The term "robber baron" was applied to powerful nineteenth-century industrialists who were viewed as having used questionable practices to amass their wealth. On the other hand, "captains of industry" were business leaders whose means of amassing a personal fortune contributed positively to the country in some way.
Identify the qualities of a robber baron and a captain of industry
Robber barons were accused of eliminating competition through predatory pricing and then overcharging when they had a monopoly.
The term combines the concept of a criminal robber with an illegitimate aristocrat baron.
The term "robber baron" contrasted with the term "captain of industry," which described industrialists who also benefitted society.
Nineteenth-century robber barons included J.P. Morgan, Andrew Carnegie, Andrew W. Mellon, and John D. Rockefeller.
In order to prevent single companies from developing a monopoly over an entire industry, public officials during this era put passing and enforcing strong antitrust laws high on their agenda.
A derogatory metaphor of social criticism originally applied to certain late nineteenth-century American businessmen who used unscrupulous methods to get rich.
"Robber baron" is a derogatory term used for some powerful nineteenth-century American businessmen. By the 1890s, the term was typically applied to businessmen who were viewed as having used questionable practices to amass their wealth. These "questionable practices" usually included a perception that they offered their products at extremely low prices as to pay their workers very poorly and buying out the competitors that couldn't keep up. Once there was no competition, the businessmen would hike prices far above the original level. It combines the notions of criminality ("robber") and illegitimate aristocracy ("baron").
The term derives from the medieval German lords who legally charged tolls on ships traversing the Rhine without adding anything of value. U.S. political and economic commentator Matthew Josephson popularized the term during the Great Depression in a 1934 book by the same title. He attributed the phrase to an 1880 antimonopoly pamphlet about railroad magnates. Josephson alleged that like the German antecedents, American big businessmen amassed huge fortunes immorally, unethically, and unjustly. The theme was popular during the Great Depression, a time of public scorn for the abuses of big business.
Captains of Industry
Robber barons were contrasted with "captains of industry," a term originally used in the United Kingdom during the Industrial Revolution describing a business leader whose means of amassing a personal fortune contributes positively to the country in some way. This might have been through increased productivity, expansion of markets, providing more jobs, or acts of philanthropy. Some nineteenth-century industrialists who were called "captains of industry" overlap with those called "robber barons," however. These include people such as J.P. Morgan, Andrew Carnegie, Andrew W. Mellon, and John D. Rockefeller. The positive term was coined by Thomas Carlyle in his 1843 book, Past and Present.
John Davison Rockefeller was an American industrialist and philanthropist. He was the founder of the Standard Oil Company, which dominated the oil industry and was the first great U.S. business trust. Rockefeller revolutionized the petroleum industry and defined the structure of modern philanthropy. In 1870, he founded the Standard Oil Company and aggressively ran it until he officially retired in 1897. As kerosene and gasoline grew in importance, Rockefeller's wealth soared, and he became the world's richest man and first American worth more than a billion dollars. Adjusting for inflation, he is often regarded as the richest person in American history.
Andrew Carnegie was a Scottish-American industrialist who led the enormous expansion of the American steel industry in the late nineteenth century. He was also one of the most important philanthropists of his era. With the fortune he made from the steel industry, he built Carnegie Hall; later he turned to philanthropy and interests in education, founding the Carnegie Corporation of New York, Carnegie Endowment for International Peace, Carnegie Institution of Washington, Carnegie Mellon University and the Carnegie Museums of Pittsburgh. Carnegie gave most of his money to establish many libraries, schools, and universities in the United States, the United Kingdom, Canada, and other countries, as well as to establish a pension fund for former employees. He often is regarded as the second-richest man in history after John D. Rockefeller.
John Pierpont Morgan was an American financier, banker, and art collector who dominated corporate finance and industrial consolidation during his time. In 1892, Morgan arranged the merger of Edison General Electric and Thomson-Houston Electric Company to form General Electric. After financing the creation of the Federal Steel Company, he merged in 1901 with the Carnegie Steel Company and several other steel and iron businesses, including Consolidated Steel and Wire Company, to form the United States Steel Corporation. At the height of Morgan's career during the early 1900s, he and his partners had financial investments in many large corporations and were accused by critics of controlling the nation's high finance. He directed the banking coalition that stopped the Panic of 1907. He was the leading financier of the Progressive Era, and his dedication to efficiency and modernization helped transform American business.
Trusts and Antitrust Laws
During the late nineteenth century, hundreds of small short-line railroads were being bought up and consolidated into giant systems. Separate laws and policies emerged regarding railroads and financial concerns such as banks and insurance companies. The railroads soon discovered that their pools lacked enforcement power. Those who nominally agreed to be bound by the pooling arrangement could—and often did—cheat. So leaders within the railroad business and beyond began looking for ways to control and manage their increasingly large industry holdings.
The corporate form of business enterprise allowed for potentially immense accumulations of capital to be under the control of a small number of managers; but in the 1870s and 1880s, the corporation was not yet established as the dominant legal form of operation. To overcome these disadvantages, clever lawyers for John D. Rockefeller organized his Standard Oil of Ohio as a common-law trust. Trustees were given corporate stock certificates of various companies; by combining numerous corporations into the trust, the trustees could effectively manage and control an entire industry. Within a decade, the Cotton Trust, Lead Trust, Sugar Trust, and Whiskey Trust—along with oil, telephone, steel, and tobacco trusts—had become, or were in the process of becoming, monopolies.
Consumers howled in protest. The political parties got the message: In 1888, both Republicans and Democrats put an antitrust plank in their platforms. In 1889, the new president, Republican Benjamin Harrison, condemned monopolies as "dangerous conspiracies" and called for legislation to address the tendency of monopolies to "crush out" competition.
The result was the Sherman Antitrust Act of 1890, sponsored by Senator John Sherman, of Ohio. Its two key sections forbade combinations in restraint of trade and monopolizing. The purpose of the Sherman Antitrust Act is not to protect competitors from harm from legitimately successful businesses, nor to prevent businesses from gaining honest profits from consumers, but rather to preserve a competitive marketplace to protect consumers from abuses. Senator Sherman and other sponsors declared that the act had roots in a common-law policy that frowned on monopolies. To an extent, it did, but it added something quite important for the future of business and the U.S. economy: the power of the federal government to enforce a national policy against monopoly and restraints of trade. Nevertheless, passage of the Sherman Antitrust Act did not end the public clamor; 15 years passed before a national administration began to enforce the act, when President Theodore Roosevelt, known as "the Trustbuster," sent his attorney general after the Northern Securities Corporation, a transportation holding company.