The Rise of Multicultural America: Economy and Print Culture, 1865-1915

SEVEN: Corporate America

7 corporate america In his widely influential Business Cycles: A Theoretical, Historical, and Statistical Analysis of the Capitalist Process (1939), Joseph Schumpeter observed, ‘‘It was not enough to produce satisfactory soap, it was also necessary to induce people to wash.’’∞ During the post–Civil War era, Americans were induced to wash. The rise of big business and the extraordinary expansion of the American economy between 1860 and 1920 were facilitated by several factors. Between 1860 and 1900, 676,000 patents were granted by the U.S. Patent O≈ce, spurred in part by the development of steel production and the application of electricity to industry. The dramatic influx of new inventions supplied techniques for converting the nation’s vast natural resources into manufactured products. Long before Standard Oil, there was the American railroad, organized in the 1830s and 1840s; by the 1890s there were over 200,000 miles of track throughout the country.≤ The national railroad system educated employees, Andrew Carnegie as well as unionized workers , in the methods of big business, while helping to transport people and products to growing domestic and foreign markets. America’s economy could not have developed as it did in the nineteenth century without the continual renewal of the American labor supply by immigrants who came for economic opportunity and helped to perpetuate economic growth. From 1800 to 1900 America was transformed into a mass society (its population increasing from 5.3 million to 76 million) distinguished by an astonishing diversity unequalled by any other nation in the world. While multiculturalism was especially identified with urban areas like New York and Chicago where 80 percent and 87 percent of the population, respectively, 214 :: corporate america were immigrants or children of immigrants, small industrial towns like Fall River, New York, and Scranton, Pennsylvania, were even more ethnically mixed. The same was true of the West, which absorbed more than 8 million immigrants who came to stake land claims in places like South Dakota, Kansas, and Nebraska. These settlers brought with them foreign agricultural strains that often proved more durable than the homegrown ones. The Kubanka and Kharkov wheat introduced by Russian Mennonites in Minnesota, for example, flourished so remarkably that by 1914 half of the winter wheat consumed in the United States was of the Kubanka and Kharkov varieties.≥ In addition to these material and human resources, American investors and entrepreneurs benefited from a general economic commitment to diversification, toward manufacturing, banking, and services and away from agriculture. Above all, the American legal system was uniquely hospitable to business enterprise. Not only were there few inhibiting tari√ barriers between states and regions but venture capitalists were protected against foreign competition by direct and indirect subsidies. Corporate and contractual laws, lenient bank and bankruptcy laws, and the relative freedom from the demands of organized labor and the claims of environmentalists , all made for a society unusually hospitable to business enterprise. With a government comparatively young and small, no aristocracy, no church, and no standing army, the nation had few impediments to the expansion of market forces. In 1861, the only big business in America was the railroad; by the time the Supreme Court dissolved Standard Oil, American Tobacco, and Du Pont in 1911, trusts were a fixture of the economy. Henry Adams and his brother Charles characterized the railroad as a modern form of piracy in their scathing and prophetic critique of big business, Chapters of Erie (1886). But critiques of this kind did little to prevent what one business historian called the great explosion of mergers between 1895 and 1905, when three hundred business firms were formed into trusts, many of them firms that became household names over the course of the twentieth century: Chiquita, Eastman Kodak, Coca-Cola, Reebok, General Electric . One hundred and eighty nine of the Fortune 500 firms of the 1990s were founded between 1880 and 1920. In the seven years between 1897 and 1904 alone, 4,227 American companies were reduced to 257 combinations, occasionally by force.∂ The theoretical purpose of the trust was to consolidate smaller companies and centralize their management, thus making production processes cheaper and more e≈cient. Recurrent depressions or panics—in the 1870s, 1880s, and 1890s—also motivated a search for means of controlling prices corporate america :: 215 and output in order to regularize profits. While their methods paralleled those of industrial giants, many of the companies...