sherman, author of the Act, explained the need to conciliate the critics of monopoly : "They had monopolies . . . of old, but never before such giants as in our day. You must heed their appeal or be ready for the socialist, the communist, the nihilist. Society is now disturbed by forces never felt before . . ." 
   When Cleveland was elected President again in 1892, Andrew Carnegie, in Europe, received a letter from the manager of his steel plants, Henry Clay Frick : "I am very sorry for President Harrison, but I cannot see that our interests are going to be affected one way or the other by the change in administration." Cleveland, facing the agitation in the country caused by the panic and depression of 1893, used troops to break up "Coxey's Army," a demonstration of unemployed men who had come to Washington, and again to break up the national strike on the railroads the following year. 

                         MORE TO COME. STAY TUNED.