American tycoons

USA 1873 - 1913 American tycoons : Captains of industry or robber barons?

Start

Home page

Objectives

Time 4

Step 3 : Self-made men?

Step 1 : Context

Step 2 : The tycoons

Step 4 : Captains of industry?

Step 5 : Robber Barons?

Conclusion

Famous figures

Timeline

Glossary

Objectives

The objective of this presentation is to show that what we call the Gilded Age, which corresponds to a period of unprecedented industrial growth that took place in the US at the end of the 19th century, was based on a fascinating mix of philanthropy and greed, embodied by a handful of immensely powerful businessmen, and that was to assert the USA as the country of entrepreneurship for the century to come.

Conclusion

The period of economic and industrial growth at the end of the 19th century is called the Gilded Age. ''Gilded'' is different from ''golden" : it has a pleasing appearance, but conceals something of little worth. It reveals that this period of growth, which turned the USA into a world industrial power, benefited some but also led to the exploitation of others, hence the two opposed terms used to define the industrialists at the origin of this development : Captains of Industry or Robber Barons. This ambiguous image of the successful entrepreneur, both ruthless and philanthropist, is still present nowadays : think of the image of men like Elon Musk, Jeff Bezos, Bill Gates, etc... Are they going to save mankind, or destroy it? What do you think?

Captains of industry - stable economy

Some tycoons argued that the monopoly of big companies was a way to stabilize the economy, on the grounds that it reduced competition : they argued that if their firms were not concerned by the existence of competitors, they would stop wasting energy trying to take down their rivals, and could focus on growth and on the welfare of their employees, which could only be beneficial to society. They presented monopolies as a form of economic peace, which could prevent financial crisis such as the one in 1873, called the Panic of 1873 (but there was another crisis in 1893, putting this belief into perspective). This quote by J.Rockefeller sums up this belief :

"What a blessing it was that the idea of cooperation, with railroads, with telegraph lines, with steel companies, with oil companies, came in and prevailed, to take the place of this chaotic condition in which the virtuous academic Know-Nothings about business were doing what they construed to be God’s service in eating each other up."

Step 1 : Context

Here are some elements that contributed to industrial growth in the USA at the end of the 19th century

Immigration

Innovations

Expansion

Finance

Step 2 : Tycoons

Industrial growth was led by powerful businessmen sometimes called tycoons. Here are some elements on them :

Their Spirit

Their tactics

Some Examples

Step 5 : Robber Barons?

Conversely, the philanthropic dimension of the lives of the tycoons should not make us forget that they also were ruthless businessmen who crushed their competitors and often exploited workers. In opposition to the term Captains of Industry, some people call them Robber Barons, a pejorative term connotating unscrupulous methods.

What they enforced

Who denounced it

Glossary

• Philanthropy

• Entrepreneurial

• Tycoon

• Steel

• Maecenas

• Greed

• Robber Baron

• Muckraker

• Captain of Industry

• Stock Exchange

Famous figures

Step 4 : Captains of industry?

Why do people start businesses? To make a profit, of course, but not only. Let's not simplify things and consider that tycoons were greedy individuals who only wanted to make money. Many genuinely thought that they were acting for the greater good and for the elevation of the society, and, for that, are sometimes called by the positive term Captains of Industry. Here are some elements on how they contributed to this elevation :

Philanthropy

Economic development

Stable economy

Captains of industry - Philanthropy

The concentration of wealth into the hands of a few millionaires was also considered by some not as a revelator of inequality but as a means to elevate the human condition : the rich had the possibility (and the moral duty) to spend their money to help those in need, give access to education and to sophisticated forms of civilization such as arts. Some tycoons called themselves philanthropists, or maecenas. This tradition of philanthropy exists today : think of the Bill Gates Foundation for example !

A quote

An example

Philanthropy : an example

Carnegie donated millions to build 2,509 public libraries, nicknamed "Carnegie Libraries", between 1883 and 1929. Of those, 1,795 were in the United States. Others were built throughout Europe, South Africa, Barbados, Australia, and New Zealand. Most still exist today.

Context - Innovations

Click on the photos to learn more

The Second Industrial Revolution, also known as the “Technological Revolution,” was a phase of rapid industrialization in the final third of the nineteenth century and the beginning of the twentieth century. Rapid advances in the creation of steel, the use of petroleum and electricity helped fuel production, including mass-produced consumer goods and weapons. It became far easier to get around on trains or automobiles. At the same time, ideas and news spread via newspapers, the radio and telegraph.

Robber Barons - Working conditions

Without going into details, the working conditions in factories at that time were appalling : 60 hour workweeks, no pensions, no injury compensations, child labour... Click on the photos to learn more.

Robber Barons - Muckrakers

In the 1890s, with the increased circulation of newspapers and magazines, the working conditions were sometimes exposed and denounced by reform-minded writers and journalists, called muckrakers (the ancestors of what we call now investigative journalism). Examples :

Although fictional, this novel by Upton Sinclair, denoucing the working conditions in the meat industry, had a huge impact. I tried to read it once, and, to be honest, I stopped before the end : it was too disgusting and depressing... Click on the cover to read an extract.

Ida Tarbell was a famous muckraker. Click on her to read a quote.

Context - Finance

Advances in mechanical and electrical engineering and the increasing scale of production meant that industrial enterprises needed more capital. This required a big change in industrial finance. Stock exchanges evolved to facilitate the issue and trading of shares.

Click on the photos to learn more

Context - Immigration

Between 1880 and 1920, America received more than 20 million immigrants. Beginning in the 1890s, the majority of arrivals were from Central, Eastern and Southern Europe. In that decade alone, some 600,000 Italians migrated to America, and by 1920 more than 4 million had entered the United States. Jews from Eastern Europe fleeing religious persecution also arrived in large numbers; over 2 million entered the United States between 1880 and 1920.

Context - Expansion

Beginning in the early 1870s, railroad construction in the United States increased dramatically. By 1900, much of the nation's railroad system was in place. The railroad opened the way for the settlement of the West, provided new economic opportunities, stimulated the development of town and communities, and generally tied the country together.

Tycoons - spirit

The context just provided opportunities. To take advantage of these opportunities and build industrial empires, managers had to have tremendous business skills and what we could call the entrepreneurial spirit : a true passion for building something great from nothing.

Self-made men? - Government help

The government helped companies develop, which puts the success of so-called self-made men into perspective. One famous example was the granting of land by the government to railroad companies. On this map you can see that on each side of the railroad track, sections of land were automatically given to the railroad companies, increasing their possessions and revenues.

Step 3 : Self-made men?

Yes?..... "Self-made man" is a classic phrase coined on February 2, 1832 by Henry Clay in the United States Senate, to describe individuals whose success lay within the individuals themselves, not with outside conditions, and who go ''from rags to riches'' : from poverty to wealth.Andrew Carnegie, himself a self-made man who started out as a poor immigrant and became one of the wealthiest men in America, is a good example. At the turn of the century he wrote that success was a “simple matter of honest work, ability, and concentration”.

No?...Carnegie’s own career was the exception rather than the rule : many stories of success were embellished, and the ''self-made man'' has often been described as a myth. Here are two elements that can help debunk the myth :

Their background

Government help

Captains of industry - Economic development

In this extract from the movie There Will Be Blood, Daniel Day Lewis plays an oil tycoon trying to persuade the population of a village to let him look for oil on their lands. He highlights the benefits that industrialization would bring to the community (the rest of the movie reveals his hypocrisy though...)

Tycoons - business tactics

Here are some business practices that enabled tycoons to build industrial empires and to hold monopolies over entire industrial sectors :

Vertical integration

Economies of scale

Horizontal integration

Economies of scale are cost reductions that occur when companies increase production. Economies of scale give a competitive advantage to large entities over smaller ones. The larger the business, the lower its per-unit costs.

When a company wishes to grow through horizontal integration, its aim is to acquire a similar company in the same industry, to increase their size or limit competition.

Strategy whereby a company owns or controls its suppliers, distributors, or retail locations to control its value or supply chain. It guarantees efficiency and increased control in the production process, and cuts down on delays in delivery and transportation.

Timeline

1873

1885

1890

1893

1906

1911

1913

1880

1903

Tycoons - examples