The Growing Economic Crisis of the Late Nineteenth Century
At the beginning of the twentieth century, financier J.P. Morgan sought a way to bring order and stability to what he considered the chaotic condition of American business. He summarized three major problems of American businessmen: (1) business had to be saved from ruinous competition;
(2) the rise and fall of prices had to be minimized and the disastrous effects of the business cycle padded and (3) the rising power of labor had to be blocked at all costs, or capitalism would eventually give way to socialism. Morgan sought to organize holding companies in nearly every major industry as a way of helping entrepreneurs make savings in buying and manufacturing, control prices, and raise profits.
Study the documents in each section for information to answer the related questions at the end.
Part A.
Document A
The story of the early history of the oil trade Is too well known to bear repeating in detail. The cleansing of crude petroleum was a simple and easy process, and at first the profits were very large. Naturally, all sorts of people went into It; the butcher, the baker, and the candlestick maker began to refine oil and It was only a short time before more of the finished product was put on the market than could possibly be consumed. The price went down and down until the trade was threatened with ruin. this great depression led to consultations with our neighbors and friends
In the business in the effort to bring some order out of what was rapidly we proceeded to buy the largest and best becoming a state of chaos refining concerns and centralize the administration of them with a view to securing greater economy and efficiency.
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This enterprise, conducted by men of application and ability working hard together, soon built up unusual facilities in manufacture, in transportation,
In finance, and in extending markets.
John D. Rockefeller, Random Reminiscences of Men and Events.
(NewYork: Doubleday. 1909). 81—83.
Document B
The first and least formal method attempted was the agreement By this each competitor agreed to certain standardized prices and policies; usually they were promptly broken when someone saw a chance to undersell his rivals. The next step, the pool, was a division of marketing areas, freight, or earnings: It also fell through when one member saw a chance to grab off a large order or to pre—empt a certain field, but it by no means was discarded and, indeed, the modern trade associations bear some resem blance to It.
The search for uniformity was next sought.. by interlocking directorates.
‘l’hat is, the directors of any corporation sat upon the boards of allied corporations and strove to reconcile policies and minimize competitive clashes.
The method was more successful than the others (and Is still used), but
It was cumbersome.
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Leland D. Baldwin. The Stream ofAmerlean History, Vol. II
(New York: American Book Company, 1952). 110.
Advanced Placement U.S. HIstory 1
Lesson 26
Handout 26 (page 2)
Document C
It is too late to argue about advantages of Industrial combinations. They are
‘heir chief advantages are: a necessity
(1) Command of necessary capital.
(2) Extension of limits of business.
(3) Increase of number of persons interested in the business.
(4) Economy in the business.
(5) Improvements and economies which are derived from knowledge of many
interested persons of wide experience.
(6) Power to give the public Improved products at less prices and still make profit for stockholders.
(7) Permanent work and good wages for laborers.
Preliminary
John D. Rockefeller’s testimony, United States Industrial Commission,
Reports on Trusts and Industrial Combinations. House Document No. 476.
56th Congress, 1st Session (December, 1899), Part 1,
