Robber Barons

The term “robber barons” dates back to the twelfth and thirteenth centuries, when it described the feudal lords of land who used corruption to increase their wealth and power. Feudalism was a class system of medieval Europe. Only those in the upper class could own land; citizens of the lower classes could live on and work the land as long as they pledged their loyalty and services to the feudal landlords. The term was revived in the late nineteenth century to describe a handful of industrialists who used questionable means to build up personal fortunes. Today, these men would be billionaires; they had seemingly unlimited amounts of money and were not afraid to let people know it. These business owners used modern strategies such as vertical integration (the involvement of a business in all aspects of the production of a product) to increase their wealth and put competitors out of business.

Cornelius Vanderbilt (1794–1877) is considered to have been the first robber baron. He quit school at age eleven to help his father make money to support the family. At sixteen, the native of New York bought a sailing ship for $100 and began a ferry service from Staten Island to New York City. Vanderbilt eventually established a line of steamboats and became a millionaire before the age of fifty. His net worth increased to $11 million before his sixtieth birthday. In 1857, Vanderbilt invested in the New York & Harlem Railroad. Within six years, he was the company's president. By 1875, the railroad king merged several lines so that his empire served the entire country. Vanderbilt was known to be loud, hardheaded, and somewhat crude. He rarely gave away his money, and when he died in 1877 his $100 million estate was left to William Vanderbilt (1821–1885), one of his thirteen children.

Another robber baron was Andrew Carnegie (1835–1919), a Scottish immigrant who created unimaginable wealth in the American steel industry . Another believer in vertical integration, Carnegie overworked and underpaid his employees, a practice that kept his operating costs to a minimum. He was able to supply his product at a cost less than that of his competitors. As a result, he became one of the world's wealthiest men when he sold his company to U.S. Steel in 1901 for $250 million. Unlike some of his infamous colleagues, Carnegie gave away much of his money to build thousands of library buildings as well as the well-known Carnegie Hall in New York City. He also donated to colleges and universities to set up scholarships. When Carnegie died at the age of eighty-three, he had given away most of his wealth.

Also among the robber barons was John D. Rockefeller (1839–1937), the man responsible for the establishment of the Standard Oil Company and the U.S. petroleum industry. Rockefeller built his first oil refinery in 1863. By 1877, he controlled 90 percent of the U.S. oil industry. His business became so large that he found it difficult to manage. Rockefeller's response was to form the first trust (an organization of several businesses in the same industry). By banding together, the trust can control the production and distribution of a product or service, thereby limiting competition. (See Monopolies and Trusts .)

Many consider Jay Gould (1836–1892) to have been the prototype (original example) of the robber baron. Viewed in some circles as more corrupt than Carnegie, Rockefeller, and Vanderbilt combined, Gould became a railroad financier who engaged in a battle with Vanderbilt over the Erie Railroad. As soon as Vanderbilt bought stock in the railroad, Gould issued more, illegally. When he was arrested for this act, Gould bribed the New York state legislature to change the laws. By 1872, he was the director of seventeen major railroads and the president of five others. Most of Gould's success was the result of dishonest behavior and corruption. When he died at fifty-seven, his fortune was worth $77 million.