into federated or centralized compa- cottonseed oil, lead, sugar, tobacco,
nies . Started during the Civil War, and rubber . Soon aggressive indi-
the trend gathered momentum after vidual businessmen began to mark
the 1870s, as businessmen began to out industrial domains for them-
fear that overproduction would lead selves . Four great meat packers, chief
to declining prices and falling prof- among them Philip Armour and
its . They realized that if they could Gustavus Swift, established a beef
control both production and mar- trust . Cyrus McCormick achieved
kets, they could bring competing preeminence in the reaper business .
firms into a single organization . The A 1904 survey showed that more
“corporation” and the “trust” were than 5,000 previously independent
developed to achieve these ends .
concerns had been consolidated into
Corporations, making available a some 300 industrial trusts .
deep reservoir of capital and giving
The trend toward amalgamation
business enterprises permanent life extended to other fields, particular-
and continuity of control, attracted ly transportation and communica-
investors both by their anticipated tions . Western Union, dominant in
profits and by their limited liability telegraphy, was followed by the Bell
in case of business failure . The trusts Telephone System and eventually by
were in effect combinations of cor- the American Telephone and Tele-
porations whereby the stockholders graph Company . In the 1860s, Cor-
of each placed stocks in the hands nelius Vanderbilt had consolidated
of trustees . (The “trust” as a method 13 separate railroads into a single
of corporate consolidation soon gave 800-kilometer line connecting New
way to the holding company, but the York City and Buffalo . During the
term stuck .) Trusts made possible next decade he acquired lines to Chi-
large-scale combinations, central- cago, Illinois, and Detroit, Michigan,
ized control and administration, and establishing the New York Central
the pooling of patents . Their larger Railroad . Soon the major railroads
capital resources provided power of the nation were organized into
to expand, to compete with foreign trunk lines and systems directed by
business organizations, and to drive a handful of men .
hard bargains with labor, which was
In this new industrial order, the
beginning to organize effective- city was the nerve center, bringing
ly . They could also exact favorable to a focus all the nation’s dynamic
terms from railroads and exercise economic forces: vast accumulations
influence in politics .
of capital, business, and financial in-
The Standard Oil Company, stitutions, spreading railroad yards,
founded by John D . Rockefeller, smoky factories, armies of manual
was one of the earliest and stron- and clerical workers . Villages, at-
gest corporations, and was followed tracting people from the countryside
rapidly by other combinations — in and from lands across the sea, grew
158
OUTLINE OF U.S. HISTORY
into towns and towns into cities al- meters from Chicago . Moreover, to
most overnight . In 1830 only one of avoid competition rival companies
every 15 Americans lived in commu- sometimes divided (“pooled”) the
nities of 8,000 or more; in 1860 the freight business according to a pre-
ratio was nearly one in every six; and arranged scheme that placed the to-
in 1890 three in every 10 . No single tal earnings in a common fund for
city had as many as a million in- distribution .
habitants in 1860; but 30 years later
Popular resentment at these prac-
New York had a million and a half; tices stimulated state efforts at regu-
Chicago, Illinois, and Philadelphia, lation, but the problem was national
Pennsylvania, each had over a mil- in character . Shippers demanded
lion . In these three decades, Phila- congressional action . In 1887 Presi-
delphia and Baltimore, Maryland, dent Grover Cleveland signed the
doubled in population; Kansas City, Interstate Commerce Act, which
Missouri, and Detroit, Michigan, forbade excessive charges, pools,
grew fourfold; Cleveland, Ohio, six- rebates, and rate discrimination .
fold; Chicago, tenfold . Minneapolis, It created an Interstate Commerce
Minnesota, and Omaha, Nebraska, Commission (ICC) to oversee the
and many communities like them act, but gave it little enforcement
— hamlets when the Civil War be- power . In the first decades of its ex-
gan — increased 50 times or more in istence, virtually all the ICC’s efforts
population .
at regulation and rate reductions
failed to pass judicial review .
RAILROADS, REGULATIONS,
President Cleveland also opposed
AND THE TARIFF
the protective tariff on foreign goods,
R
which had come to be accepted as
ailroads were especially impor- permanent national policy under the
tant to the expanding nation, and Republican presidents who dominat-
their practices were often criticized . ed the politics of the era . Cleveland, Rail lines extended cheaper freight a conservative Democrat, regarded
rates to large shippers by rebating a tariff protection as an unwarranted
portion of the charge, thus disadvan- subsidy to big business, giving the
taging small shippers . Freight rates trusts pricing power to the disadvan-
also frequently were not proportion- tage of ordinary Americans . Reflect-
ate to distance traveled; competition ing the interests of their Southern
usually held down charges between base, the Democrats had reverted
cities with several rail connections . to their pre-Civil War opposition to
Rates tended to be high between protection and advocacy of a “tariff
points served by only one line . Thus for revenue only .”
it cost less to ship goods 1,280 kilo-
Cleveland, narrowly elected in
meters from Chicago to New York 1884, was unsuccessful in achieving
than to places a few hundred kilo- tariff reform during his first term .
159