America’s Long Journey: The North and the Gilded Age

Nineteenth century (1900 back to 1800)

The North and the Gilded Age

There is a reason why the Civil War was followed by the Gilded Age. War defeats every society that engages in it, because it changes things. What both North and South alike lost in the war – beyond the loss of 600,000 men in the prime of life – was the prewar way of life. It wasn’t just the pre-war South that was gone with the wind. The North of thriving little communities and human-scale enterprises was destroyed as well.

What the North lost in the war isn’t necessarily obvious, but it wasn’t trivial. To beat the slavers, the government had to call up an army to beat them with, and war means profit, and the piling-up of profit means creating another class of predators. It was obvious in the postwar era that the government was being bought and paid for, and where do you think the money was coming from? It was money – and a big pile of it – that various companies had made on the war. Some made it honestly and some didn’t, but regardless, they had it, and they were not shy about using it to protect their interests.

The war piled up so many fortunes, it delivered the government into the hands of those that could pay for it. Ward, municipality, county, state, federal, all the way up and all the way down, it was the same. Now you could say – and it would be right in a way, and to a degree, that no matter what the new problems were, at least we had eliminated chattel slavery. People didn’t own other people and weren’t able to whip and kill and abuse them however they wanted. You could say at least the women weren’t owned by a class of owners, as in slave days. And that’s sort of true. But there were plenty of other kinds of slavery left.

Think of all those penniless whores of the postwar era. And why were people working in sweatshops 12 and 16 hours a day, for nothing much? Why were people treated as bad as the better-off slaves had been? Because economically they were slaves.

Why do you think the economic powers behind the government let in those millions of immigrants? Sentiment, as themselves the descendants of immigrants? Or was it to keep down wages and provide plenty of new fodder for their mines and factories? Yes, families did better themselves, over time, but that was just a side-effect that the owners didn’t care about one way or the other. It wasn’t why they were enticed here.

Can you say that people have economic freedom when they had to have a job and had to take what they could get, and what they could get was determined by a few men at the top? Can you say that people have political freedom, merely because they can choose between two sets of obedient puppets? One reason Theodore Roosevelt elicited such wild enthusiasm is that the people could see that here was one of the privileged elite who really did care about the welfare of the common man and woman.

Did the people have the ability to determine their own lives? Ask the strikers who were cut down by the National Guard, or beaten by the police, or by the scabs the police watched do it. Did they get clean water? Did they get nutritious food? Did they even get sunlight? You wouldn’t think a people that called themselves free would put up with having to live scarcely ever seeing the sun, would you? You might say it is one more effect of secession and civil war, which turned a nation of small towns governing themselves into a nation of cities governed by the agents of powerful corporations responsible to nobody but their directors.

Credit Mobilier and corruption

Perhaps this is too much space to give to one man’s crookedness, or perhaps the story of how one man’s crookedness bilked government and consumers may stand in for many others that might be told. Either way, it is important to remember that great enterprises may be accompanied by large-scale stealing, and that sometimes, perhaps, the great enterprise would never have been successfully undertaken unless some men had seen in it a way to prosper without risk.

The next section details the building of the great transcontinental railroad, built from the east by the Union Pacific and from the west by the Central Pacific. Here we look at the seamy underside of that project. The Central Pacific was dominated by four ambitious businessmen whose names are still legend — Charles Crocker, Leland Stanford, Collis Huntington and Mark Hopkins. They did what they needed to do to finance the project, and they exploited every loophole to get government funds, but they stayed more or less within the law. The Union Pacific was a different matter. In contrast to the relatively straightforward arrangements for the Central Pacific, the Union Pacific was involved in one of the biggest scandals of the age.

The man behind the Union Pacific was Dr. Thomas Durant, when went from medicine to grain exporting to building railroads. In the 1850s, his contracting company, Farnam and Durant, raised the capital and managed construction for the Mississippi and Missouri Railroad (M&M). In 1862, Durant’s new company, the Union Pacific, was chosen to build the eastern section of the transcontinental railroad, and Durant, as general agent for the UP Eastern Division, was charged with raising money, acquiring resources and securing favorable legislation for the company.

It wasn’t supposed to be his company. The Pacific Railway Act of 1862 limited individual holding in Union Pacific to 10 percent of the total. But this made it hard to sell stock, so Durant persuaded investors to buy the stock in their own names, using money borrowed from him for the required 10% down payment. In this way, he issued $2.18 million of UP stock to subscribers and wound up controlling half the stock, which meant that he ran the company as he pleased.

Meanwhile, he made about $5 million manipulating the stock market, using rumors to run up the value of his M&M stock, then secretly buying competing rail line stock, then starting rumors that the new railroad was going to connect with those lines, then selling those stocks at inflated prices and buying back the M&M stock at depressed prices.

Then, through an associate, he had Union Pacific accept the construction bid of a company called Crédit Mobilier, which just happened to be a company he secretly owned with a partner. No other bids were solicited. And so Union Pacific paid Credit Mobilier to build the railroad. In essence, Durant hired himself to construct the railroad, paying Credit Mobilier with money given to the Union Pacific by government bonds and risk-taking investors. Credit Mobilier subcontracted the actual work to real construction crews, who charged significantly less than Credit Mobilier charged the Union Pacific, and keeping the difference.

The common unified ownership of the two companies was successfully concealed for years, as was the fact that the same corporate officers and directors were on both sides of every major construction contract drawn up between the Union Pacific and Crédit Mobilier. The company escaped detection by the simple measure of bribing enough members of Congress.

So, you might ask, who was harm by all this crooked dealing? Count the bodies.

First, the other investors, and the stock market speculators, and the owners of the other railroads whose stock prices he manipulated, and the railroad itself. Credit Mobilier charged the Union Pacific at least $23 million more than the actual cost of construction. As a result of this systematic looting, Union Pacific faced bankruptcy within three years of completion of the road, despite having received millions in government subsidies. Those who had invested in the railroad found themselves with nearly worthless securities on their hands. The money went into the construction company, and thence into the pockets of the crooks who owned it.

Second, the body politic. Durant put so many politicians on the payroll, directly or indirectly, that it became a national scandal when the facts finally began to emerge during the 1872 presidential election campaign.

Third, and perhaps worst, all the railroad’s future customers – mostly dependent one the one road, no competition existing – who were systematically overcharged for decades because what should have been a profitable enterprise began life crippled by shoddy workmanship that had to be corrected, and capital shortage caused by so much money having been stolen. The missing capital stock of these roads was estimated at $180,000,000.

And, worst of all, they got away with it. None of the crooks involved was ever punished by law. It is to be hoped that there is a hell, and that they are presently being roasted, but I’m afraid that’s too good to be true.

One thought on “America’s Long Journey: The North and the Gilded Age

  1. So fascinating. Economic slavery made it all possible and is a continuing foundation of our country’s base of operation. Not hard to see how we’ve gotten to the leadership we’ve gotten to. Really interesting reading, Frank. Stuff I haven’t thought about in a long time and have never thought about in quite the way you present it.

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