In Pursuit of the Almighty Dollar

by Ben B. Seligman
Dial, $10.00
In our history and literature, the ordinary businessman tends to be either a prosaic figure or a subject for satire and is, on the whole, reasonably well behaved. The big businessman is frequently something quite different, an outstanding figure of drama who turns marketplaces into bloody battlefields. Thus, the making of the great fortunes, and the makers of them, have had their own kind of merciless plunder and iniquitous charm, and their own prominent role in the making of America; and when the chronicling of their lives goes beyond merely trying to divert or dazzle us, it can be very rewarding. The late Ben B. Seligman’s The Potentates in great measure has this value. Though the climate he works in and its leading characters and more lurid conquests are often familiar, his portrayal of business from colonial to computer times is the work of an economist who can articulate issues, of a historian who can delineate changes, and of a Labor functionary who wields a formidable measuring stick — or call it birch rod—in administering judgments.
The historian offers four significant changes in the nature of his potentates, characterizing them chronologically as The Individualists, The Masters, The Makers, and The Procurators useful distinctions in terms of autres temps but with an overpowering element of plus ca change in the pursuit of profits. Indeed, the more accurate theme of The Potentates is a lust after exorbitant profits, after outrageous fortunes. In the period of the Individualists—roughly from the early fur traders to the heyday of the greatest fur trader of them all, John Jacob Astor—this exists, to be sure, on a relatively miniature scale, just as it functions, for much of the way, under a mercantilist system. For Britain permitted the colonics to trade only with the mother country and paid the colonists in merchandise rather than money. This produced, however, an illicit pattern for eluding the prescribed one, whether as outright smuggling or as three-cornered trading—for example, in colonial rum. West African slaves, and West Indian sugar. If the colonial farmer seemed small potatoes, his was yet the root profession, and from living off the land he might acquire a great deal more of it. If the trapper seemed like penny buckshot, a fur trader like William Pynchon could be exporting, by the 1650s, 14,000 pounds of beaver skins.
In the cities, as time passed, merchants grew wealthy and influential; by the mid-eighteenth century Thomas Hancock of Boston had become “wholesaler, retailer, importer, banker and landlord,” his store a kind of premature department store, his interests extending to manufactures and mines. Hancock’s fortune passed to his nephew, the famous John, who was in actual fact somewhat infamous, being writ large for smuggling, bribing, and the use of thugs. As business expanded, its need for manpower brought across the Atlantic indentured servants, then 50,000 British convicts, and finally African slaves, these last the making of New England’s first millionaires.

Shipping, real estate, and mercantile activity dominated the North’s prerevolutionary economy; a depression in the 1760s, born of British restrictions, set the scene for the Tea Party and Paul Revere, and for a war during which business far from suffered and trading with the enemy was by no means a sin. The rebels could be profiteers as well; supplies were withheld from the Army to force prices up, and our first big moneyman, Robert Morris, as Superintendent of Finance for the Continental Congress, frequently let his friends and himself in on a good thing in the matter of contracts. Despite a term in debtors’ prison, Morris was by 1787 the richest man in America; it has often been said that he financed the Revolution; it has also been said that the Revolution financed him. Either way it was largely done with paper money: so great did inflation become that in Philadelphia stockings cost $400 a pair. After the war, the new sovereign states quarreled so often over commerce as to need, and to create, a Constitution which became “a document intended to advance the common economic interests of men of business.”

During the half-century that followed, business briskly expanded. Poor land in New England sent men to the building of ships and to sailing the seas; to the China trade and the whaling trade; to privateering and piracy; to carrying many kinds of cargo, even ice for hot countries. Manufacturing took hold in New England; elsewhere, John Jacob Astor came to dominate the fur trade by cheating when he bought and overcharging when he sold. By 1816 there were almost 250 state banks, possessing far more currency than specie. Boston’s Andrew Dexter got hold of a bank and its banknote plates, ran off bills for himself which he had his cashier sign after work and which he then sold. Getting hold of a second bank, he andrewdextrously fed each with the other, and from a $45 investment issued $800,000 in notes.
Business also expanded geographically. The Louisiana Purchase had opened great spaces for farming and prospecting; beyond the Appalachians other great spaces were opened, with speculators trying to buy huge tracts of land, such as a million acres, from Congress. By merely sitting at home Astor bought up all the land on Manhattan Island he could lay his hands on, to become by 1847 the richest man in America. But it was not a stay-at-home era; new transportation —first canals and then railroads— made for travel, emigration, increased business. From a single Staten Island ferryboat Cornelius Vanderbilt had come to own thirty-four steamships and ferries and seventeen ocean liners before his elderly switch to railroads —they to become the greatest and most viciously fought over of nineteenth-century industries. But by then the rough, barefisted Individualists had given way to the ruthless, barefaced Masters.
By the 1840s the railroads had pushed beyond the Appalachians, were carrying the mail, were getting vast federal, state, and local subsidies —every town involved dreamed of becoming a terminus—and great land grants as well. By 1853 the first of the big railroad men, Erastus Corning, had created the New York Central, soon to become the largest corporation in America, and quite large in paper holdings and watered stock. By the time Vanderbilt divested Corning and Dean Richmond of the Central, the great railroad drama—or serial story—had begun. Mr. Seligman has not drawn on Peter Lyon’s blasting of the principal railbirds in To Hell in a Day Coach, but certainly he nowhere challenges Lyon’s depiction of nineteenth-century railroad history as an epic of rapacity and swindling, with an all-star scoundrel cast that make bit parts of the Jesse Jameses. The century’s two most acrimonious clashes came, first in the 1860s over the Erie, in which Vanderbilt got licked by Jay Gould; and then, at the end of the century, in the Northern Pacific-Great Northern war when James J. Hill, J. P. Morgan, et al., fought E. H. Harriman, Jacob H. Schiff, James Stillman, et al.—a threatened slaughter that virtually wound up in a standstill. To polish off the Titan among industries, the railroad continued to lead in importance through the first quarter or more of the twentieth century; since then, despite its passenger-be-damned tactics and its tin-cup histrionics, it would seem to have a pretty fair record of profit-making poverty.
For half a century cotton proved of decided importance to business as the South’s great staple and even greater export. Tremendously dependent on slave labor, the South, in its need for it, had thoughts of annexing Cuba. Slavery itself, says Mr. Seligman, was not a big issue; indeed, until well into the Civil War it proved economically a workable system, with investment returns running as high as 12 percent. (Slaves also counted politically, with five blacks the equal of three whites in apportioning House seats.) The War, while financially wrecking the South, greatly enriched Northern manufacturers and businessmen. Their war profits led to reckless spending and parvenu ostentation, this the gaudy vestibule to the Gilded Age. War profits hastened the coming of age of the new Masters, whose major geography was East and West rather than North and South. There were all sorts of industrial expansion; of technological innovation, such as the sewing machine; and of new techniques, such as selling the sewing machine on the installment plan. The tactics and antics of the railroad men would be imitated, the sleight of hand with securities proliferated, the new breed in potentates would gladly learn from the old— how, for example, Commodore Vanderbilt boasted of outwitting a friend in business; or, after a squabble over a new house, threw his wife into an insane asylum.
The Masters, though they would establish the huge impersonality of corporation rule, could claim a striking image, an appalling carnage, a robber-baron polity. They robbed the Indians, they cheated the white man, they chucked out the squatters, they squeezed out the farmers, they greased palms, they twisted arms, they knifed one another. With them, a mere eye for an eye would have seemed imbecilic philanthropy. But where “Southerners stole thousands, Northerners took millions.” Not everything, to be sure, smacked of railroad yards or Wall Street; there was a big new traffic in, among other things, meat-packing, trolley cars, tobacco, the department store, the live-and-ten-cent store, the mail-order business. Furthermore, two of Mr. Seligman’s Big Three among the Masters were to rule over “new” industries: “Steel belonged to Carnegie, oil to Rockefeller,” along with Wall Street to J. P. Morgan.
The history of all three is far from unknown, in outline if not in detail: a Rockefeller detail new to me is that John D., Sr.’s father “prided himself on training his sons to be sharp by cheating them whenever he could.” His son John, who early in his career was to reject oil as “too wild a business,” was to attain through it the “most complete monopoly ever built in America.” Monopoly, it seems, was from far back Rockefeller’s goal and was granted him, he believed, by divine decree. By the time Standard Oil’s enrollment had reached forty companies, Rockefeller, in the manner of a college president, allotted his partners various professorial chairs — in pipelines, contracts, marketing, manufacturing, and finance; his own pet course in the secret rebate, or kickbacks on freight charges, proved an immense success. On and on, and bigger and bigger, went Standard, an international empire declared an illegal monopoly by the Supreme Court in 1892; on and on it blandly continued, undemonopolized, to be excoriated by Henry Demurest Lloyd, exposed by Ida Tarbell, and fined $29 million by Judge Kenesaw Mountain Landis (this overturned on appeal), until in 1909 it was ordered dissolved by the Supreme Court. But the family fortune went marching on. Its history is commensurate with its holdings, both of them too vast for easy summarizing.
Andrew Carnegie, who read books and went to concerts, hobnobbed with Herbert Spencer, and played host to Matthew Arnold, was different: he wore gloves over his brass knucks, displayed crocodile tears along with crocodile jaws, and spouted moral maxims while spreading nasty rumors about his rivals. Nor, we are told, was he a practical iron man or even a true steel one; his forte was salesmanship. His love of the workingman led him to direct the notorious Homestead Strike from abroad, while pretending to know nothing about it. He bought people at the “book price,” but when he tried to do this to his wide-awake partner, Henry Clay Frick, Frick stalked out and brought suit, denouncing Carnegie as a fraud and a cheat; what chiefly emerged was the company’s enormous profits. Indeed, so enormous by now was Carnegie’s fortune that he was as ready to sell out as were his rivals to buy him; in a transaction negotiated by J. P. Morgan, Carnegie stepped aside for almost $500 million in gold bonds.
Morgan wore no gloves and wielded a mallet. His story also is not easily summarized but can be epitomized as sheer dictatorship; he dealt, it has been said, in ultimatums. He would also float stocks and water them, create crises and settle them; his operations became worldwide: at one time he or his partners held seventy-two directorships in “forty-seven of the larger corporations,” and the - year before he died he “owned or dominated” twenty-eight railroads. He was a mighty master and scarcely equaled was his masterpiece: the formation of U.S. Steel. Hatefully magnificent, he needed no statue, being cast in marble.
With the corporation fully created by the turn of the century, its enjoyment of limited liability proved an unlimited asset. It had become “the legal device by which a nation’s resources could be plundered. . . . [It] hastened the growth of a paper economy, one that dealt in intangibles and promises to pay as a major form of wealth.” All this found a gospel in versions of laissez-faire and in Social Darwinism, an economic survival of the fittest. It had lawyers invoking that previously radical document, the Declaration of Independence, and judges discovering that the “pursuit of happiness” meant the right to enjoy property as one saw fit.
By now the Makers were supplementing the Masters; they were inventors, adapters, and the like, who did not forget to invent a suitable symbol, the cash register. With Edison and others as pacesetters, there was a kind of technological gold rush: some inventions wore huge price tags, others were up for grabs, and by hook or by crook, by perjure or merger, all sorts of potential sources of profit changed ownership. One of these, the automobile, changed American life, and to some extent, its economy. In it, says Mr. Seligman, steel found its biggest customer; and certainly oil and rubber must have been made happy also. Though European-born, the automobile was by 1903 being top produced in America. What was needed for mass production was an assembly-line technique; what was needed from it was a good low-priced car. Henry Ford soon turned out a very successful one for $850; in 1908 he turned out, for $850, his sturdy indestructible Model T, which put Ford far in the lead of his competitors—by 1912 there were 7000 Ford dealers. To achieve such success Ford merely converted the worker into part of the machinery, with a job that seemed to take place in a jail. Ford’s famous five-dollar “profitsharing” day—a benefaction that won him the name of a radical—was actually denied to a large percentage of workers, and simply drove even harder, on the assembly line, those who were granted it. His career as a leading Maker, and, with his antiSemitism and antilabor tactics, a trouble-maker, ended in a senility from which his grandson Henry II rescued the business. The other big pioneer automobile man, W. C. Durant, would early merge Buick, Cadillac, Oldsmobile, Pontiac-to-be, and much else as General Motors. Having created an empire, he got into financial trouble with it and, though he held on, first Walter P. Chrysler, then Chevrolet, and finally du Pont managed or took control of it.
Mr. Seligman includes the du Ponts and the Mellons among the Makers, and certainly the du Ponts are. What with their tremendous expansion from a gunpowder start—dynamite, chemicals, paints, plastics, Nylon (which their chief chemist discovered), 1200 items in all by 1958— theirs is a great laboratory fortune, estimated at $7 billion. But the MelIons —at any rate their Maker, Andrew—were really Masters. They too boast a great many items, if industries can be called items—steel, oil, aluminum, coal, coke, carborundum, trolley cars, shipbuilding, plate glass, banks; but there is nothing resembling a laboratory. Indeed, Andrew Mellon did a good deal of business with the old Masters—Frick, Carnegie, Rockefeller; he also conspicuously promoted the interests of business while three times Secretary of the Treasury; and he had gone many times to court before going to the Court of St. James’s. When Mellon’s big Aluminum Corporation was enjoined from monopolistic practices in 1912, “the proscription was blithely ignored.” When monopolistic charges were renewed in the 1920s, and the Attorney General, Harlan Fiske Stone, was ready to prosecute, he was hurriedly elevated to the Supreme Court, and the company totally exonerated by a Justice Department examiner who was not a lawyer, not an economist, not even an accountant, but merely a former clerk. In his elegantly icy and greedy way Andrew W. Mellon seems perhaps the least “sympathetic” potentate of them all.
With our last group, the Procurators, we are bumping up against today’s realities. Mr. Seligman is treating of “representatives” who, within a corporation structure, have taken over one company after another; is treating of corporations that have taken over one industry after another; and again of corporations that have moved into one country after another. “The Procurators” carries us from the Boom and the Crash (the Guaranty Trust judged the market collapse “a favorable development”) through the Depression (Mencken thought FDR the weakest man the Democrats could have nominated) into the explosive prosperity following World War II. In size and dollar signs alike, almost everything doubled in less than twenty years. Millions, by the sixties, had become mere pocket money; business talked in billions—as the assets of more than thirty utilities, the deposits in close to fifty banks, the sales of over a hundred industrial firms. The economy was corporation-rampant and corporation-run, while still to come was the mammoth era of mergers— almost 3000 in the year 1967. In his final chapter on the Procurators Mr. Seligman sums up the period economically as the Age of Space, which is to say of commercial air travel from its early mail-carrying through passenger-carrying to military-industrial and astronaut days.

A quite long book, The Potentates covers a great deal of ground in all parts of America and all periods of its history; treats of a great many businesses and a vast gallery—a virtual rogues’ gallery—of businessmen. There is a good deal, also, of the role that government and the law have played in our business history. All this is done at the sound level of haute vulgarisation, of channeling knowledge into applied rather than abstract economics, of brightening analysis with anecdote, and of largely elucidating the “principles” of big business through the practices of big businessmen.

Doubtless economists and historians will question some of Mr. Seligman’s interpretations and judgments, which have behind them something of Veblen, Gustavus Myers, Charles Beard, and others; but the book is free of the suppressions of the “authorized” biographies and the shoddiness of the overpopularized ones. There are minor matters to cavil at. The last third of the book suffers from a literal embarras de richesses, its clutter of fortunes making for a certain effect of sprawl, and some of its biographical sketches seeming pretty perfunctory. The book can also be rather jumpy in its chronology—thus AT & T precedes Alexander Graham Bell, and Henry Ford has lived and died before Thomas Edison comes on the scene. The only omission I would complain about is TV. True, the book deals earlier, though briefly, with radio; but TV is surely the most pervasive element in today’s cultural life, and in the most commercial form. It is all the worse big business because it should never have become big business, but should, after the British fashion, have been chiefly a public service. As it stands, it is big business operating in a lackey relationship with bigger business. It has about it nothing of the great potentates’ bullying or swagger; with its vulgarizing, its compromising, its bowdlerizing, it recalls, in cultural terms, Disraeli’s crack about O’Connell, that he “committed every crime that does not require courage.”