As former Enron CFO Andrew Fastow--who is already serving a 10-year
prison sentence--admitted at the trial, "When you misrepresent the nature of the company, artificially inflate earnings, hide
losses, when you do things like this to cause your stock price to rise, that is stealing. We stole."
Some draw lines to history's "robber barons." But that's probably
unfair--to the robber barons. Yes, some Gilded Age captains of industry defrauded investors as they gathered capital. And
yes, they ruthlessly pocketed almost obscene amounts of cash. But they also built the entire industrial infrastructure of
the post-Civil War United States.
Just look at the wealthiest and most powerful of the bunch: John
D. Rockefeller, Andrew Carnegie, Cornelius Vanderbilt, and J.P. Morgan. By some measures, the first three remain the wealthiest
Americans ever to live, amassing fortunes that, in today's dollars, would far surpass those of Bill Gates and Warren Buffett.
Morgan never reached those heights, but he wielded Wall Street's purse.
John D. Rockefeller--Liquid Assets
John D. Rockefeller (1839-1937) preferred liquid assets--namely,
oil. When prospectors tapped western Pennsylvania in the late 1850s, Rockefeller quickly put two and two together and realized
that the real money was in refining. Then, he proceeded to put everything together, first buying up refineries, then
buying up everything else involved in moving oil from rock to house.
By 1880, Rockefeller's Standard Oil Company controlled more than
90 percent of the nation's refining capacity. Ruthlessly efficient, "the Standard" could undercut any competitor's best price.
Government trust-busters finally carved up the company in 1911, and Rockefeller became a full-time philanthropist, giving
away more than $500 million.
Andrew Carnegie--Cold, Hard Cash
Andrew Carnegie (1835-1919) made cold, hard cash from steel. The
son of a Scottish peasant, Carnegie was superintendent of a railroad by age 24. There, he realized that bigger rail cars would
require new infrastructure--wooden bridges would have to be iron, and iron rails would have to be steel. By 1875, Carnegie
owned a bridge works and a steel mill. By 1889, he had an absolutely iron grip on the American steel market.
Carnegie planned, and pinched, every production cost, making his
mills more efficient than practically any other factory of the era. He retired in 1901, when J.P. Morgan bought him out to
make the largest corporation in the world: U.S. Steel. Carnegie's beliefs demanded philanthropy--"the man who dies rich,"
he wrote, "dies disgraced"--so he spent his retirement investing $350 million in cultural and educational institutions, including
2,800 libraries.
Cornelius Vanderbilt--Railroading
Cornelius Vanderbilt (1794-1877) ran railroads, and had
a knack for railroading anyone who dared compete. Once, when he discovered two associates trying to wrest control of one of
his companies, he vowed, "You have undertaken to cheat me. I won't sue you, for the law is too slow. I'll ruin you."
Vanderbilt got his start in steamboats, first schlepping New Yorkers
up the Hudson River, then rushing gold seekers from New York to San Francisco via Nicaragua. In both cases, Vanderbilt cut
fares so low that his competitors literally paid him to go away. (He was probably the first to understand "bleacher" economics:
that is, cheap seats but $5 hot dogs.)
He got into railroads at the time of the Civil War, buying up
so much railroad stock that he owned 17 local lines, which he fused into the New York Central system running between New York
and Chicago. Vanderbilt hadn't much use for philanthropy. He gave $1 million to the university that bears his name, but otherwise
willed his fortune to his son.
J.P. Morgan--Backstage Baron
J.P. Morgan (1837-1913), financier extraordinaire, wielded robber-baron
power at a fraction of the wealth (if you can call more than $100 million in Gilded Age dollars a fraction). In his era, Morgan
was Wall Street. Insiders called him "Jupiter," chief of the financial gods. If Morgan said you could have money, you
had money. If he put the market's purse away, you were halfway to running a fruit stand.
Though baronial by birth and nature, Morgan understood how to
protect the golden goose. During economic crises in 1895 and 1907, Morgan rallied Wall Street and--in the absence of a central
bank--personally guaranteed the financial liquidity of the United States.
Ruthless and Corrupt?
Certainly. Only way to get things done, said the barons. As one
political lubricator wrote in 1877, "If a [politician] has the power to do great evil and won't do right unless he is bribed
to do it, I think . . . it is a man's duty to go up and bribe."
Railroad magnate E.H. Harriman once responded to a reporter's
challenge by pulling a page from his pocket and detailing all the track he had laid and the rates he had cut. The reporter
pressed, "But the public assails and attacks you and impugns your motives and accuses you of all sorts of things. Doesn't
the thanklessness of the job ever embitter you?" Slapping his sheet of statistics, Harriman barked, "That remains."
Can today's corporate crooks say the same?
Michael Himick
Updated June 1, 2006
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