Contents
* * *
Title Page
Contents
Copyright
Dedication
Introduction: Agents of Transformation
The Age of Scoundrels
Uncle Daniel and the Commodore
Chapters of Erie
Pierpont Morgan’s Grand Tour
The King of Frauds
The Northern Pacific Panic
Jay Gould Returns
Year of Upheaval
Morgan and Harriman
The Rise of Ned Harriman
The First Skirmish
A Community of Interests
Savior of the Union Pacific
The Reconstruction
“A Pig-Headed Affair”
The Empire Builder
The Quest for the Burlington
The Ghost Dance
Peacock Alley
Lions Guarding the Way
“A Good-Sized Panic”
Exhaustion
The Trustbuster
“Malefactors of Great Wealth”
Epilogue:The End of an Epoch
Acknowledgments
Notes
Bibliography
List of Illustration Credits
Index
About the Author
Connect with HMH
Footnotes
Copyright © 2020 by Michael Hiltzik
All rights reserved
For information about permission to reproduce selections from this book, write to [email protected] or to Permissions, Houghton Mifflin Harcourt Publishing Company, 3 Park Avenue, 19th Floor, New York, New York 10016.
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Library of Congress Cataloging-in-Publication Data
Names: Hiltzik, Michael A., author.
Title: Iron empires : robber barons, railroads, and the making of modern America / Michael Hiltzik.
Description: Boston : Houghton Mifflin Harcourt, 2020. | Includes bibliographical references and index.
Identifiers: LCCN 2019033911 (print) | LCCN 2019033912 (ebook) | ISBN 9780544770317 (hardcover) | ISBN 9780544770348 (ebook)
Subjects: LCSH: Railroads—United States—History—19th century. |Industrialists—United States—History—19th century. | Capitalists and financiers—United States—History—19th century. | Big business—United States—History—19th century. | United States—Economic Conditions—1865–1918. | United States—History—1865–1921.
Classification: LCC HE2751 .H425 2020 (print) | LCC HE2751 (ebook) | DDC 385.0973/09034—dc23
LC record available at https://lccn.loc.gov/2019033911
LC ebook record available at https://lccn.loc.gov/2019033912
Cover design by Brian Moore
Cover photographs: Bettmann / Getty Images (train); Smith Collection / Gado / Getty Images (map); © Robert Alexander / Getty Images (wheels); Shutterstock (paper)
Author photograph © Amy Myers
v2.0720
For Deborah, Andrew, and David
Introduction: Agents of Transformation
FOR TWO WEEKS in deep summer, westbound passengers on a Union Pacific train encountered a tubercular Scot whose conversation, dripping with literary grandiloquence, had earned him the nickname “Shakespeare.” Pale, thin, and wracked by coughing fits, he seemed not long for this world. Generally he could be found seated at one end of a car, propping open the door with his foot as though hoping the rush of air might soothe his unremitting fever.
It was 1879, a mere decade after the Union Pacific and Central Pacific lines had met at Promontory Summit in what was then Utah Territory, completing the first transcontinental railroad. The passenger was Robert Louis Stevenson, at twenty-eight still several years shy of the worldwide fame he would acquire with the publication of Treasure Island in 1883 and Kidnapped and The Strange Case of Dr. Jekyll and Mr. Hyde in 1886. An object of pity among his fellow travelers and occasional abuse by railroad personnel, he would mine the journey for an account of rail travel as seen from the lower depths, published in 1892 as Across the Plains.
Stevenson’s fellow travelers were emigrants, lured west by lavish propaganda in which the railroads promised them access to the bounty of the plains and the golden riches of distant California. According to these reports, the climates of Minnesota and Montana were endowed with “the power of healing any malady.” The Northern Pacific declared that “prosperity, freedom, independence, manhood in its highest sense, peace of mind and all the comforts and luxuries of life are awaiting you.” The Union Pacific predicted that “a $50 lot may prove a $5,000 investment.”
The first thing Stevenson noticed upon embarking on his transcontinental trip was the contempt with which railroad personnel treated the emigrants (not excepting himself). They herded the passengers like cattle into plain wooden cars that had all the creature comforts of packing crates, equipped with benches too short to accommodate anyone but a small child, and lamps that “shed but a dying glimmer even while they burned.” Dining cars still being almost unknown on American railways, the train would stop at intervals for the travelers to take their meals at trackside hostels—and often stole away without even a whistle blast of warning. “You had to keep an eye upon it even while you ate,” Stevenson reported.
Stevenson described his companions as “mostly lumpish fellows, silent and noisy, a common combination.” Their conversation “ran upon hard times, short commons [the scarcity of food, water, land for farming], and hope that moves ever westward.” The one sentiment they all seemed to share, which Stevenson judged “the most stupid and the worst,” was scorn for the Chinese passengers, who were sequestered in their own car. Stevenson’s compatriots, mostly immigrants of European descent like himself, harbored the conviction that “it was the Chinese waggon, and that alone, which stank.” In truth, he wrote, as the train made its way west the atmosphere in the others became steadily more rank—the Chinese car was the exception, “and notably the freshest of the three.”
Along the way there were indications that for the passengers, the benefits of the westbound journey might fall short of what they had been promised: Trains as crowded as their own were passing them, headed back East. At every platform where they met, eastbound passengers cried to them through the windows “in a kind of wailing chorus, to ‘Come back.’ On the plains of Nebraska, in the mountains of Wyoming, it was still the same cry, and dismal to my heart, ‘Come back!’”
But there was to be no turning back, for the railroads had already etched themselves into the American landscape and American culture.
That had become clear after the momentous meeting at Promontory. In 1871 Charles Francis Adams Jr., then America’s most perceptive analyst of this new industry, had described the transformation underway. “Here,” he wrote, “is an enormous, an incalculable force practically let loose suddenly upon mankind.”
A muckraking journalist and politician, the grandson of one US president and great-grandson of another, Adams perceived that the burgeoning industry would exercise “all sorts of influences, social, moral and political; precipitating upon us novel problems which demand immediate solution; banishing the old before the new is half matured to replace it; bringing the nations into close contact before yet the antipathies of race have begun to be eradicated; giving us a history full of changing fortunes and rich in dramatic episodes.” The railroad, he concluded, would be “the most tremendous and far-reaching engine of social change which has ever blessed or cursed mankind.”
As Adams foretold, the railroad industry’s influence would penetrate every corner of American life, bringing ever more change to a country that, at the moment when the driving of a ceremonial golden spike marked the transcontinental railroad’s completion, was still struggl
ing to come to terms with the wrenching events of the Civil War.
In the ensuing decades, the railroads would visit upon America violent clashes among powerful entrepreneurs fighting for the prize of monopoly rights; strikes that would remake the relationship between management and labor; boom times and depressions; and stock market frenzies, panics, and crashes. Investors would be rooked, whole communities defrauded, tycoons created and others bankrupted, family fortunes established for generations and others destroyed by a single heir’s folly. Cartels would be assembled and shattered, politicians suborned.
The railroads would also give American farmers and manufacturers access to lucrative new markets for their produce and goods. Hamlets would be transformed into prosperous towns, towns into thriving cities, and the vacant territories of half a continent filled with homesteaders, very like the emigrants with whom Stevenson shared his cramped traveling quarters.
* * *
IT IS TEMPTING to view the railroad as an elemental, impersonal force, driving all before it. But of course it was the creation of human beings: the surveyors and engineers who mapped out the lines’ routes, the laborers who cleared the terrain and laid the rails, and ultimately the business leaders whose individual personalities, ambitions, determination, and morals commanded the others’ fates. The most notable among the latter group were Cornelius Vanderbilt, Jay Gould, J. Pierpont Morgan, and Edward H. Harriman. Each would play his hour upon the great stage of the railroad industry, attended by a host of supporting characters. Placed end to end, so to speak, they formed a continuum that for more than four decades, from the Civil War through the first years of the twentieth century, transformed America’s railroads from a patchwork of short lines waging constant self-destructive war with one another into a titanic enterprise that could justly be considered America’s first big business.
Historians have considered the role of outstanding individuals in shaping the fortunes of humankind ever since Thomas Carlyle codified his great man theory in a series of 1840 lectures on heroes: “They were the leaders of men, these great ones; the modellers, patterns, and in a wide sense creators, of whatsoever the general mass of men contrived to do or to attain,” he wrote.
Historians were soon engaging Carlyle’s argument, debating the extent to which even the most consequential figures of an age were responsible for shaping historical events: Were they like vessels in a river, making their way under their own power; or builders bending the river to their intentions or altering its course; or merely logs following the path the waters dictated for them? Today it is acknowledged, as the philosopher Sidney Hook wrote in his 1943 book The Hero in History, that history is a “balance between the part men played and the conditioning scene which provided the materials, sometimes the rules, but never the plots of the dramas of human history.” The question is where to strike the balance.
It is a question that pertains to the main figures in this book, a pageant of visionaries, speculators, bankers, and manipulators. In these pages they will be seen in their changing relationships as partners, competitors, allies, and enemies, until the two surviving players, Morgan and Harriman, confront each other in a battle of wills and capital that serves as a defining moment for the entire era, indeed, for the nineteenth century. Morgan and Harriman’s ferocious two-man contest for supremacy over the railroad industry would shake the nation’s financial markets, cost thousands of small investors their hard-won nest eggs, and produce dramatic, lasting changes in the relationship of business and government.
The actions of these powerful figures greatly influenced the shifting attitudes of the American public toward the railroads. At the moment of the first transcontinental railroad’s completion, Americans viewed the project as an emblem of the United States’ muscular capitalism and a symbol of its limitless possibilities. No other nation on earth had girded such a vast expanse with iron and steel rails; none so relied on its railroads as agents of economic growth and territorial expansion; none invited hosts of foreigners to its shores to cultivate millions of fallow acres. What struck visitors from abroad about the America emerging from the chaos of civil war was its enormous potential energy. When visitors came to take the measure of the New World, they traveled by rail to see it.
The completion of the transcontinental railroad in 1869 marked a new chapter in the American narrative. Despite its label, the road did not traverse the continent, running only from the Missouri River to Sacramento, nearly a hundred miles short of the coast. But the railroad frenzy it triggered was a real phenomenon. Total rail mileage in the United States soared every decade, despite occasional recession-related slumps—from fewer than 30,000 miles in 1860, to nearly 88,000 in 1880 and 163,500 in 1890.
The defining characteristic of the railroads was their size. America’s largest industrial enterprises in the 1850s, the business historian Alfred Chandler observed, were the textile mills of New England. The largest of these, the Pepperell Mills of Biddeford, Maine, had expenditures higher than $300,000 only once during that decade. In 1855, however, the cost of operating the New York & Erie Railroad reached $2.8 million. By 1862 the cost of running the Pennsylvania Railroad was $12.2 million. The Pepperell Mills employed eight hundred laborers; by the 1880s the Pennsylvania’s workforce numbered fifty thousand.
Just as the railway companies developed into the nation’s first big industry, their chieftains became the first business leaders to acquire social and cultural eminence. They would be lionized as a new American aristocracy—more so since they held their positions not by the chance of birth but by the exercise of intelligence and will. “The railway kings are among the greatest men, perhaps I may say are the greatest men, in America,” was the effusive judgment of Viscount James Bryce, a Scottish diplomat whose 1888 book, The American Commonwealth, updated Alexis de Tocqueville’s Democracy in America, a half century on. As Bryce wrote:
They have wealth, else they could not hold the position. They have fame, for everyone has heard of their achievements; every newspaper chronicles their movements. They have power, more power—that is, more opportunity of making their personal will prevail—than perhaps anyone in political life. . . . When the master of one of the greatest Western lines travels towards the Pacific on his palace car, his journey is like a royal progress. Governors of states and Territories bow before him; legislatures receive him in solemn session; cities and towns seek to propitiate him, for has he not the means of making or marring a city’s fortunes?
* * *
To less respectful observers these industrialists would become known as the robber barons, the period of their reign lampooned as “the Gilded Age” by Mark Twain and Charles Dudley Warner in an 1873 novel of that title. At the dawn of the new century they would come under attack—first by Theodore Roosevelt, who after taking office as president assailed the railroad magnates as “malefactors of great wealth,” and subsequently by congressional investigators who laid bare the secrets of what was then known as the “money trust” of Wall Street. By then Vanderbilt and Gould had passed on. But J. Pierpont Morgan and Edward Harriman still survived among the members of the caste of railway kings so admired by Bryce, and they became the Trustbuster’s targets.
The first of the railroad tycoons, Cornelius Vanderbilt, was a proprietor. His goal was to bring railroad companies together under his personal ownership. Vanderbilt’s sometime partner in this enterprise was the speculator Daniel Drew. Drew’s goal was to squeeze whatever gains he could from investors in railroad securities without ever having to build the actual roads. Vanderbilt and Drew were succeeded in the continuum by Jay Gould, whose method was to build an empire by accumulating smaller railroads, positioning himself at the fulcrum of the transactions in order to siphon the profits into his own pockets.
The last of the tycoons in this pageant, Harriman and Morgan, harbored genuine ambitions to convert the fragmented American rail network into a consolidated, stable, profitable industry that could serve the country, without skimping on profits for
themselves.
In this, Morgan and Harriman defined themselves, consciously or not, in opposition to the men who came before them. The Vanderbilts in particular would come to represent for Pierpont Morgan all that was disreputable and self-destructive about the railroads’ leaders in the first decades after the Civil War. He would make it his business to tame the unruly industry—eventually with Harriman as his last surviving adversary—but he would not relish the scale of the task bequeathed him. In his view his predecessors, like characters out of Trollope, were indifferent to whether or not a railroad was built, for fortunes were best made not by the construction of a railway, but by the floating of railway shares. Their attitude seemed to be that if these fortunes could be made “before a spadeful of earth had been moved,” how much more convenient. For the duration of his professional career, Morgan would strive to conduct himself as their polar opposite.
Morgan was a quintessential capitalist who liked to depict himself as chiefly an agent of shareholders. “Your roads,” he is said to have crisply informed an uncooperative railroad president, “belong to my clients.” Vanderbilt’s goal was to stifle competition affecting his own railroads; Morgan’s goal was to stifle all competition, so that the investments owned by his clients would have no headwinds interfering with greater profitability. Harriman’s goal was to demonstrate that the best path to profitability was to invest in his railroads’ quality until they could meet the demands of their customers.
By the end of the century, a profound revisionism with respect to America’s first big business had asserted itself. The United States had become industrialized, urban, imperial, and modern. But Americans were asking whether the drive for modernity had come at too great a cost, or made some individuals too rich and powerful for the good of the nation.
“The question might be asked how the railroad companies for many years in succession have been able to . . . pursue a policy so detrimental to the best interests of the public,” observed William Larrabee, a former governor of Iowa, in 1893, during the second of two successive economic depressions linked to the overbuilding and overinflated financing of the industry.
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