The Tycoons: How Andrew Carnegie, John D. Rockefeller, Jay Gould, and J. P. Morgan Invented the American Supercompany

by Charles R. Morris

  6

  THE FIRST MASS CONSUMER SOCIETY

  The Centennial Exposition wasn’t Philadelphia’s only grand opening in 1876. Almost as spectacular was the debut of John Wanamaker’s “Grand Depot,” which he trumpeted as a “New Kind of Store” and the “largest space in the world devoted to retail selling on a single floor.” A converted Pennsylvania Railroad station, occupying a full city block at Thirteenth and Market Streets at the center of the city, it dazzled with color and bustle. Lit by the stained glass ceiling in daylight and by hundreds of gas lights at night, the counters were arranged in concentric circles, as much as two-thirds of a mile long, with 1,100 counter stools, so a lady could sit and discuss her purchase. And, indeed, the seventy thousand people who showed up on opening day were mostly women, as Wanamaker intended, just as starched-bloused young women predominated among his sales staff. The most visible males were the lordly floorwalkers stalking between the counters in cutaway coats. By the 1890s women were permeating even the executive ranks. Edward Filene called his Boston store an “Adamless Eden.”

  Wanamaker was the first to use the term “department store,” but his store was in the grand magasin style pioneered by Aristide Boucicault’s Bon Marché in Paris, and first realized in America by A. T. Stewart’s 1862 “Cast Iron Palace” on New York’s Broadway. Stewart and Boucicault proceeded to leapfrog each other in grandeur, and set the pattern for the proliferation of metropolitan American shopping palaces. New York City could boast of Macy’s, Bloomingdale’s, Lord & Taylor, and B. Altman, while Brooklyn had its Abraham & Straus, Boston its Filene’s, Detroit its Hudson’s, Chicago its Marshall Fields, San Francisco its Emporium; even Indianapolis and Milwaukee each had a Gimbels.

  Most department stores had men’s departments, but the marketing crosshairs were focused on women. Besides clothing, all the stores featured fabrics, ribbons, sewing materials, ready-made dresses, lingerie, sheets and pillowcases, household items, baby departments, perfumes, soaps, and toiletries, each with its own department and trained staff. The marble, the statuary, the gilded chandeliers were designed to make “shopping” an elegant form of purposeful recreation: a lady could intersperse explorations of the various departments with a stop at the tea room, or the well-appointed lounges, or even listen to an organ recital. Some New York stores expressly targeted higher-income clientele, but mainstream department stores aimed at the “middle-class” homemaker. They amazed and flattered her with the elegance of the environs and with the deference of the salesclerks, but canny retailers understood that their homemaker wasn’t wealthy, and had instincts of thrift and austerity stamped in her genes. They could pull her in with spectacle, address her as a “Lady,” and encourage her to linger, but they could not persuade her to buy unless they gave good prices, reliable quality, and no-question returns. The customers enjoyed looking at a $300 lace shawl, but the embroidered chemises for seventy-five cents were the fast-moving items.

  Department stores were the surface foamings of a tectonic reshaping of American social and economic arrangements that was gaining speed in the 1870s and 1880s. Not many years before, farm wives made their soap and candles from vats of boiled animal fat, one of the nastiest of a woman’s duties. By the 1840s and 1850s, better-off farmwomen bought their soap and candles from regional manufacturers, like Cincinnati’s Procter & Gamble, which topped eighty employees and $1 million in sales before the Civil War. P&G got a taste of large-scale operations with war supply contracts, but the postwar spread of kerosene lamps hit their candle business hard. Then a lucky accident in 1879—a worker left a soap churn on for too long—produced a soap that floated, which they dubbed Ivory. After risking $11,000 on an advertising campaign, P&G found themselves with one of the first blowout national consumer brands. Within a decade, they were hawking more than thirty brands of soap, sales had quadrupled, and they were jockeying with Colgate and Palmolive for first place in the hearts and pocketbooks of American women.

  The grand opening of Wanamaker’s in a converted railroad station. The ceiling was stained glass, and counters as much as two-thirds of a mile long circled the floor. Note the signs for “Ladies’ Furnishing Goods,” “Gloves,” “Laces,” and “Linen Sheeting.”

  None of the Morgans, or Loebs, or Belmonts, or Barings, who shoveled billions of dollars into American railroads, and telegraphs, and steel mills, and iron and coal mines, thought about selling wrapped and scented ladies’ soap. But that, it emerged, was what all that infrastructure was for. P&G used tree resin instead of animal tallow for the fatty acids in their soap, so Ivory’s booming sales entailed big logging operations, wood processing and transport, steel machinery for soap making, coal-fed steam generators and heating plants, and increasingly mechanized cooling, cutting, wrapping, storing, and shipping operations. Then there were small armies of drummers to fill the order books, and legions of clerks and bookkeepers to track orders, send invoices, register payments, and monitor production. Delivering lower prices, greater variety, and consistent quality, as Wanamaker was promising, with a pleasing shopping environment to boot, became possible only at scale. And big retail operations entailed ever bigger scales all the way back the line—the P&Gs and the Wanamakers were marching in lockstep.

  There were casualties. Soap making was an important sideline for most urban pharmacy shops, and the American Journal of Pharmacy lamented in 1884:

  . . . it [is] necessary to produce a variety of soaps, at cheap prices. This has been brought about by competition and the inability of the public to discriminate between a well-made and a common soap. . . . The cheaper soaps, being more readily soluble in water, produce a lather more quickly than a pure soap, and as the public does not as a rule make comparative trials as to the lasting powers . . . the sale of the best soaps has of late fallen off considerably, and the cheaper kinds have taken their place.

  The pharmacists were probably right on the merits of handmade versus mass-produced soap, whether or not it floated. But the millions of people with modest new margins of disposable income knew only the nasty yellow soaps from the local grocer. In the America of the last quarter of the nineteenth century there was a background roar that astonished and alarmed arbiters of public virtue, as it has in developing societies ever since: it was the roar of a burgeoning new demographic—the middle class—clamoring for more stuff.

  The New Middle Class

  “The most valuable class in any community is the middle class,” Walt Whitman proclaimed in 1858, “the men of moderate means, living at the rate of a thousand dollars a year or so.” Note that Whitman had to define his term, for the notion of a “middle class” was just gaining currency in mid-century. The historian Stuart Blumin points out that in America “middle class” had quite a different connotation from Great Britain’s “middling classes,” a rigid stratum of small artisans and shopkeepers squeezed nervously between the ruling elite and the mass of worker-proles. In America, middle class was less a well-defined social layer than a state of mind, a commitment to fluidity, as noted by the always-acute Alexis de Tocqueville in the 1830s:

  I do not mean that there is any lack of wealthy individuals in the United States; I know of no country, indeed, where the love of money has taken a stronger hold on the affections of men. . . . But wealth circulates with inconceivable rapidity, and experience shows that it is rare to find two succeeding generations in the full enjoyment of it.

  Echoing de Tocqueville, the historian David Potter defined the quintessential nineteenth-century American as “the completely mobile man, moving freely from one locality to the next, from one economic position to another, from one social level to levels above.” Mobility, indeed, is central to the American national epic. A key argument in Lincoln’s case against slavery was that it supported an aristocracy determined to undermine America’s promise that “the humblest man [has] an equal chance to get rich with everyone else.”

  Historians have performed prodigies of digging to determine the truth of that cherished mythology: W
as America really such a place of opportunity? Did ordinary people regularly rise above their station? Was America actually transmuting into a genuine middle-class society? The answer is “Yes”—a “Yes” with many qualifications to be sure—but in the main the conventional picture of American social and economic fluidity is grounded in fact.

  Conventional economics assumes that inequality should increase in a developing society, since capital formation tends to concentrate within the wealthier classes. The American results at best weakly confirm that hypothesis. Wealth inequality was very high in the Robber Baron era, of course, but it is even higher today. (See chapter Notes for details.) Nineteenth-century economic mobility was also quite high, however, and in both directions, although de Tocqueville’s supposition that rich families tended to lose their standing was not true. Both the richest fifth and the poorest fifth tended to hold their positions, while rapid up and down movement was concentrated within the middle three-fifths.

  Occupational mobility was substantial: in two eastern cities, between a third and 40 percent of low-level manual workers moved into higher occupations during their working careers. Samples drawn over shorter time periods in a wide range of cities show 10–20 percent of blue-collar workers moving into white-collar jobs, which was a much bigger step up than it is now. In rural areas, occupational mobility was at least as high. Over ten-year census periods, half or more of farm laborers in Utah were reclassified as farmers, while 15 percent or so became skilled craftsmen. Rural mobility in Wisconsin was much the same: most farm laborers or tenants became farm owners within a decade or two. Upward mobility was even stronger over generations: an 1890 sample of sons of blue-collar workers showed that 43 percent were in white-collar jobs. Wealth shifts showed a similar pattern. The average Wisconsin farmer tripled his property’s value between 1860 and 1870. Even in a relatively stagnant city like Newburyport, Massachusetts, where there was little change in the local occupational structure, 48 percent of laborers owned property in 1870, compared to only 11 percent in 1860.

  European travelers marveled at the prosperity of American workers, even though pay scales were so low that wives usually had to hire out as cleaners or seamstresses just to make ends meet. Partly it was because Americans really were better off than their peers in Europe, even at the low prevailing pay scales. English workers ate less than half the meat that American workers did, while the Irish had hardly any meat at all. A substantial portion of American bottom-rung workers, moreover, were recent immigrants who tended to be young and single and spent disproportionately on clothing and entertainment, so the impression of living the high life had considerable truth. Still, large-scale immigration—5.2 million immigrants in the 1880s alone, on an 1880 population base of 50 million—exerted constant downward pressure on entry-level wages. (But upward mobility was quite high among some immigrant groups. German immigrants in Poughkeepsie moved up the occupational ladder more than twice as fast as native-born workers.)

  Being middle class was about much more than money. It was a style of speech, dress, and manners, a whole approach to living. In contemporary commentary, middle class became fairly tightly tied to nonmanual job categories. Even though a department store salesclerk earned considerably less than a skilled worker, she was more likely to be considered middle class. The department stores worked hard to project that image, and put considerable training effort into polishing up their clerks’ speech and deportment—they wanted ladies to serve ladies. In the early days, female help were “shop girls,” which sounded tawdry. Most stores quickly shifted to “saleswomen,” and by the 1890s the clerks themselves were insisting on “salesladies.” For an immigrant Irish girl, clerking at Wanamaker’s was immensely status-conferring, and only the best and the brightest could make the cut. The work was very hard; sixteen-hour days were standard during the Christmas rush. But complaints by labor historians that sales-clerking was a “deadend” job seem anachronistic. The girls were delighted to have escaped the factory or domestic work, and the store ambience was thrilling.

  The low pay for female salesclerks was an exception; pay for most non-manual workers was surprisingly high—crossing the manual/nonmanual divide was a big financial step toward a middle-class life style. Harpers ran an article in 1887 about a “typical” American worker and his family, who had a pleasant house and garden in Brooklyn. The father was a carpenter, averaging $900 per year, close to the top of the scale a carpenter could expect. His two daughters and his son lived at home, and all were employed. The girls worked in a straw hat factory, bringing home $712 between them (although they were embarrassed to tell their friends they were factory girls), but the son, who clerked in a wholesale house, made $1,092—in short, he was the only one who qualified as middle class under Walt Whitman’s $1,000 per year test.

  Although white-collar jobs accounted for only about 7 percent of total employment in 1880, they were clearly the wave of the future. Between 1870 and 1880, the number of clerks and copyists in offices quadrupled, the number of bookkeepers and accountants doubled, insurance office staffs doubled, bank and railroad office staffs nearly doubled, and the number of commercial travelers quadrupled. Clerical workers were overwhelmingly male. While entry pay was often very low, advancement could be rapid. The young John Rockefeller had no intention of spending his life as an assistant bookkeeper, but it was a perfect way to learn what a business was really about. Edward Tailer was a Rockefeller contemporary, and no tycoon, although ambitious enough. He left school to clerk for a New York dry goods importer, but complained about the pay, only $50 a year. By the time he was twenty-one, he was making $450 a year; he jumped to another firm the next year for $1,000, then became a traveling salesman at $1,200, and had his own business when he was twenty-five. “Apprentice merchant” was a better job description than clerk.

  The business historian Olivier Zunz has analyzed clerical job applications at a Chicago-based railroad from the 1880s and 1890s. Applicants were almost all under twenty-five, almost all native born, most had been to high school, and their letters were literate and clear, either written in a highly legible hand or neatly typed. They stressed their work habits, their character and reliability, their sobriety and ambition. Many, like Rockefeller, had some business college. The average pay for the railroad’s clerical workers in 1880 was $800 a year, substantially above the area’s norm of $500 for a skilled craftsman and $300 for an unskilled worker. One claims agent, who was making $1,200 a year at age thirty, had his own house, a wife and four children, and could afford a cook. Salaries for many white-collar jobs were often much higher. Almost all male Treasury clerks had annual salaries higher than $1,200 in 1881. Male and female buyers at Macy’s in 1871 got base salaries of $1,200–1,500, probably with commissions on top, and a buyer in the late 1880s was guaranteed $4,000. Accountants and bookkeepers were getting $2,000 even in the earlier years of this period, while $1,500 salaries were apparently common in insurance companies. (The rising pay scales, moreover, coincided with steadily falling prices.) Working wives were rare in white-collar households.

  A follow-up of a young male clerical cohort in Boston from 1870 through 1885 found that a fourth had become professionals or independent businessmen, although almost as many, surprisingly, had become manual workers, although mostly in skilled categories. By 1885, however, advancement no longer required opening a business. Exponential growth in the range and reach of white-collar occupations meant that an ambitious young man could often achieve status, power, and a good income over the course of a career with a single firm. As the white-collar population expanded, there was an increasing presence of “ethnics” in the ranks. A sample of clerical workers in 1890 Philadelphia showed that 31 percent were ethnics—in all likelihood German or Irish—while unskilled manual jobs were filled by Italians or the newest immigrants from Eastern Europe.

  The rigidity of the “collar line”—blue versus white—was under constant challenge, especially by artisans who had achieved middle-class lifestyles. Incomes
reported by artisan-proprietors, in fact, tended to be low, about the same as those of ordinary skilled craftsmen. But that may be a reporting phenomenon: ex-artisan businessmen generating solid, middle-class incomes tended to label themselves managers or merchants. And as their businesses grew, white-collar tasks would have occupied much of their time—selling, ordering supplies, hiring and training workers, keeping the books. Already in midcentury, successful artisan-businessmen could be seen self-consciously seeking a firmly middle-class position without losing contact with their trade. One way was to participate in “scientific” mechanical societies that examined new tools or technologies, recommended quality standards, or lobbied for trade protection. The ASME, during Alexander Holley’s presidency in the 1870s, was one of the earliest and most successful of such organizations. A stomach-churning decision for the small manufacturer who valued his relations with his craftsmen was whether to adopt mechanized processes that would de-skill the trade.

  One’s home was usually the most visible status marker. Earlier in the century, most people lived on family farms that looked and smelled like rural factories. Survival was a matter of brutally hard labor and lots of kids. Houses were painted once when they were built, if at all; yards were full of garbage and foraging animals; soap was for clothes, not for people. Accelerating growth in the 1840s and 1850s, and the steady commercialization of agriculture, was reflected in bigger farmhouses, more hired help, improved hygiene, and the spread of niceties like tableware and carpets. By 1870, most Americans no longer lived on farms, and the growing distance between work and residence, reinforced by public transit, converted the house to the locus of family bonding after daily activities—a “home.” With the opening of the Brooklyn Bridge in 1883, Brooklyn quickly evolved into a bedroom suburb of Manhattan. The “lunchroom”—a “piggery at swilltime”—was dotted throughout business districts.