Modern Capitalism: Mergers and Syndicates

Productivity rose almost six-fold in the United States during the era of railroad expansion. Thomas McCraw, Isidor Straus Professor of Business History, Emeritus, at Harvard Business School, explains that during this period, “the growth of big business was the central trend of the American economy.”35 By the dawn of World War I, America’s journey from an agrarian society to a leading industrial power was complete, with the United States’ international industrial output surpassing that of France, Germany, and Great Britain. The railroads not only set in motion the combined forces of mass production, distribution, and communication under which the American economy grew by leaps and bounds, they also shaped the foundation of modern capitalism.

  • Agreement between Henry Villard and Carlos S. Greeley, as Receivers of the Kansas Pacific Railway, and the Junction City and Fort Kearney Railway Company, 1877. Henry Villard Business Papers, Baker Library Historical Collections.
  • F. Jay Haynes.  Villard Arch, Fargo, 1883. Henry Villard Business Papers, Baker Library Historical Collections.  olvwork359135
  • Now that I am sure of the control of the Northern Pacific, the [Oregon and California railroad line] may really become valuable as a part of a road to California which we shall have to build sooner or later.

As the railroad network fanned out across the United States and connected with lines in Canada and Mexico, smaller railroad companies consolidated as a way to ensure the regular flow of traffic, reduce competition, and avoid price wars. Interstate and transcontinental lines became possible because of laws in favor of the railroads and firms having interests in each other. “[The railroads] sought to influence the people who could regulate and control the bottlenecks and choke points of legislation and administration,” Richard White contends. “The more the playing field narrowed, the more potent the transcontinental [railroad] became.”36 Regulation supported the abilities of companies in other industries to become larger corporations as well, and companies sometimes subsumed other organizations with related functions required for their operations. Strong anti-trust factions emerged represented by labor and farm parties and union activists. Growing political debates centered on matters of scale, and anti-trust issues became concerns not only for the railroads but in the telephone, oil, and steel industries as well.

  • S.G. Elliott. <em>Power of Mind over Matter: A story of Local Interest, Founded on Facts, also Anti-Monopoly Speech, Delivered at Knox Butte, Linn Co., Or., March 11, 1882.</em> Albany, Oregon: C.W. Watts, Book and Job Printer, 1883. Henry Villard Business Papers, Baker Library Historical Collections.
  • Monopoly Millionaires Divide The Country, 1882. Stock Montage/Archive Photos/Getty Images.
  • Subscriptions to Purchasing Syndicate, Oregon and Transcontinental Company, 1881. Henry Villard Business Papers, Baker Library Historical Collections.

A dramatic spike in the formation of what would become Fortune 500 companies occurred from the late 1800s to the early 1900s. Among the top corporations formed before World War I were many names we recognize today, including American Express, American Telephone & Telegraph, Exxon Corporation (Standard Oil), General Electric, John Hancock Mutual Life Insurance, Hershey Foods, Johnson & Johnson, USX Corp. (United States Steel), Westinghouse Electric, and Weyerhaeuser.

  • Atchison, Topeka, and Santa Fe Railroad Company. Westward the star of empire takes its way via the Atchison, Topeka & Santa Fe Railroad. Chicago, Poole Brothers, n.d. Advertising Posters, Advertising Ephemera Collection, Baker Library Historical Collections.
  • Colt Factory, c. 1914. General File Photograph Collection, Baker Library Historical Collections.
  • Founding of Fortune 500 Companies by Decade, 1850-1910

The railway system, as historian Henry Adams explained in his celebrated 1907 autobiography, “required new machinery to be created-capital, banks, mines, furnaces, shops, power-houses, technical knowledge, mechanical population, together with a steady remodeling of social and political habits, ideas, and institutions to fit the new scale and suit the new conditions.”37 The rise of modern American capitalism, enabled by the expansion of the railroad, was one of the transformative developments of the nineteenth century-and one that historians refer to as the second industrial revolution.

  1. Henry Villard to C. E. Bretherton, February 19, 1881, in Railroad Leaders 1845—1890, The Business Mind in Action, Thomas C. Cochran, Cambridge: Harvard University Press, 1953, p. 481.
  2. Thomas K. McCraw, "American Capitalism" in Creating Modern Capitalism: How Entrepreneurs, Companies, and Countries Triumphed in Three Industrial Revolutions, ed. Thomas K. McCraw, Cambridge: Harvard University Press, 1997, p. 320.
  3. Richard White, “Information, Markets, and Corruption: Transcontinental Railroad in the Gilded Age,” The Journal of American History 90, no. 1 (June 2003), p. 23.
  4. Henry Adams, The Education of Henry Adams, An Autobiography. Boston: Houghton Mifflin Company, 1918, p. 240.