“It is not the employer who pays the wages. Employers only handle the money. It is the customer who pays the wages.” — Henry Ford
In recent years there has been an increasing scorn for capitalism in this country and around the world. Movements like Occupy caught a great deal attention last year as they staged protests and occupied parks in New York City and Oakland. Their beef was with the greed of capitalists and bankers. They wanted government to provide more and more assistance for those who could not find satisfying jobs.
There is a great series playing on the History Channel about the Men Who Built America. The series profiles John D. Rockefeller, Cornelius Vanderbilt, Andrew Carnegie, Henry Ford, and J.P. Morgan and shows how they turned ideas into millions of dollars and in the process they built this nation.
John D. Rockefeller, Cornelius Vanderbilt, Andrew Carnegie, Henry Ford and J.P. Morgan rose from obscurity and in the process built modern America. Their names hang on street signs, are etched into buildings and are a part of the fabric of history. These men created the American Dream and were the engine of capitalism as they transformed everything they touched in building the oil, rail, steel, shipping, automobile, and finance industries. Their paths crossed repeatedly as they elected presidents, set economic policies and influenced major events of the 50 most formative years this country has ever known. From the Civil War to the Great Depression and World War I, they led the way.
Using state of the art computer generated imagery that incorporates 12 million historical negatives, many made available for the first time by the Library of Congress, this series brings back to life the world they knew and the one they created. The event series shows how these men created the greatest superpower the world has ever seen. In the series we see how their historic achievements came to create the America of today.
The series begins with the life and achievements of Cornelius Vanderbilt. Shipping and railroad tycoon Cornelius Vanderbilt (1794-1877) was a self-made multi-millionaire who became one of the wealthiest Americans of the 19th century. As a boy, he worked with his father, who operated a boat that ferried cargo between Staten Island, New York, where they lived, and Manhattan. After working as a steamship captain, Vanderbilt went into business for himself in the late 1820s, and eventually became one of the country’s largest steamship operators. In the process, the Commodore, as he was publicly nicknamed, gained a reputation for being fiercely competitive and ruthless. In the 1860s, he shifted his focus to the railroad industry, where he built another empire and helped make railroad transportation more efficient. When Vanderbilt died, he was worth more than $100 million ($2.6 billion in today’s dollars).
In the early 1850s, during the California Gold Rush, a time before transcontinental railroads, Vanderbilt launched a steamship service that transported prospectors from New York to San Francisco via a route across Nicaragua. His route was faster than an established route across Panama, and much speedier than the other alternative, around Cape Horn at the southern tip of South America, which could take months. Vanderbilt’s new line was an instant success, earning more than $1 million (about $26 million in today’s money) a year.
In the 1860s, Vanderbilt shifted his focus from shipping to the railroad industry, which was entering a period of great expansion. He gained control of a number of railway lines operating between Chicago and New York and established an interregional railroad system. According to T.J. Styles, author of “The First Tycoon: The Epic Life of Cornelius Vanderbilt”: “This was a major transformation of the railroad network, which previously had been fragmented into numerous short railroads, each with its own procedures, timetables, and rolling stock. The creation of a coherent system spanning several states lowered costs, increased efficiency, and sped up travel and shipment times.”
Unlike the Gilded Age titans who followed him, such as steel magnate Andrew Carnegie (1835-1919) and oil mogul John Rockefeller (1839-1937), Vanderbilt did not own grand homes or give away much of his vast wealth to charitable causes. In fact, the only substantial philanthropic donation he made was in 1873, toward the end of his life, when he gave $1 million to build and endow Vanderbilt University in Nashville, Tennessee. (In a nod to its founder’s nickname, the school’s athletic teams are called the Commodores.)
John D. Rockefeller (1839-1937), founder of the Standard Oil Company, became one of the world’s wealthiest men and a major philanthropist. Born into modest circumstances in upstate New York, he entered the then-fledgling oil business in 1863 by investing in a Cleveland, Ohio, refinery. In 1870, he established Standard Oil, which by the early 1880s controlled some 90 percent of U.S. refineries and pipelines. Critics accused Rockefeller of engaging in unethical practices, such as predatory pricing and colluding with railroads to eliminate his competitors, in order to gain a monopoly in the industry. In 1911, the U.S. Supreme Court found Standard Oil in violation of anti-trust laws and ordered it to dissolve. During his life Rockefeller donated more than $500 million to various philanthropic causes
In 1865, Rockefeller borrowed money to buy out some of his partners and take control of the refinery, which had become the largest in Cleveland. Over the next few years, he acquired new partners and expanded his business interests in the growing oil industry. At the time, kerosene, derived from petroleum and used in lamps, was becoming an economic staple. In 1870, Rockefeller formed the Standard Oil Company of Ohio, along with his younger brother William (1841-1922), Henry Flagler (1830-1913) and a group of other men. John Rockefeller was its president and largest shareholder.
Standard Oil gained a monopoly in the oil industry by buying rival refineries and developing companies for distributing and marketing its products around the globe. In 1882, these various companies were combined into the Standard Oil Trust, which would control some 90 percent of the nation’s refineries and pipelines. In order to exploit economies of scale, Standard Oil did everything from build its own oil barrels to employ scientists to figure out new uses for petroleum by-products.
Scottish-born Andrew Carnegie (1835-1919) was an American industrialist who amassed a fortune in the steel industry then became a major philanthropist. Carnegie worked in a Pittsburgh cotton factory as a boy before rising to the position of division superintendent of the Pennsylvania Railroad in 1859. While working for the railroad, he invested in various ventures, including iron and oil companies, and made his first fortune by the time he was in his early 30s. In the early 1870s, he entered the steel business, and over the next two decades became a dominant force in the industry. In 1901, he sold the Carnegie Steel Company to banker John Pierpont Morgan for $480 million. Carnegie then devoted himself to philanthropy, eventually giving away more than $350 million.
Ambitious and hard-working, he went on to hold a series of jobs, including messenger in a telegraph office and secretary and telegraph operator for the superintendent of the Pittsburgh division of the Pennsylvania Railroad In 1859, Carnegie succeeded his boss as railroad division superintendent. While in this position, he made profitable investments in a variety of businesses, including coal, iron and oil companies and a manufacturer of railroad sleeping cars.
After leaving his post with the railroad in 1865, Carnegie continued his ascent in the business world. With the U.S. railroad industry then entering a period of rapid growth, he expanded his railroad-related investments and founded such ventures as an iron bridge building company and a telegraph firm, often using his connections to win insider contracts. By the time he was in his early 30s, Carnegie had become a very wealthy man.
In the early 1870s, Carnegie co-founded his first steel company, near Pittsburgh. Over the next few decades, he created a steel empire, maximizing profits and minimizing inefficiencies through ownership of factories, raw materials and transportation infrastructure involved in steel-making. In 1892, his primary holdings were consolidated to form Carnegie Steel Company.
The steel magnate considered himself a champion of the working man; however, his reputation was marred by a violent labor strike in 1892 at his Homestead, Pennsylvania, steel mill. After union workers protested wage cuts, Carnegie Steel general manager Henry Clay Frick (1848-1919), who was determined to break the union, locked the workers out of the plant. Andrew Carnegie was on vacation in Scotland during the strike, but put his support in Frick, who called in some 300 Pinkerton armed guards to protect the plant. A bloody battle broke out between the striking workers and the Pinkertons, leaving at least 10 men dead. The state militia then was brought in to take control of the town, union leaders were arrested and Frick hired replacement workers for the plant. After five months, the strike ended with the union’s defeat. Additionally, the labor movement at Pittsburgh-area steel mills was crippled for the next four decades.
In 1901, banker John Pierpont Morgan (1837-1913) purchased Carnegie Steel for some $480 million, making Andrew Carnegie one of the world’s richest men. That same year, Morgan merged Carnegie Steel with a group of other steel businesses to form U.S. Steel, the world’s first billion-dollar corporation.
One of the most powerful bankers of his era, J.P. (John Pierpont) Morgan (1837-1913) financed railroads and helped organize U.S. Steel, General Electric and other major corporations. The Connecticut native followed his wealthy father into the banking business in the late 1850s, and in 1871 formed a partnership with Philadelphia banker Anthony Drexel. In 1895, their firm was reorganized as J.P. Morgan & Company, a predecessor of the modern-day financial giant JPMorgan Chase. Morgan used his influence to help stabilize American financial markets during several economic crises, including the panic of 1907. However, he faced criticism that he had too much power and was accused of manipulating the nation’s financial system for his own gain. The Gilded Age titan spent a significant portion of his wealth amassing a vast art collection.
During the late 19th century, a period when the U.S. railroad industry experienced rapid overexpansion and heated competition (the nation’s first transcontinental rail line was completed in 1869), Morgan was heavily involved in reorganizing and consolidating a number of financially troubled railroads. In the process, he gained control of significant portions of these railroads’ stock and eventually controlled an estimated one-sixth of America’s rail lines.
By the start of the 20th century, Morgan’s focus had shifted from railroads to other industries. In 1901, he bought the Carnegie Steel Company from Andrew Carnegie (1835-1919) for some $480 million then merged it with a group of other steel companies to create U.S. Steel, the world’s first billion-dollar corporation. Morgan also helped engineer the deals that established General Electric, International Harvester, American Telephone & Telegraph and other industrial giants. In 1902, he was instrumental in the formation of International Mercantile Marine (IMM), a conglomeration of transatlantic shipping companies. A decade later, the Titanic, owned by one of the IMM companies, White Star, sank on its maiden voyage after hitting an iceberg. Morgan, who attended the ship’s christening in 1911, was booked on the ill-fated April 1912 voyage but had to cancel.
During Morgan’s era, the United States had no central bank so he used his influence to help save the nation from disaster during several economic crises. In 1895, Morgan assisted in rescuing America’s gold standard when he headed a banking syndicate that loaned the federal government more than $60 million. In another instance, the financial panic of 1907, Morgan held a meeting of the country’s top financiers at his New York City home and convinced them to bail out various faltering financial institutions in order to stabilize the markets.
While working as an engineer for the Edison Illuminating Company in Detroit, Henry Ford (1863-1947) built his first gasoline-powered horseless carriage, the Quadricycle, in the shed behind his home. In 1903, he established the Ford Motor Company, and five years later the company rolled out the first Model T. In order to meet overwhelming demand for the revolutionary vehicle, Ford introduced revolutionary new mass-production methods, including large production plants, the use of standardized, interchangeable parts and, in 1913, the world's first moving assembly line for cars. Enormously influential in the industrial world, Ford was also outspoken in the political realm. Ford drew controversy for his pacifist stance during the early years of World War I and earned widespread criticism for his anti-Semitic views and writings.
A month after the Ford Motor Company was established, the first Ford car—the two-cylinder, eight-horsepower Model A—was assembled at a plant on Mack Avenue in Detroit. At the time, only a few cars were assembled per day, and groups of two or three workers built them by hand from parts that were ordered from other companies. Ford was dedicated to the production of an efficient and reliable automobile that would be affordable for everyone; the result was the Model T, which made its debut in October 1908.
The "Tin Lizzie," as the Model T was known, was an immediate success, and Ford soon had more orders than the company could satisfy. As a result, he put into practice techniques of mass production that would revolutionize American industry, including the use of large production plants; standardized, interchangeable parts; and the moving assembly line. Mass production significantly cut down on the time required to produce an automobile, which allowed costs to stay low. In 1914, Ford also increased the daily wage for an eight-hour day for his workers to $5 (up from $2.34 for nine hours), setting a standard for the industry. The mass production techniques Henry Ford championed allowed the Ford Motor Company to turn out one Model T every 24 seconds.
So during this great age of industrial expansion from the end of the Civil War to the end of the First World War what bound these giants of industry together? Firstly these men had fierce completive and entrepreneurial spirits. With the exception of J.P. Morgan they came from modest working-class roots and were not high-born. Second is that they wanted to win and would not take no for an answer. They hated competition and would take whatever measures needed to defeat that competition. Thirdly they all had a vision of what their efforts could achieve. Fourth is that they were not afraid of long hours and hard work and expected such from those around them. Fifth is that when they saw an opportunity they were quick to take action and if that opportunity did not pan out they were equally as quick to move on to other opportunities that would arise, especially from the work of others. And sixth, and perhaps the most important is that they realized the needs and wants of their customers and did all they could to keep them well feed.
In 1862, the Pacific Railroad Act chartered the Central Pacific and the Union Pacific Railroad Companies, and tasked them with building a transcontinental railroad that would link the United States from east to west. Over the next seven years, the two companies would race toward each other from Sacramento, California on the one side and Omaha, Nebraska on the other, struggling against great risks before they met at Promontory, Utah, on May 10, 1869.
By the 1880s the nation was overbuilt of railroads and many were losing money — including those owned by Vanderbilt. He was looking for new customers willing to ship goods on his lines. At the same time John D. Rockefeller was attempting to corner the market on kerosene — the fuel used to light homes and businesses across the nation. He needed a secure and cheap method of shipping his kerosene from his refineries to market. He also renamed his company Standard Oil implying that his kerosene was the standard on which all others should be compared with.
To insure his shipping Rockefeller struck a deal with Vanderbilt to ship exclusively on his railroads — namely the New York Central Railroad. Both men were wary of each other, but kerosene was making both Rockefeller and Vanderbilt rich. Starting in 1853, Thomas A. Scott of the Pennsylvania Railroad Company employed Andrew Carnegie as a secretary/telegraph operator at a salary of $4.00 per week. At age 18, the precocious youth began a rapid advancement through the company, becoming the superintendent of the Pittsburgh Division. His employment by the Pennsylvania Railroad Company would be vital to his later success. The railroads were the first big businesses in America, and the Pennsylvania was one of the largest of them all.
This did not sit well with Rockefeller. He was fearful that the cabal of Vanderbilt’s NYCRR and Scott’s PRRC would raise their prices and damage Standard Oil. So what did Rockefeller do — he built a pipeline and cancelled his exclusive deals with Vanderbilt and Scott.
In 1877, Standard clashed with the Pennsylvania Railroad, its chief hauler. Rockefeller had envisioned the use of pipelines as an alternative transport system for oil and began a campaign to build and acquire them. The railroad, seeing Standard’s incursion into the transportation and pipeline fields, struck back and formed a subsidiary to buy and build oil refineries and pipelines. Standard countered and held back its shipments, and with the help of other railroads, started a price war that dramatically reduced freight payments and caused labor unrest as well. Rockefeller eventually prevailed and the railroad sold all its oil interests to Standard. But in the aftermath of that battle, in 1879 the Commonwealth of Pennsylvania indicted Rockefeller on charges of monopolizing the oil trade, starting an avalanche of similar court proceedings in other states and making a national issue of Standard Oil’s business practices. Rockefeller was creating vertical and horizontal monopolies — but he was serving the public with cheap kerosene to light their homes.
Standard Oil added its own pipelines, tank cars, and home delivery network. It kept oil prices low to stave off competitors, made its products affordable to the average household, and to increase market penetration, sometimes sold below cost if necessary. It developed over 300 oil-based products from tar to paint to Vaseline petroleum jelly to chewing gum. By the end of the 1870s, Standard was refining over 90% of the oil in the U.S. Rockefeller had already become a millionaire.
In his 84 years, Thomas Edison acquired a record number of 1,093 patents (singly or jointly) and was the driving force behind such innovations as the phonograph, the incandescent light bulb and one of the earliest motion picture cameras. He also created the world's first industrial research laboratory. Known as the "Wizard of Menlo Park," for the New Jersey town where he did some of his best-known work, Edison had become one of the most famous men in the world by the time he was in his 30s. In addition to his talent for invention, Edison was also a successful manufacturer and businessman who was highly skilled at marketing his inventions — and himself — to the public.
Serbian-American engineer and physicist Nikola Tesla (1856-1943) made dozens of breakthroughs in the production, transmission and application of electric power. He invented the first alternating current (AC) motor and developed AC generation and transmission technology. Though he was famous and respected, he was never able to translate his copious inventions into long-term financial success — unlike his early employer and chief rival, Thomas Edison.
Edison not only invented the electric light bulb he also developed a means of transmission of electricity — direct current (DC). His assistant at the time was a 29-year old Serbian immigrant named Nikola Tesla. In 1885, Tesla claimed that he could redesign Edison's inefficient motor and generators, making an improvement in both service and economy. According to Tesla, Edison remarked, "There's fifty thousand dollars in it for you — if you can do it" — this has been noted as an odd statement from an Edison whose company was stingy with pay and who did not have that sort of cash on hand. After months of work, Tesla fulfilled the task and inquired about payment. Edison, claiming that he was only joking, replied, "Tesla, you don't understand our American humor." Instead, Edison offered a $10 a week raise over Tesla's $18 per week salary; Tesla refused the offer and immediately resigned.
Tesla immediately teamed up with George Westinghouse who was famous for his development for air brakes on train cars. And now the current war began. Edison, who had partnered with J.P. Morgan were pushing DC while Westinghouse was pushing Tesla’s alternating current (AC). When Sing-Sing prison in New York was looking for a more “humane” method of executing prisoners they developed an electric chair using AC. The first trial was a botched failure and Edison and Morgan immediately began a nasty public relations campaign hyping the dangers of AC. This set Westinghouse back and in order avoid bankruptcy and convince investors to buy into AC Tesla signed all of his patent rights over to Westinghouse. At this time the Niagara Falls Power Company was building a massive hydro-electric generating plant to service the entire Northeast. They were taking bids from companies to provide the generators and were considering Westinghouse’s AC system and the Edison/Morgan DC system. The bidding war had begun.
In order to convince the public of the safety and efficiency of AC Westinghouse and Tesla worked feverishly to wire the 1893 World's Columbian Exposition (AKA Chicago World’s Fair) with thousands of lights. The Morgan/Edison (now General Electric) bid was $1.8 million and later reduced to $554,000. The Westinghouse/Tesla bid was $399,000. Westinghouse won the bid and had invent their own light bulb as General Electric refused them the rights to use the Edison bulb.
When the exposition opened and the great illumination was viewed by the public it convinced the Niagara Power to select the AC generators. Westinghouse had won the battle of the currents.
Meanwhile John Rockefeller was looking on from the sidelines wondering what would happen to his kerosene business now that electricity was beginning to light the nation. Rockefeller urged his scientists to come up with new ways to use petroleum and they did. One of the waste products from the refining of kerosene — a substance that was being dumped into the fields — was something called gasoline. But there was little use for gasoline until the emergence of the auto industry and Henry Ford.
With the introduction of the Model T Ford in 1908 the public was beginning to drive gasoline powered vehicles. Rockefeller’s Standard Oil empire was not only saved it was expanded through his vertical monopolies of owing the wells producing the oil and the refineries to owning the pipelines carrying his products and the service stations dispensing gasoline to the ultimate customer. With the widespread growth of the electrical industry a door had closed to Rockefeller, but with the growth of the automobile industry another door had opened.
Even though Morgan had lost the current war it did not take him long to dump Edison and buy into AC making General Electric one of world’s largest corporation.
Meanwhile with the PRR suffering setbacks in the Railroad business causing Carnegie and Scott to part ways it did not take the Scotsman long to jump head first into the steel business. The Bessemer process for making steel was not only a technical success it was also a great business success. Carnegie’s Homestead plant began turning out steel on a massive scale. With the development of Otis’s elevator taller and taller buildings became possible. The demand for Carnegie’s steel grew and grew as skyscrapers began to dot the cities of the nation. It was not only steel for buildings but steel for bridges, automobiles, and ships.
Carnegie built Pittsburgh's Carnegie Steel Company, which he sold to J.P. Morgan in 1901 for $480 million, creating the U.S. Steel Corporation. Carnegie devoted the remainder of his life to large-scale philanthropy, with special emphasis on local libraries, world peace, education and scientific research. With the fortune he made from business, he built Carnegie Hall, and founded the Carnegie Corporation of New York, Carnegie Endowment for International Peace, Carnegie Institution for Science, Carnegie Trust for the Universities of Scotland, Carnegie Hero Fund, Carnegie Mellon University and the Carnegie Museums of Pittsburgh, among others. His life has often been referred to as a true "rags to riches" story.
These men, while not perfect by any means and sometimes unethical, created whole industries supporting other businesses. Edison’s light bulb gave rise to the lamp industry with companies like Tiffany making lamps for the wealthy — lamps that sell for thousands of dollars at auctions today. Henry Ford’s auto plants created thousands of small, entrepreneurial enterprises supplying the auto industry — even to today’s Auto Zone. The cheap availability of steel brought forth the home appliance industry and gasoline not only fueled millions of automobiles but also allowed two brothers and bicycle makers in Dayton, Ohio to make a successful flight of something called an airplane on the wind-swept dunes of Kitty Hawk, North Carolina. Two high school dropouts who pioneered a trillion dollar aviation industry — an industry that transports billions of passengers safely each year around the globe.
Today many of our K-12 students learn virtually nothing of these giants and what they do learn is biased away from capitalism and towards something call social justice, They learn of the purported “evils” of the capitalistic system and the virtues of the collective. They learn that government is the source of all technology and invention. They have no idea of why the lights go on in their homes or classrooms when the flip a switch on the wall. They go into a high-rise building not knowing how steel and elevators were responsible for the construction of those buildings. And they ride in mom’s SUV or school bus with no idea of how the fuel that runs that vehicle got there. Even musicians who perform at Carnegie Hall probably don’t realize how this magnificent edifice came to be. It was not government who built it but the money from Carnegie’s steel. Yes, Mr. Obama, they did build it — not government.
We owe a great deal to these capitalist who were willing to risk everything of their visions and efforts. Yes, they made profits for without profits nothing would have happened. The next time you flip a light switch or ride an elevator give some thought to the men who built America.