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Excerpt from The Culture of Make Believe

Vanderbilt and Morgan (p. 414)

From chapter "Distance"

In the 1870s, most Americans suffered through this country’s worst depression up to that time, precipitated by the failure of the Northern Pacific Railroad Company. The suffering of the railroad investors would make unbelievably maudlin fiction. One man sent Jay Cooke, the primary financier for the railroad; a letter saying, “At the request of Eliza———-, a poor blind woman who holds a $500 Northern Pacific bond … I write to state to you this bond is all her earthly wealth, and the loss of it will oblige her to go to the poor house. I thought perhaps you could do something for her in her destitution…. She is without father, mother, sister or brother, and what she made she had by honest labor. She told me . . . that if she could only see to work she would not care.” Another letter: “I wish you would try and make up the money that you owe me, three hundred and sixty dollars ($360). I worked twenty-eight years to get that little sum together. I have to support an insane husband and I am a poor woman. You told me and my little girl when we went to the bank to get out our money that all was safe, and if anything happened to the bank you would let us know. Did you do it? My number is 1127 Vine Street. I shall look for the money, for of course it is a little bill to you which you could pay out of your private purse and make us comfortable.” Mr. Cooke did not suffer so greatly. He maintained an interest in Northern Pacific, as well as many other companies, and, soon enough, became a partner in a Utah mine that brought him, from this one enterprise alone, $80,000 a year.

It wasn’t just investors in Cooke’s railroad who suffered. Across the whole nation, business declined 32 percent, and hundreds of thousands of workers were forced out of their jobs. In 1874, ninety thousand workers in New York City, nearly half of them women, had to sleep in police stations. By 1877, even The New York Timesnoted that because of poverty and pollution “there will be a thousand deaths of infants per week in the city.”

[J.P. Morgan] didn’t suffer, though: He turned the economy’s collapse into a seven-figure profit, telling his father, “I don’t believe there is an other concern in the country [that] can begin to show such a result.”

In 1877, massive strikes broke out across the country. In Martinsburg, West Virginia. In Baltimore, Maryland (where half the National Guardsmen quit in disgust after a bloody battle that left ten strikers, including young boys, dead). In Pittsburgh (where corporate and governmental officials, after learning the local militia wouldn’t kill their fellows, called in the militia from Philadelphia, and where twenty-six people, mostly bystanders, were later killed: “The sight presented after the soldiers ceased firing was sickening. Old men and boys . . . lay writhing in the agonies of death, while numbers of children were killed outright”). In Harrisburg, Pennsylvania (where the militia gave up their guns and shook hands with strikers). In Chicago, Illinois (where twenty-one men and boys were killed by police and Morgan-paid soldiers: “The sound of clubs falling on skulls was sickening for the first minute, until one grew accustomed to it. A rioter dropped at every whack, it seemed, for the ground was covered with them”). In St. Louis (where, saying, “The people are rising up in their might and declaring they will no longer submit to being oppressed by unproductive capitalists,” blacks and whites set aside their differences to shut down the city in a general strike). In New York City (where militia fraternized with workers, but police did not; after a peaceful gathering closed, with the words, “Whatever we poor men may not have, we have free speech, and no one can take it from us,” police charged, clubs flailing).

Apart from profit derived from doing his “obvious and sacred duty,” the strikes didn’t matter much to Morgan. The poor continued to be poor, and continued to live in their “infant slaughter houses” where children were “damned rather than born.”

In 1879, William Vanderbilt, the country’s richest man, approached Morgan and asked him to rescue the New York Central Railroad from the American public. William’s father, Cornelius, had died two years earlier, leaving his son with $100 million, an 87 percent share of the ownership in the railroad, and a host of legislators no longer on the take. Tired of poor, expensive, and dangerous rail service, the public began clamoring for action. Congress and the New York State legislature, made vague attempts to tax railroad profits, which, to that time, had not been taxed. William Vanderbilt’s first response to public outrage (this explicitly directed at the cancellation of a popular express train) was, “The public be damned; I’m working for my stockholders. If the public want the train why don’t they pay for it.” Note that the public had paid for the train through extensive grants. Note, also, that since he owned 87 percent of the stock, he was merely saying that he was working for himself (as opposed to working for the greater good of the community), which is of course the prime manifestation of a destructive culture. His second response was to cut railroad workers’ wages by 10 percent. His third was to secretly convince New York’s governor to send troops to quell the ensuing riots. His fourth was to tell a reporter, “A public sentiment is growing up opposed to the control of such a great property by a single man or a single family. It says we rule by might. We certainly have control of the property by right.” His fifth was to ask Morgan for help in preventing the taxes from being implemented.

Morgan agreed, then sold 250,000 shares of Vanderbilt’s New York Central stock—quietly, so as to not cause a panic—removing Vanderbilt as majority owner. For his services, [Morgan] received three million dollars, as much as the seamstress I mentioned earlier in this book (the one who said, “Sometimes in my haste I get my finger caught and the needle goes right through it”) would have made in 12,785 years. In addition, and far more importantly, Morgan was made director of the company. By maintaining proxy votes of shares he had sold, Morgan gained effective control over the railroad. Although control of the railroad became no less concentrated, having merely shifted from Vanderbilt to Morgan, legislators backed off from their threat to impose taxes.

The next ten years were to see this oft-repeated pattern, as Morgan set out, in his words, to secure “harmony among the trunk lines.” The question of legality was not important to him; when a counsel said of a Morgan action, “I don’t think you can do that legally,” Morgan replied, “I don’t know as I want a lawyer to tell me what I cannot do. I hire him to tell me how to do what I want to do.” The West Shore Railroad, the Pennsylvania, the South Pennsylvania, the Philadelphia and Reading. Each of these and more fell under his control. Others were brought together under “Gentlemen’s Agreements” brokered by Morgan—at Morgan’s house—which fixed the hauling prices of parallel lines. After one of his “Gentlemen’s Meetings” he told a reporter, “Think of it—all the competing traffic of the roads west of Chicago and Saint Louis placed in the control of about 30 men!” His goal was to reduce that number to one.