The Prospering Fathers
There has been a serious flaw in American historical writing that is only now beginning to be corrected.
American historians have rightly celebrated the passionate moral purpose of the Pilgrim Fathers, decisive in forming the matrix of the nation’s character. They have, with equal justice, canonized the Founding Fathers, that extraordinarily varied and talented group of men who, combining the best of Enlightenment values with the hard-won lessons of the English tradition of empirical statesmanship, gave the new nation a model Constitution and a splendid start toward its high-risk experiment in republican self-government. But a third key group in the country’s development—the Prospering Fathers, as I call them—have never really received their due.
In the period between the end of the Civil War and the onset of World War I, this collection of entrepreneurial individualists, united only by their colossal energy, native shrewdness, and belief in their country’s future, transformed a predominantly agricultural society into an industrial and financial superstate, laying the foundations of the nation’s geopolitical supremacy and of what has rightly been called the American Century. Not only have these men failed to be canonized, they have been, to the contrary, demonized, and dismissed collectively as “robber barons.” Around their works and days there has gathered a deep encrustation of acidic mythology, advanced during their own time by “crusading”—i.e., unscrupulous—journalists and long accepted as truth by historians who might have been expected to know better.
As time marches on, however, it has become harder and harder to maintain this corrosive view. The deeds of the Prospering Fathers are now a century old, and that century, if we exclude the horrific gash of the still-inexplicable Great Depression, has been mostly a saga of wealth-creation and wealth-distribution unique in world history. The huge increment produced by the United States made it possible to fight and win two world wars against autocracy and totalitarianism, to underwrite freedom, democracy, and the rule of law everywhere, to invest in new technologies that are now spreading at stupefying speed and, at the same time, to give the American people, who have more than doubled their numbers—as well as all those around the world who have followed the path the Prospering Fathers trod—an affluence never dreamed-of before. So whom did the barons rob?
All the more reason, then, to hail two recent and quite complementary studies: Ron Chernow’s Titan: The Life of John D. Rockefeller1 and Morgan: American Financier by Jean Strouse.2 Neither Chernow nor Strouse is a hagiographer. Theirs are true portraits, warts and all; but together they go some way toward redressing the historical balance.
What did the Prospering Fathers have in common? By achieving enormous economies of scale, they turned the luxuries of the rich into the necessities of the poor, and thereby reduced the real price of almost everything. Andrew Carnegie was one exemplar of the type. Using chemists to find out what actually happened inside a steel furnace, he was able to raise production and cut costs so dramatically that steel soon replaced iron as the primary metal. The rapid and benign consequences of this feat were experienced in almost every aspect of life, from farm machinery (and productivity) to construction, making skyscrapers possible and high-quality housing cheap.
The closing of the Iron Age (as it were) and the opening of the Steel Age also cut the cost of rails and locomotives. Edward Harriman, another Prospering Father, took advantage of that fact, rationalizing the system and making it not only cheap but safe. Equally huge strides were registered in fuel costs. Henry Clay Frick, Carnegie’s protégé, played a major role in the steel revolution by cutting coking bills.
But, as Ron Chernow shows, it was John D. Rockefeller who pounced on the new fuels provided by crude oil, achieving a temporary monopoly of as much as 80 percent of world production and refining. No industry in history has ever profited so much as oil refining from economies of scale, or done so much for the ordinary consumer. Right at the outset of Rockefeller’s empire-building, he was able to reduce by 70 percent the cost of kerosene, the staple of housewives throughout the nation. Even more important in the long run was the competition that cheap oil offered to solid fuel in the generation of electricity. The electrical age began in earnest around 1900, rapidly making California the richest state in the union and in time transforming the Far West into one of the world’s most efficient industrial zones.
Cheap petroleum contributed still more to the automobile revolution, a revolution introduced by the last of the Prospering Fathers, Henry Ford. Thanks to vertiginous economies of scale, the sturdy, reliable, safely driven, and easily maintained car created by Ford soon became cheap, too. By putting the automobile within the means not only of most farmers but of the workers who produced it, Rockefeller and Ford ended the isolation of the farming families who made up half the nation and set industrial workers on the road to comfort and even affluence.
The methods employed by men like Rockefeller to achieve their temporary monopolies were ruthless—and they were resented. As Chernow faithfully reports, Rockefeller was none too gentle in putting inefficient producers out of business. One of his victims was the father of Ida Tarbell, the first “investigative journalist,” and she took her revenge by spending most of her life exposing and denouncing the excesses of Standard Oil. In an image that persists, she branded Rockefeller a monster.
The hostile journalists soon stirred up the politicians, among them old-money grandees like Theodore Roosevelt, who, taking a particular objection to Edward Harriman, denounced him as a “malefactor.” Thus was detonated a populist revolution that fed off a sore spot in the American character, the conflict between bigness and democracy. Loving the advantages of bigness, Americans have also always wanted the voices of the “people” to be heard above its uproar. Rockefeller’s quest for a large-scale oil industry genuinely scared a lot of Americans, not all of whom, like Tarbell, were parti pris.
In 1879, a grand jury in Pennsylvania indicted Rockefeller for conspiracy and extortion. For 30 years, he became, in strict law, a fugitive from justice, and had to be extremely careful to avoid extradition from the states where he lived, made his money, or enjoyed himself. If he built and sustained an empire, and became the richest man in the world, he did so against a constant campaign of political and legal opposition, much of it bitter and highly personal. I would guess that more legal actions were taken, and (later on) more corrective laws passed, against him than against any other man in history. That, of course, is one reason why his business crimes, real or imaginary, have been brought so thoroughly to light. Chernow goes into them with energy.
Suspiciousness of bigness was not confined to “little people.” It also loomed large in the demonology of intellectuals, not least in the legal profession. When chain stores were created by the disciples of the Prospering Fathers, pushing smaller and less efficient competitors to the wall while driving down retail costs, progressive legal minds challenged the idea that large-scale enterprises would benefit ordinary families. Their view was given for all time by Supreme Court Justice Louis D. Brandeis, who was speaking with both the chain stores and Standard Oil in mind:
I have considered and do consider that the proposition that mere bigness cannot be an offense against society is false, because I believe that our society, which rests upon democracy, cannot endure under such conditions.
This was not so much an argument, however, as an article of political faith, and one more likely to be held by a well-paid judge than by a working-class housewife on a tight budget. But Brandeis’s doctrine did and no doubt still does find favor among lawyers and professors. Rockefeller was the first major victim of the antitrust legislation to which this doctrine gave birth: Standard Oil, in its pristine form, was broken up.
Of course, the legal progressives were never able to defeat outright I the Prospering Fathers and their disciples and descendants, for another forensic groundwork had been laid down early in the 19th century by the first great Chief Justice of the Supreme Court, John Marshall. His rulings, which made large-scale capitalist enterprise in the U.S. not only possible but profitable, were graven in granite. What the progressives were able to do was to put big business perpetually on its guard, to force it to watch its step, to calculate legal consequences at every stage, and to muster the resources to fight court battles as part of routine operations. Over the decades, all this has proved mightily beneficial to the legal profession; since the costs have naturally been written into retail prices, whether consumers have benefited is another question altogether.
A classic instance today of this continuing trench warfare is the Microsoft case. In the last quarter-century, Bill Gates, a latter-day Prospering Father, has built up from nothing the largest company in the world, right at the forefront of technology (as were Carnegie Steel and Ford Motors and Standard Oil in their day) and with a total value equal to the gross national product of a medium-sized country like Turkey. The cost of communicating information is falling steeply and continuously, and there can be no doubt that Gates has had a great deal to do with that fact.
Since communications are at the heart of the present industrial revolution, all of us are the beneficiaries of Bill Gates’s ingenuity and of the economies of scale he has pioneered. At the same time, his bigness has made him target number one for federal lawyers. So the battle continues, and will continue, until the end of time or at least until the end of the union.
In Ron Chernow’s hands, John D. Rockefeller emerges as a complicated human being, one who mixed low cunning and sharp practice with high purposes, even idealism, and who certainly saw himself as a public benefactor unjustly assailed by pygmies. In those respects and others, he bears a certain resemblance to other Prospering Fathers. Yet, like the Pilgrims and Founders before them, these men were hardly all of one type. In addition to Carnegie, Rockefeller, and Ford—and in contrast to them—was J. Pierpont Morgan.
Morgan was not new money but old—third-generation. He was not an industrialist but a banker. He did not create new products, he financed them. He assembled empires, but they were takeovers, not conquests by a dynamic engine of his own making.
There was an even more important difference: a difference of temperament or one might even say of philosophy. The others took a naturalistic view of competition and believed in the survival of the fittest. They pushed individualism almost to extremes. By contrast, Morgan strove for the health of business society as a whole; he saw the need for the protection of endangered economic species, and took steps to preserve the capitalist environment in which all could flourish.
I am not saying Morgan was a corporatist—far from it. He believed in competition and practiced it. But, in an enlightened society like America, he saw the business community as a moral entity, governed by laws that may not necessarily have been written down in the form of statutes. He was a conciliator, a mediator, an arbiter of rougher, greedier spirits.
Though keen on money, Morgan was also not avid for it—a difference in temperament reflected in his net assets. Unlike Carnegie, who at one time held nearly a half-billion dollars in cash, or billionaires like Rockefeller and Ford, Morgan died in 1913 leaving $80 million, and some of his art collection had to be sold to meet the provisions in his will. Thus, Rockefeller’s surprised observation: “Why, just think of that—Mr. Morgan was not even a wealthy man!”
Needless to say, these distinctions between Morgan and the other Prospering Fathers were ignored by the public. Like the rest, he was classified as a robber baron and abused accordingly (perhaps most famously in our own day by the novelist E.L. Doctorow in Ragtime). But in Morgan: American Financier, the literary biographer Jean Strouse, who has made extensive use of hitherto unpublished papers from archives on both sides of the Atlantic, performs a notable demolition job on this mythology.
A chief target of her research is the fantastic invention that Morgan provoked the financial panic of 1907. Anyone in business knows that bankers, especially successful ones like Morgan, never provoke panics. On the contrary: they seek order at all times. And Morgan was exemplary in this respect. The Bank of the United States had been abolished by President Jackson, and nothing like it existed again until Woodrow Wilson created the Federal Reserve System in 1913. In the meantime, business prospered thanks largely to irenicists like Morgan. If the public did not appreciate the difference between him and the others, Wall Street did; and that was the source of his authority.
During the panic of 1907, potentially a very serious one, Morgan returned to New York and, over the next 24 hours, in the vast room that now forms the core of the splendid Morgan Library, he sorted out the unsavable businesses from the sound majority, arranging 10-percent loans for all the healthy firms in trouble. As news of his doings got out, the panic subsided. In short, Morgan carried out the role of the chairman of a central bank—a chairman of exceptional quality. He did so not by virtue of institutional powers, but solely on the basis of the trust he personally inspired. There has been no parallel performance in business history.
The reason Morgan was able to pull Wall Street out of the abyss in 1907 emerged a few years later when he gave evidence to the Pujo committee, a congressional inquiry into the so-called “money trust.” Morgan’s perennial weakness was self-presentation. As a rule he was inarticulate, particularly concerning things he cared deeply about and had pondered the longest. Samuel Untermyer, the slick committee attorney, persisted in questioning Morgan about the way he did business, and finally the old man managed to get something important out. Strouse gives us large chunks of the exchange.
When he made decisions, Morgan explained to Untermyer, he often did so not in order to enrich himself but because “I thought it was the thing to do.” In other words, his reasons, at least in the short term, could be moral rather than commercial, although in the long term this meant they were commercial, too: a system in which moral principles had weight would inspire confidence and therefore function more efficiently.
Morgan, however, lacked the words to say all this plainly and fully to the exasperated Untermyer. Instead, he just stuck to his formula: “it was the thing to do.”
Untermyer: That does not explain anything.
Morgan: That is the only reason I can give.
Untermyer: It was the thing to do for whom?
Morgan: That is the only reason I can give. That is the only reason I have, in other words. I am not trying to keep anything back, you understand.
Untermyer: I understand. In other words, you have no reason at all.
Morgan: That is the way you look at it. I think it is a very good reason. One of these days you will agree with me.
Untermyer insisted that business was about money or it was about nothing. New York banks, he suggested, lent money to those men or institutions that already “have the money back of them.” But Morgan corrected him: “No sir, it is because people believe in the man.”
Untermyer. And he might not be worth anything?
Morgan:. . . I have known a man to come into my office, and I have given him a check for a million dollars when I knew [he] had not a cent in the world.
Untermyer: Is not commercial credit based primarily upon money or property?
Morgan: No sir; the first thing is character.
Untermyer: Before money or property?
Morgan: Before money or property or anything else. Money cannot buy it, . . . because a man I do not trust would not get money out of me on all the bonds in Christendom.
This, then, was the moral element that, in varying degrees, characterized the approach to business of the Prospering Fathers. And, as both Chernow and Strouse show, there was a corollary to it: they gave away the fortunes they had amassed. Carnegie enunciated the relevant principle in his essay On Wealth. While it was morally acceptable, he wrote, for a man to become rich, it was wicked for him to hang on to his wealth: “The man who thus dies rich dies disgraced.”
Carnegie practiced what he preached. By the time he died, in his sleep, in his 84th year, he had disposed of practically everything he possessed. In 1919, the Carnegie Endowment published A Manual of the Public Benefactions of Andrew Carnegie; already, by then, over $350 million (more than $3 billion in current dollars) had been spent on a huge variety of projects, including 2,811 public libraries and 7,689 church organs.
Rockefeller’s benefactions were on a similar scale. They began in the 1870′s and expanded gradually under his almoner, Frederick Gates, who once said to Rockefeller that, unless he gave most of his money away, “it will crush you, and your children, and your children’s children.” Rockefeller took the advice: his gifts were made systematic, efficient, and permanent, and continue to this day. It was the same with Ford.
Not all of this entrepreneurial money has been spent in ways the Prospering Fathers would have approved. Some, in fact, has gone to movements and individuals that seek not to increase but to undermine American prosperity.3 Yet it is hard to imagine America today without these munificent benefactions, which include both the Morgan Library and the Frick museum—my favorite library and my favorite art collection in the whole world. Indeed, traveling around America, and seeing the results of the generosity of the Prospering Fathers and their countless followers, I am led to conclude that unrestricted capitalism plus unlimited philanthropy is a far better way of redistributing wealth than any compulsory system that any government, no matter how enlightened, could ever devise.
1 Reviewed by Leslie Lenkowsky in the October 1998 COMMENTARY.—Ed.
2 Random House, 800 pp., $34.95.
3 For more on this point, see Chester E. Finn, Jr., “Giving It Away: An Open Letter to Bill Gates,” in the January 1998 COMMENTARY.—Ed.